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Transportation subsidies distort the marketplace, create inefficiencies,and preclude aff solvency -- rejecting government intervention infavor of the free market solves best

Carson 1!-senior fellow and holder of the Karl Hess Chair in Social Theory at theCenter for a Stateless Society. He won the 2011 Beth A. Hoffman Memorial Prize forconomic !ritin".#Ke$in A. %The &istortin" ffects of Trans'ortationS()sidies*+o$em)er 2010 , -ol(me /0 , ss(e , Print This Post, / comments3

The 4reeman3 htt'55www.thefreemanonline.or"5feat(res5the6distortin"6effects6of6trans'ortation6s()sidies57558Altho("h criticson the left are $ery ast(te in descri)in" the e$ils of 'resent6daysociety3 they (s(ally fail to (nderstand either the root of those 'ro)lems#"o$ernment inter$ention7 or their sol(tion #the o'eration of a freed mar9et7. nPro"ressi$e commentary on ener"y3 'oll(tion3 and so on:otherwise often ;(ite insi"htf(l:calls for "o$ernmentinter$ention are ;(ite common.


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)een ;(ite different. n a nation of h(ndreds of local ind(strial economies3 with lon"6distance rail trans'ort m(chmore costly than at 'resent3 the nat(ral 'attern of ind(strialization wo(ld ha$e )een to inte"rate small6scale 'ower

machinery into fle@i)le man(fact(rin" for local mar9ets. Alfred Chandler3 inThe -isi)le Hand3 ar"(ed that thecreation of the national railroad system made 'ossi)le3 first3 national wholesale and retail mar9ets3 and then lar"eman(fact(rin" firms ser$in" the national mar9et. The e@istence of (nified national mar9ets ser$ed )y lar"e6scaleman(fact(rers de'ended on a relia)le3 hi"h6$ol(me distri)(tion system o'eratin" on a national le$el. The railroadand tele"ra'h3 %so essential to hi"h6$ol(me 'rod(ction and distri)(tion3* were in Chandlers $iew what made'ossi)le this steady flow of "oods thro("h the distri)(tion 'i'eline %The re$ol(tion in the 'rocesses of distri)(tion

and 'rod(ction rested in lar"e 'art on the new trans'ortation and comm(nications infrastr(ct(re. Modern mass'rod(ction and mass distri)(tion de'end on the s'eed3 $ol(me3 and re"(larity in the mo$ement of "oods andmessa"es made 'ossi)le )y the comin" of the railroad3 tele"ra'h and steamshi'.* Th e T i ' ' i n " P o i n t Thecreation of a sin"le national mar9et3 (nified )y a hi"h6$ol(me distri)(tion system3 was 'ro)a)ly the ti''in" 'oint

)etween two 'ossi)le ind(strial systems. As M(mford ar"(ed inTechnics and Ci$ilization3 the maineconomic reason for lar"e6scale 'rod(ction in the factory system was the need to economize on 'ower from 'rimemo$ers. 4actories were filled with lon" rows of machines3 all connected )y )elts to dri$e shafts from a sin"le steamen"ine. The in$ention of the electric motor chan"ed all this A 'rime mo$er3 a''ro'riately scaled3 co(ld )e )(ilt intoeach indi$id(al machine. As a res(lt3 it was 'ossi)le to scale machinery to the flow of 'rod(ction and sit(ate it closeto the 'oint of cons(m'tion. !ith the introd(ction of electrical 'ower3 as descri)ed )y Charles Sa)el and Michael

Piore inThe Second nd(strial &i$ide3 there were two alternati$e 'ossi)ilities for or"anizin" 'rod(ctionaro(nd the new electrical machinery decentralized 'rod(ction for local mar9ets3 inte"ratin" "eneral6'(r'osemachinery into craft 'rod(ction and "o$erned on a demand6'(ll )asis with short 'rod(ction r(ns and fre;(ent shifts)etween 'rod(ct linesJ or centralized 'rod(ction (sin" e@'ensi$e3 'rod(ct6s'ecific machinery in lar"e )atches on as(''ly6'(sh )asis. The first alternati$e was the one most nat(rally s(ited to the new 'ossi)ilities offered )y

electrical 'ower. B(t in fact what was chosen was the second alternati$e. The role of the State in creatin" a sin"lenational mar9et3 with artificially low distri)(tion costs3 was almost certainly what ti''ed the )alance )etween them.The railroads3 themsel$es lar"ely creat(res of the State3 in t(rn acti$ely 'romoted the concentration of ind(strythro("h their rate 'olicies. Sa)el and Piore ar"(e that %the railroads 'olicy of fa$orin" their lar"est c(stomers3thro("h re)ates* was a central factor in the rise of the lar"e cor'oration. ?nce in 'lace3 the railroads:)ein" a hi"hfi@ed6cost ind(stry:had %a tremendo(s incenti$e to (se their ca'acity in a contin(o(s3 sta)le way. This incenti$emeant3 in t(rn3 that they had an interest in sta)ilizin" the o(t'(t of their 'rinci'al c(stomers:an interest thate@tended to 'rotectin" their c(stomers from com'etitors who were ser$ed )y other railroads. t is therefore nots(r'risin" that the railroads 'romoted mer"er schemes that had this effect3 nor that they fa$ored the res(ltin"cor'orations or tr(sts with re)ates.* D e ' r i s i n " t h e D o l e As new forms of trans'ortation emer"ed3 the"o$ernment re'rised its role3 s()sidizin" )oth the national hi"hway and ci$il a$iation systems. 4rom its )e"innin"the American a(tomoti$e ind(stry formed a %com'le@* with the 'etrole(m ind(stry and "o$ernment hi"hway'roects. The %most 'owerf(l 'ress(re "ro(' in !ashin"ton* #as a PBS doc(mentary called it7 )e"an in (ne 123when


