Free Markets and Tolerance: Make More Stuff I Don’t Like, Please!

The other day I told my Facebook friends that my current favorite thing is when the Spring collections from fashion designers come out and they’re full of edgy, wild, often gender bending designs (especially this year in the men’s collections–because Billy Porter) and dads everywhere repost the runway images and declare with outrage that they won’t be buying any of THIS nonsense.

Do they really mean to suggest that if the clothing had been more traditionally styled they’d have laid out $800 for a t-shirt?

Sometimes, you–whoever you are–just aren’t the target audience for a product. I’m Jewish, so I’m not buying any Christian rock anytime soon, but you don’t see me getting all outraged over that trinitarian stuff they keep trying to foist on me. It’s not FOR me. If I liked it, the Christian rockers would be doing their job wrong.

If my crew of Facebook dads liked the current collections from cutting edge fashion houses, those fashion houses would be doing their jobs wrong.

I don’t like olives. I also don’t like horror movies. I don’t like death metal, or rice pudding, or perfumes that smell like food. I don’t like self help books, white wine, spray air fresheners, acrylic yarn, spider plants, flip flops, or golf.

I’m not an exceptionally disagreeable person–at least I don’t think I am. But I’m a person, and that means there are things that I don’t like. I have, in other words, what economists would call preferences.

Free markets mean I can satisfy my preferences for things that I do like–dark chocolate, movies about superheroes, lyrics-driven angsty guitar folk/roots/punk music, clotted cream, perfumes that smell like incense, books about magic and alternate universes, Cabernet, herbal wreaths, cashmere yarn, rose bushes, block heeled boots, and taekwondo. 

The market doesn’t deliver everything I want to me, of course. Sometimes this is because the technologies to make the things I want don’t exist yet. (Apparently this includes a chocolate yogurt that actually tastes like both chocolate and yogurt). Sometimes it’s because I’m weird enough that not enough people want the things that I want (Cars with all the bells and whistles BUT that still have windows that roll down manually). Sometimes it’s because I want stuff I can’t afford (diamond necklaces, houses by the ocean, a Shakespeare First Folio). But most of the stuff I want is out there, and if I choose to spend some of my money on it, I can get it. That’s how functional markets work.

And people who make stuff to satisfy my effective demands (that means my demands for things I can afford) are getting better and better at knowing what we want and providing it. Targeted advertising sometimes feels a little creepy, but it’s also how I found out there’s a Canadian bookshop that curates boxes of books and goodies for kids exactly the ages that mine are. It’s how I found my favorite pair of shoes. And it’s how I discovered the wonders of Japanese office supplies. 

But sellers’ increased ability to cater to my weirdo wants and desires isn’t limited to me. (As my parents always told me, the world isn’t here to make me happy.) This increased ability to fulfill wants and desires serves all of us. It means my husband can find t-shirts with jokes about his favorite band’s lead singer’s dogs. It means my older daughter can find enamel pins for a web series I’ve never heard of, and my younger daughter can find socks decorated with the faces of her favorite K-pop idols.

It means that people who like olives and horror movies and death metal and all the other stuff I don’t like can find those things too.

A free market is going to make a lot of stuff I don’t like, don’t want, and don’t need.

If the market offers something illegal, I can bring legal action. If it offers something I think is immoral, I can protest or boycott. That’s cool. I don’t have to buy everything the market offers. If I don’t like olives, no one’s going to make me buy them. But I can rest perfectly content knowing that people who do like the revolting salty ovoids can buy them. In exchange for providing me with the stuff that I do want, the free market asks only that I tolerate the wants of others even if I don’t share them. In nearly every case my preference for a particular good or service is just that–a preference. It’s not a referendum on my character, or yours, if we disagree about olives, or white wine, or superheroes. 

That’s what makes it great. Even if it does mean that olives, somehow, persist.

If it presents me with things that are tacky, or irritating, or taste bad, I can complain to my friends on Facebook if I want, or I can just realize that not everything the market puts out is for everyone. 


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Individual and Collective Choices in Cars

There appears to be something basic that most people in most of human history don’t understand. Or is it me (along with a lot of economists)? Here is the argument.

