A. Individual good of resource discretion

Economic rights can serve the interests of individual right-holders by providing resource discretion (examined in this section) and social contribution esteem (examined in the next section).^{Footnote 10} We enjoy resource discretion when we have some control over our earning and spending. To take spending first, markets allow individuals to exercise considerable discretion over their consumption activities. With this discretion we can choose how we use our resources in accordance with our needs and wants, including making judgments about trade-offs. Therefore, markets allow us to govern our spending in such a way that it partly reflects our idiosyncratic needs and desires.

To see this, consider someone whose food, housing, transportation, and health care are provided by the state. Like patients in a hospital, they are not able to exercise the most minimal agency over how their needs and wants are satisfied. Goethe offers this prophetic remark: “[With regard to] mankind’s beautiful dream that things will go better someday . . . I too am convinced that humanity will win in the end; my only fear is that at the same time the world will turn into a vast hospital and each of us will become his neighbor’s sympathetic nurse.”^{Footnote 11} If all service provision is determined and delivered by the state, then we do not make individual choices about how to satisfy our wants and needs. Another way of seeing why this is important is to consider the virtue of generosity. When we lack control over how resources are used to satisfy our needs and desires, we cannot divert resources that would be spent on us toward others. For this reason, in fact, Aristotle argues that the collective ownership of resources hinders the exercise of temperance and generosity.^{Footnote 12} At the very least, we are less able to give to others when we lack discretion over our resources.

Resource discretion is also enhanced when we have discretion over our earning. When we have some control over our productive activities, we have the power to intentionally act in ways that translate our time and talents into income. Granted, our income level is always partly determined by factors outside of our control. But we can calculate that this task or product has a price in our social context, and invest our time and energy in a way that leads to acquiring additional income. In other words, we can increase our resources according to the time and energy that we devote to income-generating activities. This means that our pool of discretionary resources is something we can deliberately and reflectively manage, at least to some degree. This ability to partly govern our resource situation is a significant contributor to well-being.

The discretion that I am talking about does not entail economic security or economic independence. In a complex economy, these things are as impossible as they are undesirable. What matters is that we are able to exercise some agency with regard to our various dependencies.^{Footnote 13} One reason the affluent seek to maintain their wealth is that it puts them in a position to choose the mixture of economic dependencies that suits them. Therefore, resource discretion includes the ability to save, invest, and navigate financial risks, as these are valuable forms of second-order control. Having some control over the way in which one secures and manages resources is valuable over and above controlling the resources once they have been obtained.

When we have some control over our earning and spending, these two kinds of discretion work hand-in-hand to expand our sense of agency. When they are both present, we can intentionally manage how we translate our activity into needs-provision. This discretion allows us to meet our needs by a combination of active and passive means, in just the mix that suits us. Some of us want to have our own garden, some want a community garden, and some want to buy food from other people’s gardens. In none of these cases do we escape dependence. It is just that a market provides a range of options, so that some negotiation of the boundaries of dependence remains in our hands. George Washington was fond of quoting the Hebrew Bible imagery of a paradise in which each family is dwelling beneath their own “vine and fig tree”—a longing that suggests that, while we can never be entirely independent, we still value having some control over how we meet our basic needs.^{Footnote 14}

The value of this discretion can be understood as an application of the principle of subsidiarity—roughly, the idea that it is better for decisions to be made at the lowest possible level of competence. If decisions have to be made about the terms of cooperation, then it is better for the cooperating parties to decide than for some higher authority to do so.^{Footnote 15} Since productive activity defines so much of our day-to-day experience, it is an important arena in which to be guided by our individual values and goals in life. For these reasons, resource discretion reflects important aspects of human well-being.^{Footnote 16}

B. Individual good of social contribution esteem

Markets offer us a unique way of being esteemed for our contributions: the sense of being valued that arises from uncoerced payment for work. When we participate in a market by selling our goods or our labor, we gain social contribution esteem. Granted, certain forms of unpaid work are viewed as social contributions, but paid work offers a special kind of affirmation that our work is considered valuable by others in our community. This is because it involves an accumulation of many free individual decisions to spend money, a currency of universal value. Others are not under an obligation to buy our goods and services, nor are they forced to pay for them, so their free choice indicates their subjective valuation.