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models rely most hea$ily on that factor3 at the e@'ense of those who de'end on itthe least. S()sidies to trans'ortation3 )y 9ee'in" the cost of distri)(tion artificiallylow3 tend to len"then s(''ly and distri)(tion chains. They ma9e lar"e cor'orationso'eratin" o$er wide mar9et areas artificially com'etiti$e a"ainst smaller firms'rod(cin" for local mar9ets:not to mention )i"6)o@ retailers with their wareho(ses6on6wheels distri)(tion model. Some conse;(entialists treat this as a (stification for

trans'ortation s()sidies S()sidies are "ood )eca(se they ma9e 'ossi)le mass6'rod(ction ind(stry and lar"e6scale distri)(tion3 which are #it is claimed7 inherentlymore efficient#)eca(se of those ma"ically (nlimited %economies of scale3* of co(rse7.Ti)or Machan ar"(ed(st the o''osite in the 4e)r(ary 1 4reeman Some 'eo'le will say that strin"ent 'rotection of ri"hts =a"ainsteminent domain> wo(ld lead to small air'orts3 at )est3 and many constraints on constr(ction. ?f co(rse:)(t whatsso wron" with thatL Perha's the worst thin" a)o(t modern ind(strial life has )een the 'ower of 'olitical a(thoritiesto "rant s'ecial 'ri$ile"es to some enter'rises to $iolate the ri"hts of third 'arties whose 'ermission wo(ld )e tooe@'ensi$e to o)tain. The need to o)tain that 'ermission wo(ld indeed serio(sly im'ede what most

en$ironmentalists see as ram'ant:indeed rec9less:ind(strialization.The system of 'ri$ate 'ro'ertyri"hts . . . is the "reatest moderator of h(man as'irations . . . . n short3 'eo'le mayreach "oals they arent a)le to reach with their own reso(rces only )y con$incin"others3 thro("h ar"(ments and fair e@chan"es3 to coo'erate. n any case3 the%efficiencies* res(ltin" from s()sidized centralization are entirely s'(rio(s. f the

efficiencies of lar"e6scale 'rod(ction were s(fficient to com'ensate for increaseddistri)(tion costs3 it wo(ld not )e necessary to shift a maor 'ortion of the latter tota@'ayers to ma9e the former 'rofita)le. f an economic acti$ity is only 'rofita)lewhen a 'ortion of the cost side of the led"er is concealed3 and will not )e(nderta9en when all costs are f(lly internalized )y an economic actor3 then its notreally efficient. And when total distri)(tion costs #incl(din" those c(rrently shifted to the ta@'ayer7 e@ceedmass6'rod(ction ind(strys ostensi)le sa$in"s in (nit cost of 'rod(ction3 the %efficiencies* of lar"e6scale 'rod(ctionare ill(sory.

"aith in central planning is dangerous -- turns solvency, and makesnuclear #ar inevitable

$ock#ell, !%American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent of the

A(strian School of economics3 and chairman5C? of the 8(dwi" $on Mises nstit(te.#8lewellyn3 %The Haye9 moment*3 Mises nstit(te3 May 2003htt'55mises.or"5freemar9etdetail.as'@LcontrolNI, Callahan&B(t fail(re does not deter the state. ndeed3 weare now as9ed to )elie$e that the !hiteHo(se is not only omni'otent )(t omniscient as well. These 'eo'le in "o$ernment'res(me to ma9e definiti$e (d"ments a)o(t the entire ra;i r(lin" class 3 e$en "oin" sofar as to say that they 9now the secret hostility of a h("e ran"e of 'eo'le toward Saddam3 which th(s;(alifies them#who (st ha''en to ha$e essential technical 9nowled"e7 to hel' in administerin" theco(ntry. They canOt 'ossi)ly 9now this.That they )elie$e they can3 or they )elie$e we will )elie$etheir claims to 9now3 is incredi)le and fri"htenin". The alarmin" reality )rin"s to mind Haye9Os +o)el Prize lect(re in

1GI. !ith "reat co(ra"e3 Haye9 s'o9e of the tendency of economists to 'res(me thatthey 9now thin"s a)o(t h(man )eha$ior that they do not and cannot 9now . They dothis )eca(se they try to a''ly the models of the 'hysical sciences to e@'lain h(manaction3 always with an aim toward controllin" the o(tcomes of h(man choice. n tr(th3h(man action is too com'le@ and s()ecti$e to )e accessed )y social scientists 3 andthe attem't will always lead to a)ysmal fail(re. Haye9 went on to e@'lain how his criti;(e of'ositi$ist economic modelin" a''lies more )roadly to anyone who wo(ld attem't toimitate the form while missin" the s()stance of scientific 'roced(re. B(t it is )y nomeans only in the field of economics that far6reachin" claims are made on )ehalf ofa more scientific direction of all h(man acti$ities and the desira)ility of re'lacin"s'ontaneo(s 'rocesses )y Oconscio(s h(man controlO. He mentions that the 'oint a''lies to
http://www.tinyurl.com/n8jxxphttp://www.tinyurl.com/n8jxxphttp://mises.org/freemarket_detail.aspx?control=439http://www.tinyurl.com/n8jxxphttp://www.tinyurl.com/n8jxxphttp://mises.org/freemarket_detail.aspx?control=439


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sociolo"y3 'sychiatry3 and the 'hiloso'hy of history. Haye9 was raisin" an o)ection not to the ideaof omniscience )(t of the 'ossi)ility of accessin" e$en m(ndane 9nowled"e. +osmall "ro(' in "o$ernment3 m(ch less a sin"le 'erson3 can acc(m(late and sortthro("h the 9inds of information necessary to administer society3 m(ch less destroy andreconstr(ct one3 as the B(sh administration 'ro'oses to do thro("ho(t the


