Snake Musings on Markets
February 7, 2006
10:37 a.m., MT

Why do so many people seem to reflexively dislike black markets? That's found even among pro-freedom folk. A black market is simply a free market that state intervention has forced into the shadows, and by so doing, increased transaction costs.

Now, I can understand a fear of engaging in various black market transactions, because if the powers-that-wish-to-be catch free marketeers, the costs can be high. They don't like "naughty" men slipping about, after all, not only because it reminds them that they can't control individuals the way they want, but more importantly because it interferes with their money supply.

And really, when one thinks on it in this way, what self-respecting pro-freedom individual would want to willingly support the hand that's economically choking him or her? That's what licensing and inspections and other types of regulatory compliance do: they keep some individuals from entering a field because the entry costs are too high; and they raise the prices of "legitimate" goods and services offered -- getting all those permission slips costs money, after all. (Those costs aren't just in the form of fees to the nanny-ninnies, but also in complying with ridiculous laws that mandate certain kinds of equipment or handling.)

Very few individuals -- indeed, if any -- can completely avoid all markets. So the choice seems to be one of paying the state's inflicted transaction costs, or paying a "risk surcharge" for black market transactions. Gray markets -- where individuals operate in a narrow area that appears not to be regulated by the govgoons yet (like some of the raw milk sellers that Cat brought to our attention a couple of months back), and don't yet require the shadows of black market transactions -- would appear to be the closest thing to a genuine free market.

I'm not sure how I'd go about finding them, but after seeing the issue in this way, I'm pretty tempted to try to find more free markets to patronize. And to create my own niche or two.

Sunni

Comments: 6 people have contributed to the conversation

On Tuesday, February 7th, at approximately 9:10 p.m. Mountain time, Wolf DeVoon said:

Dope, gunrunning, money laundering, corruption, fraud, extortion, loan sharking, gambling, illegal immigration, child prostitution, sex slaves and preachers. I think 'vice' will persist, cops or no cops; that it will always be relatively small (maybe 3% of GDP) and roundly damned by parents and grandparents as evil.

On Wednesday, February 8th, at approximately 7:28 a.m. Mountain time, SRS said:

Go for it Sunni!
And thanks for "wasting" your time just for us!!

On Wednesday, February 8th, at approximately 7:37 a.m. Mountain time, Pood said:

pood Yum!

On Wednesday, February 8th, at approximately 8:25 a.m. Mountain time, Sunni said:

Hope I didn't say blogging was a waste of time, because I don't see it that way at all. (I just use it as an excuse for browsing way too much.)

And yes, I did have pood in mind while writing this entry.

On Thursday, February 16th, at approximately 8:25 p.m. Mountain time, Rieben said:

Sunni,
I came across this article and remembered your post.
The Black Market for Property Rights by Bruce Benson in JLS
http://www.mises.org/journals/jls/5_3/5_3_5.pdf
Seems that the main aversion to the black market, is that it is a scam devised by the politicos - sorta like insider-info: they fix the laws and run the scams, driving folks to the black market, where they sit waiting to make a profit. It is very enterprizing, but not very free. Since black markets are caused by the state, the link is usually made that the enterpreneurs and the politicos, if not one and the same, are working hand-in-hand. Two Russian novel characters come to mind, but I can't recall the name of either - one in Dr. Zhivago and one in We The Living, very similar types. I think our present-day black-marketeers are rather similar, although usually more at the level of the local thug department (except the drug trade, which runs to higher level thugs). This is also the foundation of the modern corporation (circa 1850), as govbiz collusion. A protected market is, essentially, black (in the originial meaning: distinct from free). An evolved concept is that the black market is not the official or legitimate or legal (as sanctioned by government) market, but this makes the alternate markets a function of the government prohibition (see alcohol or drug prohibition - and who runs the trade in those markets?). Of course, I don't think the government is taking a cut in the private farmer who sells raw milk. But ya never know.

thanks for link to takeliberty (underlying link should now be http://www.tbns.net/kelly/index.html - since I gave up the domain - or you could link directly to the links page lnkdex.html, which is far more interesting than the home page).

Richard

On Thursday, February 16th, at approximately 8:44 p.m. Mountain time, Sunni said:

Hi Richard, and thanks for your comments. I'll check out the article you reference; but in the interim, I thank you for your bit of history regarding the origin of the terminology and its evolution. I was thinking mostly in the "alternative market" sense you describe above. I've more to say on the subject of markets, when I have the time.

Thanks for the notice on updating the link. Can you email me regarding our unfinished business, at your convenience, please?

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