Wednesday, June 20, 2007

Imperfect People or Imperfect Masters?

A frequently heard criticism of people who have confidence in the social benefits of the free market system is that we believe it will "magically" produce results. Of course, this is a gross simplification. The fact that we hear this criticism so often tells us we have work to do.

We do not support the free market system because we believe in magic. We support it because we know that it is the best way to organize imperfect people with widely dispersed knowledge and a strong preference for their own self interest. The results of the market are innovative, enjoyable, occasionally perplexing, and sometimes disturbing. But the system gets results, and it does so peacefully.

Ah, says the critic. Why leave social organization to vague market forces with unpredictable results? Why trust the chaos of undirected and self-interested human behavior? Why not organize with the best available knowledge, using our collective and most powerful efforts towards a common and mutually beneficial goal? Why not use the might of the political system?

The answer is simply this. Imperfect people do not become perfect when they don the mantle of the political actor. They are still imperfect people, but now with more power over other people's lives, properties and incomes. They become imperfect masters. The fact that they are elected and can be unelected does nothing to lessen this fact.

Inevitably, these people make mistakes. Inevitably, they act according to their own self interest. Inevitably, they cannot gather all the dispersed and fragile knowledge they need to run the system, compounding their own errors with errors in the information system itself. And they do all this at other people's expense. While such systems can produce spotty successes, e.g., the Bolshoi Ballet or Romanian gymnasts, the results are more widely tragic.

The historical record is clear. Imperfect people in a free market system will do a better job, with smaller and less costly mistakes. That is why we have confidence in the system. It's not magic, and it's better than tragic.

No comments: