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Friday, August 28, 2009

Proposers versus Producers

Why do people who really make us better off get nowhere near the attention when they die that prominent national politicians get? “Prominent national politicians” isn’t quite what I mean. “Prominent politicians who favored government power over liberty” is more on target.

The media spotlight on the late Sen. Edward Kennedy is the latest example. Admittedly, it’s an extreme case because of his family history. Nevertheless, when was the last time a cable news channel celebrated the life of a recently deceased entrepreneur or founder of a great company? It doesn’t happen, and that should offend our sense of justice. Producers make things they think we will value and offer them for a price they think we’ll be willing to pay. All they can do is proffer, persuade, and cajole. Free exchange is win-win. But we, individually, can say no. We can buy from a competitor or not buy at all. And guess what? Nothing happens to us. We don’t get threatening letters. We don’t find our wages garnished or our bank accounts frozen. We don’t get sent to prison. We’re left alone. This is only contradicted when companies are close to government. You don’t get to say no to helping to bail out Chrysler, GM, or too-big-to-fail financial companies.

Now contrast what happens in a market with what happens in the political sector. Politicians talk all the time about making us better off, but they are thwarted by an iron fact they prefer to ignore: Government provides no net benefits. What it gives away it has first taken from others under threat of punishment. It has to break windows in order to bestow benefits. Politicians simply move scarce resources around, defying consumers, who in a free market would direct them to uses that they believe would better serve their purposes. Government is the antonym for choice.

This means the politicians truly can do good only by doing what they abhor: giving up power. That happens only on rare occasions. To his credit, in the late 1970s Kennedy helped divest the government of the power to regulate the commercial airline and trucking industries. Except for those who lost State privileges, everyone has benefited from competition and lower prices. (Deregulation didn’t go nearly far enough, but it was a start.) That’s right: The “Reagan years” preceded Reagan. Ironically, today “deregulation” is a dirty word to most people who adore Kennedy.

Unfortunately, Kennedy never let himself see that the healthcare industry needs the same approach he applied to air travel and trucking.

So why do mere distributors of wealth — politicians — get so much more flattering attention in death (and life too) than producers of wealth?

I see several reasons, only a few of which I’ll mention. One is that for many people the market deals in material goods, while government is thought to be concerned with (social) justice. But this isn’t true. The market is built on justice: self-ownership, self-determination, social cooperation, and mutuality — all of which are undermined by the corporatist welfare state we labor under.

Ignorance of Economics

Another reason is that most people do not understand the marketplace. Bryan Caplan analyzes this ignorance in The Myth of the Rational Voter. The common view is that trade is zero-sum (a loser for every winner) and that profit is added to the price of goods rather than squeezed out of the costs. Such an attitude leads, at best, to a lack of appreciation for the efforts of entrepreneurs, who take risks to bring us new things in new ways. Besides this, many people take today’s vast array of accessible goods and services for granted, as though it’s a fact of nature rather than the product of ingenuity, foresight, and risk-taking. Another factor is that improvements in living standards tend to be incremental and undramatic. Even a big innovation, such as the personal computer or mobile phone, soon seems commonplace. (See Donald Boudreaux’s take on this.)

For most people an understanding of how markets work is not intuitive. It requires the grasp of such elusive ideas as unplanned order, entrepreneurial profit, and prices as capsules of (imperfect) information. These concepts can’t be conveyed in a television sound bite or editorial cartoon. In contrast, government “solutions” are simple. Total health insurance is too expensive? Pass a bill decreeing it to be universal and affordable. Next problem.

A politician who makes a career of proposing such “solutions” is likely to win admiration not only from the public but also from the news media, whose reporters and commentators know as little economics as their readers and viewers. The dynamic leader who gives impassioned speeches and sponsors legislation on behalf of social justice appears heroic in part because few people can find the logical flaws in the program. Observers see only his presumed motives. But motives divorced from understanding are worthless — even dangerous. In a more sensible world, proposing ends while being oblivious to means would be a sign of irresponsibility, the intellectual equivalent of drunk driving. Maturity lies in understanding that, as Steven Horwitz reminds us, ought implies can. That’s where economic logic enters the picture.

During the endless hours of television coverage of Kennedy’s death, someone mentioned that when he was stricken with brain cancer, he received the quality of medical care that “he wanted for everyone.” But such things don’t come from wishing, proposing, or decreeing.

There’s a moral side here also. Business is for profit. Government is not. At least that’s how it looks on the surface. Apart from ignorance of the economics of profit (see Horwitz on this), there is a moral prejudice against profit — that is, against the pursuit of self-interest. People who do things for profit do not get the respect of those who seem to act from other motives. This is a big subject that can only be touched on here. Suffice it to say that 1) if life is a value, then the pursuit of self-interest is praiseworthy; 2) as Adam Smith taught, given the right institutions general good grows out of its pursuit; and 3) politicians are as self-serving as anyone else. What makes them different is that because they have power their incentives are out of alignment with the public’s well-being.

Nevertheless, for most people government, despite its occasional scandal and atrocity, is generally trusted (despite what they say), while business, despite its routine creation of benefits, is generally distrusted. (I acknowledge that the unholy alliance of business and state — corporatism — justifies a good deal of mistrust, but it doesn’t account for all of it.)

Let us hope for the day when the passing of a politician gets little more than an inch or two in the obituary section of the newspapers.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.