Does Discrimination Contradict the Free Market?

Free market capitalists seem to love to remind the rest of us plebeians that private institutions should be able to refuse service to anyone, for any reason. This of course has been used to deny people service based on non-market factors, i.e. religion.

The free market working at its optimal involves rational actors making rational decisions. In this way, it is said, the markets balance themselves, and optimal prices are to be had. If we assume this hypothesis (which it is a mostly untested hypothesis and not a theory with sound empirical evidence behind it), we are assuming that people will make logical choices, driven by a desire for low prices or fair profit. Looking at the market as a group of individuals, it is the needs and wants of the individuals that drive action. However, it seems a rather large degree of homogeneity is needed for this system to function optimally.

Let’s take, for instance, the baker who refused to bake a cake for a gay wedding. The gay people who wanted the cake made a rational decision to choose this cake shop; either it was a good one, or the only one, but it is unlikely, given the price of wedding cakes, that the couple would randomly choose a bakery. Random choice is clearly not a rational choice — it doesn’t involve thought or comparison about the price. The baker, in refusing to serve the gay couple, is not making a rational choice. The rational choice for a seller of basically any good is to sell to any customer that will buy at fair market price. This is just supply and demand. You have the supply, you want to satiate the demand, or else you are not making as much money as you can.

The baker, of course, is making a moral choice. As a Christian, he feels he cannot serve a gay couple who would destroy the sanctity of his institution of marriage. Despite the fact that marriages recognized by the government are a public contract with the government, and not necessarily a holy bond.

The baker, in making a moral choice, is not only irrational from a capitalist/free market perspective, but is also not affecting his perceived degradation of marriage. In his eyes, he is being oppressed by a government that would force him to go against his beliefs. In refusing to supply a wedding cake, his non action does nothing to stop gay weddings. He may not be supporting the idea of gay weddings, but he is not stopping them. But in his eyes, it is religious freedom to deny others. How very Christian.

If we are to take a community of like minded people, who are against the idea of gay people in general, and they have a free, private market for commerce, there are only a few natural logical conclusions. Either the suppliers hold a right to discriminate, and they can drive out or let starve those undesirables they will not serve. Or they cannot discriminate, and must serve anyone who can pay the fair market price.

There may be cases where discrimination is acceptable, cases that follow from a rational, logical argument. One such case could be refusing to serve and kicking out a sufficiently obnoxious or disturbing customer. Such a customer could create a dangerous space that would drive out other customers, so a decision to remove the one obnoxious customer could mean retaining several more.

If we broaden the hypothetical to the community, and bring back the bigot baker, there may be a rational decision not to serve gay people. If the community is sufficiently insulated and homogeneous (and bigoted against a group), the baker, who may not be a bigot, may fear selling to a certain group. This is because he would fear the consequences from the community: they would stop shopping at his store. So now the supplier is faced with the same dilemma as the demander. Either he can try to stay in the game and sell, and possibly starve from lack of sales because of a community that discriminates against him; he can pack up shop and move somewhere where discrimination isn’t an issue, which isn’t an option for many people for many reasons; or there may be a culture change in the community so that he is not discriminated against for making a rational choice.

I don’t agree with Ayn Rand on much, but I think I do agree that religion does not belong in the realm of rational decision making. I also find it very strange that we consider the market of America (and really the globe) to be a private institution, or sets of private institutions, and not a public entity, as the markets demand our participation as much as the US government demands taxes.