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In light of recent comments on this board vis
a via the problems in California; I thought this
article was especially appropo and
timely.
chas
====
Voting
Booths vs. the Marketplace
by T. Norman Van Cott
[Posted May 14, 2003]
<IMG align=right border=0
src="">Statists—those who advocate
concentration of economic power in centralized government—salivate like Pavlov's
dogs at the mention of economic difficulties, real or imagined. Statists of a
left-liberal bent are usually louder than their counterparts on the right.
Nevertheless, when the economic difficulty "bell" rings, all begin repeating the
mantra about "new, imaginative government programs" bringing us closer to the
promised land.
So successful has this salivating class been that virtually
nothing Americans buy escapes seemingly endless lists of government do's and
don'ts. The lists aren't cheap.
Not only do Americans lose their freedom to engage others in the
marketplace on mutually agreeable terms, they also have to pay the bureaucratic
busybodies that take away this freedom. Like having to buy your own guillotine,
huh? Moreover, Americans also spend additional billions fighting
and/or complying with the regulations. Nobel Laureate economist Milton Friedman
once estimated that fighting/complying costs exceed the government's explicit
budgetary costs by a multiple of
twenty!
The popular rationale for the government do's and don'ts is that
in their absence, avaricious sellers prey upon uninformed buyers. Predator and
victim reverse in the labor market. That is, workers (sellers) must be protected
from avaricious employers (buyers). The salivators' vision is one of government
as a kindly nanny who gets the "right things" produced in the "right way."
Critics of regulation effectively cede the offensive to statists
by confining their critique to case studies of regulation gone awry. Statists
remain free to claim that things will be different next time. Professor Sam
Peltzman's (University of Chicago) well-known examination of the U.S. Food and
Drug Administration is such a study. Raising the regulatory hurdle on new
pharmaceuticals was ostensibly designed to reduce the chances of harmful
prescription drugs appearing on the market. However, the higher hurdle
necessarily meant that the introduction of new, beneficial drugs would be
delayed. Peltzman demonstrated that the downside costs of delayed introduction
exceeded the upside benefits of fewer harmful drugs.
Retrospective studies like Peltzman's gloss over a serious
logical flaw at the heart of regulation's popular rationale. Once the flaw is
recognized, the rationale crumbles like a house of cards. The point is simple
yet powerful. To wit: in democratic societies, elected political officials are
the final arbiters of the government's marketplace do's and don'ts. Who elects
these political officials? Surprise! The same people supposedly incapable of
making informed decisions in the marketplace.
How do people who are unable to make informed decisions about,
say, lawnmower safety become able to make an informed choice among legislative
candidates, who then select the "right" amount of lawnmower safety? Could it be
that bolts of enlightenment strike Americans in the voting booth but not in the
marketplace? Yeah right. More plausible is the proposition that the popular
rationale for regulation is statist nonsense. Logic points to Americans being
better informed in the marketplace than in the voting booth.
To see why, suppose you're shopping for a refrigerator. You've
narrowed the choice to a General Electric or a Frigidaire. If you opt for the
General Electric, it's your call as far as size, color, and features. At each
stage in the process, your choices are "decisive"—that is, they determine the
brand, size, color, and features of the refrigerator that ends up in your house.
Your incentive to be informed about refrigerators is obvious.
Now instead of buying a refrigerator, suppose you're "shopping"
for your state's new U.S. senator in the next election—that is, you're voting.
Suppose further that the Senate is scheduled to enact sweeping new refrigerator
regulations. By voting, you're engaged in "indirect" refrigerator shopping. The
problem is that you have little or no incentive to discover the candidates'
positions on refrigerator regulation. In the overwhelming preponderance of
election outcomes, your vote is simply going to mean your preferred candidate
either wins by one more vote or loses by one less vote. Your vote isn't
"decisive." Notwithstanding the fact that new refrigerator regulations will be
sweeping, you have little incentive to bone up on the candidates' positions.
Does this mean that the refrigerators people buy are more
important than who is in the U.S. Senate? Not at all. Rather, it
means people have more incentive to learn about refrigerators they're going to
buy as compared to senatorial candidates who restrict their refrigerator
choices. Ditto for the countless other goods and services bought and sold in the
marketplace every day.
The larger lesson is that uninformed voting provides an
important reason for democratic societies to limit the scope of government. The
limitations, moreover, must go beyond mere statute law. Otherwise, the hazards
of uninformed voting will impinge on the attempt to avoid the hazards. The
limitations must be constitutional in nature. Americans had such a constitution
during the country's early decades, so the idea is not a pipe dream.
Unfortunately, that constitution started to slip away in the nineteenth century
and the erosion continues.
T. Norman Van Cott is a professor of economics at Ball State
University in Muncie, Indiana. Send him <A
href="">MAIL. See his Mises.org <A
href=""
target=_blank>Articles Archive.
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