What the Interventionist Overlooks; S. Richman

Sheldon Richman WHAT THE r(\Ol'\S1 \l'1E.",~tI OVERLOOKS How MANY TIMES has a detailed de fense of the free market ended with a show of incredulity on the part of the advocate of interventionism? A typical case might go like this: You have just argued that the mar ket process and the principles of human action make it impossible for there to be long-term, mass, in voluntary unemployment or infla tion or depression or any of the evil attributed to capitalism, but actu ally caused by government tinker ing. The astonished defender of socialism inevitably will smile and say something like this: ttDo you expect me to believe that all of these problems are caused by the govern ment? That none of them is the Mr. Richman Is a Journalist and tree-lance writer from Newark, Delaware. 542 result of capitalism; and that if we just got the government out of the market these problems wouldn't exist? Come on! It's too simple, too pat. Life isn't that easy. Wake up to the real world."

To a young libertarian just begin ning to study the workings of a free society, a criticism like that can be devastating. After all, isn't it too pat? Isn't it too easy to blame the government for all these problems? Isn't it simplistic? A brief reflection on the subject reveals that while it may be simple, it is far from simplistic. Simplicity, a forgotten rhetorical virtue, is hardly an indictment of an argument. When faced with such criticism, the defender of the market would do well to remind his opponent of what's being discussed. The market, absent of force and fraud, is a short hand term for a group of individ uals cooperating in the pursuit of various goals. Striving after differ ent values, working to realize diver gent plans, possessed of diverse stores of knowledge, these individ uals go their chosen ways, trading only when it is to mutual advan tage. Without intending it, such actions by individuals-their acceptance and non-acceptance of goods and services at market prices-generate a complex system in which all the diverse knowledge of the separate individuals is put into a form that is WHAT THE INTERVENTIONIST OVERLOOKS 543 usable by all the market's partici pants. It is a system in which all people are left free to pursue their plans without constraint; where the wealth of information contained in market prices offers all the opportu nity to rationally adjust those plans when appropriate ..In short, the sys tem that spins out of the actions of free human beings offers them the only peaceful, efficient way to deal with an uncertain future. (In this regard, see F. A. Hayek's Law, Legislation and Liberty, Vols. 1 and 2.) Now, what is government inter vention and what does it do to this process? Government intervention, when it comes down to it, is the power of the gun. It is brute force, pure and simple. Motives here are irrelevant. Whether the government is full of benevolent bureaucrats or pernicious politicians is of no conse quence. If a seller charges more than the government-imposed price ceil ing allows, he will be jailed or de prived of his property. The same fate befalls anyone who violates gov ernment edicts.

The opportunities of the market participants to make and attempt to realize their plans have been stymied. The system that makes the harmonizing of divergent plans pos sible has been distorted into one of inevitable clash due to government distribution. Hayek writes, cCThe spontaneous order arises from each element balancing all the various factors operating on it and by adjusting all its various actions to each other, a balance that will be destroyed if some of the actions are determined by another agency on the basis of different knowledge and in the service of different ends." Hayek here points out the in teresting and crucial fact that the market is resilient and flexible re garding forces generated from within, but is easily thrown. out of whack by forces from without, that is, political forces. Is it any wonder that government intervention (read force) creates un desired consequences? Hardly. In fact, to argue that the free market is the only road to peace,prosperity and freedom ought to be a recog nized truism. What could be a more obvious statement? It's like saying peace is peaceful or free people are free. That this is not grasped by most people illustrates how far our culture has departed from the lib eral thought that characterized the late 18th and 19th centuries.

But the interventionist doesn't see it that way. Granting, for the sake of argument, that his motives are pure, he will insist that freedom, peace and prosperity can only be obtained by regulation. We must prevail upon him to explain this apparent contradiction.