It would be better if our car were chosen democratically. A democratic referendum could ask voters to choose which car will be available to consumers. (How individual purchases would be financed, either with private money or by government, does not matter at this point.) Assume the voting system is the one you prefer and that the number of choices or write-in options is also what you think is most democratic. The voters are asked to vote for the single brand and model of car to be produced or imported. Each individual has one vote, however “one vote” is defined in your preferred voting system. The economies of scale brought about by a single model would reduce the price of cars compared to the wasteful diversity of the market—the 250 different models available on the American market, not counting the numerous options and colors for each model. Collective rationality would replace individual ignorance and market anarchy. Equality would be promoted: the times would be over when the rich could afford more luxurious and safer cars than the average American. The car manufacturer whose model has been chosen would, in a real sense, be elected democratically. A true collective choice would democratically decide which car we drive. What can be wrong with that?

Many things. In fact, this whole argument is invalid. A few reasons:

(1) Depending on the voting system (majority, plurality, ranked-choice, Borda, Hare, etc.), a different choice of car would likely prevail, so the person or group that chooses the voting system and the choices to be proposed would indirectly decide, or at least strongly influence, which car you will drive (on voting systems, see, in the forthcoming Spring issue of Regulation, my essay on William Riker’s Liberalism against Populism).

(2) Each individual’s vote has an infinitesimal chance of changing the result of the referendum, that is, of getting him the car he wants—or, for the real altruist, the car he thinks is better for the large masses.

(3) With only one producer and a lack of competition, including import competition, economies of scale would soon be overcome by reduced incentives, bureaucratic growth, and union power. In between referendums, the main incentives of the chosen producer would be to satisfy a faceless average consumer; or to swindle him if the incumbent thinks it is unlikely to be allowed to put one of its cars among the candidates next time. The consequences would be similar if, in a more complex referendum, a number of producers were chosen to offer, say, a black-made car, a white-made car, a LGBTQ+-made car, or any other stakeholder-made car. History provides us with an example of a near-collective car named Trabant, “a sparkplug with a roof.” (A Trabant model is shown on the featured image of this post.)

(4) This reminds us that political processes, even democratic ones, are very rough and imperfect. The most popular car in the American market is a pickup, Ford’s F-150, but only those who individually choose it are obliged to drive it, which is what individual choices are about.

(5) Economic efficiency, which is defined as the satisfaction of the varied preferences of different individuals, would be replaced by some common preferences of a centrist group of voters according to the median-voter theorem.

(6) Socialism and imposed uniformity in consumption are antithetical to individual dreams and their subjective utility—the sort of car you have wanted to buy for yourself since childhood, for example. I say “socialism” but it is the same in conservative collectivism or the old elitist right.

(7) Another obstacle to “collective rationality” would come from the voters’ “rational ignorance.” Since every individual voter knows that his vote has practically a zero chance of delivering the car he prefers, he would have no incentive to buy (if only with his time) information on the referendum alternatives—to subscribe to Consumer Reports, to read car magazines, to google technical terms or watch YouTube videos, to visit manufacturers online or physical showrooms, and so forth. (See also David Henderson, “The Logical Basis is a Difference in Incentives,” Econlog, March 9, 2021; and my own post “One Thing Rationally Ignorant Voters Don’t Know,” September 14, 2020) And if there are many voters whose cognitive limitations or sensibility to propaganda lead each of them to believe that he will decide the vote, how can anybody trust the rationality of such an electorate? Collective rationality amounts to voting blind or, at best, voting with one’s tribe.

(8) Market competition, not political competition, is, theoretically and historically, the way to reach economic efficiency.

(9) The equality obtained by letting every voter vote on our collective car would be illusory. Even with the ideal referendum, the real influencers would be the car manufacturers’ P.R. departments and popular pundits and media personalities (as well as perhaps QAnon-type websites).

(10) Even in this ideal democratic system, political competition would fill the void of economic competition. When economic markets are forbidden to clear, political markets will clear. Rent-seekers would try to influence which models will be put on the ballot, which producers will thus be privileged, and how long the monopoly will last.

(11) Consider the financing aspect of car purchases, ignored up to now. This issue would also need to be decided by an equally imperfect referendum. Suppose that “our national car” is to be paid by the government and financed by public debt. All the voters who think that their individual votes count and who want “social justice” hic et nunc would likely vote for Cadillacs to be paid by their descendants.

