I was thinking about free markets. When many people talk about ‘Free ‘ markets I wonder exactly what they mean.  Is it ‘Free’ as in laissez-faire? Is it ‘Free’ as in ‘no monopolies but anything else goes’? Is it ‘Free’ as in caveat empor? Or is it ‘Free’ as in open and above board – a level playing field with free access to all? Somehow I don’t think the last option fits with most uses of ‘Free Market’.

I was thinking about free markets in terms of rivers. Some people think that rivers should be free. They should flow unobstructed, where ever nature takes them. People have noticed that building communities along rivers led to many good things. Not only do they get the enhanced agriculture from the constantly refreshed alluvial plain, but they also have a handy transport highway on the river itself. The communities learn to deal with the annual floods that refresh the fields. Life is good and everyone prospers. But, once a generation the river runs wild, floods outside its expected fields, diverts its path, gouges new channels, leaves communities high and dry, threatens prosperity, induces change. All-in-all, rivers may cause more damage in one year than all the good produced since the last catastrophe.

And people began to try things to prevent the catastrophes, or at least reduce the size of the catastrophes. They built dikes and levees to keep the water out of where they didn’t want it. They dredged deep channels to guide the water. They built concrete  causeways to keep the water flowing in a particular direction. They build dams to buffer the flow of water and deliver it to agricultural areas in a measured way. They regulated the free river to maintain a steady state of prosperity and they regulated it to handle the generational floods. 

But what happens when the 100-year flood comes? The dikes and the levees and the dams and the channels can be wiped away.The designers probably didn’t consider the 100-year flood too much in their plans. Why build for something that comes so infrequently? But the people will consider that when they rebuild and they will decide if they want to take the 100-year flood into account for the next set of dikes and levees and dams.  Then the 500-year flood, or Katrina, hits. Wipes everything out, at least in some communities along the river.

Does the building of all these river regulations increase the damage the river can do when it breaches them. Not directly, but people will start building more right under the dam when they think it is safe and will be for several generations. So the damage is greater because more people are living in exposed areas thinking, they are safe.

What’s probably worse is that people start taking down or ignoring the old dikes and levees because they haven’t  been needed. The last generation of floods didn’t push the limits of the regulations and people can see they are a waste of time and money to maintain.

So they forget the lessons learned many years ago, live in places that no sane person would have 100 years ago and live in blissful ignorance of the danger they may face.  And there is the other crux – may. Very seldom will a river threaten everywhere along its banks at one time. Over the course of hundreds of years, every spot along a river may face a threat,  but just because the folks down river were swept away doesn’t mean that you and yours need to worry about it.

So think about the free market as a free river. Subject to the vagaries of nature. Raging every once in a while, sweeping away everything in its path, destroying lives in many ways. And then returning to a placid, gentle stream with no sign of the raging monster within. And we people that live along the river can set up controls that prevent the raging damage. Stop the catastrophes that can wipe some of us out. The river still runs ‘free’, it’s not wild anymore. It just runs in the manner that is beneficial to the people that live along the river.

I suppose that there are some people that can make a living off the chaos of a river running free and wild, but not many. The river will damage more people running wild than it supports.