Reply to a Conservative Friend

A clarifying look at fundamentals
of government and the economy

by Win Wenger, Ph.D.

  1. Clinging to one fixed principle or idea or ideology, to the exclusion of every other consideration, creates monstrosities. Witness Marx and the other Determinists, Watson-Skinner and Behaviorism, and all the fanatics of bloody history, religious and secular.

  2. All human instrumentalities and processes are imperfect; error is implicit in the system. The conservative friend whose letter prompted this reply and piece pointed out: substituting government in place of areas where the free market should be the instrument of choice, brings in error. There is also a shoe on the other foot...

  3. Trying to force the free market to operate, without help, in areas where it is not the instrument of choice, also brings error. Largely how we got into the present fix was irresponsible deregulation, for example. There are two glaring areas where the free market is definitely not, by itself, the instrument of choice. One of these was the set of spill-over functions pointed out in 1776 by Adam Smith himself, the "father of the free market": indivisibilities and external economies and diseconomies. The other has been made glaringly apparent by both history and the present: the key function of a free market, its pricing mechanisms which act as a Directory directing people and resources toward more and more productive uses—Adam Smith's "invisible guiding hand" rendering congruent private and public interests—operates only within a relatively narrow range of norms and expectations. Outside that range, non-rational factors take over, resulting in destructive stampedes and cascades such as we have been witnessing.
Within its range, and especially in handling the infinitely intricate detail of people's lives and decisions, the free market is so clearly the preferable instrument, that government policy should be to nurture the conditions which allow the free market to function well—and to extend, by persuasion, law, incentive and other means, the range of economic activities which the free market can perform well over sustained periods of time. But treat the free market economy as a means to an end, not as the ultimate end-goal and principle to the absolute exclusion of all other considerations.

The long-term and sustainable multi-dimensional well-being of many or most members of our society and civilization, and even of humanity in general, should subsume lesser goals.

Government is a terribly flawed instrument, often inconsistent with its stated reasons-for-being and therefore often illegitimate even in its own lights. With the fall of Communism, the world has managed to survive its latest massive demonstration of monstrosities resulting from a single idea or ideology being driven to the exclusion of all other considerations. Is a similar fall of Capitalism about to culminate the current demonstration?

Command economies don't work—but in emergencies and in short-term situations where decisions, policy and strategy need be made quickly, some sort of command arrangement is required. A command arrangement which is answerable to some sort of democratic checks-and-balances process within context of a generally agreed set of overall rules. Which democratic checks-and-balances process itself results in monstrosities and failure if pursued to the exclusion of common sense and emergency short-run requirements.

The main point here is this:

To artificially force any human instrumentality to replace the one normally best suited to its domain, results not only in an increase in error but in monstrosities and costly profound failures. To substitute government and command economics for the free market in areas where the free market is best left alone to serve, brings disaster. But to force the free market to operate, to the exclusion of all other considerations, in ranges and domains where it is not suited, is not only just as disastrous, but it is largely how we got into the present fix.

The answer lies not in an ill-suited substitution of one instrumentality for another, the triumph of one ideology over another, but a common-sense bringing-to-bear whatever factors are needed to re-rationalize the economy, mitigate human suffering, and restore operating conditions and expectations to the point where market pricing will not only permit the return of people and resources to productive uses and to the production of wealth generally, but serve once again as an effective Directory steering people and resources toward ever more productive uses.

Hence, both the title and the substance of my article, Mixed Economy.

Proposed action: that we look more toward the incentive side, in whatever recovery packages we attempt, as minimizing the direct role of and cost to government, while enabling policy to repair the areas of neglect and abuse and ideologically-driven monstrosities in the ruins of which we now wallow.—As our best and soonest chance of returning to conditions where people and resources will again be productive, and where free market pricing can operate rationally.

Yes, government is a source of error. Yes, within government, checks-and-balances democracy is a source of error—so is a command system. Outside of government, the free market is also a source of error. All human instrumentalities are sources of error.

Error compounds when we try to force a given instrumentality to operate, for long, way outside its special competence. Within a multi-inputted system at least partially independent of single-view ideologies, we have our best chance of more people behaving more rationally and of enjoying a system in which common sense plays a role.

...Win Wenger

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