What most people do not understand, even apparently in America and in other sophisticated countries, is that individual choices are preferable to collective choices for both economic and moral reasons. This is true not only for cars but also for most other goods. Only goods or services that must be consumed simultaneously by all—what economists call “public goods”—escape this characterization but a separate argument has to be made for them.


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The Pandemic in Europe and America

The pandemic evolution now appears to be more worrying in Europe than in America, as illustrated by the graph below reproduced from yesterday’s Wall Street Journal (Marcus Walker, Bertrand Benoit, and Stacy Meichtry, “Europe Confronts a Covid-19 Rebound as Vaccine Hopes Recede,” March 12, 2021). In France, for example, after two very long and restrictive (even tyrannical) national lockdowns, ICUs are close to 80% capacity. The Wall Street Journal explains:

Europe’s efforts continue to suffer from the EU’s slowness in procuring and approving vaccines, production delays at vaccine makers, and bureaucratic holdups in injecting available doses.

The “production delays at vaccine makers” are most likely due to the fact that the EU government has not purchased them in time while, of course, there as in America, individuals and private organizations cannot purchase them.

Those who have read Ayn Rand’s famous novel may wonder if Atlas is shrugging more visibly in Europe than in America. As for those Europeans who put all their faith in an omniscient and all-powerful welfare state, they seem deeply disappointed (although they may be asking for more). In Germany, 30% don’t trust the competence of Angela Merkel’s center-right government and trust even less her center-left parliamentary allies.

The progression of new covid variants in Europe may be an immediate culprit, but a major reason for that is that European governments, under the punctilious EU government, have been slower than the US government in making vaccines widely available to the public.

Yet, the vaccine rollout in America has not been a marvel of federal or state planning. Four months after Pfizer announced the completion of its clinical trial, three months and a half after it started delivering doses to the United States, and three months after the vaccine was approved by the FDA, only 10% of Americans are fully vaccinated and another 10% have received a first dose (according to data from the Wall Street Journal). As far as we can see, this was, although not exactly warp speed, fast enough to prevent the variants from outrunning the building of herd immunity. This relative American success was achieved with much fewer restrictions to individual liberties than in most European countries. Federalism and popular resistance have been a big advantage.

It is notable that Pfizer and its partner BioNTech were not full-fledged participants in Operation Warp Speed. Pfizer did not accept research funding to develop its vaccine. The New York Times explained (“Was the Pfizer Vaccine Part of the Government’s Operation Warp Speed?” November 10, 2020):

In July [2020], Pfizer got a $1.95 billion deal with the government’s Operation Warp Speed, the multiagency effort to rush a vaccine to market, to deliver 100 million doses of the vaccine. The arrangement is an advance-purchase agreement, meaning that the company won’t get paid until they deliver the vaccines. Pfizer did not accept federal funding to help develop or manufacture the vaccine, unlike front-runners Moderna and AstraZeneca.

Pfizer CEO Albert Bourla made that clear (see “Leading Covid-9 Vaccine Makers Pfizer and Moderna Decline Invitations to White Summit ‘Vaccine Summit’,” Stat, December 7, 2020):

Bourla later defended the decision to decline federal research and development funding, citing a desire to “liberate our scientists from any bureaucracy” and “keep Pfizer out of politics.”

Except perhaps for that, the pandemic does not provide a strong confirmation of the benefits of American free enterprise. There may be more free enterprise in America than in Europe, but it’s a matter of degree. In America too, the distribution of the vaccines has been basically a governmental affair. And think about the “price-gouging” laws that have prevented market price adjustments in 42 states, not counting the Defense Production Act at the federal level. (See Rik Chakraborti and Gavin Roberts, “Anti-Gouging Laws, Shortages, and Covid-19,” Journal of Private Enterprise 35:4 (2020), pp. 1-20.)

Perhaps the administrative-welfare state, in both Europe and America, is not as good as we thought?


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Who gains under non-price rationing?

The rich!

Who gains under price rationing?

The rich.  And everyone else as well.

The economy is not a zero sum game.  Under a price rationing system, the vaccines will get out to the public more quickly and fewer people will die.  It’s true that many of the first doses would go to wealthier individuals, but that’s also true of non-price rationing.  In practice, states spent so much time fighting over how to distribute the vaccines in a “fair” way that they slowed the rollout of vaccines, leading to many needless deaths.