As Adam Smith observes, when we address ourselves to the self-interest of others, we put ourselves in a position to be recognized as someone who contributes something of value to them, by their lights.^{Footnote 17} In a market, the price mechanism gives us comparative information about how to apply our time and talents, given our situated knowledge about our abilities and circumstances. We then use this information to engage in activity that others are likely to regard as valuable. Thus, the market allows us to experience being esteemed for our contributions, because we can observe how others value them through their willingness to pay.^{Footnote 18} This lines up the fact of income with the recognition of the value of the product or service by those receiving it. Market-based income better achieves this alignment, because the determination of payment is closer to the perceived value of what is provided.^{Footnote 19}

There are ample reasons not to equate spending decisions with objective social value.^{Footnote 20} However, spending decisions are a fair proxy for whether people believe something is valuable. They indicate the perceived value to others of what we do, thereby furnishing us with a basis for being valued by others as a contributor. It is important to observe that a buyer is not so much recognizing that we are valuable, but that something we have provided is valuable. This detaches the social worth judgment from the individual producers and transfers it onto their labor or products. Market-based income allows us to see our earnings as arising from the unforced recognition by others of the value of what we can provide, rather than having our income levels set by electoral politics, lobbying, or the government bureaucrat’s incentives.^{Footnote 21} Only then can the ensuing income be viewed as a signal of social contribution, and only then can it serve as a source of social contribution esteem.^{Footnote 22}

C. Collective good of wealth

So far I have been describing goods that are generated for individuals by the legal protection of their economic agency. Now I turn to the collective goods, those benefits that are provided more generally.^{Footnote 23} Sometimes, rights come to be justified not only through serving the interests of the rights-holder, but through serving the interests of others. In other words, they bring about some social or cultural circumstances that are good for everyone, not just those who engage in the activity that is protected by the right. This logic can be found in J. S. Mill’s argument that expressive liberties serve the collective interest in truth.^{Footnote 24} Joseph Raz has expanded Mill’s logic to cover a range of liberal rights:

Thus, for Raz, liberal rights are justified by their contribution to well-being through the maintenance of a public culture. What might be the contribution of economic rights? My suggestion is that economic rights contribute to general well-being by providing three collective goods: wealth, diffusion of power, and freedom of association.

The first collective good that markets serve is wealth. Astute readers will have noticed that I did not mention wealth, or even utility, as an individual good served by markets. That is because I think it is more plausible to construe the utility gains that are produced by markets as a collective good: namely, the elevation of average real income. Markets achieve this because they lead to productivity gains and growth on a relatively sustainable basis. Markets are not the only means to this end, but they are a reliable and proven means of realizing it on a large scale.^{Footnote 26} One plausible mechanism for this is the superior use of information in a market system. F. A. Hayek argues that markets solve two problems—the use of knowledge and the operation of incentives—thereby allowing for economic action that is better guided by the relevant information. He concludes that competition is a good procedure for discovering the most effective use of resources, because it induces many individuals to rationally and dynamically adjust to the actions of others.^{Footnote 27}

Another mechanism by which markets generate wealth is economic growth, facilitated largely by entrepreneurs and capitalists. Both bear financial risks privately: capitalists risk their own resources, while entrepreneurs are normally backed by investors. They both enable growth and increased productivity without the need for public assumption of risk. Entrepreneurship in particular is a vital source of endogenous economic growth, as Joseph Schumpeter points out.^{Footnote 28} When entrepreneurship occurs on a regular and voluntary basis, it provides a durable basis for the steady increase of wealth.

