Freeman

ARTICLE

Water Famine on the Hudson

SEPTEMBER 01, 1965 by LEONARD E. READ

Thousands upon thousands of kulaks starved to death during the 1930′s on the richest farm lands of the Soviet Union. Down through the ages, countless millions, strug­gling unsuccessfully to keep bare life in wretched bodies, have died young in misery and squalor. Why were famines their lot? Why did men walk and carry burdens on their straining backs for sixty known centuries? And how did it happen that suddenly—almost miraculously—on a small part of the Earth’s surface, the forces of nature are harnessed to do the bidding of the humblest citizen? 

These questions are posed and answered in Weaver’s Main­spring.’ And the answer, he con­vincingly insists, is that man learned how to release creative human energy through such in­stitutions as the private owner­ship and control of property and voluntary exchange under a mar­ket system of competitive pricing.

Today, in the metropolitan New York area, I am aware of no more plentiful resource than water—except air. The average annual precipitation, while presently down 20 or 25 per cent, has been about 40 inches; the enormous Hudson River bisects the area, one side of which has a great deal of marsh land; New York State abounds in fresh water lakes. And, it’s only a hop, skip, and jump into the Atlantic Ocean! Why, then, are the twentieth century residents of this area faced with a water famine—that same prob­lem of scarcity which plagued mankind for the centuries of re­corded history? Why are res­taurateurs not offering water on their dining tables? Why a fine if caught washing an automobile? Why must lawns dry up? Why are citizens asked to be parsimonious with toilet flushing? Why is the air conditioning shut down at Newark Airport? Why is there a flurry of free enterprise well dig­ging? And entrepreneurs truck­ing in water for sale at $15.00 per thousand gallons?

The answer to these questions is suggested when we ask another question: Why are Gothamites and Jerseyites begged to go easy on water—by which they are virtu­ally surrounded—while they are incessantly urged to use more electricity and other relatively scarce goods and services that are efficiently dispensed by market pricing?

Reflect on this hypothesis: the impending water famine is rooted in the same cause as the starva­tion and death of our Pilgrim

Fathers during the first three years after landing at Plymouth Rock, the same cause that brought on the famines that punctuate the historical record: water is sub­jected to the political formula from each according to ability, to each according to need. The rem­edy would appear to be the same as the only one that has ever over­come scarcity: leave supplying of water and the determination of its use to private ownership and control, that is, to the market!

The Idea Is Faulty

Before going further, let me hasten to the defense of the Water Commissioners, those in charge of the socialized water system. The famine is not in consequence of their administrative inabilities. Nor was it the incompetence of Governor Bradford or Stalin that accounted for the famines of their times. And it definitely was not the managerial ineptitude of a successful businessman, who, as Postmaster General for eight years, failed to slow down the rapidly increasing deficits of the socialized postal service. The ques­tion here is what’s responsible, not who’s to blame. Is it not the socialistic form of organization, rather than the person, that is chiefly responsible for the inferior performance? The personal fault, in every such case, is no more than an unawareness of the fact that no one knows how to make social­ism work.²

In Case of Necessity

Most Americans, like their fam­ine-threatened ancestors, are the victims of a sticky fallacy, a carry­over from ages of political super­stition: Any good or service on which there is a general depen­dence cannot be entrusted to the market; ownership and control must, therefore, be consigned to a public (political) agency. In other words, a critically needed good or service will be safely cared for only if socialized; necessities will be subjected to willful exploitation if left to the free market. No one, so goes the fallacy, should be al­lowed to profit from a public ne­cessity!

Let me suggest that both good theory and practical experience dictate the precise opposite: The greater the dependence on and them more general the need for any good or service, the more should we insist on leaving it to the mar­ket, and the more reluctantly should we entrust it to political agencies.

