Monday, November 5, 2012

Letter to my friend

Here's a letter I wrote to a friend of mine.  I had no intentions of posting this, but I think it does a good job explaining my worldview.   Where have I gone awry?

You know this already about me, but I'll state it again.  I'm a free-market guy.  I believe in the voluntary cooperative arrangements that happen millions of times each day, in particular time and circumstances that enable our economy to work.  For example,

We take for granted that when we shop at Kroger there will be an abundance and variety of food on the shelf.  Why and how did this food get there? 

We take for granted that we will be able to fill our car with gas, day or night, rain or shine, 365 days a year in almost every city in America.  How on earth is this accomplished? 

We take for granted that we can get t-shirts made in Vietnam, plastic toys made in China, and silverware made in Indonesia all at Wal Mart for extremely competitive prices.  Who arranges this?

The amazing thing is that all this and more happens every single day unbeknownst to the general public.  We simply take it for granted. 

Now, is it perfect? No, but we haven't identified any other system than comes even close.  When free people are allowed to voluntarily enter into exchange with whomever they desire, we all benefit.  We are all made better off.

But, then government, for various reasons, interferes.  Government places restrictions on certain trades, or makes others outright illegal.  Sometimes for good, but mostly for naught.  Taxes, tariffs, regulations of various sorts, mandates, subsidies, licenses, and other market interventions are almost always served up with good intentions, but in the same frequency fail to account for the unintended consequences.  No policy intervention is without unintended consequences, yet pols routinely ignore them or falsely label them as additional market failures only to suggest more market interventions.

Show me a sector with high government intervention and most likely you'll find escalating prices, distorted and disjointed demand, decreasing quality, and the like.  It's inevitable.   What about sectors with very little government meddling?

The internet has revolutionized our world in ways not foreseen.  Why?  Because government has largely remained on the sidelines.  And we are immensely better off. 

So, when people such as yourself call for more government to fix this imperfection or that failure, I ask that you think through your proposed policy intervention and determine if the benefit is worth the cost.  You are often quick to parade the benefit, but slow to claim the cost.

Cash for clunkers.  Terrible policy.  At best shifted demand from one period to the next.
First time home buyers credit.  Delayed the inevitable and terribly expensive.
Ethanol mandate.  Raises prices (hurts poor) and does zero to improve air quality.

I could go on, but by now you have probably lost interest.  But you now fully understand my viewpoint.

BTW: when you get a chance, you should read Milton Friedman's book: Free to Choose.  Excellent read. 



  1. Well, we wouldn't have this joint blog if I didn't agree. For the more academically inclined who want proof that freedom works across even "socially desirable" lines (like education), check out Pete Leeson's "Two Cheers for Capitalism?"

    A big important point that I wrote about awhile ago: economic freedom leads political freedom. So if you have a hard-on for democracy, get free markets in place first, and the democracy will come.

  2. Amen, brother Jeff!

    You interact with students on a daily basis - the future youths of America. Are the majority of them inclined toward free enterprise and liberty? Or do they see the nanny state as a positive development?

    1. I guess there is still a group on either side, but more of them are receptive to my message perhaps because I'm in the business school. At the same time, it's a Catholic college which makes the 'stakeholder' view of companies more prevalent.

      I am pretty encouraged by the level of support for Ron Paul among the youth. That's where is base was, and the old folks of the Repubs wouldn't give him a chance.