When this sort of growth occurs consistently over time, the government can comfortably finance public goods through taxation. One of the most vital public goods is common defense, a precondition for the secure enjoyment of other goods.^{Footnote 29} But tax revenue can also be used to fund goods like education, health care, dependent care, and the arts. Providing these further goods is possible only when there is an ample stream of tax revenue. When communities have spare resources to support these goods on a sustained basis, the whole group is better off. Some also argue that a community cannot fulfill its duties of care to members unless some people generate surplus wealth voluntarily.^{Footnote 30}

Besides unleashing the creation of wealth, markets also sustain wealth through the optimization of public spending. All markets require that some party—whether individual, group, or institution—play a governance function, and that party needs resources in order to operate effectively. Often this function is fulfilled by a state government, but not always; sometimes the common expenditure is managed through customary or voluntary arrangements. For simplicity, I will refer to the resources required for upholding the market as “public expenditure.” Markets provide incentives to keep public expenditure efficient—that is, as low as possible while still enabling exchange to occur. When a market is functioning well, the resources that are required for governance are collected from all participants. In this arrangement, the pool out of which public expenditures are funded is perceived by contributors as a sum of privately-generated wealth. In a state, this means that the government relies mostly on taxation for its income. Individuals perceive the taxes they pay the government as given, not merely returned. ^{Footnote 31} Hence it is felt that the government depends on the people, rather than the other way around. This leads to a sense of ownership and accountability regarding common expenditure: not only is money spent in the name of all those involved, the money that is spent is regarded as the people’s money.

This sense of ownership, in turn, has positive effects on the quality of public spending. Here I draw on an argument advanced by J. S. Mill:

When those with the power to spend public funds are accountable to those paying into the treasury, this maintains the link, as Mill says, between “the power of control” (raising and spending common funds) and “the interest in its beneficial exercise.” Moreover, Mill thinks that this tax burden should be felt by everyone directly, in a way that is unmediated by consumption:

I read Mill as making an argument here about the operation of incentives: when we feel that our contribution to the public expenditure comes out of our own private wealth, we are keen to keep the expenditure low and ensure that it serves our interests. In other words, we are incentivized to make sure that the costs of governance are worthwhile and not overly burdensome.

Mill’s argument is echoed in debates about development aid. Dambiso Moyo argues in Dead Aid that as long as governments derive substantial portions of their budgets from foreign donors, they do not need tax revenue from their citizens. Speaking from her own experience in sub-Saharan Africa, she suggests that a lack of reliance on the private wealth of citizens reduces the degree to which governments feel—and actually are—accountable to their citizens. She argues that foreign aid reduces the government’s financial dependence on its citizens, which in turn, reduces accountability. This can lead to a system in which the citizens are economically reliant on the government, rather than the other way around.^{Footnote 34}

These observations indicate that when a market is functioning well, its system of public spending will be optimized to serve wealth creation, since its operating revenue depends on taxation of this wealth. Leaders have an incentive to make sure that the common expenditure is effective and efficient, and that it is seen as such. They are also motivated to ensure that the collective public expenditure does not have unintended consequences that would impede the production of wealth. These dynamics provide an incentive for prudent public spending, which in turn allows wealth to be sustained and increased over time.

D. Collective good of diffusion of power

Another collective good that markets promote is the diffusion of power. When markets are functioning properly, they allow us to avoid systematic dependence on a few powerful actors, whether those actors be public or private. Someone may worry that markets facilitate the domination of the many by the few.^{Footnote 35} It is true that markets cannot eliminate the dependence of some individuals on other individuals who have more power. But markets are a necessary part of avoiding large-scale and systematic dependence of many people on a small number of actors.^{Footnote 36}

Without market freedoms, there is a risk that two spheres of power will converge, thus amplifying the concentration in each. Michael Walzer argues that by maintaining a separation between the spheres of economics and politics, we can avoid having differential economic power translate into differential political power.^{Footnote 37} Milton Friedman goes further, suggesting that separating economic and political power counteracts the tendency of power to become more and more concentrated:

Friedman’s point here is not that economic power will always counterbalance political power. Rather, it is that economic power has a chance of doing so only if it is kept separate from political power. This observation implies that, when markets are functioning properly, they provide a means of counteracting the concentration of political power, thereby promoting the overall diffusion of power. In order for a market to deliver on this promised good, it must be organized in such a way that it prevents monopolies, lowers barriers to entry, and avoids elite capture of regulatory power.

