Pro-Business vs. Pro-Market

The past four years of my life, I’ve been a business economic consultant and forecaster.  It’s been a very informative experience, and one that helped drive home a very important point: there is a world of difference between being pro-business and being pro-market.

When someone like myself advocates free market policies, a common slur that is tossed around is that we are “big business shills.”  The reality, of course, is very different.  There are extraordinarily few businesses that unconditionally support free markets.  Many seek some kind of protection, either from international competition or from each other.  They lobby for rules, regulations, and protections to keep them safe and harm their competition.  In his famous article, Bruce Yandle explores the relationship of businesses to regulations.  This is not free market behavior.  In this sense, people like Bernie Sanders and Liz Warren are pro-business.

However, this slur is so politically popular that the term “pro-market” and “pro-business” are often used interchangeably.   But it misses a huge point: firms (producers) are only one aspect of an economy, just one aspect of a market.  There are also consumers.  When pro-business policies, such as tariffs or regulations are passed, it is often the consumer that gets hurt.  The free market supporter recognizes this.  The pro-business supporter often (although not absolutely) does not.  For example, if a tariff is passed on Chinese solar panels, then that raises the cost for consumers, which leads to less solar-powered homes and entrenches the power of fossil fuels in the US energy market.  Consumers are directly harmed by higher installation costs, but also indirectly by prolonging the issues caused by greenhouse gas emissions.  To be fair, there are other matters involved here (especially with the Chinese), but that is a matter for another time.

One must be skeptical when a policy is presented as “pro-business.”  The important question to ask is: who is paying the cost?

One thought on “Pro-Business vs. Pro-Market

  1. And what the left completely misses (and always will) is that as long as there’s a big powerful govt in D.C. or even locally, businesses will try influence it and employ its coercive power to do their dirty work (at small, if any, cost to them). You can even argue (not my unique insight, of course) that its irresponsible for them to do otherwise, as they will surely suffer if they unilaterally “disarm” by not playing that game.

    They (the left) accuse libertarians of being naive’ and/or utopianist, but they are the ones guilty of that as they imagine that somehow that influence peddling can be controlled, much less banished. But alas their blind spot is a mile wide and incurable for most.

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