The Logic of It All

This is how some people think: Business has long used the government to gain benefits it could not get in the marketplace. I have the cure for that: Abolish the market and expand the government to encompass all of society.

TGIF: Markets Clean Up

Donald Boudreaux, a professor of economics at George Mason University, has been a great defender of individual liberty for a long time. One of his favorite projects is pointing out how innovative and usually unnewsworthy market activity, to the extent that government keeps out of the way, increasingly helps us to live in cleaner, healthier surroundings. In other words, if "the environment" matters for human well-being -- and it certainly does -- the freer that markets are, that is, the freer that we are, the better for everyone. Freedom and the wealth it generates on net make our world better.

This has been known for a long time, but many people have never learned it. (Disclosure: Boudreaux hired me to edit The Freeman magazine in the late 1990s when he became president of the Foundation for Economic Education. Working for him was a pleasure.)

I should stop there and let Boudreaux explain what he means by the environment. It's not immediately obvious. He writes that

the relevant environment for humanity is not exclusively the outdoor and often-distant environment that we think of today when we encounter this word. Humans’ environment includes more than just the likes of the outdoor air that we breathe, the condition of the oceans and of far-away tundra, and the average temperature of the globe; humans’ environment includes also the cleanliness of the buildings in which we live, of the furniture on which we sit and sleep, of the clothing that we wear, and of the foods that we eat.

By implication, the world was pretty dirty before markets prevailed in the West. Just for example; think of all that horse manure, not to mention those rotting equine carcasses in the sometimes-dusty-sometimes-muddy streets before oil and the internal-combustion engine rescued us. Most cases are not as dramatic but are just as important.

Boudreaux explains that nine years ago he began a feature on his blog, Cafe Hayek, that he called "Cleaned by Capitalism." He writes, "Each post describes – and is typically accompanied by a photograph of –  an affordable and familiar modern good that makes humans’ immediate environment cleaner, safer, and more pleasant. Each of these goods is made available to the masses by innovative, competitive markets."

Keep in mind that the spread of at least semi-free markets made mass production of clothing and other basic household goods a feature of everyday life for the first time in history. Before that, production was for the aristocracy only. The rest of the people made do with a paltry number of homemade goods. That was the case for millennia.

Boudreaux wants to do more than broaden the definition of the word environment. As noted, he wants to illustrate "the practically countless ways that innovative capitalist markets cleanse our personal environments of filth and perils that pose a far greater and more immediate threat to us than do global warming and the other the environmental conditions that are today regularly featured in the news." (There's plenty of evidence that catastrophic warming or climate change is not happening. Look up the writings or YouTube videos of Stephen Koonin, who was a top energy physicist in the Obama administration.)

And, further, Boudreaux wants to

encourage readers to understand that, while capitalist production does indeed emit pollutants into the air and water, it also – and in the process – produces goods many of which make our everyday lives less polluted. Whatever are the costs of the "seen" environmental effects of industrial production – effects such as carbon emissions and the risk of oil spills – these effects must be weighed against the benefits, including the unseen environmental benefits, of the very industrial activities that have as a by-product these "seen" environmental effects.

Here Boudreaux reminds me of Julian Simon, the late economist who documented how much richer and cleaner the world had become because human beings ("the ultimate resource") are intelligent and enterprising. (See Simon's classics, The Ultimate Resource II and The State of Humanity.) He's also making a point that the philosopher Alex Epstein makes online and in many writings. (See Fossil Future.)

"There’s no question," Boudreaux winds up writing, "that the environment in which modern humans live is immeasurably cleaner, safer, and more pleasant than was the filthy and dangerous environment in which all of our pre-industrial ancestors lived." Amen.

But stay tuned. Boudreaux isn't resting on his laurels. He has promised to start a new series on his blog: "Soiled by Socialism" and is soliciting reader help in finding examples. He doesn't mean just socialism in other countries. See his article for a preview.

Additional reading: Saving the Environment for a Profit, Victorian-Style, by Pierre Desrochers, The Freeman, May 2003.

We Need Markets Now More than Ever

Jeff Tucker's "In a Disease Panic, the Free Market Is Your Friend" ought to be atop everyone's reading list. As libertarians well know, people who are under the delusion that government is a creative element in society, rather than a predator, will never let a good crisis go to waste. (Barack Obama's first chief of staff, Rahm Emanuel, put it just that way.) The historian and economist Robert Higgs has documented the history of exploitation of crises to expand power and consume liberty in America in his classic, Crisis and Leviathan. We can see this process on vivid display with the outbreak of the coronavirus, or COVID-19.