E. Collective good of freedom of association

Another collective good that markets provide is a public culture of freedom of association—that is, a rich and varied civil society that is characterized by the easy and regular formation of associations for all kinds of purposes. A shared social practice that allows us to step in and out of these associational ties without seeking the permission of an authority is valuable.^{Footnote 39} This value is most visibly embodied in the political culture of the United States, but its theoretical defense derives from European theorists of liberal democracy such as J. S. Mill and Alexis de Tocqueville. For instance, Tocqueville hails freedom of economic association as an essential part of a healthy political culture. In Democracy in America he says,

Thus, Tocqueville sees economic associations as important training grounds for political cooperation. But more significantly, he argues that this benefit will be reaped only if there is legal protection of the right of association:

Tocqueville argues that it is the right to associate, as much as the activity itself, that benefits the public. Where only some associations are allowed, there is enough doubt to discourage the practice in general, thereby harming the public culture. Here he is not resting his defense on the outcomes of association, or even the activity of association—rather, his defense rests on the salutory effects of wide legal protection of association. Hence, Tocqueville thinks that what is essential to a healthy public culture is the absence of restrictions on associational life, including economic associations. Tocqueville’s argument resonates with liberal perfectionists ranging from Mill to Raz, who argue that the legal protection of individual rights promotes important collective goods for society.

A. Economic and political association

Aristotle famously describes human beings as political animals.^{Footnote 42} But what marks out a political community from other types of social organization, for Aristotle? Often we focus on Aristotle’s conclusion that a city is, essentially, a partnership in virtue.^{Footnote 43} But it is instructive to look again at the starting point of the investigation. Aristotle begins by defining the political community as that which is self-sufficient for living well.^{Footnote 44} But why not, then, count as political other forms of community that are big and diverse enough to adequately provide for the common welfare—such as, for example, a marketplace?

Aristotle sees the force of this objection, since he straightaway considers communities based on exchange:

One might be inclined to hear these remarks as a Hobbesian observation that the enforcement of contracts is necessary for justice. But that would miss the deeper point. These treaty agreements are about cooperative arrangements for mutual advantage, and the terms include enforcement. Since these agreements are not enough to constitute a political community, according to Aristotle, the political community must be more than just a system of cooperation with an agreed mechanism of enforcement. Aristotle emphasizes this further by explicitly considering the case of a stable and complex market:

For Aristotle, it is quite possible to imagine large-scale communities that are sufficiently organized and self-sustaining to provide for the needs of their members through trade. He is effectively describing a marketplace, right down to the division of labor. In these circumstances, the participants have no shared end beyond perpetuating a system of mutual advantage, where advantage is to be judged privately by the parties to the cooperation.

Such a marketplace does not count as the highest form of human community, for Aristotle, because the individuals are not partners in deliberative choice—that is, they do not choose together to live together:

Aristotle claims, then, that participants in a market are not truly partners in deliberative choice. Otherwise they would “establish offices in common” to deal with any matters that arise. This system of common offices would have to go beyond the enforcement of contracts, since Aristotle thinks such enforcement is available in relations based on trade and defense. For Aristotle, contract enforcement exists only for the sake of “preventing wrongdoing and exchanging goods.” In contrast, when the parties to the association “establish offices in common,” this evinces a commitment to be partners in the exercise of deliberative choice.

Here is the key point for my argument. On this reading of Aristotle, it is characteristic of trade relations that they do not involve a partnership in choosing ends, including shared deliberation about the means to those ends. Otherwise trading relations would not be different enough from membership in a political community. Aristotle speaks of alliances for trade and defense as falling short of a political community because they do not involve the sharing of ends, or even sharing in deliberation about joint ends. Because they lack this feature, according to Aristotle, these sorts of relations fall short of the highest form of human community.

