In the 1970s President Nixon severed the dollar’s link to gold. The result was a falling dollar measure that revealed itself through rising nominal prices of oil, wheat, soybeans, and much else priced in the global currency. It’s not as though the commodities mentioned were suddenly scarce as much as the dollar shrunk in size. The best way to think of it is if the foot were cut in half to six inches, Kim Jong-Un would suddenly stand over 10 feet tall even though his actual height wouldn’t change one iota. That’s what happened with commodities like oil in the '70s, and it explains $70 oil today. The commodity isn’t scarce as much as the dollar is once again shrunken.
Government Policy Creates Lines and Waits
Notable about the ‘70s is that politicians, totally confused by what was a monetary error on the part of Presidents Nixon and Carter, imposed price controls on gasoline. The result was lines at the gasoline pump. Long ones. When the price of anything is artificially suppressed, scarcity is a certainty. No surprise there. It was so bad in California that endlessly deluded lawmakers instituted an odd/even system. Cars with license plates ending in an odd number were only allowed to purchase gas at the filling station on odd-numbered days and vice versa.
In a capitalist system, scarcity is a certain sign that producers will soon fix what’s wrong. Price signals will be the lure for producers to create more of what’s in short supply. Bad as it was, the lines were largely confined to gasoline. Government error was the cause. By definition. In a capitalist system, scarcity is a certain sign that producers will soon fix what’s wrong. Price signals will be the lure for producers to create more of what’s in short supply.
All of the above explains why life in the former Soviet Union was so miserable. As Hedrick Smith noted in his classic book The Russians, the lines Americans suffered for gasoline in the 1970s were the norm for every product in the U.S.S.R. Not only were the goods produced completely awful, the awful was incredibly hard to attain. Lines for everything. Such is life without the profit motive.
Traffic Is Caused by the Government's Monopoly on Roads
This brings us to traffic. It’s a constant in the lives of those who live in major cities—and even not-so-major ones. Traffic is arguably the only unfortunate tie we have to the world’s central planning past when so many world leaders substituted state control for free markets. Gridlock on the roads whereby trying to drive 10 miles at 9 a.m. or 5 p.m. can take up to an hour is merely a variation of what we experienced for gasoline in the ‘70s and what the Soviets experienced with everything.
Governments have largely been given monopoly power without protest from the governed. This sad truth doesn't elevate us.
Up front, this column is not about privatizing roads. Government control of them is “settled science” as it were. Governments have largely been given monopoly power without protest from the governed. This sad truth doesn't elevate us. It doesn’t because while every other aspect of life comes with a “price,” the roads are “free” in a sense. We all have access to them at any time. Assuming private ownership, prices would inform our road usage. Those prices would logically force drivers to make decisions on when, where, and how often they should drive, and the result would be much smoother traffic. Better yet, the attachment of price to road usage would lead to more road access—access that would actually reflect our market-driven desires.
Alas, it doesn’t seem like private interests will be handed control of roads. Thankfully, it may not matter.
Capitalistic Innovation Provides Yet Another Solution
The answer as to why it may not matter is the driverless car revolution that’s within striking distance. The erasure of some of the human error that is the constant of today promises to have a profound impact on traffic. As USA Today reported via a recent National Science Foundation study, “having a single self-driving car on the road can reduce congestion by influencing the traffic flow of at least 20 human-controlled automobiles around it.” The newspaper added that “phantom” traffic jams “are not actually mysterious at all. They are caused by people. As one driver hits the brakes or slows down, the vehicles behind them often make adjustments too aggressively." Daniel Work, one of the authors of the study, made the simple point that “[H]umans are not perfect at driving,” so when “traffic gets dense enough, small mistakes by one driver get amplified by the drivers behind them.” Not for long.
What the very few enjoy is always and everywhere a preview of what we’ll all eventually enjoy thanks to the profit motive.
By most accounts, we’re just a few years away from driverless cars for the very few. If so, brilliant. What the very few enjoy is always and everywhere a preview of what we’ll all eventually enjoy thanks to the profit motive. Wealth is an effect of the mass production of former baubles of the rich.
As is, a growing number of cars have adaptive cruise control features that partially remove the mistake-prone human element from the driving equation. Traffic will become lighter simply because the mistakes that can lead to traffic will be reduced. Once driverless cars become standard, imagine what our commutes will look like.
It’s all a reminder that one of capitalism’s greatest virtues is turning scarcity into abundance. Where there’s little to no capitalism, there are lines. Traffic is a flashing red light that capitalism doesn’t yet dictate how we get around by automobile. It soon will, and the result will be that yet another inconvenience is erased by the profit motive.