“Economic calculation can only take place by means of money prices established in the market for production goods in a society resting on private property in the means of production.”
– Ludwig von Mises
For the past several months we’ve been subjected to numerous advertisements shaming us into completing the U.S. Census form. Some of the ads are annoying, but a few are downright absurd.
The ads to which I refer are those that include phrases such as, “If we don’t know how many people are in your community, how will we know how many hospital beds your community needs?” Or: “If we don’t know how many people we have, how will we know how many buses we need?” I’ll ignore the fact that I’m not really sure who “we” are and get to the main point:
The ads present a ridiculously false story.
Has your local grocery store ever been out of food? Do you fear that the store might miscalculate the amount of food needed, leaving residents hungry? Have you ever received a census from your grocer? Has the grocer ever run ads claiming that without your household survey, he won’t know how much food to stock?
The idea that “we” have to count heads to ensure the right quantity of goods and services is falsifiable with very little mental effort. Markets manage to deliver billions of incredibly specialized goods to every corner of the globe with amazing efficiency every day without census forms. They use an ingenious process called the price system.
Unlike the census, the price system in a free market is not the product of human design, but of millions of human actions, spontaneously coordinating to signal producers, consumers, investors, shippers, shelf-stockers, and all the other players in the market what decisions they should make to best achieve their objectives. The free play of millions of individuals, each seeking to better their situation, results in awe-inspiring cooperation and organization.
Of course, inasmuch as things like mass transit and hospitals are run by government rather than by individuals in the market, the census ads have a point. They cannot know how many hospital beds or buses to provide without population data. The dirty little secret is that they cannot know how many hospital beds or buses to provide with population data either.
If it were possible to figure out what type and quantity of goods were demanded by a population by surveying them, businesses would never fail — entrepreneurs could simply ask their target market what it wanted and produce just the right amount.
In reality, even if you are able to count how many people live in a region, that information alone does not determine how many hospital beds or buses they will demand. In fact, chances are those people don’t even know how much of those goods and services they themselves want. If you merely ask, it is costless to answer. If you allow entrepreneurs to offer those goods and services on the market, they will quickly discover customers’ revealed preferences and how much they want compared to other goods. A head count is almost useless at discovering a community’s needs.
If you haven’t completed your census form you needn’t feel guilty that your public bus system will miscalculate demand and over- or underserve your community. It will indeed miscalculate demand, but that has nothing to do with the absence of good census data; it has everything to do with the absence of market competition. Competition is more than just a contest that weeds out weak firms. As economist F. A. Hayek put it, competition is a discovery procedure. It can discover things no census ever could and coordinate resources beyond the ability of any government boards, commissions, or planners.
The solution to surpluses or shortages of buses or hospital beds is not an unleashing of paper surveys and patronizing television ads, but an unleashing of competition.