In the case of human affairs, being efficient (with one another) is not the best rule! Who among us longs for being handled efficiently? Shouldn't someone, everyone, care about the impact of his/her decisions and actions on other people and on our future as a society? Survival of the fittest is not about one individual surviving, but rather the survival of an entire species. Clearly, the implication is having concern for the viability of future generations. Again, the market has no what's-best-for-we as a guide. Why create a society if it matters not whether it remains safe for people and viable for future generations?
Who takes care of all things efficiently and effectively? The market! But, the market is no one! So, who is in charge? Self-interest, silly! But, no one is watching out for everyone! No one is concerned about equity and stability through the exchange, yet everyone is keeping score of their own winnings.
Still, the argument for efficiency and effectiveness of free markets continues with the idea that all that is required is that we seek our own gain through economic exchange; the invisible hand will take care of the rest. (So, who, if not self-interest, tied the visible hands in the transactions leading up to the 2008 financial crisis?) It seems that this circular argument is tying a noose around our collective neck.
But Not in My Yard
If the free market is the Holy Grail for efficient and effective management of the exchange of products/services among people in society, why don't those in authority in corporations use the free market mechanism to organize and manage the transactions within the enterprise? After all, a business organization is nothing more than a series of transactions transforming inputs into outputs! Why not let the free market manage things in its efficient and effective manner?
Why not trust the thinking of Adam Smith, in regard to the value gained from self-interest pursuing individuals: "He intends only his own gain; and, he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention; pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it."?
Do away with managers and supervisors, because all that is needed is the free market mechanism. Who needs unnecessary costs and nanny-type oversight of free individuals who are exchanging their skills and knowledge as they carry out the work of the business!?! We don't need high paid executives to centrally plan and control things, just free-acting individuals with the omnipresent invisible hands, which are (presumed) reliable and readily available. And, most importantly, these hands are free, and, thus, could save shareholders a huge amount of money! Talk about reducing costs and maximizing profit!
If free markets are the answer, why do so many corporations seek to monopolize and control things? According to the free market perspective, such action is so inefficient. The amount of money spent on lobbying by the Chamber of Commerce, big business, industries and other self-serving interest groups is clear evidence that many don't hold much faith in the efficiency and effectiveness of free exchange to provide their needs.
Why is there advocacy for applying markets everywhere but not in the organizing and managing of organizations? Why the inconsistency? It is in the self-interest of the business-minded to make everything in a market, presenting even more opportunity for profit. It is in the self-interest of the business-minded to forsake enabling people the freedom to act in a semi-autonomous way, and, instead, use mechanistic control-over approaches as a way of organizing and managing the business--talk about central planning and control! The guide in both decisions is self-interest. Essentially, the business-minded are for markets everywhere except in their yard.
The Bottom Line
With the pursuit of material self-interest as the overriding intent, how could there not be a need to regulate transactions among self-serving actors who mistakenly believe they are independent actors? The fact is we are interdependent with everyone else, especially those not actively participating in the transaction. If you doubt that those not participating in the exchange are at risk, just step back and start counting the millions of people adversely impacted by the decisions of a few Wall Street traders or of a few oil company managers. When interdependent actors have no sense of responsibility to others and to the larger systems, such limited and narrow concern will inevitably be destabilizing and destructive. How can stability of the system be ensured otherwise?
Economic activity must not happen in a vacuum of self-interest; it must be within a context of cooperation. But, if we are each competing toward the maximization of our own gain, how could cooperation enter in? While the actors in the exchange are competing, they must also cooperate with the rules of exchange and of society. Effectually, instead of trying to make markets work everywhere-- markets are not everywhere appropriate --we need to formulate rules that regulate economic exchange to reduce uncertainty and risk, and to ensure equity and stability of the larger societal systems.
The irrationality of free market efficiency and effectiveness rests on faith in the goodness of self-interest, as does the irrationality that the invisible hands are there to ensure our actions add up for the greater good, especially when we act selfishly. Hey, who is to argue the slight-of-hand flimflam worked for the big banks when their self-interest put a noose around the neck of the rest of us!?!
The lesson here is that when self-interest--what's in it for "me"--directs the decision, the soundness of the decision is greatly diminished by the inherent bias of the decision-maker with the most leverage. They win, and we lose! As long as self-interest rules , there are no rules to ensure the viability of society. Remember, survival of the fittest is about the entire species, not the individual--survival is not possible without a viable We!
The market cares not about what's-best-for-we but only about what's in it for "me." Recall Adam Smith's assertion: "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from the regard to their own interest." When people try as they might to make markets work where they are not appropriate, it is a losing proposition for all.
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