What Aristotle sees as the crucial defect of a marketplace can, instead, be seen as a strength. In a market, individual parties pursue their separate ends, and their cooperation is merely a means. A system in which participants exchange goods and services for the sake of mutual advantage does not require a sharing of ends. Some instances of market exchange may involve shared ends incidentally, but this is extraneous. Nor does exchange require any kind of co-deliberation of how best to pursue joint ends. What might appear to be deliberation about the terms of the exchange is effectively a bargaining process. Individual parties deliberate for themselves about the terms on which they are willing to go ahead, and then reveal that to other parties in whatever way best serves their interests. Therefore, market exchange is instrumental in nature—it is a means to ends that the parties have chosen separately and independently of that particular exchange.

B. Collective goods without collectivism

Drawing on this element of Aristotle’s analysis, I suggest that the distinctive feature of markets, as compared to other forms of social organization, is that they facilitate cooperation without shared aims. A market system facilitates beneficial cooperation by assigning some legal protection to economic agency, while neither neglecting nor overstating its significance. When a system allows individuals to pursue their own ends, and at the same time, to generate mutual advantage with others who do not share their ends, then its participants get some benefits that they would not get otherwise. This potential is unique to markets.

This way of understanding the unique potential of markets resonates with F. A. Hayek’s defense of the market. Like Aristotle, he thinks it is characteristic of a market not to be oriented toward a uniform hierarchy of ends. Thus, Hayek distinguishes between economy and catallaxy: an economy is an organization in which “all effort is directed toward a uniform order of objectives” (such as a household or a business), whereas catallaxy refers to spontaneous order. He argues that what we currently call “the economy” is actually order that emerges spontaneously from patterns of exchange, and that “the objectives it serves are actually the particular objectives of all its participants in all their diversity and polarity.”^{Footnote 48} Hayek thinks that this feature is the distinctive advantage of market forms of social organization. It is important to acknowledge that the parties to an exchange may in fact be motivated to bring about mutual benefit, and that the practice of exchange may engender virtuous dispositions over time.^{Footnote 49} However, such motivations and dispositions are not essential for the market to deliver the benefits of cooperation on a large scale.^{Footnote 50}

C. Legitimacy of markets

Now we can return to the question of legitimacy. At the most general level, markets promise to benefit those who participate in them through the protection of a sphere of economic agency. The unique potential of markets, I have suggested, is to enable the sort of beneficial cooperation in which participants need not share ends. This is its raison d’être, I submit. And just as with the public library, insofar as a market does not fulfill its raison d’être, or it fails to do so in a way that is recognized by participants, it lacks legitimacy.

In the discussion of the goods served by markets, I spoke of “markets functioning properly.” This idea of proper functioning allows me to be more precise about the economic rights that are suitable for realizing this raison d’être. In order to provide resource discretion, a market must minimize interference in freedom of contract—for instance, licensing schemes.^{Footnote 51} Discretion over consumption requires avoiding a welfare system so extensive that virtually all consumption decisions are made by the state. In order for a market to function in such a way that it delivers the collective good of wealth, there must be a strong presumption against price controls and wage controls. The interest in promoting wealth through optimal public expenditure implies that the tax base should be broad, so that the burden is not thrust chiefly on the poor or the wealthy, and so that public spending is directed toward public goods. The interest in diffusion of power implies the fostering of a competitive environment, including effective mechanisms to prevent monopolistic behavior and elite capture of regulatory agencies. While this is not the place for an exhaustive list, these are the sorts of features of a market that would allow it to function properly—that is, to achieve its raison d’être. Whether all of these features can be suitably combined is a question I will address below.