PS.  Of all the head-scratching decisions made by the US government during the past year, it’s hard to top the one described in this new Alex Tabarrok post.  Imagine being a government official making a decision that costs thousands of lives, and has precisely zero benefit to anyone.


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Is Amazon a Corporate Mother Teresa?

Amazon is in many ways a fascinating company and deserves to be defended against most of its mainstream critics. However, it would be simplistic to explain its campaign for a $15 federally-imposed minimum wage by identifying it with a corporate Mother Teresa. Its more obvious reasons to preach for minimum wages are not defendable.

I will not repeat all the arguments against the minimum wage, summarized in a good article by Cato Institute’s Ryan Bourne (“The Case Against a $15 Federal Minimum Wage: Q&A”). My co-blogger David Henderson has also defended many of the standard economic arguments. There exist some disagreements among economists about the employment effect of minimum wages, but they mainly relate to the size and victims of the negative effect (see Bourne’s overview).

One thing is sure: Amazon would benefit from forcing higher costs on its small competitors, including mom-and-pop businesses. A higher minimum wage would have exactly this effect while it would have zero effect on Amazon’s costs. As the company already pays a starting wage equal to the proposed $15 minimum, the latter would be non-binding and irrelevant for the retail behemoth.

One reason why Amazon was able to bid up the wage of its entry-level workforce is that its technology and other capital embedded in its warehouses and distribution network increase the productivity of its employees, which justifies the bidding up from a pure profit-maximizing viewpoint. There is nothing wrong with profits, but there is something wrong wtith using state power to bankrupt one’s competitors. This is what is happening. Jonathan Meer, an economist at A&M University observes:

It’s a lot harder for Joe’s Hardware. We should take note that Amazon—the place with no cashiers—is the one calling for a higher minimum wage.

Other large companies—such as Walmart—have come out in favor of an increase in the federal minimum but not up to $15. In their case, indeed, $15 would be binding for some employees. (Cf. Eric Morath and Heather Haddon, “Many Businesses Support a Minimum-Wage Increase—Just Not Biden’s $15-an-Hour Plan,” Wall Street Journal, March 1, 2021)

Amazon has another reason to be politically correct, that is, to signal its virtue under current faddish and unrealistic ideas. The company can hope to cajole DC’s powerful men to spare it from some regulation that would bite. The systemic effects of such behavior point to crony capitalism and groveling toward the state, which are not good for free enterprise and future prosperity.

It is not clear, to say the least, what kind of acceptable ethics could justify Amazon’s current behavior.


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The two China policies

The Economist has an article showing a dramatic difference in economic growth between northern and southern China:

There has been some migration to southern China, but nowhere near enough to fully explain this divergence.  The southern provinces really have done better, even in per capita terms.

The Economist provides a number of explanations for this gap, but barely even alludes to the most important; southern China is considerably more capitalist than northern China.  That oversight would not have occurred in the Economist I read when I was young.  Someone should revive the Far Eastern Economic Review.

PS.  Of course there are more than two Chinas.  Taiwan is even more capitalist than the southern mainland, and is even richer.  Hong Kong is even more capitalist than Taiwan, and is even richer.  Funny how that works.

PPS.  I said, “barely even alludes to” as this is the only reference to free market policies in the article:

In 2013, the peak of China’s building frenzy, investment in assets such as roads and factories reached an eye-watering 66% of gdp in the north versus 51% in the south. Southern officials have been more hands-off.


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The Mysterious Microchip Shortage

When the press reports on a microchip shortage, as it has done regularly since the beginning of the year, the economist does not believe it on faith. How can there be a shortage if market prices can freely adjust? A shortage is not simply a high price, for how useful would be a special word meaning exactly the same as “high price”? For the economist, a shortage is a situation where it is impossible to get something at any price, that is, by bidding up the current price. To cite just one textbook, see Arman A. Alchian and William R. Allen, Universal Economics, edited by Jerry L. Jordan (Liberty Fund, 2018), chapter 10. Since microchip prices are not, for all we know, capped by some domestic government under penalty of fine or jail, we need to find out what is happening.

At least, we need to ask the right questions. Let me suggest a few and propose some answers.