544 THE FREEMAN September He will usually fall back on the ueconomic power" argument. In es sence, he will say, ((Okay, it is true I am advocating the use of govern ment power. But only because in the free market some people will wield excessive economic power. There fore, it is a choice of who should wield power for which purpose: economic power for private purposes or government power for public pur poses." A subtle-and hopelessly con fused-argument. First, the distinc tionbetween public and private purposes is an illusion. The public is simply a group of private persons. So, all purposes are private. Simi larly, all interests are nspecial." And what is this ueconomic power" to which it refers? It can only be the power to produce things con sumers desire. How can this be ex cessive? Our earnest interventionist is likely to reply that it becomes excessive when the provider is able to sell at an uexcessive price." He becomes less earnest when re minded that (a) no one is forced to buy a good if he thinks the price is too high and (b) no one has ever bothered to define ((excessive price."

Perhaps an excessive price is one that consumers wish were lower. In that case, is there any price that is not excessive? (Incidentally, every day of the week people decide prices are excessive for them in their special circumstances. And they turn down the products in question.) Backed up against the wall of re ality, the interventionist reveals his confusion about two other items: consumer demand and the pricing system. If a consumer cannot afford a pro duct, it is argued, his rights have been violated. But it cannot be true that a consumer has a right to another's product, for that would make the producer his slave. There would be an inequality of freedom. Our interventionist may then take the ((created needs" tack. This is the argument, popularized by J. K. Gal braith, that producers use advertis ing to create consumer need for their products. Is it fair to create needs, then make the product too expensive for the consumer to afford?

This, too, is an illusion. No one can create a need. A person may learn to desire something and may expect to continue having it. But that is the result of his choice. All a producer can do is to inform a poten tial consumer about a product. He cannot create a need. This would be obvious if the interventionist would think of all the things he doesn't buy, despite frequent advertise ments. Or is he the only one immune to Madison Avenue brainwashing? ((But people have to eat!" says the interventionist. ((The seller is wield ing power over us by charging us too much for food."

1978 WHAT THE INTERVENTIONIST OVERLOOKS 545 It is true that people have to eat and use other goods to live. But this is not the fault of producers. It is a condition of nature that mortal men need to produce certain values to maintain their lives. Does it make sense to blame this condition on those who produce those values? Does it make sense to criticize them for not doing more than they have done? Does it make sense to attack them for not offering to become serfs? This is an ill-considered posi tion for sure. It also ignores the fact that no one has ever controlled or could ever control all the food production re sources and the further fact that all products have substitutes. The up shot is that no one, not even the alleged monopolist, is immune from market competition. The ignorance of the pricIng mechanism is even more profound. The interventionist believes that prices are arbitrary. To be more pre cise, he thinks that prices begin at some point above ttcosts," and that any particular price is arbitrarily set by the seller.

ttHe can charge any price he wants," sums up the attitude. Well, it's true that a seller can ask any price he wants. But that doesn't mean he can get it. Prices are not arbitrary and they are not determined by Ucosts."They are set by the intensity of consumer demand for the existing supply. If an apple pie that costs $3 to produce can command a price of only $1 on the market, no seller is going to hold out for $3 or more if his interest is profits. The fact that it costs $3 to produce is of no interest to consum ers. Their concern is whether the satisfaction the pie will render is greater than what they are being asked to give up for it. The seller's costs are irrelevant. According to the subjective theory of value, the value of an item exists in the mind of the person who would use it. Far from costs determining prices, it is really the other way around. The costs of factors of pro duction will be determined by the price producers expect the final good to command in the market.

What all this means is that con sumers have as much control over prices as do producers. Each has the ability to say ttno." The foregoing demonstrates that the interventionist prefers the power of government to impose its arbitrary will to the power of people to produce for the satisfaction of consumer desires. Well, that's his choice to make. But please let's make certain he knows what he's advocating. One cannot make claims to rationality by advocating force to achieve peace, restraints on production to achieve prosperity, and slavery to achieve freedom. , W)rld inthB grfI?<2fan Iae~ Clarence B. Carson 21. The United States: The Thrust to Transformation THE OCCASION was, a civilized one, very nearly formal, 'and certainly decorous. Military personnel in their dress uniforms presented the colors. The well dressed audience, many of the women in full-length evening dresses, stood for the singing of the Star Spangled Banner. A multi coursed dinner was served by male waiters, well trained in those flour ishes which add to the decor of an occasion. A goodly number of promi nent people were present, and the In this series, Dr. Carson examln~s the connection between Ideology and the revolutions of our time and traces the Impact on several major countries and the spread of the Ideas and practices around the world.