Were it necessary to consign any goods and/or services to govern­ment ownership and control, I would, quite seriously, nominate such things as hoola hoops, juke boxes, ostrich feathers—where a famine would inflict no great in­jury on anyone. This must be the position of any individual who un­derstands the nature and the lim­ited usefulness of organized police power, on the one hand, and, on the other, the creative potentiali­ties of the miraculous market—men cooperating in willing ex­change.

But note the prevalence of pop­ular opinion to the contrary. The dictionary defines a utility as "something useful to the public, especially the service of electric power, gas, water, telephone, etc." We might appropriately add rail­roads, airlines, mail delivery, and sewage disposal. It is these goods and services—prime necessities and not frills—that most people insist on turning over to govern­ment or, more to the point, that politicians insist be turned over to them!

In the United States, water sup­ply is, for all practical purposes, a monopoly of government, as are sewage disposal and mail delivery. Private utilities, all of them, are being subjected to increasing gov­ernment control which, when final­ized, is ownership.

Let us now ask ourselves, how many different goods and services are produced in this country and available to consumers? No one knows; but, assuredly, it’s in the millions; one company alone pro­duces about 250,000 separate items. These millions of artifacts and services—all but a few—have been left to relatively free mar­kets. Please note that only those items consigned to government—for presumed reasons of "public safety"—give us any concern at all: water, sewage, mail delivery, education, roads! Or those goods and services where government strongly intervenes: wheat, cot­ton, housing, and the like.3 Items left to the free market—clothing, churches, corn flakes, electric com­puters, pencils, publications, heat, automobiles, and all the others—are rarely given a second thought; supply and demand always move toward equilibrium. The evidence favoring the free market is so abundant that it is seldom noticed.

Paradoxically, the demonstrations are too numerous to attract atten­tion. Like the air we breathe, and on which we are dependent, their omnipresence dulls our perception of them. If we wonder how effi­ciently water would be supplied by the market—without serious prob­lems of surplus or famine—we need do no more than extrapolate from our countless experiences with free market goods and serv­ices.

Theory, also, gives the same an­swer. If we know the theory of the market economy, then we will un­derstand why socialism does not and cannot work.

Absence of Realistic Pricing

One cause of the current water famine is the absence of realistic pricing. Many residents of New York City, for instance, pay only a monthly rate per water connection. Waste and large usage bear the same monthly charge as frugal and minor usage. But, then, real­istic pricing is impossible under socialism, as Professor Ludwig von Mises so clearly demon­strates.4 Instead of free-market pricing, socialistic systems must resort to "dollar guessing." In short, the socialists can do no bet­ter for economic guidance than to peek over their left shoulders and see what free market prices are.5 The problem with water is, of course, that there is scarcely any market pricing left to be observed.

The free market operates as a computer.6 Billions of complex data flow into it daily and signals issue in the form of prices. No more proficiency is required of anyone than the ability to observe prices. High prices caution lower consumption and stimulate higher production, and low prices encour­age consumption and discourage production. Were the provisioning of water left to the market, prices would rise whenever the heavens withhold their bounty from any given area. Consumers by the mil­lions would voluntarily impose their own economies—no govern­ment edicts required! And sup­pliers would spontaneously spring from we know not where. Short­ages and surpluses do not plague the free market where supply and demand equate; distortions are caused by political attempts at production, exchange, and price controls.

Under socialism, the Commis­sioners must make guesstimates from intricate data they cannot comprehend. Even the best of them have no competency for this. In the free market, the freely fluc­tuating market prices serve as clear-cut guides to producers and consumers alike. All producers and consumers—even children—are competent to observe and obey these price signals.

Allocating Scarce Resources

In most areas of the world to­day, pure, fresh water is an eco­nomic good, that is, there isn’t enough of it to meet all demands, and users must pay for it. Water is scarce, and economics is the study of how best to allocate scarce resources. Let’s suppose, for example, that by reason of training, research, discoveries, skills, I am suddenly the one man on earth who can cure cancer. Un­told thousands are destined to suf­fer this dread disease during the coming year; but my treatment is such that I can attend to no more than one patient per month, or twelve a year. How best can this exceedingly scarce resource of mine be allocated? Knowing of the miraculous market and the way it works to alleviate poverty, disease, distress, I would try to price my services sufficiently high to bal­ance supply (my scarce resource) and demand (the need of untold thousands). The price, let us say, reaches equilibrium at $100,000! "But," cry those who don’t under­stand economic phenomena, "your way will save only the very wealthy."