Of course, a temporary shortage in a segment of the market is not impossible, although it stretches and fuddles the meaning of “shortage” a bit. Perhaps I can say that there is a shortage of croissants at my preferred bakery every day at a certain time. But if I offered one million dollars (with a $100,000 deposit) for a croissant, the bakery would rapidly turn around or, if necessary, somebody would jump in a plane and bring me a croissant within at most 12 hours. Similarly, if your local grocery store is out of baguettes, you are facing a localized and temporary shortage of sorts—but only until the grocery supply truck returns.

In the same way, the so-called chip shortage is not across the whole market. Computer manufacturers, smartphone makers, and others apparently have no problem getting them, although they may have to pay more as they renew their supply contracts. And, of course, it takes more time to manufacture a microchip (typically a few weeks or months after an order) than to cook a croissant or deliver a baguette—the time dimension of shortages.

Another factor to factor in is that up to 50% of the chips car manufacturers need are non-generic, that is, they are not standardized commodities. The spot market for chips is limited but that does not prevent prices from rationing demand, if only in indirect ways through special fees for quicker delivery, for example.

What happened recently in the chip market appears to be that the car manufacturers’ demand suddenly increased last Fall as the economy recovered. This pushed up the price of chips and their components, including the ubiquitous wafers. Just over the past three months, chip prices have increased by an estimated 20%.

For one million dollars per chip instead of a few cents or a few dollars, a car manufacturer or a car part supplier could certainly find a chip maker who would be willing to pause its new contracts (usually signed months before delivery) and start producing for the new buyer as soon as they could. At such a high price some car companies would presumably be willing to sell part of whatever stock they have or to sell their own chip supply contracts with close delivery dates.

Of course, car manufacturers aren’t willing to bid up chip prices to $1 million. They obviously calculate that, at current prices, another batch of chips would increase their marginal cost of car production by more than their marginal revenues from car sales. This is why many car manufacturers in the world have announced production cuts and are waiting for lower prices or later deliveries. Some car manufacturers reallocate chips from their less profitable cars to their more profitable ones. For a student of economics, this is a reminder that possibilities of substitution in production exist—in this case, of an input between two products.

Why didn’t car manufacturers order their chips or chip-containing parts several months before the recovery and stock them? Because they did not need them during the slump in car demand caused by the pandemic. Stocks are expensive—they use space, cost interest, and require management—especially in uncertain conditions when they might not be needed. When the demand for cars picked up last Fall, manufacturers all started placing new orders. In the meantime, manufacturers of computers and other consumer electronics had increased their own demand for chips as consumer demand for their products had grown due to lockdowns and remote work and education. The variety of the chip supply had changed (with some retooling) to meet the changed demand. (Car manufacturing typically uses about 10% of chip production.)

Car manufacturers probably realize now that it was an error not to stock chips or chip-containing parts while waiting for the recovery of car demand. Risto Puhakka, president of VLSIresearch, an industry analysis firm in Silicon Valley, says that it was a big “car industry failure.” On a free market, of course, localized errors happen—all the time. But profit-seeking firms have an incentive to correct them for the future. Automobile manufacturers will no doubt become more attentive to their chip procurement.

To summarize how this reported shortage looks from an economic perspective: If we say that there is a current shortage in the microchip market, we must immediately add that it is a localized and temporary “shortage.” It is localized in that it is limited to certain products—for which users typically do not want to pay higher prices, which does not make it a shortage at all. It is temporary because the production cycle does some time during which supply is fixed.


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Will Walmart Save America?

My question is only partly rhetorical. Just two days after I published my post “Vaccine Adventures,” I read in the Wall Street Journal that the federal and state governments had started allocating vaccines to large pharmacy chains, including Walmart (Sharon Terlep and Jaewon Kang, “CVS and Walmart Decide Who Gets Leftover Covid-19 Vaccine Doses,” February 11). After reading this story in the wee hours of February 12, I went on Walmart’s website and, in just a few minutes, made myself an appointment for six days later. Appointments are available at 20-minute intervals during the whole day.

The efficiency of Walmart is legendary despite its being a behemoth, just as the inefficiency of the government is legendary because it is a behemoth (and other reasons explored by the economics of public choice).

