Mental Mistakes
Seen any symphonic recordings at the flea market lately? Here's one, in the "American Classics" series of the budget label Naxos: violin concertos of Walter Piston, Pulitzer Prize winning American composer and Harvard professor. The violinist is James Buswell, of Juillard School, The Chamber Music Society of Lincoln Center, and the New England Conservatory. The conductor is Theodore Kuchar, trained in Cleveland and Boston, and now conductor of the Boulder Philharmonic. Quite an American lineup for a recording of American classics. And the orchestra? That is the National Symphony of Ukraine.
In the same series, music of John Philip Sousa is conducted by Keith Brion, who tours with his own New Sousa Band. He is conducting, of course, the Razamovsky Symphony Orchestra of Bratislava.
What a scandal! American symphony orchestras not allowed to record American music. American soloists and conductors flying off to Europe to record American music. Look at the sheer cruelty: Theodore Kuchar is not even allowed to record with his own orchestra, because it is in America.
And the cruelty goes in all directions. Imagine you are the boss of the budget label. To get established in America, you want to record American music with American musicians. You find all the talent you could possibly need in America, including an immense variety of orchestras. All you need to complete your marketing plan is a known American orchestra. Or even an unknown orchestra in a known place—like the Boulder Philharmonic. But you cannot afford it.
American orchestras do not bargain. Their should committee, a union, states its requirements, and that's the end of it. Either you charge for your recording accordingly, or you make it elsewhere. From Europe, the perception is that American orchestras do not like to work much, so they raise the price and lower the demand. From America, the perception is that if those price-cutting foreigners would just charge what they should, then everyone would make more. In fact, classical record companies claim that they make their best money by re-releasing old recordings.
That is the real cruelty of the market: it does not let you get away with ignoring part of the evidence so you can hold to a pretense. Not only classical but popular artists are discovering that their new recordings compete not just with other new recordings, but also with all old recordings. Because of the permanent nature of recordings, competition can only become more severe. The subjective answer is a should committee to restrict sales of old recordings. The objective answer is developing in the market, as popular artists, classical artists, and symphony orchestras start their own recording companies, and reissue their own older recordings. They cannot charge anything they want, but they can please their patrons.
Can we find traders in the market able to defy its cruel discipline, and charge anything they want? What about Microsoft, seller of "Windows", and accused of monopoly by the government? A monopoly is defined as a seller who has no competition in the market, and so is able to charge monopoly prices, which are defined as above-market prices. The newest version of "Windows" sells for ninety dollars. What kind of a monopoly price is that? A monopoly price is supposed to reflect the fact that there is no other way to get the good except through one supplier. The monopolist has you over a barrel, and you have to pay whatever he demands. Surely that would be more than ninety bucks.
The problem for Microsoft is that you do not need "Windows", because you already have "Windows". They are only selling a newer version. They are in competition with themselves. The cruel market will not even allow a monopoly price to the sole supplier of a computer program desired by everybody.
Subjectivists who search out monopoly prices have this problem: there are none. Prices are the result of voluntary trades, so there are no voluntary above-market prices. What are called "monopoly prices," are not prices at all, but artificial costs of subjective government. If your local should committee gives one cable company permission to operate in your city, and sets the cost, that is not a price any more than your property tax is a price. It is your share of what the committee decided to charge.
You can investigate this at the flea market. Look around long enough and you'll find some item that you really want. That figurine is exactly like the one that made your mother cry when you accidentally broke it. How wonderful! Now you can send her a replacement! You must have it! "How much for this figurine?"
"Ten thousand dollars."
"Very funny. You're serious? It wouldn't be worth that if it were pure gold."
"It's clay. But it's the only one there is, so that's the price."
"If I was that rich, I wouldn't be wandering around the flea market."
You found a monopoly price, except since you didn't pay it, how could it be a monopoly price? Until somebody pays it, it is not a price at all, but an offer. Mom has probably forgotten the whole thing by now, anyway.
When trading is voluntary, there can be no monopoly prices, because there is no one thing for which people will voluntarily trade all their effort. That is something one might do for the theoretical last glass of water in the desert, or the theoretical last place in the lifeboat, or the theoretical sole cancer cure, but not for the actual item in a crowded market.
The two principles that prevent monopolies in a voluntary market are, first, that all goods compete with all other goods; and, second, that all goods compete with themselves. There is only one Elvis, but you still get to decide how much Elvis you want. Economists call this "marginal utility", to emphasize that the decision is not, "Should I buy an Elvis?" but, "Should I buy another Elvis?" If you are contemplating your first Elvis recording, the decision is, "Should I buy another recording?" In any market, every decision is, "Should I buy another item in this market?"