It is worth clarifying why this standard of legitimacy is a moral standard, even though it is distinct from justice. First, the raison d’être is something that has pro tanto moral value because it corresponds to important human interests—for instance, resource discretion. Resource discretion is morally significant even when it is imperfectly realized and contingent on certain background conditions. Therefore, a legitimacy standard that requires the fulfillment of this raison d’être incorporates an aspect of morality. The second way in which the standard is moral is more subtle because it pertains to beliefs. Someone might be inclined to think of criteria that rely on social facts about a practice, such as the beliefs of those involved in the practice, as merely sociological—that is, belonging on the descriptive side of the normative-descriptive divide. However, I think this is too quick. When participants in a practice recognize that a practice has value and accept it on that basis, such widespread acceptance takes on moral significance. In these circumstances, participants come to engage with social structures in a non-alienated way and, over time, learn to pursue their interests in ways that align with the perceived interests of others. This mode of engagement is often the critical ingredient in cooperative social orders whose maintenance does not rely on oppressive coercion. While some participants may have mistaken beliefs, this does not necessarily cancel out the value of their non-alienated participation in a practice that has moral value. For these reasons, the standard of legitimacy I am proposing can be seen as one register of moral evaluation, though it is distinct from other aspects of morality such as justice and welfare-promotion.^{Footnote 52}

D. What market legitimacy is not

The account I defend implies that some common criticisms of markets, if true, would not make them illegitimate. For example, it is sometimes said that markets embody a kind of justice, one that is based at least partly on responsibility. According to these views, the divergence between actual outcomes and the outcomes that we are responsible for is a problematic aspect of markets—one that calls their legitimacy into question. We could close that legitimacy gap, they say, by altering market outcomes in such a way that they better track responsibility.^{Footnote 53} But notions of responsibility are at least partly internal to the institutional framework of markets.^{Footnote 54} To my mind, this suggests that tracking a market-independent notion of responsibility cannot be what a market is for, fundamentally speaking, and thus cannot be what grounds its legitimacy.

Others argue that markets embody a kind of justice that is based at least partly on equality, taking this to be the legitimating aim of markets. Whether this is plausible depends on what is meant by equality. Equality of outcomes, to take one interpretation, is evidently incompatible with the definition of a market, since a crucial element is competition for unequal shares. Equality of opportunity, another interpretation, also seems to be in tension with the basic definition of a market, at least insofar as that includes an ordinary understanding of private property as inheritable.^{Footnote 55} A third option is equal concern for persons, a view that requires the government to remedy some inequalities brought about by markets through a fair scheme of taxation, where this is defined by what citizens would endorse from a hypothetical perspective.^{Footnote 56} Locating the legitimacy of markets in a hypothetical choice situation relies on a notion of fairness that is at odds with the essential features of markets, in my view. All actual exchange is the result of bargaining under conditions of asymmetric information and power, and the exploitation of this positional knowledge is precisely what enables markets to deliver their distinct benefits. To my mind, this opposition between equality and the essential dynamics of markets indicates that equality cannot be what a market is for, fundamentally speaking, and thus cannot be what grounds its legitimacy.^{Footnote 57}

Failures to realize equality or track responsibility would not compromise market legitimacy, in my view. While they may be desirable or good-making features of a market or a society, their absence does not—in and of itself—make a market illegitimate. To see this, consider the library example again. There are ways in which a public library could fall short on these dimensions but not be illegitimate. The library may waive fines twice as often for those who bring doughnuts to the librarian (unequal concern), or impose fines without due regard for whether the user had a good reason (insensitive to responsibility). It can be true that the library would be better if it avoided these things, but that fact by itself does not show that the library is illegitimate.

Ultimately, these ways of criticizing particular markets rest on judgments about justice. Why should we expect markets to be fully just in order to be legitimate? Some of the criticisms boil down to second-order claims about an overlapping consensus on justice (say, one that can be endorsed by all reasonable people). But again, why should we expect markets to reflect shared judgments about justice in order to be legitimate? As Aristotle points out, the commitment to common adjudication of questions of justice is distinctive of a political community, not an economic one. What markets offer, instead, is a form of social order that functions without shared views of justice. Therefore, my disagreement with those who theorize about the justice of markets goes deeper than the intramural debates about egalitarianism and distributive fairness. The standard of legitimacy that I defend leaves open the possibility that markets make their distinctive contribution to human welfare—and thus warrant our endorsement—without necessarily claiming to advance equality or distributive justice.