Yesterday, another Wall Street Journal story described the rollout of Walmart’s Covid-19 vaccination (Sarah Nassauer, “Walmart’s Covid-19 Vaccine Rollout Heads to Small Town,” February 14). To get an idea of “what the weather [is] really like on earth” (le vrai temps qu’il fait sur la terre) to borrow an expression from Saint-Exupéry (in his novel Southern Mail or Courrier Sud), a few quotes from this Wall Street Journal story are useful:

Skowhegan, Maine—Pat and John Thomas were watching the news one night last week when they saw that Walmart in this central Maine town of 8,000 people was taking appointments for the Covid-19 vaccination. They had signed up for shots at a hospital about a month ago but still hadn’t heard back. Ms. Thomas, a 74-year-old retiree, jumped on the computer.

On Friday the couple got the Skowhegan Walmart’s first doses …

Walmart Inc., the U.S.’s largest retailer and private employer, is set to become one of the biggest distributors of the Covid-19 vaccine as the federal government enlists retail pharmacies to accelerate what has been a choppy rollout. …

Walmart is likely to benefit in other ways. Many of the people getting the vaccine at the Skowhegan store Friday didn’t previously have patient profiles in Walmart’s system, said [regional Walmart manager] Mr. Tozier. “We are making relationships with new patients,” he said.

Ann Jackson and her husband, Norman Jackson, 73 and 76 years old respectively, arrived for their vaccine appointment midmorning after waiting for weeks to get an appointment at the local hospital, said Ms. Jackson. Later, she added chips, bananas and T-shirts to her cart. “You never want to waste the trip to Walmart,” she said.

Contrary to what I implied in my previous post, there seem to be incentives enough for private pharmacies, at least those with a Walmart sort of efficient logistics, to administer Covid-19 vaccines when Big Brother releases them.

Such recourse to private enterprise could partly protect us from the central planners in DC and the state capitals. But why give the vaccines to some private organizations but not others—say, to Walmart but not to Hannaford? Is it because the central planners know better where demand is most intense or where low-cost distribution is most likely? That would possibly be a first in the history of mankind.

It would have been much more efficient, from the beginning, if the government had sold the vaccines to whoever was willing to buy them in order to make a profit and had given vouchers to whoever wanted to be vaccinated. After this redistribution of purchasing power, the market—that is, individual demands—would have decided where the vaccines should go.


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Vaccine Adventures

Following up on information that Covid-19 vaccines were available there, I walked into the small Maine pharmacy. I saw nobody inside, not even at the cash register. I continued to the back of the store: nobody manned the two counters of the pharmacist’s hideout. I stood in front of one. After just a few minutes, an employee appeared on the other side.

“Could I see the pharmacist?” I asked.

The pharmacist came.

“I have been told that you have Covid vaccines,” I said.

“We have a waiting list,” she replied.

I asked to be put on it but she would not, or could not, tell me when they were likely to phone me for an appointment. I recognized something like the Canadian health system, under which I lived for decades.

“Is it a matter of days, weeks, months, or years,” I asked.

“Days. At least.”

That looked good, except for the “at least.” In some of the on-line and mortar-and-brick places, there is not even a queue you can get at the back of.

At this stage, the actual vaccines don’t seem to be the problem. In the United States, the manufacturers have delivered twice as many vaccines as have been administered. According to the Wall Street Journal (Jared S. Hopkins and Arian Camp-Flores, “Demand for Covid-19 Vaccines Overwhelms State Health Providers,” February 8, 2021),

[a]lthough state officials often cite limited vaccine supply, manufacturers are producing largely on schedule. Pfizer Inc. and Moderna Inc. since December have supplied about 60 million doses, nearly one-third of the 200 million the companies together must deliver by the end of March.

State governments are supposed to distribute the vaccines that the federal government, after literally monopolizing the market, makes available to them. The length of the queues varies from place to place, perhaps depending partly on the success of whatever entrepreneurship can creep into what is basically a socialized distribution system. One Missouri hospital has a waiting list of 100,000 names and no vaccine left. Queues are not an efficient way to ration demand.

In the former Soviet Union, the government always had an excuse for shortages. The real problem was different: no private property, no market prices to signal scarcities, and no free entrepreneurship to respond to the signals.

