Mistakes Will Be Made
Life is an endless series of problems all of them offering competing, imperfect solutions. But, not all solutions are actually solutions, some are also mistakes. I know of no system or individual that hasn’t made mistakes.
The usual wisdom passed on in this matter is one should learn from their mistakes — that the intelligent learn from their errors and correct them. That certainly is something one should do.
But, the truly intelligent learn from the mistakes of others. This is true in several ways. I had relatives who smoked and drank copious amounts of alcohol. What I witnessed as a child made it clear both habits are terrible ideas detrimental to the individual doing them. So I’ve done neither, not because I think it sinful, but because I think it ultimately self-destructive.
This is true in the realm of economic development and public policy as well. G.K. Chesterton once jested, “The whole modern world has divided itself into Conservatives and Progressives. The business of Progressives is to go on making mistakes. The business of the Conservatives is to prevent the mistakes from being corrected.”
Like all good humor there is a nugget of truth in Chesterton’s comment. Progressives may share some principles with Liberals, but they also share solutions with Conservatives. Both tend to think centralized planning by superior individuals is needed in order to structure a society that is either “fair” (for the progressives) or “moral” for the conservatives, and both make mistakes
The Progressive rushes in with top-down solutions that end up not working, often at great cost to the entire society, while conservatives, ever anxious to cling to the past — even a past that didn’t work — want to preserve it.
What puts these two at odds with market liberalism is the liberal tends to shun top-down solutions and prefers bottom-up ones instead. That is precisely what depoliticized markets are, bottom-up systems to try to solve problems.
Yet, didn’t I already say everyone makes mistakes? Entrepreneurs err and so do politicians.
If we are all error prone then what makes markets preferable to political planning and manipulation? There are some major differences that tend to lean in favor of market-based solutions over political ones.
Markets mean millions of actors making economic decisions. It means competition and that gives them a step-up over political planning. When government pushes a solution and mistakes are made everyone pays the price. When entrepreneurs promote a new solution in error they, and their investors, pay the price, not the rest of us. Not only does this limit the damage they may do, but also gives them a strong incentive to be as careful with their choices as possible — even if there are some notable exceptions.
The entrepreneur is using his own money or money voluntarily made available to him by investors while the political planner is using very little of his own money. He is dipping into the public purse. If he makes a huge mistake others pay the price. If private producers err they pay the price. This means the private sector, even with equally flawed individuals as the public one, has a greater incentive to get it right.
If they are on target they benefit, if they are way off the mark, they pay the price. That dramatically changes how they make choices.
Imagine that you could eat anything you wanted and engage in any vices you found tempting and someone else would pay the price. You are likely to be far more reckless in your choices. In some ways it would be like Oscar Wilde’s The Picture of Dorian Gray. Gray could behave as he wished and the painting paid the price. But even Gray could see the picture and realize the impact of his own choices — which is why he hid it away.
In politics the politician’s actions harm the public in general while benefitting special interest groups. The politician tends to deal with the special interests who benefit from his interference, but not with the general public who are left paying the price.
Producers and politicians have different incentives, but so do consumers and voters. The consumer buys a product and knows the price they are paying. They can’t leave the store without knowing. In politics voters tend not to know which politicians are responsible for what. And, unlike private purchases, the cost of political planning is all lumped together. The cost of any one bad policy is thus hidden in an array of other policies.
With a can of beans you see the price on display. With bad policies it’s all lumped together in one giant tax bill.
Yes, both producers and politicians make mistakes but the incentives each face differ significantly and the result is producers make fewer mistakes, negatively impact fewer consumers, all at lower prices. Neither system produces perfect records in finding solutions but the incentives in markets give them the edge.
Due to unforeseen circumstances income has dropped dramatically making it harder to sustain this page. Your support to fund these columns is critical, visit our page at Patreon to make a $10 pledge. If you wish to pledge another amount per month you can do so at this link — anything starting from $1 and up. All of it helps especially now.
