Two Cheers for the Free Market
Visible Hand: A Wealth of Notions on the Miracle of the Market, by Matthew Hennessey (Encounter Books, 2022), 248 pages.
Perhaps no social science is less understood—and more often manipulated—than economics. As our economy becomes more financialized, the dismal science grows more and more difficult for the average citizen to grasp. It’s little wonder our debates on the minimum wage, balanced budgets, or tax exemptions feel intractable.
Wall Street Journal editor Matthew Hennessey aims to address this problem in his new book Visible Hand: A Wealth of Notions on the Miracle of the Market by communicating basic economic principles “in plain English, without resort to numbers, graphs, or jargon.” The back cover adds that “A teenager should be able to discuss [supply and demand, incentives and trade-offs, scarcity and innovation, work and leisure] intelligently.”
It’s a noble endeavor. On the basics, Hennessey performs admirably, dispelling misconceptions and articulating the essential tenets of any Economics 101 (and perhaps 201) course. He notes that Scotsman Adam Smith—considered the father of modern economics—is less a theorist than a journalist. Smith reported on people’s behavior in economic situations, says Hennessey: “That is to say, how we assign value to goods, how we produce and trade them, how we work, how we spend time productively, how we organize our lives.”
He’s right that our desire to benefit ourselves and our immediate loved ones —what we might pejoratively call selfishness— is what sets economic activity in motion. “Greed isn’t good, ambition is — ambition to improve your circumstances, ambition to feed yourself and your family, ambition to make a better life for the next generation,” Hennessey argues. Very few people are capable of working solely for the good of others, and those who do are either independently wealthy or dependent on the charity of others to pay their expenses.
His definitions of capitalism and socialism are pithy and cut to the heart of the matter. Capitalism, he claims, is “the sum total of the actions of those private entrepreneurs who use money to invest or build so they can earn more money,” while socialism is a system in which “the government, not private actors, decides how to invest and what to build.” And he’s certainly right to claim that capitalism has done great things for our nation and millions of its citizens, though it has admittedly enabled a fair share of exploitative treatment of workers and their families.
Hennessey offers simple, straightforward explanations of economic concepts like diminishing marginal utility, price mechanisms, and minimum wages. Consider this one on minimum wage: “Wages and salaries are the price of labor. When an employer must pay a higher price than the market-clearing wage or risk breaking the law, he will reduce supply of the very thing that low-skilled employees are in the labor market to find — low wage jobs.” Or this one, on rent regulations:
When landlords are prohibited from charging the market-clearing price for housing, they supply less of it. Why? Because at the margins, where all economic decisions are made, it no longer makes sense for them to rent an apartment or house to a tenant. The extra income they receive from doing so isn’t worth the added cost of maintaining a rental property and catering to tenants’ needs.
Anyone involved in the housing market knows this, but many of our politicians—and the lobbyists who influence them—are ignorant of these economic realities.
Hennessey’s assessment of the free market is nevertheless a bit too simplistic. He argues that “free markets, for all their faults, beat the pants off unfree markets,” and repeats conventional pro-free-market data points on the “billions of people” brought out of poverty by free trade. Hennessey doesn’t grapple with the fact that a significant percentage of those people live in countries that are not just America’s economic competitors, but ideological and military ones (e.g., China).
Free trade with China has done wonders for a couple generations of Chinese and flooded the United States with affordable goods. But did we lose anything in the process? As writer Nathan Hitchen argued in TAC last year, our defense-industrial and technological base have been eroded. In 2020, the Commandant of the Marine Corps warned that Chinese shipyards could outpace the United States in replacing naval losses in war. Apple CEO Tim Cook has noted that many key skill sets—like advanced and precision tooling—effectively do not exist among workers in our country. Offshoring high-tech U.S. businesses to China has significantly accelerated China’s military development, as the 2021 U.S.-China Economic and Security Review Commission recently observed.
Even more confounding is Hennessey’s chapter on what he calls “the anti-marketeers,” or those critical of unfettered free markets. He notes that “recent years have elevated to prominence a larger number of right-wing market skeptics than anyone previously knew existed.” He continues:
They think America has grown decadent and disconnected because Americans are too free. Of course they think markets are too free and that tax cuts are the only policy that outfits like the [Wall Street Journal] opinion page can muster the courage to advocate for. They call people like me “market fundamentalists,” as if recognizing that economic liberty is essential to human flourishing means you worship mammon rather than God.
Who are these conservative skeptics of pure capitalism? Hennessey never says. He hints at “a half dozen politicians,” an “insular coterie of opinion writers and Twitter polemicists, a handful of no-name professors at small Catholic universities, and a cable talk show host with a national audience second in size and scope only to that of a certain one-term former Republican President.” Okay, so the last one is Tucker Carlson. But who else is Hennessey talking about?
He notes that some of these people “call themselves ‘common-good’ conservatives,” and draw upon Catholic social teaching to argue that a government has an obligation to use coercive power to promote virtue, “foster strong communities, and vouchsafe traditional values.” These common-good types worry about the moral poverty engendered by capitalism and “promote government intervention in the private market to support outcomes that they call ‘worker friendly’: pro-planning, pro-redistribution, anti-business.” Such persons, says Hennessey, “want power.” Others, he notes, call themselves national conservatives. He says they “lack humility.”
But who are they and what exactly are they saying? The chapter doesn’t have a single footnote or endnote. It never cites an example of anyone who falls within this conservative camp of anti-capitalists or capitalism skeptics. It never quotes any of them, nor are they cited in the index. I can guess—perhaps he’s talking about Oren Cass, Josh Hammer, Sohrab Ahmari, Ryan Anderson, R.R. Reno, or Patrick Deneen, many of whom appeared in a January 2022 New Criterion symposium on the future of conservatism. If you know anything about the above-listed persons, you know they agree on perhaps a few principles but disagree on many others. I don’t think any of them are categorically opposed to markets, and those who urge greater restrictions on trade do so to varying degrees.
Moreover, criticism of unfettered trade is not restricted to 21st-century postliberals and “anti-marketeers” on the right. George Washington and Alexander Hamilton both pursued tariffs on foreign goods and established priority trading partners. As Hitchen explained, the Republican Party made protectionism national policy for over 50 years. It wasn’t until after World War II that the United States pursued a full-fledged liberalization of trade, and even then we still limited trade with ideological competitors like the Soviet bloc and China.
All of which is to say that Hennessey’s ability to simply and persuasively argue in favor of capitalism and free markets is also his weakness. Oversimplifying the arguments of one’s opponents is unhelpful. Asserting that those opponents are “very good at calling people names” is similarly counterproductive. Hennessey refuses to name his critics and thus leaves us more confused than enlightened.
Casey Chalk writes about religion and culture issues for The American Conservative and is a contributing editor for the New Oxford Review. He is the author of The Persecuted: True Stories of Courageous Christians Living Their Faith in Muslim Lands (Sophia Institute Press).