A. Regulation as balancing and blending

Suppose that I am drafting an essay prompt for a university course on Rousseau. I am aware that one student has read Rousseau before and is particularly gifted at philosophy, and I want the essay prompt to be challenging for her. But I am also aware that many students, probably the majority, are not capable of grappling with the deepest elements in Rousseau’s thought before the deadline. Therefore, I should construct a prompt that will be engaging both to the majority and to the star student. Furthermore, I want to balance two modes in which the essay assignment serves their interests. One mode pertains to the outcome: excellent essays. Another mode pertains to the process of reckoning with the material. The prompt should be challenging enough that students learn something in the process of attempting to answer it. The gains of this reckoning are distinct from whether the resulting output is a superb essay (sometimes it turns out worse). As an instructor, I seek to balance these two aims rather than neglect one for the sake of the other.

To take another example, suppose that I am planning the menu for a feast in which a large family cooks and eats together. I should choose dishes that are both engaging to make and pleasurable to eat, thereby balancing outcome goods (tasty food) with process goods (enjoyable cooperation in cooking). Also, I should select an array of dishes that are hated by no one (or off-limits due to dietary restrictions), thereby balancing individual and group satisfaction. My four-part balancing act must also accommodate the physical constraints of time and equipment.

Anyone who has ever planned the menu for a feast or drafted an essay question will recognize that balancing these different goals is difficult but not impossible. The fact that the goods are plural and occur in different modes makes balancing them a more complex task, one that is not reducible to a maximizing calculus. Still, there is a kind of excellence involved in devising a single coordination mechanism for a non-uniform group, in such a way that the group jointly realizes a range of goods. In the best-case scenario, the goods are not just balanced, but blended, and even integrated. Crafting regulations for a market involves a similar sort of balancing.

B. Regulating markets

I have proposed that markets have the potential to realize a nexus of human goods through the protection of economic agency. In order to determine the appropriate contours of this protection, regulators must consider how to balance and blend these goods in such a way that they can be jointly realized. When this realization is achieved in a given set of circumstances, a market is functioning properly. This way of thinking reminds us that there is no market without some regulation, thereby avoiding the false naturalization of economic relations.

Economic agency can be regulated in ways that not only fail to realize these goods, but actually set them back. For example, the regulatory framework for collateralized debt leading up to the 2008 American mortgage crisis led to a situation in which several goods that should have been advanced by the market were set back, to say the least. Therefore, regulators can fail in their balancing act through inadequate calibration. This inadequate calibration could manifest itself in several different ways—for instance, loss of individual discretion over consumption, or an excessive concentration of power in a few hands. When this happens, it suggests that the delicate calibration of laws pertaining to economic agency needs to be revisited and adjusted.

To guard against this sort of calibration failure, regulators should never entirely sacrifice one element in the nexus of values for the sake of maximizing another element. Such an unbalanced approach is often the result of the influence of particular schools of political thought. Some approaches to regulation (often associated with economics) are tempted to sacrifice freedom of association for the sake of maximizing utility. Other approaches (often associated with social democrats) are tempted to sacrifice utility in order to promote social esteem. And other approaches (often associated with libertarians) are tempted to sacrifice the diffusion of power for the sake of resource discretion. They all grasp part of the truth about market legitimacy, in my view, but mistake their part for the whole.

The goal of regulation, on the account of market legitimacy I have been defending, is to (i) uphold the proper functioning of the market and (ii) do so in a way that makes its proper functioning evident. In other words, regulation should guide and constrain economic activity in such a way that the raison d’être of a market is broadly fulfilled, and can be seen to be fulfilled. Then a market will have achieved legitimacy.

