For all the sophistication of those who market “spin,” sometimes the public shows its good sense by refusing to buy. Thus the attempt to refer to the $700 billion Emergency Economic Stabilization Act of 2008 as a “rescue” fell flat. “Bailout” became the term of choice for the various remedies hastily designed to prevent financial disaster, and the metaphor is telling: keep the ship afloat until it gets to port, but don’t think all is well or that repairs will not have to be made. President-elect Obama, to his credit, endorsed the pragmatic mood with his centrist appointments to economic posts, suggesting a smooth transition rather than a dramatic “Hundred Days.” That may change, of course, and future political battles have likely been postponed, not prevented. Despite the eager acquiescence of business to government intervention in the moment of crisis and the apparent agreement of politicians to restore market stability before fundamental restructuring, a great debate about free markets and good government is coming. Pragmatism alone won’t be adequate to defend market freedom, nor will a pure market libertarianism that is blithely optimistic in the face of real market failure. Instead, it is worth reflecting on what is good in commercial society and on commercial society’s limits, looking for principles to help guide the policy choices we soon will face.

What, then, is good about free markets?

First, free markets generate and spread wealth—not by redistributing what people have, but by providing the conditions that reward individual effort and foster human enterprise. To speak broadly, ancient policy emphasized the distribution or redistribution of a city’s wealth among its people (not to mention acquisition by imperial conquest), but modern policy has promoted the development of commerce among peoples with the promise that the fortunes of all are raised. In tandem with the progress of global science, which it catalyzes and by which it is in turn transformed, the free market has generated unprecedented prosperity and previously unimaginable technological achievement. While tolerating inequalities beyond what were prescribed by ancient writers, modern market society has made available to the least well-off levels of nourishment, comfort, education, and health care that were once out of the reach even of society’s elite. This effect, evident in the rise of the middle class in nineteenth-century Europe and the United States, has been repeated in the latter half of the twentieth century, as domestic barriers fell for those previously excluded from full participation in market society—witness the growth in the U.S. of the African-American middle class—and as whole countries like China and India gradually introduced free market reforms and earned economic growth. While it is easy to see the shortcomings of global progress—not least because of electronic media that the market has enabled—the real accomplishments of global capitalism in improving the standard of living of masses of people should not be taken for granted.

Second, markets achieve a kind of rough justice in establishing prices for goods and services, rewarding sustained effort and prudent venture while correcting their opposites. As Friedrich Hayek showed, it is impossible that any central authority could gather as much information about what is plentiful and what is dear as is conveyed by prices established in an open, competitive marketplace. If the equilibrium of compensation often seems less than satisfactory, I think it is an open question whether that represents the failure of the market or a distortion caused by the presence of large corporate and state bureaucracies, which cushion market pressures at the top and suppress them throughout. If opportunity remains open, markets ought to correct for unjustly high prices or low compensation, not only on the model of the rational actor, but in the context of common sense: though customers like low prices, they want a good product from a firm with a reputation for just dealing. Effort and prudence can be justly rewarded only if sloth and recklessness are allowed to fail.

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Third, free markets are valuable not only for the wealth they generate and distribute, but for the opportunities they make possible and the activities they enable. Here I refer not only to strictly economic opportunities for material gain and physical benefits, but to the whole range of institutions and practices that constitute civil society. Families, churches, schools, and many other institutions of culture cannot be adequately understood on a market model or supported as mere market entities, but they thrive when property rights are safe and self-direction is permitted. Indeed, they moralize the market, so to speak, often supplying the true ends of economic activity and forming persons who are not mere wealth-maximizers but well-rounded human beings. It is nobler to make that extra gain to support one’s family than to indulge oneself. Many a successful entrepreneur turns to philanthropy when his fortune exceeds his needs. The market itself teaches certain virtues—self-discipline and civility, self-control and the deferral of reward, fair-dealing so as to secure a customer base—and it is further humanized and refined when surrounded by other virtues. The institutions that promote these and the practices that reinforce them often depend on internal forms of authority that are different from those anchored in the law of supply and demand, but a free marketplace and the plenty it promises give these forms the conditions to thrive.

Fourth and finally, the freedom of the market is valuable in its own right, not only for its consequences for material wealth or cultural development. As many have remarked, the ability to choose one’s own way in the world—to develop and share one’s skills or services, or to make and market a product or a work of art—is a mark of human dignity, a basic human right. Free markets are not the only locus for the development of talents, and not all talents are readily or rightly marketed, but many are served by access to the marketplace, and the freedom to choose how to develop one’s gifts is essential to the gifts themselves and only possible in a society with substantial market freedom.

Now each of these justifications of the market suggests market limitations as well as freedoms and so can guide regulation. All agree that sound markets need just courts, willing and able to protect the rights of property and the obligations of contract. Numerous other rules have evolved through the practice of merchants and have been ratified by law; maintaining a proper balance between fairness and freedom is essential, as well as a balance between openness to innovation and security for the tried and true. Though “24/7” is handy when the work is done by computers and robots, markets often need regulations that establish their days and hours, permitting an equilibrium between time for trade and activity and time to pause and reassess—not to mention time to remember that there is more to every balanced life than work and trade. Because society should protect non-economic goods as well as economic ones, some sorts of trade should be suppressed, for example in sexual favors or stolen property. A sound sense of the value and limits of markets is a better guide concerning when and how to regulate commerce than an aimless pragmatism that lumbers from crisis to crisis or than ideological blinders, either those that see nothing that cannot be marketized or those that would collectivize all. “Two cheers for capitalism” seems to me to get it just about right.

What about government? Government provides, literally and figuratively, the public space where all citizens can gather, and it superintends the whole. Its responsibilities include not only regulation of the market and correction of its failures, but also protecting society against threats to its safety from outside and from within, supporting the rule of law, and maintaining the basic moral order or culture that underlies social trust and makes possible human freedom. In a free society, government has to be circumscribed in its overall extent as well as specifically restrained from interfering with certain basic rights, but the size of government is not the only relevant question to be asked about it. The American Founders spoke of “good government,” by which they meant government that was capable and just, even “energetic,” in its exertion of public power, while limited in what it can rightly do: lean and fit, not meddlesome and clumsy. There is a scandal of government waste both when government undermines market efficiency and when government fails in the tasks to which it is rightly appointed. In an era of burgeoning demand for government solutions beyond the bounds of government competence, “less government” is a good rough-and-ready rejoinder, but “good government” is the true principle and one that conservatives should not be ashamed to embrace.

One failing of conservatism in recent years has been the tendency to think of politics itself in market terms: political scientists have developed a whole “economic theory of democracy;” politicians grant access and measure influence by campaign contributions, even to one another, and voters expect representatives to bring home federal projects and programs as well as pass laws. It is not that politics can or even ought to proceed without consideration of real interests—as James Madison wrote in Federalist 10, “the regulation of these various and interfering interests forms the principal task of modern legislation”—but that building political organizations as ever more efficient machines for the aggregation of majority interests undercuts the ambition to articulate the public interest. Such a view has had disastrous effects, from the failure to recognize genuine corruption—witness the Abramoff scandal, which cut closer to the heart of modern conservatism than most Republicans have been willing to admit—to the squandering of the idealism of the young, whose interests are not yet fixed and who naturally long to test their talents in and become a part of something larger than themselves.

The cause of the free market is paradoxical in a way that is rarely recognized by its advocates and regularly exploited by its enemies: free markets require a public-spirited defense, but they generally reward private-spiritedness. In the debates ahead, the friends of freedom need to make their case in public, explaining the virtues of market society, acknowledging its vices, and focusing on those things that government can rightly do—and how it can do them well.