Dr. North, economist, lecturer, author, is editor-publisher of the Remnant Review, a fortnightly economic newsletter. He also is the commentator on the "Gold and Inflation Telephone Report"
Recently, I had occasion to purchase a pair of four-drawer filing cabinets. In recent years, I have become a kind of maniacal newspaper clipper, having been influenced heavily by a lady who is perhaps the world’s champion. I keep running out of filing space, so out I go in search of more files.
I also have a phobia about buying anything new. I am always getting a bargain by picking up some used item on its last legs. Naturally, I spend most of my time (or rather my wife’s time) poring over the classified ads in search of used filing cabinets. Unfortunately, there appear to be a lot of other people in southern California who are as frantic to buy them as I am. They are really quite scarce, and good ones bring $65 or more. Thus, when my wife spotted a pair for $15 each, she called immediately. We had not been the first ones to call, either, although the ritual over the classified ads begins early in the morning in our home. The lady was about to leave, but she planned to be back at one p.m. I decided to arrive early, since another person was coming to look at them.
Predictably, I was detained, so I arrived at one o’clock sharp. Sure enough, the other person was already there. He was in her garage, waiting for her to come out. When she appeared, he announced that he wanted the two filing cabinets and the separate metal card file on top. "He was here first," she said, half ashamed.
I had not even gotten close enough to examine the cabinets, but I had already made up my mind that I would pay $40 each. There is a psychological ploy that sometimes works at an auction: you let the bidding stabilize at one price, allowing some competitor to imagine that the item is virtually his. Then you shout out a bid considerably higher than his. Sometimes it paralyzes the others into silence. You get the item, even though in a closer bid, the competition might have fought the price up even higher. (I’m told that some poker players use the opposite approach: nickel and dime the competition, keeping them in the game, when you’re holding aces.) I decided that I ought to use this tactic.
"But He Was Not First"
"I’ll pay $40 each, cash on the line," I announced. The other fellow looked stunned. Not as stunned as the lady did, however, "But he got here first," she repeated, completely confused by what I was saying. I had had inkling that this would be her response. When she had stated that the other fellow got there first, I could see that she was looking for an easy way out. She did not want to have to face one of us with a negative response. That old standby, "he got here first," seemed to her to be the best way out. I had reintroduced the problem of decision.
I waited for an answer. She literally could not give one. The other fellow lamely said, "I’ll buy them at the original price." That failed to solve her problem. I stood around for perhaps two or three minutes, waiting for her to make up her mind. A tremendous debate was apparently running through her mind. She told me, "These cabinets have been in the garage for years. We didn’t think they were worth that much." My razor-sharp mind, geared as it is to marginal utility curves and the intricacies of linear regression analysis immediately came up with a technically precise response: "They’re worth what you can get for them, lady."
That seemed to strike some kind of responsive chord in her mind. "I guess that’s right," she said. Still, it was too large a task. The other fellow had arrived first, after all. "You’ll have to wait a minute." She went into the house. I heard her talking on the phone. When she came out, she did not even look at the other potential buyer — too difficult, I imagine. She said I could have them.
The other man, who appeared to be about 20 years old, with hair over his shoulders, stalked off. He never even bothered to try to buy the card file, although I had expressed no interest in it. His unsuccessful competition in a free market had seemingly demoralized him. After all, he had been there first.
This leads me to the question of the hour: Why is the initial response of so many people to competitive situations a variation of "I got here first"? My wife had one reasonable answer. From the day we are first in school, we are told to line up. Instinctively, we know that being first is best. If we do not know it instinctively, then teachers instruct us in this bit of arcane knowledge so early that we are not able to remember a time when we did not believe that first in line is best.
We also learned that it is not polite to sneak into the line or shove someone out of line. If being in the front of the line is something to be desired, then the use of fraud or violence is illegitimate. Reasonable enough. But what about those of us — the vast majority, by definition — who show up too late to be first in line? What about those of us who value other things, such as staying in bed a little longer, more than we value being first in line, but who would nevertheless like to be right up there at the front? There ought to be some way of getting a shot at that front spot in a legitimate fashion.
Try the Market
There is, of course: buy your way in Trade. My frog for your space. Children work out such arrangements, too. But the possibility for such bargaining is extremely limited: teachers do not approve of it. They use the line as a means of rewarding those whom they favor. They use it as a means of discipline. "Baxter, you go to the end of the line right now. We’ll have no more of that!" So poor Baxter slinks to the rear, head down. He is learning what the world has in store for people who do not follow the rules. (Pity the girl in front of Baxter. Since he was unable to exchange his frog for a spot in front, he can still use it for something creative and/or amusing.)