What really will happen? With­in a very short time, thousands of doctors will be stimulated, not only by their desire to save lives but by the high price, to attain my proficiency. The price for the cure of cancer will soon fall to the point where all of the untold thousands can be accommodated. Supporting evidence is superabundant. Ball point pens, for example, were first priced at $13.95. The spread be­tween low cost and high price drew countless competitors into the field. Today, they’re give­aways.

Political Rationing

The socialistic alternative? Put a political ceiling on the price, low enough to be within the reach of all consumers. Such a low price, however, will not serve to enlarge supply. I could still save twelve lives a year, but that would be it! So, how will my limited service be allocated among the untold thou­sands? I can resort to personal discrimination or a public commit­tee can decide who shall and shall not be saved.? Or the government may take from thousands of Peters to save Paul which, of course, disables thousands of Peters.

The fact that prices do fluctuate and serve as a guide to action in a free market—even though this motivation brings supply and de­mand into a state of equilibrium—causes many persons to reject the market method. They seem to feel that enlightened human beings—which they conceive themselves to be—should be less crassly moti­vated; that "human need," rather than price or dollar inducement, should provide the incentive for action and conducts Self-interest (attention to self-aspiration and self-direction) which I frankly ac­knowledge is the motivating force in free market miracles, is frowned upon by them as beneath human dignity. Thus, if we would know why socialism does not and cannot work or, to the point, how scarcity can exist amidst plenty—of water or any other commodity—we must pause and reflect on the nature of self-interest.

Self-Interest Examined

Self-interest, here used inter­changeably with self-aspiration, is as varied as are individual aspira­tions and goals.

Contrary to a great deal of cur­rent opinion, self-interest is as prevalent among "enlightened" human beings as it was in cave men. It exists no more or less in men who resort to thievery as a labor-saving device than in "hu­manitarians." Self-interest can no more be shed by a living individual than can thirst or appetite; it is an undetachable component of the psyche; self-interest is a built-in feature of each breathing soul on this earth. The denial of this, in my judgment, is self-delusion. There’s only one person in John Smith’s driver’s seat, and that is John himself!

In order not to be led astray on this point, we must first concede that self-interest, as the term is used here, is not in the moral cate­gory—any more than are the senses; it is neither good nor bad, in itself. Self-interest is compan­ion to self-determining, self-con­trolling, self-responsible individ­ualism. No "selfless" person exists nor is one conceivable! While self-interest does not imply a solici­tude for others, neither does en­lightened self-interest necessarily preclude such concern. The "hu­manitarians," who have corrupted this conceptual term, would have us believe otherwise.

The observable differences in "social conscience" or morality are not to be explained by the pres­ence or the absence of self-interest, but, rather, by the different ways individuals interpret their inter­ests. Differences in individual so­licitude for others, and in other moral qualities, originate at the point of interpretation. Are the interpretations intelligent or un­enlightened? That’s the question.

I repeat, individual interpreta­tions of self-interest vary as greatly as do individual aspira­tions; no two are identical. But only I can interpret mine; only you yours. As unenlightened as yours and mine may be, our own interpretations will be more intel­ligent than those made for us by another. Other-interpretation must, of necessity, be hopelessly unintelligent, as much so as if another tried to smell or taste or feel for us. Others may hold the light high that we may better see, but the interpretation itself origi­nates with self; it cannot be other­wise.

I, a free market devotee, believe my self-interest is best served when other millions of people are free from me to pursue their own aspirations as they please so long as their pursuits are creative; that is, so long as each respects the similar rights of others.