In America, once the federal government has purchased them, the Covid vaccines are priced at zero, which implies that government allocation is required. At a zero price, demand is much larger than the quantity that bureaucrats can supply. The fee governments pay providers (hospitals, pharmacies, and such) for administering the vaccines may not be higher than the latter’s cost. For example, Medicare pays about $40 for administering the two doses of the currently available vaccines. In a flash of economic realism, Joe Biden has expressed some concern that this fee may not be sufficient.

It is no consolation that all governments in the “free” world have adopted similar policies. No “American exceptionalism” here.

For Soviet agricultural production, the weather was often the excuse. For Covid vaccines, we are told that “the supply chain” and logistics are the problem. The Wall Street Journal‘s Jennifer Smith reported (“Mass Vaccination Sites Will Mean Scaling Up Logistics Coordination,” January 30, 2021):

Other local health departments might need information technology help to cope with overwhelmed appointment systems, or assistance with planning and sourcing the labor, supplies and procedures needed to administer hundreds of shots a day. “People underestimate that this is a massive logistics operation,” Dr. Wen said. “That type of expertise is often missing in state and local public health.”

But except for governments—that is, political and bureaucratic processes—that should not be an unsurmountable logistics problem. Private businesses without central coordination produce and deliver the food, in innumerable configurations, for the daily meals of 320 million Americans. Recall the Russian official who, shortly after the collapse of the Soviet Union, asked British economist Paul Seabright, “Who is in charge of the supply of bread to the population of London?”

In 2020, Amazon shipped 4.5 billion packages to American consumers—more than 12 million per day. The UPS hub in Louisville, Kentucky has a five-million-square-foot facility for sorting and treating more than 400,000 packages or documents per day. The hub sees 387 inbound or outbound flights daily from the company’s fleet of nearly 600 aircraft. What is more impressive is to think of the millions of individuals around the country and around the world who work in long and diverse supply chains to provide the equipment and inputs necessary for UPS’s operations. We are reminded of Leonard Read 1958 essay I, Pencil, which explains how the manufacture of a simple pencil requires the voluntary cooperation of a multitude of individuals producing, without a mastermind, the zinc, the copper, the graphite, and the equipment to make pencils out of that, and all the equipment for producing that equipment, and so on.

Although working under no central direction, these innumerable people who contribute to the production of pencils or UPS’s equipment and supplies are coordinated by markets (supply and demand) and the prices that signal what is needed where.

Compare this to the federal government’s “centralized system to order, distribute, and track COVID-19 vaccines” in which “all vaccines will be ordered through the CDC” (see the description by Anthony Fauci’s shop: COVID-19 Vaccine Questions and Answers, accessed February 10, 2021), the price for the final consumer is zero, and providers are paid fees determined by bureaucrats. No wonder the distribution runs into problems. The contrary would be surprising.

Note that the vaccine could still be free for the final customer if the federal government had simply subsidized consumers for their vaccine purchases (with vouchers, for example) and had let markets, entrepreneurship, competition, and prices distribute the stuff. And it wouldn’t take ages, luck, and some humility to put one’s hands on the thing—or one’s arm under the syringe.

The consumer who wants a vaccine gets a small taste of what French philosopher Raymond Ruyer, in his 1969 book Éloge de la société de consommation (In Praise of the Consumer Society), described as the difference between a market economy, where the consumer is sovereign, and a planned economy, where the producer runs the show (under government’s control):

In a market economy, demand gives orders and supply is supplicant . . . In a planned economy, supply give orders and demand is supplicant.

« Dans l’économie de marché, la demande est impérieuse, et l’offre suppliante (the supply is supplying). Dans l’économie planifiée, l’offre est impérieuse, et la demande suppliante. »


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An 18th-Century Revolution, With Current Examples

One of the greatest discoveries of the 18th century did not come from physics or astronomy but from the nascent science of economics. It is the theory that if individuals independently and freely pursue their ordinary self-interest, the resulting social order will be efficient, that is, will allow virtually all these individuals—or at least their vast majority, given their starting points in life—to better satisfy their own preferences.

Adam Smith is, among the first modern economists, the one who, in his 1776 The Wealth of Nations, best formulated the idea:

The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.

Most schools of economics, with notable exceptions (orthodox Marxian and Keynesian beliefs, for instance), have carried this idea to our days.