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command o$er a$aila)le reso(rces is d(e to a fact(al error )y the latter a)o(t how 9nowled"e of these reso(rces isand can )e "enerated and (tilised. As a ;(estion of fact3 this conQict m(st )e settled )y scientiRc st(dy.* % am now'rofo(ndly con$inced3* he )elie$ed3 %of what had only hinted at )efore3 namely3 that the str(""le )etween thead$ocates of a free society and the ad$ocates of the socialist system is not a moral )(t an intellect(al conQict.*%!hat am tryin" to do in The 4atal Conceit is to show that their =classical socialists> ar"(ment is wholly )ased on

fact(al mista9es.*The di$ision of 9nowled"e3 Haye9 tho("ht3 'recl(des classical socialism."norance of this tr(th3he )elie$ed3 was the "reatest o)stacle to increased and

im'ro$ed economic 'rod(ction. +ow3 of co(rse3 thro("h the nternet and other im'ro$ements incomm(nication technolo"y3 it is 'ossi)le to centralize 9nowled"e and decision ma9in" as ne$er )efore. To thee@tent that Haye9s ar"(ments for free mar9et order rest on the ina)ility to centralize 9nowled"e and decisionma9in"3 circ(mstances are li9ely to chan"e:'erha's dramatically:in the years ahead. ohn St(art Mill wrote 10years a"o in his "reat wor9 Etilitarianism %+o one whose o'inion deser$es a moments consideration can do()tthat most of the "reat...e$ils of the world are in themsel$es remo$a)le3 and will3 if h(man affairs contin(e toim'ro$e3 )e in the end red(ced within narrow limits. Po$erty3 in any sense im'lyin" s(fferin"3 may )e com'letelye@tin"(ished )y the wisdom of society....$en that most intracta)le of enemies3 disease3 may )e indeRnitely

red(ced in dimensions....All the "rand so(rces...of h(man s(fferin" are in a "reat de"ree3 many ofthem almost entirely3 con;(era)le )y h(man care and effort.* The economic 'ro)lem form(ch of the world is close to )ein" sol$ed. !hile3 'artic(larly in s()6Saharan Africa3 e@treme'ri$ation re"(larly occ(rs3 almost e$ery other maor 'o'(lation area on earth is now in )etter sha'e. There is noreason that this trend of im'ro$ement sho(ld not contin(e. n short3 as Mill had it3 almost all the main so(rces of

h(man s(fferin" may )e con;(ered )y %h(man care and effort.* The "reatest h(man 'o'(lationcom)ined with the hi"hest standard of li$in" is )oth the (tilitarian and theli)ertarian $ision.


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Epistemologyredictions


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democratic forms of life ha$e ta9en root. B(t most im'ortant3 &ewey wo(ld a"ree with Haye9 thatrationalistic 'hiloso'hical tendencies ne"lect the e$er6im'ortant role that(ncertainty 'lays in e$ery facet of o(r li$es .12


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redictions "ail / General

The aff(s assumption that most factors are kno#able and hencepredictable establishes the legitimacy of using political and militaryintervention to manage international politics

3alby, %-'rofessor of "eo"ra'hy at the Eni$ersity of Carleton #Simon3 CriticalSec(rity St(dies Conce'ts and Cases3 ed. )y Keith Kra(se Michael !illiams'.2I75584inally3 'ossi)ly the most im'ortant reason for (n)(ndlin" the theoretical dimensions ofsec(rity is related to the e'istemolo"ical and 'olitical matters im'licit in the'ositi$ist ass(m'tions of neorealism.The ass(m'tion that most3 if not all3 thin"s are)oth 9nowa)le and hence 'redicta)le thro("h the a''lication of social scientificmethods and reasonin" is intimately related to the form(lation of sec(rity as themana"ement and control of ris9s and threats. B(t(st a)o(t any social or nat(ral'henomenon can 'otentially )e hazardo(sJ 'rotectin" a"ainst e$ery e$ent(ality isclearly im'ossi)le. B(t the ass(m'tions of control and 'redicta)ility s(""est that'olitical and military inter$entions offer the 'ossi)ility of mana"in" international'olitics. As so m(ch of the 'ast decades 'olitical history s(""ests3 howe$er3 this may )e adan"ero(s ill(sion. The will to 'ower that is im'licit in the 'ositi$ist e'istemolo"y ofneorealism s(""ests that other less am)itio(s a''roaches deser$e to )e ta9enmore serio(sly.


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redictions "ail / Economics

The affirmative places too much faith in central planning solutions --ceding decision-making authority to supposed e*perts guaranteesthe collapse of individual liberty and irresponsible domestic andforeign policy solutions -- free market solutions are more accurateand effective

$ock#ell, !%American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent ofthe A(strian School of economics3 and chairman5C? of the 8(dwi" $on Misesnstit(te. #8lewellyn3 %The Haye9 moment*3 Mises nstit(te3 May 2003htt'55mises.or"5freemar9etdetail.as'@LcontrolNI, Callahan&The rele$ance of Haye9 in o(r times e@tends )eyond (st )(siness cycle analysis. n later years3 Haye9t(rned hisattention to other matters concernin" the methods of science #he decried the 'retense of9nowled"e affected )y social scientists7 and the (ses of 'ower in society . His Doad toSerfdom warned that the re"imentation of totalitarian societies can only come to Britain andthe ES thro("h central 'lannin".!hat is at sta9e3 he wrote3 is not (st 'rod(cti$eeconomies )(t freedom itself. n o(r time3 that freedom is threatened )y inter$ention ine$ery as'ect of economic life)(t also thro("h the (se of military 'ower.


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redictions are impossible -- the human mind can(t process all thekno#ledge necessary to accurately understand economicsCro#ley, 1.Mana"in" &irector of the Macdonald68a(rier nstit(te3 a national'()lic 'olicy thin9 tan9 )ased in ?ttawa. He was also the fo(ndin" President of theAtlantic nstit(te for Mar9et St(dies #AMS73 a '()lic 'olicy thin9 tan9 )ased in