The socialist, on the other hand, believes his self-interest is best served when other millions of peo­ple are not free from his interpretation of their interests. I insist that he assumes a capability for correctly interpreting the inter­ests of others which he does not possess in the slightest degree.

Personal Creativity Depends on Pursuit of One’s Own Choice

Self-interest, a prime concern for things closest to home, is a universal human characteristic, and is, perhaps, the greatest of all motivating forces. It stands to reason—indeed, is self-evident—that each of us will put forth his best effort on matters of deepest and most immediate concern to him. And this is the basic premise concerning human nature upon which the entire theory and prac­tice of the market economy rests.9 Socialism presumes otherwise: that our respective abilities should be directed according to the inter­ests (needs) of others; and the typical result is a water famine on both sides of the Hudson!

For example, there come to mind a man, wife, and grown daughter who have a hostelry and real estate development under way in western Washington. Their in­terest in the success of this proj­ect (including a private water sys­tem) coincides precisely with their own self-interests. They love it, live it, talk it, dream it, work it. The creativities of their very be­ings are finding free release, and it is a joy to observe the results of their efforts. Beavers could take lessons from them! That the proj­ect will be a success, I have no doubt; that many others will bene­fit from their completed handi­work is beyond question. But, we must ever keep in mind, it’s the free market form of organization, not entirely the person, that is re­sponsible for the superior per­formance.

Now, suppose we were to divert this competent threesome from their self-interests into a situation where only other-interest is at stake: organize them into a Tri­umvirate charged with the opera­tion of New York‘s socialistic wa­ter system. They’ll be no more to blame nor do any better than the present administration, should na­ture fail to confer bounteous pre­cipitation. The results of socialis­tic practice cannot be otherwise.

Why Socialism Fails

There are many reasons, but chief among them is the fact that creative actions and thoughts are bereft of self-interest motivation under socialism. The requirements of the socialized project and the fulfillment of self-interest go in different directions; the problem and the would-be problem-solver are on different wave lengths! Both empirical evidence and sound theory support this conclusion.

True, not everyone finds fulfill­ment—a free release of creative energies—in a free market soci­ety. But this is the individual’s rather than the free market’s fault; for the opportunity for such release is wide open and many mil­lions do, indeed, enjoy creative ex­pression. In socialism, it is demon­strable that the administrators are endowed with authoritarian, not true creative, expression. Again, it is self-evident that crea­tivity will be more abundant where millions of people find crea­tive fulfillment than in politically rigged situations that negate indi­vidual initiative and creativity.

As suggested above, there is no self-interest motivation under so­cialism; there is no driving force for efficiency, beyond the more or less unattractive emoluments of political office. The discipline of profit and loss is nonexistent; tax­payers are obliged to pick up thetab. Nor does the failure of a proj­ect reflect fully on the administra­tor, for there are no competitive forces to rid the economy of his failures. Maintaining position de­pends more on excuses than effi­ciency.

For what other reason does a 20 or 25 per cent decline in local pre­cipitation bring the threat of a water famine? It seems that the self-interest of administrators of socialistic systems does not ade­quately force their attention on future contingencies. But examine private power and light companies in the U.S.A. Their administra­tions are looking years ahead as to any possible failure in fuel supply. If they are presently using coal or gas or oil or hydro or atomic power, they have plans for substi­tution. Their self-interest puts a premium on not getting "caught short."" If, contrary to present trends, the government doesn’t take over these private companies, we can count on it, they’ll con­tinue to urge American consumers to use more power and light in the future.

As I approach the end of my argument, I confess the unlikeli­hood that water will be left to the market in the foreseeable future. As no one knows how to make so­cialism work, neither does one know how to let go of it once it has taken root in the economy. And the rooting, emanating from the federal, state, and local gov­ernments, is unbelievably deep! The best we can do, in these dis­tressing circumstances, is to re­peat, over and over again, the case for the market economy, improv­ing our understanding and exposi­tion on each occasion, hoping that sooner or later enough persons will share our faith in freedom to bring on one more miracle, in this instance, dispelling the threat of water famine. If it ever comes to pass, it will likely be because of a cessation of taxpayer subsidy to such projects and the removal of restrictions to private entry into the business. This, admittedly, re­quires a revolution in thinking—and on an enormous scale.

