Black markets vs. free markets

20 November 2009 by Mike Gogulski
Posted in economics, philosophy | 7 Comments »

On a private mailing list, someone asked:

Aren’t Black Markets and Free Markets mutually Exclusive?

Free markets don’t exist in any real sense anywhere today. State prohibitions, subsidies, taxes, regulation, privilege and the rest make them impossible on any substantial scale.

“Black market” as commonly understood is a problematic term, since it encompasses both harmless things that governments ban (the cannabis trade, for instance) in most places, as well as harmful things that governments also ban (murder for hire, for example).

I personally favor the market analysis given by agorist theory, which breaks down things along two axes:

  • White market: State-approved, moral (i.e. non-rights-violating) (e.g. on-the-books employment)
  • Gray market: Banned unless done in state-approved manner, moral (e.g. off-the-books trade)
  • Black market: State ban, moral (e.g. drugs)
  • Red market: State ban, immoral (e.g. murder for hire)
  • Pink market: State-approved (and largely state-conducted), immoral (e.g. taxation, conscription, compulsory education)

Visual illustration on slide 7 of a powerpoint I made for a presentation to a libertarian meeting this summer at (reproduced for readers of this blog below).

The five markets

The five markets

  1. 7 Responses to “Black markets vs. free markets”

  2. By Jac on 21 November 2009

    Brilliant chart.

  3. By Irish on 21 November 2009

    Nice analysis and well presented. I personally feel that morality is totally subjective and can only be best described as “social norms”. Our community (in a participatory manner) would need to determine when something was “outside the norm” and act in a unified manner to deal with the situation.

    The “black” markets provide us examples of this. Someone sells dope. The sacks light. Everyone in that “community” hears about it, no one buys their dope there anymore unless the guy makes some kind of amends to the community, maybe cheaper dope.

    The same idea can be applied to more intense situations. Someone kills another person. The community hears about it. No one associates with the killer, including trade of any sort.

    Yes, it is shunning, but seems to me the only way of dealing with the situation without being an aggressor ourselves.

    And if all else fails, the threat the individual poses to the community or to an individual must be considered. We must defend ourselves, as a duty to the community. Yes, this reeks of positive obligation, but in reality it would be an actual social contract, where each participant in the community (or collective) would agree to defend themselves to help avoid a hierarchial military state from forming. And of course everyone is free to abstain from taking action.

    Anyway, just some rambling thoughts.

  4. By David Z on 21 November 2009

    Excellent work! Now if only those who shall remain nameless would f*cking stop accusing agorists and other market-anarchists of being proponents of rape.

  5. By WageSlave on 21 November 2009

    Outstanding! This chart IMO would be an excellent tool to build a presentation around (YouTube, etc.) explaining ideas of free economics and free markets.

    More importantly, makes obvious where the State’s idea of economics and operation is immoral and that freedom of individual is actually the ethical and moral position.

  6. By Winterset on 23 November 2009

    It strikes me that by the definitions of the chart, there is no such thing as a red market. All the examples you list are things commonly done or sanctioned (by action or inaction) by the government and therefore would go in the Pink market list.

    Thoughts on that?

  7. By Mike Gogulski on 23 November 2009

    @Winterset: The line to the right of the white and pink markets might be thought of as where a state’s prerogative to prosecute the behavior kicks in. For example, theft by a bank robber triggers the prosecutorial apparatus, but theft via money-supply inflation doesn’t.

  8. By Pavitra on 10 December 2009

    Most of the entries in the pink box should really be in the gray column — imprisonment, for example, is banned if committed by private citizens (kidnapping), but allowed if committed by state officials (prison).

    The lower left box should be a separate category from the ones considered here. I’d do the bottom row like…

    Immoral/approved (pink market): parents treating their children as property; in certain (largely historical) societies, slavery in general.

    Immoral/controlled (purple market): imprisonment, taxation.

    Immoral/forbidden (red market): murder, rape.

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