Markets of Government: Whom Do You Trust?

Markets of Government: Whom Do You Trust?

October 30, 2012
Originally published in The Washington Examiner

Free-market advocates have the deck stacked against them in the marketplace of ideas (ironically) for a very simple reason: Markets are impersonal, intangible things, whereas governments often have friendly, nurturing personae attached to them. From Uncle Sam to Mother Russia, people like to think of their government as a friendly face, and governments love to indulge them this delusion.

Markets? The very word conjures up notions of commerce, but in a way that feels cold, heartless and mathematical -- the opposite of 'shop' or 'trade,' which denote similar concepts but in a more tactile manner.

In the battle for hearts and minds, image is everything, and reality is only a secondary consideration. Take President Obama's stated goal of a society with "shared prosperity." The reality is if you really want prosperity to be spread throughout society, you let the market remain open and free. We rich, fat, happy, incredibly lucky citizens of the West have 'the market' to thank for a bounty that places our poor among the world's wealthy. But who would be so daft as to give thanks for this to "the market?"

On the other hand, when the government delivers something, even in an atrocious and/or wasteful fashion, it gets credit for caring. Take Medicare -- the market could distribute all the health care dollars and services in a far more efficient manner, but then people would have no one to thank.

Markets just work, in a stunningly efficient and yet thankless way. Why?

The problem is one of agency. The agent of a government is a politician whom the people have placed in office for the management of government services. The beneficiaries of this agency are both the people (Food stamps! Auto bailouts!) and the politicians themselves (votes from food stamp recipients). Because the recipients of the goodies see a direct causal line from government to their mouths, they do not see the politician as acting in his own interest (basically bribing voters into keeping him in power). The voter thinks of his vote as a reward.

But who are the agents of the "market?" Businessmen. Their activity benefits the people, as well, of course. But the benefits to the people in the businessman's case are unintended -- his prime objective, about which he is nearly always straightforward, is to enrich himself.

So, "who you gonna trust?" A greedy, selfish businessman whose activities benefit you in a spectacular fashion by accident, or a paternalistic government that takes care of you dismally, though on purpose? Sadly for many, the questions of agency and purpose trump the only metric that really matters in economics -- results.

Free-market enthusiasts are at least beginning to recognize that "the market" needs a PR makeover. On Nov. 15, for example, my organization, the Competitive Enterprise Institute, will bring Leonard E. Read's famous 1950's essay "I, Pencil" to life in an animated short film. "I, Pencil" shows how the complex interactions of hundreds of people around the globe -- all pursuing their own self-interest -- combine to bring us something as elegant and useful as a pencil (you can see a sneak peak of the film at cei.org/i-pencil).

It's a wondrous story, and told wonderfully -- how the free market improves our lives in ways both obvious and subtle. The astonishing health and wealth of the modern world is the visible handiwork of Adam Smith's "invisible hand." The Department of Motor Vehicles? That's the government's caring, smiling face in action.

So, who you gonna trust?