Schools are not market institutions for children. In our era, they are not even market institutions for parents. So there is only one other way to administer discipline and preserve order: bureaucratically. Someone in authority runs the place like a boot camp. Fair enough; children are not adults. But when do the adults start learning alternative ways of allocating scarce resources?
Look at the Federal Communications Commission. It controls the frequencies used in broadcasting. It awards licenses to those who perform according to the proper standards — set, of course, by the FCC. They do not allow competitive bidding, either for the right to rent, lease, or permanently purchase the right to use the designated frequencies. And you know what rule they use? Return the use of the frequencies to those who now control them, unless there has been a violation of the rules. In short, they got here first! So the rest of us — the vast majority of all those who would like to view an alternate station, and who would pay another management to provide us with what we want — slink, as usual, to the end of the line. In a bureaucratic world, most of us are Baxters. (Most of us have known it since kindergarten, too.)
Post Office Lines
What the FCC does to the airwaves, the Civil Aeronautics Board does for the airlines. The Interstate Commerce Commission is doing about the same with truckers, railroads, and anyone who would like to ship his goods more cheaply. But the archetype for the whole bureaucratic system is (you guessed it) the United States Postal Service. (Service is to Postal Service as demilitarized was to the Demilitarized Zone in Vietnam.) "I’m sorry, this line just closed." "But lady, I’ve been waiting for 30 minutes." "I’m sorry; please step to the end of that line over there."
Wouldn’t it be great to shout out: "I’ve got this package to mail. Will one of you guys shuffling around behind that pile of unmoving mail like to earn three bucks to take care of this for me?" But that would be crass. That would disrupt the smooth non-flow of mail. Besides, you were late, weren’t you? You failed to do your shopping on time. Now that you’ve been naughty, you know what has to happen, don’t you? You bet your triplicate forms, you do. Back to the end of the line. And if some crass individual tries to set up a rival organization that allows you to pit man against man (dog against dog) to serve your equally crass wants, well that person will be hit with so many fines that he will be at the end of all lines for the rest of his life. (The phrase "anti-monopoly legislation," when used in reference to the Postal Service, means just that: legislation against any firm that is against the monopoly.)
There is only one person at the front of any given line. There are many ways of getting there. You can get up earlier. You can bribe the man directing the line. You can pay off the person up front. Or, probably best of all, you can go to some other place where the lines are shorter, probably because the prices are higher. You can pay with money or pay with time. In a bureaucratic culture, the latter is the only legal way to get to the front. That is why socialist nations are visible from about 1,000 feet in the air: lots of lines. The Soviet businessmen who spend their lunch "hour" standing in lines or shopping, have no other choice. If you are not able to convert your income into goods, because of price controls and artificial shortages, then the key asset is time. This is what men steal. This is how they prefer to be paid. Time, in a bureaucratic society, is the money. Lost time is the coin of the realm. It subsidizes those in the society who are unproductive, and who therefore have very low alternative uses for their time. Time is not even taxed; leisure is not on the graduated income tax scale.
A culture that puts all of its emphasis on being first in line is a culture in which men will waste lots of valuable time to look around for lines to be first in. A culture that will not permit men to bid up monetary prices in a competitive market guarantees the wasting of time on an enormous scale.
Moment of Decision
I know where that lady went when she could not decide what to do. She went to phone her husband. As my wife remarked, after I had made the purchase and we were driving home: "I knew you had it made when she went into the house. She had to be phoning her husband to get his advice, and he was almost certain to tell her to sell to the highest bidder."
She let him make the decision. She could have taken the $80, pocketed $50, and given him the $30 (the newspaper’s price). It never occurred to her. Or she could have given him the $80, and they could have had an evening out, or more meat on the table, or whatever. But so conditioned was she to the bureaucratic first principle — "he was here first" — that she was emotionally paralyzed. She literally could not decide by herself.
We need more auctions in America. We need to make people think in terms of auctions. We need the auction mentality to creep into areas of life that are considered too sacrosanct to allow crass materialism, i.e., competitive pricing, to direct their operations. We need to find mature people who understand that there are more ways of getting to the front of the line than getting up at 5 a.m. or bringing Miss Grundy an apple. If we fail to allow the auction mentality to have its day, not in court, but in areas outside of the courts and law enforcement, then we will be ruled by an army of Miss Grundys all the days of our lives. It will destroy the creativity of men. And Baxter’s a big boy now. He no longer drops frogs down little girls’ backs. He blows up power stations in Portland. I may never make it to the front of the line, but I sure don’t want Baxter behind me.