Atlantic Canada. #Brian 8ee3 %The Man !ho Chan"ed $eryoneOs 8ife*3 TheMacdonald68a(rier nstit(te3 20123http4###macdonaldlauriercafilespdf5ayek-Commentary-6ay-.!1.pdf, Callahan&Plannin" an economy therefore im'lies 9nowin" all sorts of thin"s !hen and why'eo'le want to wor93 and when and where their 'artic(lar s9ills are re;(iredJ thestate of f(t(re demand for 'artic(lar "oods and ser$ices3 and therefore when to)(ild new 'rod(cti$e ca'acity or when to close down the oldJ how emer"in"technolo"ies and other disco$eries will ca(se 'eo'leOs needs and wants to shift in(nforeseen directions.Most cr(cially3 it in$ol$es 9nowin" what 'eo'le act(ally want andneed. P(t a foot wron" in any of these decisions and the whole com'licated fa)ric ofthe economy )e"ins slowly to (nwind.Uet Haye9Os main 'oint is that all h(man 9nowled"e3

and es'ecially that a$aila)le to social 'lanners3 is irremedia)ly fra"mentary andincom'lete. +o one can ha$e the 9nowled"e that 'lanners re;(ire to s(ccessf(lly ordersocial relations. The a(thor of The Doad to Serfdom ne$er tired of claimin" that his own economics 'rofession was"(ilty of 'retendin" to ha$e 9nowled"e at its dis'osal that it did not and co(ld not ha$e3 th(s (sin" the 'resti"e ofscience to mas9 a cr(de "ra) for 'ower and infl(ence. So central was this idea to his whole $iew of social scienceOsrole in the e$ol(tion of ci$ilization that Haye9 (sed the most 'resti"io(s 'latform he was e$er to occ('y3 his +o)elPrize acce'tance s'eech3 to dri$e it home. Enre'entant in the $iews that had earned him academic ostracism 0

years earlier3 he casti"ated his fellow economists for their 'retence of 9nowled"e #the title of thelect(re7 Belie$in"3 and leadin" others to )elie$e3 that they 9new eno("h3 or co(ld9now eno("h3 to direct and control somethin" as intricate and com'le@ as aneconomy. T? TH M?&D+ M+&3 ?4 C?EDS3 HAUKS ATTACK ?+ S?CA8 SC+C MAU APPAD T? B A K+&?4 K+?!6+?TH+


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faster than we can e$er ho'e to ed(cate o(rsel$es )eca(se o(r a)ility to ac;(ireand reflect on information is relati$ely fi@ed3 while o(r collecti$e 9nowled"e ise@'andin" e@'onentially.

conomic 'redictions are im'ossi)le 66 differin" e@'ectations ma9e cons(merdecisions (n'redicta)le.

7rthur 286 Desearcher at the Sante 4e nstit(te #Brian3 The nd of Certainty inconomics. Kl(wer Academic P()lishers. 1I.t($al(.santafe.ed(5Ww)arth(r5Pa'ers5Ma"ritte.'df755T&!orse3 e@'ectations )ecome (nsta)le. ma"ine that a few 'eo'le thin9 that 'rices on themar9et are "oin" to "o ('. f )elie$e this and )elie$e that others )elie$e this3 will re$ise my e@'ectations ('ward. B(t then may 'ic9 (' some ne"ati$e r(mor. will reassess downward3 )(t realizin" that others may reassess and that they toorealize that others3 may f(rther reassess. @'ectations )ecome f("iti$e3 ri''lin"(' or down whether trades are made or not. Predictions )ecome (nsta)le . This is theway 'rice )())les start.f somehow 'eo'le e@'ect 'rices to "o ('3 they will forecast thatother 'eo'le will forecast that 'rices will "o ('. So they will )(y in3 and once the)())le th(s starts off3 'eo'le can see 'rices "o (' and their e@'ectations of ('ward

motion f(lfilled. Therefore 'rices may contin(e to "o ('.Similar lo"ic a''lies to %floors* and%ceilin"s.* f3 for e@am'le3 the 'rice is I3 many in$estors )elie$e that at 00 there is some sort of mem)rane3a ceilin"3 and when the 'rice reaches this ceilin" it will )o(nce )ac9 down with a certain 'ro)a)ility or it may%)rea9 thro("h.* S(ch ideas seem stran"e at first. B(t it is ;(ite 'ossi)le that many in$estors ha$e sell orders at003 sim'ly )eca(se it is a ro(nd n(m)er. So e@'ectations that the 'rice will fall if it hits 00 are li9ely to )ef(lfilled. Ceilin"s and floors emer"e as 'artially self6f(lfillin" 'ro'hesies3 held in 'lace )y their )ein" con$enient sell

and )(y 'laces.!e are now a lon" way from homo"eneo(s rational e@'ectations . Enderthe realistic ass(m'tion that traders may inter'ret the same information differently3 e@'ectations )ecomeindeterminate and (nsta)le. And they may )ecome m(t(ally self6f(lfillin".10


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redictions "ail / 0$


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7. E*perts Good

$eliance on elite e*perts ensures policy failure -- kno#ledge is toodecentrali)ed for any individual to gain an accurate picture of the#orld

ing 1!6 Ph& in economics from MT3 former senior economist for 4reddie Mac3 andad(nct scholar at the Cato nstit(te. #Arnold3 The ra of @'ert 4ail(re. Cato.Se'tem)er5?cto)er 2010.www.cato.or"5'()s5'olicyre'ort5$2n5c'2n61.html!ith "o$ernment e@'erts3 the 9nowled"e6 'ower discre'ancy is 'artic(larly ac(te.As we ha$e seen3 the e@'ectations 'laced on "o$ernment e@'erts tend to )e(nrealistically hi"h. This selects for e@'erts with (n(s(al h()ris. The a(thority of thestate "i$es "o$ernment e@'erts a dan"ero(s le$el of 'ower . And the a)sence of mar9etdisci'line "i$es any errors that these e@'erts ma9e an o''ort(nity to acc(m(late and com'o(nd almost witho(t

limit. n recent decades3 this 9nowled"e6'ower discre'ancy has "otten worse. Knowled"e has "rownmore dis'ersed3 while "o$ernment 'ower has )ecome more concentrated.Theeconomy today is m(ch more com'le@ than it was (st a few decades a"o. Thereare many more ty'es of "oods and ser$ices . Cons(mers who once were concei$ed as a massmar9et now ha$e sorted into an e$ere@'andin" array of niches. n the 1/0s3 most ho(seholds had one tele$ision3which was (s(ally t(ned to one of (st three maor networ9s. Today3 some ho(seholds ha$e many tele$isions3 witheach family mem)er watchin" a different channel. Some 'eo'le still watch maor networ9s3 )(t many others

instead foc(s on 'artic(lar interests ser$ed )y s'ecialty ca)le channels. Still others watch $ery little T- at all.Thisincreased di$ersity of cons(mer tastes in a world of tremendo(s $ariety ma9es the'ro)lem of a""re"atin" cons(mer 'references more diffic(lt. t )ecomes harder for"o$ernment e@'erts to determine which 'olicies are in cons(mersO interests . 4ore@am'le3 is a national )road)and initiati$e "oin" to "i$e cons(mers access to somethin" they ha$e )een denied or

somethin" that they do not wantLThe ad$ances of science are lea$in" (s with 'ro)lems thatare more com'le@. As fewer Americans die of heart ailments or cancer in their fifties and si@ties3 more of o(rhealth care s'endin" "oes to treat 'atients with m(lti'le ailments in their ei"hties and nineties.