To nail down the principle, imagine that you have cornered the market in some imaginary vital commodity which has no substitute. So now you can charge whatever you want. But you will still not sell the same quantity at any price, because the ability to pay is not limitless. So, to maximize your profit, you must still decide on an objective price. You must find out what traders voluntarily do.
This principle of markets is a restatement of a principle about thinking: it is always contextual. You see similarity by viewing a difference in the context of a bigger difference. You make a trade in the context of all possible trades. You pay a price not in the context of having no choice, but in the context of having only so much to trade. If you had no choice, then what you paid was not a price but a tax.
Subjective thinking tries to mitigate the cruelty of the market by calling real prices "monopoly prices", and punishing a company that has become dominant in some market. Strangely, it also tries to mitigate the cruelty of the market by doing precisely the opposite. Governments designate monopoly cable companies, phone companies, garbage companies, and so on, and decree arbitrary "prices". This is necessary, they say, to prevent market failure. If doctors used that reasoning, heart failure would be prevented by removing the heart.
If monopolies are concocted by government instead of produced by markets, why is there so much talk about them? Because Passiveman listens. A passive mind gets taken advantage of so often that it expects to be taken advantage of. It assumes that people who know how to do things will take advantage, monopolize the market, and charge high prices. If Passiveman compared actual prices, he would see otherwise, but he prefers to complain. If he compared prices before and after government fixing, he would see them go up. But he prefers to hope. If he compared subjective promises with subjective performance, he would look for better methods. But he prefers to hate the cruelty of the market.
When Subjectiman demands control of the market, Passiveman thinks what is to be controlled is the rich monopolist and the fat cat banker. He could compare to see if that happens, and notice that he himself is the one being controlled. Instead, he thinks that the cruelty of the market is what constrains him, and the government is what constrains the fat cats. Comparison would show him that it is the other way around. The market is voluntary, so it constrains any attempt to fake value. The should committee is coercive, so it enslaves anyone without the means to fight back.
Subjective demands create a cruel place. They turn the home into a battlefield, the workplace into an obstacle course, the sporting contest into an ambush. Attempts to get things without earning them make life one cruel disappointment after another. Since Subjectiman thinks he deserves to get what he wants, he experiences life as very cruel. He does not grasp that the essential of markets is voluntary trade, so he does not see that markets are benevolent on purpose. He thinks they are cruel on purpose. He sees how Passiveman must struggle to make a living, and assigns that not to the importance of reason, but to the cruelty of markets. He demands that the market reward Passiveman as generously as it rewards Activeman.
Passiveman could not agree more. He takes each sophistry of Subjectiman as another profundity. If he compared his hopes with the actual result of Subjectiman's demands, he might wonder if he is being duped. But he avoids the comparison. After all, it takes no effort to see that prices of wonder drugs his doctor prescribes are high. If he is told they are "too high", he wants to believe that. He does not compare the effort of paying for a drug to the effort of developing and marketing the drug. He is not aware of trading his effort now for many years of effort by researchers, testers, and marketers. He assumes the drug just happened, and joins Subjectiman's chorus: "Monopoly!"
The victim of this love affair between Passiveman and Subjectiman is Mixtureman. When his mind is in gear, he will be glad that his fellow traders will not let him get away with faking values. When he is thinking subjectively, he will resent his fellow traders for their "cruelty". If the conflict is painful, he might shut his mind down to avoid the pain. But when his mind is passive, he will feel that resentment all the more, which will increase the urge to evade. He is in a cycle of increasing evasion.
The way out is to compare his feeling of resentment while passive to his feeling of mastery while active. The way out is to insist on being alive.
For a rational being, to live is to think. An internal conflict is not a sign to stop thinking, but a sign to start analyzing. One extra minute of thought today can be repeated tomorrow, and become two extra minutes the next day. You can start a cycle of decreasing evasion and increasing awareness. Once you have taken charge, habits can be changed.
When you see the market as voluntary, you see it as benevolent, and you see that it can help you think actively and objectively. In discovering objective values by trading, the market will show you being reasonable, and show you being unreasonable. Voluntary trading will punish a cycle of evasion, and encourage a cycle of awareness.
"Market failures", "market cruelties", and "market monopolies" are different ways of expressing the same complaint: trading does not match expectations. Normally, when reality fails to meet expectations, we revise the expectations. In the case of markets, many consider the expectations more important than the facts. To see why that happens, the thing to study is "market crashes".
| Next Chapter | Previous Chapter | Contents | Home |