There is one mental block we must scrupulously avoid: Do not reject the idea of nonsocialized water supply because you or I can-not envision how the market would supply water. We do not know; no one knows!¹¹ I lay no claims to clairvoyance and, thus, can no more foresee how the market would attend to fresh water deliv­ery than Adam Smith could have foreseen how the human voice could be delivered around this earth at the speed of light or than George Washington could have predicted how the market would overcome scarcity—removing dis­tress and poverty on an unimagin­able scale.

We can entertain but one cer­tainty: The market, if not chained down and aborted by restrictions, will dispose of water famine as it has other famines.

The free market releases crea­tive human energy; this is its jus­tification. A by-product is the rid­dance of famines: this is its god­send!

 

***

Intervention

Of all things, an indiscreet tampering with the trade of pro­visions is the most dangerous, and it is always worst in the time when men are most disposed to it—that is, in the time of scarcity.

Edmund Burke, Thoughts and Details on Scarcity (1795)

Foot Notes

1 See The Mainspring of Human Prog­ress. (Available in paperback from the Foundation for Economic Education, Inc., Irvington-on-Hudson, New York, 95¢.)

² Critics may claim that Los Angeles, for instance, knows how to make social­ism work. Reports the N. Y. Times (7-6­65), "Los Angeles’s antidrought formula, worked out more than a half-century ago, goes like this: Plan ahead at least a gen­eration. Reach out as much as 700 miles for a water supply. Spend billions of dol­lars. Engage in intensive politicking, on both state and national levels. If some­body gets in the way, don’t be afraid to shoot it out with guns." The socialistic formula from beginning to end is found­ed on coercion. Can this be said to work? If so, then robbery works.

3 There is no good or service in the U.S.A. today that is free from interven­tion. But if the intervention is not too powerful, the free market forces tend, markedly, to overcome the political hin­drances.

4 For an explanation as to why eco­nomic calculation under socialism is out of the question, see Chapter XXVI, Hu­man Action, by Ludwig von Mises. (Ob­tainable from the Foundation for Eco­nomic Education, Inc., Irvington-on-Hud­son, New York. 907 pp. $15.00)

5Aleksy Wakar and Janusz Zielinski, leading professors of The Central Plan­ning School of Poland, astonishingly for socialists, frankly admit this allegation. See The American Economic Review, March, 1963.

6See my "The Market Is a Computer." The Freeman, March, 1964.

7 For an enlightening commentary on this point, as related to artificial kidneys, see "Who Is Worth Saving?" Newsweek, June 11, 1962.

8 The cure of cancer is an economic service as water is an economic good. Free, unrigged pricing—not need—is the economic means of allocating these scarce resources. To substitute need for pricing is to confuse the categories; it is as senseless as to substitute need for thrift as a means of capital formation.

9 For readings in depth on reasoning from self-evident assumptions, see "Some Preliminary Observations Concerning Praxeology" in The Ultimate Foundation of Economic Science by Ludwig von Mises. pp. 1-9. (Obtainable from the Foundation for Economic Education, Inc., Irvington-on-Hudson, New York. $4.50.)

10 Most electric utilities use large quantities of fresh water. Engineers of one of the nation’s largest producers es­timate that desalination of sea water can now be achieved at a cost of not more than 300 per thousand gallons.

11 See the chapter, "I Don’t Know" in my The Free Market and Its Enemy. (Foundation for Economic Education, Inc., Irvington-on-Hudson, N. Y. $1.00 paper; $1.75 cloth.)

ASSOCIATED ISSUE

September 1965

ABOUT

LEONARD E. READ

Leonard E. Read (1898-1983) was the founder of FEE, and the author of 29 works, including the classic parable “I, Pencil.”

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