The Free Market Beats Government Planning Every Time

One of the most challenging and important jobs for an economics professor is to teach students how little we know and can possibly know.

My longtime friend and colleague Thomas Sowell says, “It takes considerable knowledge just to realize the extent of your own ignorance.” Nobel laureate Friedrich August von Hayek admonished, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

The fact that we have gross ignorance about how the world operates is ignored by the know-it-all elites who seek to control our lives. Let’s look at a few examples of the world’s complexity.

According to some estimates, there are roughly 100 million traffic signals in the U.S. How many of us would like the U.S. Congress, in the name of public health and safety, to be in charge of their actual operation?

Congress or a committee it authorizes would determine the length of time traffic lights stay red, yellow, and green and what hours of the day and at what intersections lights flash red or yellow.

One can only imagine the mess Congress would create in the 40,000 cities, towns, and other incorporated places in the U.S.

But managing traffic lights — and getting good results — is a far less complex task than managing the nation’s health care system and getting good results, which Congress tries to do.

Here’s another task I’d ask whether you would like Congress to control.

The average well-stocked supermarket carries 60,000 to 65,000 different items. Walmart carries about 120,000 different items.

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Let’s suppose Congress puts you in total control of getting just one item to a supermarket — say apples. Let’s not make it easy by having the help of apple wholesalers. Thus, you would have to figure out all of the inputs necessary to get apples to your local supermarket.

Let’s look at just a few. You need crates to ship the apples. Count all the inputs necessary to produce crates. There’s wood, but you need saws to cut down trees. The saws are made of steel, so iron ore must be mined, and mining equipment is needed. The workers must have shoes.

The complete list of inputs to get apples to the market comes to a very large, possibly an unknowable, number. Forgetting any one of them, such as spark plugs, would probably mean no apples at your supermarket.

The beauty of market allocation of goods and services, compared with government fiat, is no one person needs to know all that’s necessary to get apples to your supermarket. Free markets, accompanied by free trade, including international free trade, make us richer by economizing on the amount of knowledge or information needed to produce things. https://stream.org/the-free-market-beats-government-planning-every-time/ Free markets, competition, and capitalism are the keys to economic success. Government and the state are not. The author makes this perfectly clear.

 

It’s time to trust the marketplace, trade, and capitalism with our well being and future as citizens and not expect a supposedly all knowing government to impose one size fits all solutions upon its subjects.

 

Yea..it worked great in 2008 right?

 

In fact the problems of that year created by democrats and their refusal to make changes to how government was doing things was largely fixed before the end of 2008. That recession was caused by government actions and choices.

 

Walter, is that you?

 

We don't have to choose between unbridled capitalism and government-run economies. All developed nations have regulated capitalist economies.

 

No

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Bush and economist warned that it was coming to a head, butt Fat Barney and Frank DUD swore up and down that life was good and idiots making $1200 a month could make a $850 house payment and still eat

 

When haven't had anything resembling free markets since government placed the control of currency creation into the hands of foreign bankers and started taxing wages in 1913

 

Can you credit him with your post?

 

Yes, the link in the original seed leads directly to his article from the linked source. Williams wrote the article and I’m not Him.

 

Thats ridiculous. 90% of our economy is private industry.

 

What's that got to do with free market capitalism?

 

We have a privately owned competition-driven market. We do not have a purely free market but we do have a regulated market.

 

I must have missed the links.
I agree with him however.
Thanks for posting. Would have been neat if you were him, but it's cool that your you too

 

Regulated markets aren't capitalism.

 

I love Thomas Sowell. The AJC (Atlanta Journal & Constitution) regularly publishes him in the op eds.

 

I guess we should have let the free market build the atomic bomb or get us to the moon.