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red(ce the concentration of 'ower. !e sho(ld try to resist the tem'tation to "i$e'ower to "o$ernment e@'erts3 and instead allow e@'erts in )(siness and non'rofitinstit(tions to "ro'e toward sol(tions to 'ro)lems.

$eliance on e*pertism to guide government planning is the #rongapproach -- it degrades democracy, diminishes freedom, and can(t

produce accurate kno#ledgeing 1!6 Ph& in economics from MT3 former senior economist for 4reddie Mac3 andad(nct scholar at the Cato nstit(te. #Arnold3 The ra of @'ert 4ail(re. Cato.Se'tem)er5?cto)er 2010.www.cato.or"5'()s5'olicyre'ort5$2n5c'2n61.html

The additional'ower that is )ein" "ranted to e@'erts (nder the ?)ama administration isindeedstri9in". The administration has a''ointed czars to )rin" e@'ertise to )ear o(tside of the traditionalca)inet 'ositions. Con"ress has enacted swee'in" le"islation in health care and finance3 and &emocratic leadersha$ee;(ally am)itio(s a"endas that en$ision 'lacin" "reater tr(st in e@'erts tomana"eener"y and the en$ironment3 ed(cation and h(man ca'ital3 and trans'ortationandcomm(nications infrastr(ct(re. Howe$er3e;(ally stri9in" is the fail(re of s(ch e@'erts.

They failed to 're$ent the financial crisis3 they failed to stim(late the economy tocreate o)s3 they ha$e failed in Massach(setts to hold down the cost of health care3 and sometimes they ha$efailed to 're$ent terrorist attac9s that instead had to )e thwarted )y ordinary ci$ilians. ronically3 whene$er"o$ernment e@'erts fail3 their instincti$e reaction is to as9 for more 'ower andmore reso(rces. nstead3 we need to ste' )ac9 and reco"nize that what we areseein" is not the $indication of Keynes3 )(t the $indication of Haye9. That is3decentralized 9nowled"e is )ecomin" increasin"ly im'ortant3 and that in t(rnma9es centralized 'ower increasin"ly anomalo(s. TH A


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$eliance on e*perts is also bad because it e*cludes the voices of thepeople #ith lived e*periences thereby missing the root causes of conflict6ilovanovic 9 :chehr, 22#&ra"on Milo$ano$ic V Assistant Professor in theCriminal (stice Pro"ram at the Eni$ersity of llinois S'rin"field Do)ert C. Schehr VProfessor in the &e'artment of Criminal (stice3 Sociolo"y and Social !or9 at+ortheastern llinois Eni$ersity3 Social (stice3 %Conflict mediation and the

'ostmodern Chaos3 catastro'he3 and 'sychoanalytic semiotics3* S'rin"3 $ol. 2/3 no.13 Pro;(est7Decent indications of renewed hostilities in co(ntries not (nfamiliar with ethnic3 reli"io(s3 "eo'olitical3 economic3and c(lt(ral str(""le #e.".3 America5ra;3 ndia3 Pa9istan3 Per(3 Dwanda3 U("osla$ia3 +orthern reland3 the So(thChina Sea3 B(r(ndi3 and the Ara)5sraeli conflict7 once a"ain "i$e rise to methodolo"ical concerns re"ardin" theefficacy of contem'orary conflict inter$ention strate"ies. Similarly3 with the E.S. 'rison 'o'(lation well o$er 1.million inmates3 with 'rison constr(ction )oomin"3 and with some fi$e million Americans (nder some form of

s('er$ision3 alternati$e tho("ht is s(rely needed that more ade;(ately deals with thecrisis and 'artic(larly with conflict inter$ention a''roaches. n this essay3 we contend thatcon$entional conflict resol(tion methods 6 those artic(lated)y 4isher #117 as conciliation3cons(ltation3 ar)itration and mediation with m(scle3 and 'eace9ee'in" 6 willcontin(e to 'ro$e to )e only 'artially effecti$e in calmin" dis;(iet and newdirections m(st )e so("ht. There are fi$e 'rimary reasons for the shortcomin"s the

'ri$ile"in" of hierarchical re'resentations3 the s(''osition of order3 the cele)rationof the ideal s'eech sit(ation and consens(s dynamics3 the contin(o(sencroachment of le"al disco(rse at the e@'ense of alternati$e disco(rses3 and3finally3 the lac9 of connected strate"ies )etween the macro and micro domains .4irst3 contem'orary conflict resol(tion strate"ies "enerally rely on hierarchicalre'resentation of conflictin" "ro('s3 ne"lectin" the com'le@ com'osition of'henomenolo"ical and "ro(' identification. Political3 economic3 and c(lt(ral )eliefs3interests3 and concerns intersect within the lifeworld#17 to create and recreatemodes of s()ect and "ro(' identification that may or may not )e ade;(atelyre'resented )y elected3 a''ointed3 or declared re'resentati$esd(rin" conflictne"otiation sessions. This 'oint has recently )een made )y Timothy Sis9 #1/7 of the Enited Statesnstit(te for Peace #ESP7. n a man(scri't meant to "(ide 'olicy6ma9ers thro("h the conflict ne"otiation 'rocess3