C. A Place for rhetoric

Achieving legitimacy requires not only well-calibrated regulation, but also well-crafted rhetoric, so that it is seen as functioning properly by those who are involved. The recognition aspect is essential for a realization of the raison d’être that is secure and sustainable over time. The practice will continue only if it is endorsed by participants as serving the values that justify its continued existence. This means that the case for a market must be made to participants in such a way that a wide cross-section of them recognize that it is fulfilling its potential. In other words, the participants who recognize it must significantly outnumber those who do not, and those who do must include members of multiple socioeconomic categories—the poor and the wealthy in all cases, and in some circumstances subgroups corresponding to gender, race, language, and so forth. Hence, those who are in charge must “sell the public” on the market’s promise, as well as show that it has been fulfilled.

This is easier than it sounds because the basic ideas are intuitive and graspable. Former U.S. President Barack Obama engaged in this public rhetoric in his 2016 op-ed in The Economist, which expanded on his speech to the United Nations. There he enumerates a plurality of ways that markets can fall short of what we expect:

Obama explicitly names prosperity and opportunity as two key values that markets enable. But implicit in his list of “legitimate concerns” are other goods that markets should not ignore entirely: broad-based income growth, sufficient wages to meet one’s needs, a price mechanism in financial services that better reflects genuine contribution, and avoiding the concentration of power among elites. Having validated the perception that markets are not functioning properly, he then goes deeper into why his audience should not lose faith in markets:

Thus he acknowledges that markets can be seen as worthwhile only if these problems are addressed. Otherwise, markets fail in their core value proposition, even if they deliver other benefits. While reminding us that America’s economy is “enormously complicated,” Obama nevertheless points to how these problems could be addressed jointly. He emphasizes that leaders should contrive particular policy adjustments that will advance one aim of markets without undercutting others. For instance, “Curbs to entitlement growth that build on the Affordable Care Act’s progress in reducing health-care costs and limiting tax breaks for the most fortunate can address long-term fiscal challenges without sacrificing investments in growth and opportunity.” Whether or not this is true, it illustrates the sort of balancing judgment that I described earlier—how to promote one good without entirely sacrificing others. Overall, Obama’s speech conveys to a general audience that economic regulation consists of delicately balancing a set of vital goods. Since this balancing is something that ordinary people can understand—just like the menu at a large feast—no mystification is required.^{Footnote 60} While the overall argument will not be won or lost in a single speech, Obama’s rhetoric cuts through the political propaganda (on both sides) and provides an example of how to sell a disillusioned public on the promise of the market.

D. Comparative advantages

Adopting this standard for market legitimacy allows us to jettison several problematic aspects of other accounts. First, it allows us to assess markets on multiple evaluative dimensions rather than just one. For example, we need not make the dubious claim that markets are legitimate because they maximize utility. Also, we need not rely exclusively on moral ideals of self-ownership or natural property rights as the basis of market legitimacy. Furthermore, it allows us to avoid the simplistic dichotomy of freedom and coercion. Markets are not always free of coercion, and this is one reason that I replaced the typical slogan of “cooperation without coercion” with “cooperation without collectivism.”^{Footnote 61} This account offers a standard of market legitimacy in which we do not need to rely on abstract idealizations of freedom and equality.^{Footnote 62} Avoiding over-reliance on these one-dimensional standards of market legitimacy is a major advantage.

A further advantage is that this legitimacy standard broadens the horizons of those who regulate markets. They can sidestep the pressure to justify all of their regulation in the narrow terms of market failure as defined by economists. This account also makes a place for rhetoric in securing the endorsement of participants in a market, rather than relying on forms of justification that are accessible only to experts. Overall, this account of market legitimacy provides a more comprehensive and coherent basis for criticizing and reforming markets.

Finally, this standard allows us to say that while markets can be valuable in certain circumstances, they are not the solution to every social problem. The degree to which market institutions deliver the goods that would justify their existence varies according to the particular item that is being exchanged—consider, for instance, markets in votes. It also varies according to the context and background conditions. There are some circumstances in which markets simply cannot function properly, and this is not just a matter of fine-tuning the regulation. In these situations, market arrangements would set back important human interests, because the conditions are not suitable. Markets are not intrinsically legitimate, whenever and wherever they exist. Instead, they are capable of being legitimate, depending on the circumstances.