The 18th-century idea of an autoregulating society was deeply revolutionary as it had been unknown all along the previous 500,000 years of mankind. It would make it possible to understand, during the following three centuries, the escape of ordinary people from hunger and poverty through the multiplication of real goods and services (GDP) in countries where political authorities stopped trying to control everything. Between 1775 and 2018, it is estimated that the British GDP per capita was multiplied by 13 (see the Maddison Project).

Among many illustrations of the power of the idea of autoregulation, consider a story in yesterday’s Wall Street Journal: Leslie Scism, “Car Insurance Prices Fell in 2020 as Pandemic Reduced Driving.” Why did car insurance prices decrease by an average of 4% last year? Is it because the shareholders of property-casualty insurance companies started being altruistic? It would be a complex and unrealistic hypothesis to entertain. Nor would it be a credible hypothesis that altruistic governments across all American states forced the insurance companies to cut their prices. It is true that car insurance rates are monitored or controlled by many state governments (not everybody understands Adam Smith!) but only a minority of them require prior approval—which could probably not have worked so rapidly after Covid-19 hit in 2020. (See Marianne Bonner, “How Insurance Rates are Regulated,” December 14, 2028.)

The explanation of the price reductions lies in the simple fact that that the several hundreds of car insurance companies in America are in competition and cannot avoid cutting their prices if only one of them does it to gain a competitive advantage. So if reduced driving pushes down automobile accidents and their cost during a pandemic, the price of insurance will automatically decrease.

This is a general feature of free markets. Suppliers try to get the highest prices while buyers try to pay as little as possible. It would be vain to blame individuals in either group. On the contrary, it is because they act this way that prices are autoregulated towards the lowest possible prices for consumers consistent with suppliers’ costs.

The drama is that many people still don’t understand the autoregulating character of free interindividual relations. A well-known story is that of the Russian official who, shortly after the collapse of the Soviet Union, asked British economist Paul Seabright, “Who is in charge of the supply of bread to the population of London?”

There are many examples of the persistent ignorance of the autoregulating character of free interindividual relations, and one does not need to look at poor countries laboring under tyranny to find them.

Consider the vice mayor of Long Beach in California who defended the imposition of a $15 per hour minimum wage for grocery workers. Two grocery stores just announced they were closing: see Havley Munguia, “Long Beach’s Grocery-Worker Wage Bump Spurs Closure of Ralphs, Food 4 Less Sites in City,” Press-Telegram, February 1, 2021 (H/T: Andrea Mays). “Our job is to keep providing for the residents,” he declared, not realizing that providing for the resident grocery workers means not providing for the residents who eat food, as food prices will rise if only through shopping travel. More fundamentally, the vice mayor does not understand that the most efficient way to determine wages is to let the market do it.

Another exquisite example is the postal inspector who opined on the conduct of a convenience store owner who sold Covid-19 supplies at a price the politicians and bureaucrats considered too high (see the Department of Justice’s press release):

Unfortunately, Mr. Singh allegedly chose to use this opportunity to make money by hoarding and price gouging PPE [personal protection equipment]. The conduct charged in the complaint is reprehensible and against our most fundamental American values.

Singh later entered into a deferred prosecution agreement and agreed to “donate” $450,000 of PPE, to be distributed by politicians and bureaucrats instead of being sold on the market to ordinary individuals who needed it urgently. If he thought he was in the “country of free enterprise,” he was obviously mistaken.

There are quite probably exceptions to, and within, the theory that individual liberty generates an autoregulating social order—a “spontaneous order” as contemporary economists like F.A. Hayek call it. Justifications exist for governments acting under a realistic presumption of unanimous consent—for example around the goal of not settling conflicts by open violence and organizing protection against that or, more controversially, around other preferences for public goods. But to be credible, these justifications must be built up from an understanding of the general efficiency of the spontaneous order, not handed down from the millennial ideal of a shepherd or some political authority protecting his flock to better exploit it.

A good question is why the 18th-century monumental discovery is still ignored by so many people. Public choice theory suggests many answers, which revolve around the idea that it is in some individuals’ interests to make sure it is ignored. Think of shareholders and executives of steel companies and the bosses of their trade unions. But there are also purely intellectual reasons: after all, many people—despite, or because of, public schools—still believe that the earth is flat.


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