Sis9 contends that 'ower6sharin" arran"ements sho(ld )e )ased 'rimarily on the'olitical will of the 'arties in conflictand not )e the res(lt of e@cessi$ely hea$y'ress(res from theo(tside #)id. 117. The second3 related concern in this essay is the 'ri$ile"in" oforder in m(ch of the literat(re. !e wish to resit(ate the disc(ssion in order to c(lti$ate methods of conflictresol(tion that 'ri$ile"e )oth insta)ility and difference3 within a more sta)le whole. That is3 rather than $iewin"conflict and insta)ility as anomalo(s and (ncharacteristic of h(man )eha$ior3 they sho(ld )e $iewed as anine$ita)le 'rod(ct of h(man interaction. Most radical and 'otentially contentio(s in o(r 'ro'osition is to e@'lode the)o(ndaries constit(tin" 're$io(s conce't(alizations of conflict resol(tion to eliminate mor'holo"ical efforts that'ri$ile"e inter$ention at the state le$el. Therefore3 the linearity im'lied in conflict ne"otiation #Prein3 1I7 will )ecalled into ;(estion here. To esta)lish an alternati$e to esta)lished modes of conflict resol(tion3 we will t(rn to thetheoretical insi"hts of chaos3 catastro'he theory3 and 'sychoanalytic semiotics. ?(r third concern with m(ch of thecon$entional literat(re is the ass(m'tion of an (nderlyin" meta'hysics cele)ratin" rational ar"(ments tendin"toward ideal s'eech sit(ations #Ha)ermas3 1I7 and consens(s #8yotard3 117. t is not that we cannot come ('with tentati$e concl(sions3 'ositions3 $iew'oints3 stand'oints3 )indin" resol(tions3 etc.J rather3 followin" thedynamics im'lied )y chaos theory3 with its notion of dissi'ati$e str(ct(res3 alon" with the close ne@(s with'ostmodern feminist 'ositions of contin"ent (ni$ersalities3 contin"ent 'ositions can )e de$elo'ed that )ecome

the )asis of relati$ely sta)le forms of action and lifeworlds. Uet these 'ositions or stand'oints are always s()ect tore$ision3 chan"e3 deletion3 and s()stit(tion. The lifeworld3 in short3 can )e reconce't(alized in terms of dissi'ati$estr(ct(res and far6from6e;(ili)ri(m conditions. 4o(rth3 mediation 'ro"rams are in contin(o(s dan"er of )ein"s()$erted )y le"al disco(rse #&el"ado3 1J &el"ado et al.3 1J


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nonconflict(al self is constit(ted.This is well in line with 4o(ca(ltOs notion of docile )odies and)odies of (tility3 res(lts of 'ano'ticism. lsewhere #Henry and Milo$ano$ic3 1/ 173 we indicated that of si@ideal ty'es of social inter$ention strate"ies3 two #e.".3 radical acc(satory and reformist remedial7 remain(n(sed. m'hasis in criminal (stice 'olicy wo(ld also incl(de macro6le$el chan"e since the (nderlyin" ass(m'tionsincl(de the idea that social str(ct(re is a contri)(tin" factor in the manifestation of conflict. Conflict Mediation as

Contin"ency Cross6C(lt(ral Macro6 and Micro68e$el &is'(te Desol(tion A theoretical and 'roced(ralem'hasis on 'ri$ile"in" m(lti'le 'ossi)le methods for resol$in" dis'(tes is one of

the more recent inno$ations in conflict resol(tion #4isher3 1J Prein3 1IJ Cohen3 11J 4isherand Keashly3 11J Keashly and 4isher3 10J Keashly3 4isher3 and


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for third6'arty inter$ention3 )(t "ro('s and or"anizations contin(e to reco"nize this as the most rele$antcom'onent of conflict resol(tion.The second tension in the con$entional literat(re is its 'rioritization of hierarchicaldecision6ma9in". t is manifested in two ways. 4irst3 it offers a restricted artic(lation of the third6'arty cons(ltant3which is intimately related to a limited conce't(alization of contin"ency. Shared )y the literat(re as a whole3 this

artificially minimizes em'hasis on microlo"ical inter'retations of e$ents. Second is the cons'ic(o(s'ri$ile"in" of third6'arty e@'erts 6 what 8acan #1GG7 referred to as the disco(rse ofthe master 6 where only 9nowled"ea)le and dis'assionate actors are ca'a)le of

'roc(rin" a reasona)le settlement. An em'hasis on e@'erts de$al(es the9nowled"es of the s()altern3 while 'ri$ile"in" the interests and 9nowled"es ofelected3 a''ointed3 or declared re'resentati$es #4reire3 1G7. !e will )rieflycomment on each of these in t(rn. The con$entional conflict mediation literat(re'ri$ile"es reco"nition of hierarchical decision6ma9in"#Di")y3 1J see Cr(i9shan93 1G3 foran e@ce'tion7. ndeed3 it is ty'ically ass(med that the 'artici'ants in conflict ne"otiationare the elected3 a''ointed3 or declared re'resentati$es of the 'eo'le. ?$erloo9ed3howe$er3 are the $oices from the streets. A 'rimary methodolo"ical foc(s sho(ld )eon the elimination of hierarchical decision6ma9in" and the incl(sion of m(lti'le sitesfor the 'er'et(al disc(ssion of matters of interest to the s()altern. ?$erreliance on masternarrati$es 'romotes an ideolo"ical commitment to dominant interests )y occl(din" the lan"(a"e and3 hence3 the

c(lt(ral ca'ital and ha)it(s of the s()altern #see Bo(rdie(3 1I7. P(t in another way3 si"nifiers are

filled with the content of dominant "ro('s and interests#8acla(3 1/ II7. Mastersi"nifiers#those emanatin" from the 'owerf(l7 'rod(ce 9nowled"e $ia a linear ded(cti$e lo"ic.Alternati$e constr(ctions are re'ressed. Con$entional conflict resol(tion disco(rseass(mes and $al(es sta)ility3 'redicta)ility3 consistency3 stases3e;(ili)ri(m5homeostatic dynamics3 and 'ermanence.Those officially reco"nized as)ein" res'onsi)le for the artic(lation of interests within conflict(al settin"s will findthat their decisions#their methods of resol$in" dis'(tes and their s'ecific remedies7 will3 o$er timeand with re'eated a''lication3 a''roach stasis. The methods and concl(sions3discerned $ia the disco(rse of the master3 coalesce into what chaos theorists referto as 'oint attractors. That is3 they esta)lish the 9nowled"e3 interests3 $al(es3 and)eliefs of the master disco(rse#hierarchical re'resentati$e of conflictin" interests7 as le"itimate.

