Market Decisions versus Political Decisions - Island of Sanity

Island of Sanity



Economics

Market Decisions versus Political Decisions


An example

Here is the fundamental difference between decisions in a free market, and decisions in a political forum.

Let's consider a simple example: Suppose many people are deciding what to have for lunch. Let's say that 51% of them want hamburgers, 25% want chicken, 15% want tacos, and 9% want pate de foie gras. (I'm just making these numbers up for an example. These aren't based on any real survey.)

If this decision is made in a free market, 51% of the people will go to hamburger places, 25% to chicken places, etc. Each individual will get the lunch that he wants. Restaurants that serve the kind of food people want will do well. Restaurants that serve food that few people want will do poorly or go out of business.

Of course, it's not quite that simple. People may not be able to find a restaurant serving what they want. Etc. But that's the principle.

If this decision is made politically, at best we will take a vote. As a majority want hamburgers, hamburgers will win. Then everyone will have to have hamburgers. For the majority who wanted hamburgers, this is fine. For the minorities who wanted other things, they will be out of luck. They will be required to have hamburgers whether they like it or not.

This is the advantage of a free market. In politics, the majority get what they want and minorities are out of luck. In a free market, everyone can get what they want.

Objections

I suppose at this point someone might object that the government wouldn't necessarily force everyone to abide by the will of the majority. The law might allow people choices. But my point is that once it becomes a political question, that is exactly what will happen. The government does not pass laws that say, "Everybody do whatever you want. Do whatever you would have done if there had been no law." What would be the point of passing such a law? Once the government gets involved, it takes away choices. A law that does not tell people that they must do this or they must not do that is not a law. It might be a suggestion, but it is not a law.

Another possible objection is that I am creating a ridiculous example. Why would the government pass laws about something as trivial and harmless as what you have for lunch? My first response is that I am just using this as an example; I am not saying that this is a law actually being debated in Congress or anything like that. My second response is that it isn't all that far out an example anyway. It is not significantly different from many existing laws. We have laws regulating how much companies must pay their employees, how much a loaf of bread must weigh, and how much water your toilet can use. Indeed lunch is not an off-the-wall example. New York City recently passed a law banning foods with trans-fats.

The not-so-best cases

I said that "at best" we will take a vote. In real life, politically powerful groups, like rich corporations and activist groups, will work to influence the laws. Suppose some health group comes along and says that hamburgers are bad for you and people should eat chicken instead. A small minority that is very outspoken can have a lot of influence. Of course the chicken and taco restaurants will back this group, not because they will benefit from hamburgers being restricted or banned, oh no, but because they are concerned about public health. Politics is rarely really about the will of the majority. More often it is about the will of the rich and the loud.

Furthermore, in practice you rarely get to vote on each specific issue. Rather, you vote for a candidate who takes positions on many issues. The chances that you will agree with everything he says are small. You vote for the candidate who agrees with you the most, and have no choice but to accept some number of issues where you disagree. Then you hope that he actually lives up to his campaign promises. Often he doesn't.

© 2009 by Jay Johansen


Comments

Sasquatch May 23, 2014

"A small minority that is very outspoken can have a lot of influence."

Like Ancel Keys. His deliberately flawed report to congress is what started the whole "food pyramid" thing and got the FDA involved in manipulating our diet. That led to the skyrocketing obesity and diabetes rates everyone has been complaining about lately. Never underestimate the power of one evil man to corrupt an entire society.

Jay Johansen May 23, 2014

Evil and/or simply mistaken. I don't doubt that many very harmful laws are passed by people who truly, honestly believed that they were doing good.

Londok Jul 23, 2014

I could watch Schrndlei's List and still be happy after reading this.

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