What propels the expansion-through-crisis process is the belief that only government can respond effectively to the crisis. Most people, busy with their lives, don't know enough about economics and politics to see the flaw in the statist's case. By and large, and through no real fault of their own, they operate at a primitive level intellectually. Plus they take for granted what they've enjoyed all their lives: the increasingly accessible abundance of necessities and luxuries, which even a couple of generations ago would have made people green with envy. That is all the result of the fact that, despite all the obstacles, government has not managed to abolish markets, the price system, and entrepreneurship.

Enter Jeff Tucker's article:

The truth is that the market loves you right now, more in the midst of a disease panic than ever before. It would love you even more if companies were not being browbeat by government into curbing sales of essential items. Let the prices of sanitizer and masks rise and you draw more into production and distribution. Throttle the market and you reduce supply. 

The market would have loved you more had the Centers for Disease Control not failed to authorize private companies to test for the virus. It was only after the aggressive protests of the governor of New York that the CDC gave in and let people do what they wanted to do....

In a disease panic, we are learning, people lose their minds and stop thinking clearly about things that matter. They also reach out to authority to save them. All of this is expected. And it’s very sad. Even sadder is how the unscrupulous power mongers among us use such times to enhance the power of the state over our lives and claim it is for our own good. 

Libertarians need to speak up -- now more than ever.

Price-Gouging Laws Violate the First Amendment

Laws against so-called price gouging -- that is, price spikes during emergencies -- violate our natural right to engage in voluntary exchange at mutually acceptable terms. As economics has long taught, price ceilings that defy market forces make the affected goods vanish from the market. Instead of a product being available at a price more-than-X, it is instead unavailable at a price less-than-X. Small comfort for the consumer. (Try to find masks and hand sanitizer on ebay or at the supermarket.)

Here's another way to look at those laws: they violate freedom of speech (expression) and hence the First Amendment. Civil libertarians should be up in arms.

How can those laws violate the First Amendment? It is rather simple. The market's price system is a communications process, a means of expression. In the market, people's demonstrated preferences with respect to scarce resources are translated into highly usable information in the form of prices. Typically, when the quantity demanded for something rises, so does the price tend to rise. (Other things equal, as the economists say.) And vice versa. Adam Smith explained this beautifully in The Wealth of Nations. (See my article "The Market Is a Beautiful Thing.") Through the price system consumers (without realizing it) tell producers what to produce and in what quantity. And producers use it to tell us when we need to economize (that is, buy the product only for our subjectively most important purposes, leaving some for others). This is important because we live in a world of scarcity. To produce more of good A, we might need to produce less of good B. If we want the market to be sensitive to consumers' priorities, we'll want the price system to be free of political and bureaucratic molestation. It's as simple as that.

It follows, then, that if price controls -- such as law against so-called gouging -- are enforced, our voices are muffled if not silenced. That violates our freedom of expression and thus the First Amendment. When the price of hand sanitizer is bid up during a pandemic, the higher price is like a broadcast summoning producers to bring more product to the market. Laws against price spikes are like the gagging of consumers. It's true that empty shelves are also a form of communication, but unfortunately, price controls also remove the incentive for people to produce more of the goods that are suddenly in short supply. Prices are the irreplaceable tool of economic calculation, as Ludwig von Mises spelled out a century ago in his case against central planning.

No good comes from stifling the market -- that is, from interfering with peaceful cooperation.

TGIF: My Most Excellent Election Day Experience

Last Tuesday, special day that it was, I awoke early and prepared to go out. By 7 a.m., I was where I always go on this special day, eager to do my duty and exercise my sacred right to choose.

Read TGIF at The Libertarian Institute.

TGIF (The Goal Is Freedom) appears Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com.

Become a Free Association patron today!

Markets and Correction of Error

If money can be made bucking market trends (shorting, etc.), people will have an incentive to uncover, correct, and limit the damage from errors in the market.

Corollary: Restrictions on shorting, etc., lock in error and magnify the damage.

Isn’t it funny that those who try to make hay out of the imperfection of markets are most enthusiastic about measures that would exacerbate the imperfections?