The effect is not only to limit access to decision6ma9in" to those who ha$e the

reco"nized sym)ols constit(tin" the disco(rse of the master3 )(t also to diminishthe le"itimacy of 9nowled"e3 interests3 $al(es3 and )eliefs of the s()altern. Thissit(ation is )oth (ne;(ita)le and 'otentially dan"ero(s3 as history seems to )areo(t.

Cognitive psychology proves our kno#ledge argumentsGick !%6 Professor of economics at &artmo(th #$elyn3 Co"niti$e theory and moral)eha$ior The contri)(tion of 4. A. Haye9 to )(siness ethics B. o(rnal ofB(siness thics. (ne 200. Pro;(est7n Haye9Os seminal wor93 The Sensory ?rder #127 as well as in his essays D(les3 Perce'tion and ntelli"i)ility#1/G3 ''. I6/73 The Primacy of the A)stract #1G3 ''. 6I73 and The Theory of Com'le@ Phenomena#1/G3 ''. 226I273 his aim is to e@'lain 'erce'tion as well as h(man action as a '(rely indi$id(al or s()ecti$e

'henomenon.Haye9 com)ines meta'hysical iss(es with ne(ro)iolo"ical ones in

showin" how ne(rons and ne(ronal connections 'lay a s'ecific role in the h(man)rain. Altho("h these ar"(ments were lar"ely reected d(rin" his lifetime3c(rrent research inco"niti$e 'sycholo"y re$eals that Haye9Os a''roach is correct in most as'ects#Dizzello3 17. The startin" 'oint of Haye9Os co"niti$e theory is the relationshi' )etween stim(l(s and res'onse on

an indi$id(al 'lane.1Haye9 thoro("hly reflects on a sim'le stim(l(s6res'onsemechanism and lin9s 'rocesses that occ(r on a ne(ral 'lane with 'hiloso'hicalreasonin". The ar"(ment that connects Haye9 with the co"niti$e a''roach called


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stim(li. $ery 'ercei$ed stim(l(s or )(nch of stim(li m(st fit into socalledcate"ories. These cate"ories wor9 as a filter in that only cate"orized or classifiedstim(li may lead to an action. After stim(li ha$e 'assed the 'rocess of classification3the h(man mind is a)le to 'ercei$e them )eca(se they )elon" to a certain set ofcate"ories the )rain 'ossesses . ?ne may find 'arallels to KantOs conce't of cate"ories. !hile KantOscate"ories of mind are (nchan"ea)le and 'ermanent3 Haye9Os conce't allows for a semi6'ermanent nat(re of these

'atterns. Haye9 a"rees with Kant that cate"ories are "enetically transmitted3 )(t "oesf(rther to say that they are also hi"hly infl(enced )y indi$id(al e@'erience and3hence3 can )e chan"ed. This fact mar9s the startin" 'oint of Haye9Os indi$id(alism. n other words3cate"ories lead to the 'erce'tion of data from o(tside the mind. Since thesecate"ories are indi$id(ally (ni;(e 6 inherited and formed )y e@'erience 6 e$eryindi$id(al has his own framewor9 )y which he is a)le to 'ercei$e the world . n Haye9Os#127 descri'tion3the mind itself can )e descri)ed as a framewor9 that or"anizes the'erce'tions recei$ed from the o(tside world. Howe$er3 'ercei$in" is not a 'assi$eactJ it entails an act of inter'retation #Dizzello3 13 '. 27 the 'lacin" of somethin" into one orse$eral classes of o)ects #Haye93 123 '. 1I27. 4(rthermore3 indi$id(al 'erce'tion is3 as Haye9 claims3necessarily red(ced to 'arts of any 'hysical e$ent3 which refers to those 'arts that can )e related to alreadyclassify stim(li #Haye93 123 '. 1I7. Hence3 e@'erience 'lays a cr(cial role in )(ndlin" the res(lts into a "ro(' ofstim(li. !hat we 'ercei$e is what we ha$e already com'ared with other classes of e$ents on a ne(ral 'lane. n

other words3 mind is a framewor9 attri)(tin" classifications to "ro('s of stim(li. n a''roachin" Haye9Osindi$id(alism3 that will e@'lain his tho("hts a)o(t 9nowled"e we shall )ecome familiar with the central conce't of

the co"niti$e writin"s 6 dis'ositions.!ith the introd(ction of the conce't of dis'ositions3Haye9 is a)le to e@'lain why an indi$id(al (ses certain cate"ories and not others3and why he is li9ely to res'ond to stim(li in a certain way . &is'ositions are the mostcon$enient startin" 'oint . . . which ma9es an or"anism inclined to res'ond to stim(li of a certain class3 not )y a'artic(lar res'onse3 )(t )y a res'onse of a certain 9ind #Haye93 1G3 '. I07. &is'ositions can )e fo(nd on twole$els either on the le$el of 'erce'tion or on the le$el of action. Cate"ories follow dis'ositions. The inter'retation ofthe 'erce'tions or the classifications )y which a recei$ed stim(l(s has a s'ecific si"nificance is )ased oninclination3 a dis'osition of an indi$id(al to 'ercei$e this stim(l(s in this way.2 Beca(se dis'ositions ha$e formedcate"ories3 they share some similarities. &is'ositions are "enetically inherited )(t are also the res(lt of thesocietyOs e@'eriences. Hence they may )e re"arded as the res(lt of the socialization 'rocess in a )roader sense3encom'assin" )oth ed(cation and li$in" conditions3 as well as indi$id(al e@'erience. A dis'osition to act is a)stractas is the classified 'erce'tion3 which was the startin" 'oint for the dis'osition to act. Therefore3 the dis'osition toact is only a $ery $a"(e and a)stract 'attern. t is called a "eneral r(le or 'attern of action3 and is (s(allys('erim'osed )y other dis'ositions #see 4i"(re 17. These additional dis'ositions refer to the c(rrent sit(ation of theindi$id(al and e$o9e the indi$id(alOs res'onse. t is im'ortant for o(r '(r'oses to hi"hli"ht the a)stract ;(ality of

the 'rimary dis'ositions. These 'redis'ose an action in a $ery "eneral sense. t e@'lains why Haye9(nderlines the 'ossi)ility only to 'redict a "eneral dis'osition )(t the im'ossi)ilityto 'redict an indi$id(al action. This means that $al(a)le 'ro"nosis can )e done re"ardin" the 'attern ofe$ents since 9nowled"e of only a few sit(ational circ(mstances3 which concern the connection )etween thecharacteristics of the e$ent3 are necessary. n the followin" section3 we will see how the conce't of 'attern'rediction is related to the conce't of limited 9nowled"e in a world of com'le@ 'henomena. . The 9nowled"e'ro)lem As we ha$e seen3 the conce't of the h(man dis'ositions (nderlines Haye9Os em'hasis on indi$id(alism.

