Free Market Utilitarianism

In the pursuit of the philosophy of business ethics I have come to realize that there are always at least two sides to an issue, that everyone always has an opinion, and that there is always someone out there who wants to argue against an opinion. Among these debates there is one fundamental issue that has been debated since the early days of business ethics, and will continue to ring in the ears of philosophers of business ethics for centuries to come. The question that has been cause of so much debate is whether the business market, where people buy, manufacture, produce, sell & trade goods and services, should be a free market which is subject to only negligible intrusion by governmental forces.
While there is no “right” answer to this question, I will attempt to defend that a free market, which is only constrained by basic governmental forces, can be justified by the views expressed by the principles of utilitarianism.
First, to alleviate any issues or problems associated with semantics I will clarify some of the significant terms I will use in this paper. First and foremost is the importance of understanding “utility”. I fell in love with this concept of utility when it was explained to me in my first economics course. In class it was simply stated as follows; utility is the satisfaction one receives from a thing or event. This said, utilitarianism is the view that an ethically moral act is one in which the sum total of utility produced by an act is greater than all other alternative acts. It must be understood, and this is key, that this act produces the greatest utility, or satisfaction to all persons affected by the action and takes into account all foreseeable costs and benefits! Also of note is the difference between an instrumental good, and an intrinsic good. An instrumental good is one that in and of itself does not produce utility, but provides for other good things. For example, a measles shot does not produce utility, but produces a healthy body, which does have value. An intrinsic good on the other hand is one in which the thing, or act, in and of itself produces utility. For example love has intrinsic value independent of anything else.
Now, back to the debate… What about a free market and utilitarianism? Adam Smith is noted as the founder of how the utilitarian way of thinking justifies a free market. Although this may be true in a literal sense, the concepts were in use far before Mr. Smith received credit. The freedom to buy and sell, along with the ownership of goods and property have been dutifully sought after for eons. The concept of a capitalistic society and the notion of private property are key tenants to the views associated with utilitarianism. It is the concept of utilitarianism, or the greatest net benefit outcome for all participants, which has inspired many of the aspects which laid the foundation for the establishment of this country.
The utilitarian argument states that an unregulated market will provide for the greatest net benefit to all the participants in the market, specifically the buyers and sellers. As some state, there is an “invisible hand” that fosters the welfare of all participants. First, buyers of goods and services will seek after the things they want and or need at the lowest price they are able to find. This demand of the goods by buyers will provide desire for producers to supply the goods. This supply and demand, coupled with little government intervention, will provide for the lowest possible prices of the products that consumers want and need. Producers, in order to keep costs down will seek after ways to use resources more efficiently and thus economically. If a resource is scarce, and therefore expensive, a producer will find ways to extend the resources available, or innovate other ways to use alternative resources. The result of this free market is a situation in which all involved receive the greatest net benefit or greatest utility.
In this situation government intervention and regulation should be negligible. The purpose of governmental interaction would solely be to protect the continuance of a free market and the pursuit of happiness and the right to private property. It is believed that any interaction or regulation above this would only impede the natural and efficient flow of a free market. Many economists also believe that government action is usually ineffective because it is often “after the fact” or that actions are based on limited information and is therefore less successful.
While there are some valid arguments against a utilitarian view of a free market, are they strong enough to dethrone the defense established above? First, the most often raised criticism of the utilitarian defense of free markets is that the views are based on assumptions that are inherently flawed. Some believe that these assumptions are impractical, improbable, and idealistic. For example, utilitarian arguments assume that there are multitudes of suppliers and a plethora of alternative products. Some state that unfortunately this isn’t always the case. In many situations there may be an oligopoly, or even a monopoly that may adversely effect the normal market processes of supply and demand. For example, Bill Gates could greatly increase the prices of his operating systems and there is relatively little the consumer could do about it. This situation does not provide for ultimate utility for all participants.
While this claim is valid in the short run, it does not take into effect the true idea of utilitarianism in that the benefits and costs must be evaluated not only immediately, but for the entire foreseeable future. If a monopolistic entity took advantage of its position there would undoubtedly be initial negative implications. Fortunately the market, in the long run, would correct this problem. This would happen in one of two ways.
• Competitor(s) would find a way to enter the market in order to claim “a piece of the action.”
• Consumers would attempt, and finally discover alternatives.
Another argument against the utilitarian free market is in relation to the assumption and idealistic view that manufacturers will bear all the costs associated with production. It is argued that manufacturers may dump hazardous waste into the air and sea without having to incur the costs associated with cleanup, or health and environmental issues. It could be said that the sludge of industrial activity slips through the fingers of the “invisible hand.”
While this issue is also valid, there is a rebuttal. As time progresses and information distribution becomes more efficient and easily obtained, it becomes more difficult for manufactures to hide their actions. The consumers are knowledgeable and will place value (utility) on the issues they feel to be of the most import. If the general public discovered that their favorite company was polluting the environment they could choose (in a free market) whether they receive greater satisfaction (utility) from the product, or the environment being polluted. A close parallel to this is that even though the entire population has information regarding the effects of smoking, millions choose the satisfaction they receive from the product over the pollution of their bodies.
In conclusion, it is imperative that we recognize that it is the relatively free market in which we live that has made possible the vast accomplishments of our great nation. While it is important to maintain a free market, I also admit that a market void of governmental regulation of any kind is problematic. As stated above, government has the duty to protect the rights of the individuals, both producers and consumers, within the market, and to insure that their rights to property and free trade are maintained. In addition to this, I believe that government should aid in the collection and distribution of information relevant to the market. It is only in an educated and knowledgeable population where 1; alternatives can be recognized and, 2; utility can be measured, that 3; the alternatives with the greatest sum total of utility produced can be chosen.