Wednesday, March 2, 2016

Antibiotics, Automobiles and the Free Market

NOTE: While looking through my old essays, I found another 15 that struck me as particularly interesting. Some may seem a bit dated, as they discuss current events during the period 2008 to 2010, but the principles they discuss are still relevant.

Let us start by supposing you have an infected wound. Let us say it is in your finger. You try treating it yourself, cleaning and bandaging, maybe using some topical antibiotic creams, but it still seems red and painful. So, you go to the doctor and he cleans and bandages it, give you an injection of antibiotic and then prescribes some antibiotic capsules. The question is, do you then demand he amputate the finger? Or do you trust the antibiotics have a good chance of curing the infection and so wait to see how things progress?

Or, let us take a second example. You own an automobile. You have a full tank of gas, know how to drive, and need to get across town. With that in mind, you get into your car, shut the doors and start the engine. The question is, do you wait until late at night when the streets are empty so you can drive without risk of accident? Or do you wear a seat belt, drive defensively and trust in your own skills at driving and the other drivers' aversion to accidents to get you there safely despite traffic?

In both cases, almost without exception, we choose the more prudent, less intrusive solution. We wait for the antibiotics to work, and we rely on our own driving skills. Why? Because we have confidence in modern medicine and our own abilities.

However, there is a third example which seems to follow the opposite pattern.

Let us suppose over the course of six months the price of gasoline rises $2 per gallon and shows no signs of stopping. Increased demand on the world market coupled with disruptions due to political and military upheavals have made oil slightly less abundant, while demand has risen considerably. So, what do you do? Do you trust that speculators will buy up oil on the early rise and sell on the crest, leveling out price shocks, while price increases will force voluntary economy, at the same time increased earnings will attract investment and new exploration? Or do you demonize those same speculators and investors and call for the government to intervene?

As 2008 showed us, most people will choose the second option. ("Authoritarian Oil Talk") Even those who seem to choose the first, asking for government to remove restrictions on oil exploration and drilling, will often couple it with a demand that speculation be stopped or that new oil be sold only in the US. (" Smaller Government , Fair Weather Friends and Special Cases", "Deadly Cynicism") In short, rather than trust in the free market, the price mechanism and the rest of the economic system which has solved problems for centuries or longer ("Planning For Imperfection", "Greed Versus Evil", "Bad Economics Part 15", "Bad Economics Part 17", "In Praise of Contracts ", "Moral For Me, But Not For Thee"), we demand government intervention which inevitably creates new problems without solving the original ones ("Inescapable Logic", "The Cycle of Compassion", "Recipe For Disaster", "The Endless Cycle of Intervention", "Bad Economics Part 18", "The Irrationality of Government Redistribution")

The reason is obvious. Unlike antibiotics and driving we have no faith in the free market. Or, even if we have some abstract faith in it, we lack the real certainty the market will resolve our problems. And, to be fair, it is not certain it will resolve every problem. What is certain is that the free market tends to channel resources to the most strongly felt needs, and that that process tends to resolve most of our economic woes. However, it does take time, it occurs in fits and starts, and sometimes it does not solve problems in the precise way many would wish. ("The Inherent Disappointment of Authoritarianism", "Utopianism and Disaster", "Life Is Not Fair - And Trying To Make It So Makes Things Worse")

On the other hand, the government promises the moon. ("The Presumption of Dishonesty", "Legislating By Lying") Solutions are promised to be instant and cheap or free. The assurance is always given that with enough power the government can resolve any problem. And so, despite their ostensible dislike for government power, individuals are willing to give them what they ask in order to avoid any potential problem ("Defending Freedom?", "Don't Blame the Politicians", "What We Deserve", "Who Is To Blame?", "What is Wrong with Us", "The Single Greatest Weakness", "Why We Lose").

All because we lack the faith in the free market, we are willing to buy into government promises which we are fairly certain are lies. It is a very sad state of affairs.

Originally posted in Random Notes on 2010/04/09

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