Markets are voluntary, politics is coercive

Milton Friedman:

The political principle that underlies the market mechanism is unanimity. In an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary, all parties to such cooperation benefit or they need not participate [...]

The political principle that underlies the political mechanism is conformity. The individual must serve a more general social interest — whether that be determined by a church or a dictator or a majority. The individual may have a vote and say in what is to be done, but if he is overruled, he must conform.

From ‘The social responsibility of business is to increase its profits’,
The New York Times Magazine, 13 September 1970.

Paternalism for traders

The government is proposing to restrict spread betting on financials, which will primarily affect small investors.

This is wrong:
a) because paternalism is immoral,
b) because speculators (particularly small players) increase the efficiency of markets.

IG Index gives the following example of what will happen.



Even for experienced traders, the margin requirement (the amount of cash you need to deposit with IG) will go up from £345 to £1725, a factor of five. It’s hard to see this as anything other than a way of prohibiting trading, without making it outright illegal.

The vast majority of small traders, argues the consultation document, lose money – but so what? If that is how they want to spend their hard-earned pay, they should have that choice.

To express your views on the proposed legislation, fill in the online response form here.