Speech, Markets, Lampert & Hayek

This week as I’m traveling please consider the following excerpt on free speech and free markets from Eddie Lampert, of ESL Investments and chairman of Sears Holdings, excerpted from his most recent shareholder letter.

"…I believe that in a capitalist society we are always faced with the tradeoffs between freedom and tyranny. In a free society and free markets, what people say and what people write have been largely protected by the U.S. Constitution (this is not always true in any capitalist society). This is much less true in the economic domain, where constitutional protections of private property and economic rights have been watered down over time to permit significant levels of regulation and government intervention. Just as with free speech and a free press you will have people saying things that others view as harmful, hateful, or obscene, so too in a free economy you will have individuals and businesses doing things that others will disagree with. Some of those things may lead to great business success and others to failure or to disgrace. To expect or allow for excessive regulation of business, including financial businesses, is to stifle growth and creativity, which ultimately produce jobs and wealth that are the foundation for any successful and free society.

The two most important books that any student of current events should be reading in this environment are both by Friedrich Hayek, the esteemed Austrian economist. Based on events he witnessed beginning in the early part of the 20th century, Hayek wrote The Road to Serfdom as a warning to England and the United States against the damaging impact of socialist policies and The Fatal Conceit as a warning against heavy intervention in markets and society at large. Despite the almost universal belief today that more, but better, regulation is needed and that the role of the state needs to be not just temporarily larger, but permanently larger, Hayek’s writings and logic should give everybody pause as to the consequences of these actions.

As a country, we need to rebuild confidence and trust and to understand what happened. Whether by business or by government, the misdiagnosis of situations leads to poor prescriptions for rehabilitation and recovery. When the misdiagnosis is done at the federal government level and involves large parts of a national economy, the consequences can be swift and significant. The unintended consequences are often swifter and even more significant. As the leaders in our nation continue to evaluate and evolve the policies and rules of the game, we would all be wise to heed the cautions raised by Friedrich Hayek. I appreciate that the free market can be a difficult master and that there is an important role for government and regulators, but I hope that as we move forward the rules of the game and the methodology for changing those rules will be more consistent and fair than they have been over the past year. Those who desire to protect civil liberties in times of war appreciate the importance of laws protecting individuals and institutions. In times of economic and financial distress we need to be similarly vigilant in protecting economic and contract rights so that we can continue to have a system that functions properly. Attempts to threaten or eliminate those rights will chase away the capital and investment that our country needs to restore prosperity and to thrive in the future…”