 

I generally agree with you. The free market is basically a natural method of trade, whereas most other approaches are manipulated. For the most part, anything we manipulate is done for short-term success and results in long-term failure. People who blame business and wealth do not understand that we are all in business for ourselves. Whether you have one customer buying your services (where you are an employee) or many customers buying your products and services (the employer) we are both selling what we produce to people who wish to buy it at a price and terms we both agree on. That is simple free-trade. Of course, we have already manipulated the nature of this trade when it is considered employment, placing many burdens on the employment side and virtually none on the employee side. This has created the illusion that selling your services as an employee is totally different, and the employer is always obligated for many things that no ordinary buyer is subject to. We have made employers into both social service agencies and unpaid servants of government, as tax collectors who must provide that service free, yet be subject to all kinds of penalty if it's not done correctly.

The same people who see business as a social service agency usually fail to understand where money comes from. Money itself does not have value- except that it represents
value, which means production; goods, services, property. Government prints the paper money, but if there is no value behind it, printing more simply dilutes the value. In the end- what we produce is what establishes our wealth. Government aid for example is money that it taken from us in the form of taxes- then sent back with conditions and a reduction to pay for the cost of administration. The illusion of it being aid when they give us back our own money serves political power. When money is distributed that is not taken from us in taxes today- is money borrowed from our future- it is debt, resulting in the taxes our children and grandchildren will have to pay, and the interest, or debt service increases it dramatically. The bottom line is that while the scale of something like government may be far beyond the average business, eventually- it will be subject to the same financial realities. If you spend more than you produce, you eventually become bankrupt.

Part of the manipulation of people's perception is based on the free lunch concept; the idea that someone else is paying the bill for you. This too is an illusion, one very popular with voters and a great tool for politicians. Most of the time, this too is an illusion- a fraud. When government makes big business pay more tax so average people pay less, it sounds good. However, business does not pay tax; they collect it. To a business, taxes are an expense of doing business, just as materials and labor are. So, the tax gets built into the price of the products the consumers pay, and then forwarded to the government. The business profit, which is absolutely necessary to survive- stays the same.

It seems the more we manipulate things, the muddier the water gets.... the less people understand about the mechanism that makes the economy run. That makes them even easier to manipulate, and makes it harder for them to manage their own lives. To pay a game well, one must know the rules- and the rules need to be simple enough for people to grasp them. Our rules, the laws and regulations we have created have grown so far beyond comprehension that this is impossible. Even our tax people fail to understand their own rules.
The free market is self-regulating. While this is not instantaneous, it is very consistent in the longer run. Of course, people continue to believe that it would be better if they could just tip the scales to favor themselves- and we have unlimited interests doing that, everyday. It's called Congress

I often think of this like the old saying- "Oh what a tangled web we weave when first we practice to deceive..."

 

Alan Greenspan has a somewhat different opinion on that

he former Federal Reserve chairman, Alan Greenspan, has conceded that the global financial crisis has exposed a "mistake" in the free market ideology which guided his 18-year stewardship of US monetary policy.

A long-time cheerleader for deregulation, Greenspan admitted to a congressional committee yesterday that he had been "partially wrong" in his hands-off approach towards the banking industry and that the credit crunch had left him in a state of shocked disbelief. "I have found a flaw," said Greenspan, referring to his economic philosophy. "I don't know how significant or permanent it is. But I have been very distressed by that fact."

It was the first time the man hailed for masterminding the world's longest postwar boom has accepted any culpability for the crisis that has engulfed the global banking system.

During a feisty exchange on Capitol Hill, he told the House oversight committee that he regretted his opposition to regulatory curbs on certain types of financial derivatives which have left banks on Wall Street and in the Square Mile facing billions of dollars worth of liabilities.


"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan.

 

Yes. But sanity and logic like that won't go over well here. Most posters believe the answer to any question is "more government".

 

corporations are like mini governments

 

Government has a small role to play in restricting risky behavior that could place the entire system in jeopardy. But those situations are few and far between. Government doesn't need to stick its nose in every transaction and micromanage the economy.

 

You seem to think you know more than Alan Greenspan.

Hmmm

 

That's not free market deregulation. They had a monopoly on currency with no restraint.
Free market deregulation would have broken the monoply