Altho("h mem)ers of a society will tend to act in a s'ecific way )eca(se of thesocial ;(ality of their dis'ositions3 the final indi$id(al action cannot )e 'redicted)eca(se of the indi$id(al ;(ality of the dis'ositions. &is'ositions are thereforeres'onsi)le for what is 'ercei$ed )y the indi$id(al3 and 'erce'tion and action ha$ea s()ecti$e character. t is easy to show how this a''roach lin9s to the conce't of 9nowled"e.The 9ey

element of Haye9Os theory is that h(man 9nowled"e is limited. !hy indi$id(als ha$eonly limited 9nowled"e a)o(t their en$ironment and are a)le to act only )y referrin" to a small 'art of itlies in the fact that the social system3the mar9et'lace in economic systems3 and the ner$o(s systemare com'le@ 'henomena. There are so many $aria)les or circ(mstances that )rin"forth a res(lt that one cannot ta9e them all into acco(nt #!eimer and Palermo3 127.


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;inks


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;inks / Centrali)ed lanning

The affirmati$es faith incentrali)ed economic solutions relies on a synopticdelusion -- the market is too comple* to be managed or understoodby government planners

Cro#ley, 1.Mana"in" &irector of the Macdonald68a(rier nstit(te3 a national'()lic 'olicy thin9 tan9 )ased in ?ttawa. He was also the fo(ndin" President of theAtlantic nstit(te for Mar9et St(dies #AMS73 a '()lic 'olicy thin9 tan9 )ased inAtlantic Canada. #Brian 8ee3 %The Man !ho Chan"ed $eryoneOs 8ife*3 TheMacdonald68a(rier nstit(te3 20123http4###macdonaldlauriercafilespdf5ayek-Commentary-6ay-.!1.pdf, Callahan&+either of the two co'in" strate"ies (s(ally trotted o(t )y as'irin" 'lanners can infact o$ercome this disa)ility.The first s(ch strate"y relies on technolo"y f we )(ild im'ressi$eeno("h com'(ters and cram them with com'rehensi$e eno("h data3 we can'rocess the information artificially3 )y'assin" the constraints of the h(man mind.Alas3 they for"et that com'(ters 9now no more than the h(mans that 'ro"ram them3 andthat many of the 'ieces of information on which the economy de'ends are often not9nown )y any)ody at all or are ine@trica)ly lin9ed to a 'artic(lar 'lace and time3 ortheir im'ortance is ill (nderstood )y h(mans3 incl(din" those who 'ro"ram com'(ters. +or isthe stoc9 of 9nowled"e itself a constant3 as technical and other inno$ations Vcom)ined with chan"es in 'eo'leOs needs and 'referencesV re"(larly resha'e theintellect(al landsca'e of society and the economy.4or e@am'le3 a manin r(ral +o$a Scotiahad a little )(sinessma9in" and sellin" hi"hland 'ara'hernalia3 s(ch as s'orrans3 da""ers3 and )elt)(c9les. ?ne day3 his eye fell on a news'a'er ad callin" for tenders for the ma9in" ofaircraft 'arts. He ;(ic9ly realized that3 with the e;(i'ment he 'ossessed3 he co(ldeasily ma9e the 'arts descri)ed3 and he s()mitted a )id. He is now s(ccessf(l in)oth lines of wor9.+ote3 howe$er3 that no 'lannersittin" in Halifa@ or ?ttawa wo(ld ha$e

incl(ded this man in their in$entory of aircraft 'arts ma9ers3 )eca(se he did not9now himself that he 'ossessed this ca'acity. By the chance act of readin" the ad3he learned somethin" a)o(t himself3 and transformed the tiny 'art of the economyof which he is the centre .The economy as a whole is com'osed of )illions of s(chindi$id(als whose tr(e circ(mstances are ne$er f(lly 9nown to themsel$es3 let aloneto distant 'lanners. The other strate"y social 'lanners trot o(t for o$ercomin" theiri"norance is to claim that they donOt need to 9now the details3 )(t only the "rando(tlinesV that they can sim'lify com'le@ social 'rocesses down to lar"e statistical a""re"ates. B(t in theHaye9ian $iew3 this is the syno'tic del(sion3 li9e mista9in" a two6dimensional ma' forthe real three6 dimensional world. Ma's are (sef(l for "ettin" aro(nd or for seein"9ey data in relation to one another3 )(t can accom'lish this only )y stri''in" theworld of its messy com'le@ity3 and distortin" its real sha'e to fit on a 'iece of

'a'er. Beca(se most 'eo'leOs idea of the arth is sha'ed )y ma's )ased onMercatorOs 'roection3 they thin9


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com'rehensi$e statement3 we are condemned to "rowin" s'ecialization asindi$id(als and3 the corollary of that3 to a "rowin" de'endence on others similarlys'ecialized in their fields. Haye9Os -iennese contem'orary3 and 8S collea"(e3 the 'hiloso'her of scienceKarl Po''er3 '(t it this way ?(r 9nowled"e can only )e finite3 while o(r i"norance m(stnecessarily )e infinite#1/07.


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E*ts / Centrali)ed lanning "ails

lanning to create gro#th is impossible -- policymakers can(t controleconomic comple*ities

5aynes, !


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re'resents what occ(rs in the mar9et3 and e@'lains the ina)ility of the mar9ets to reach and maintain e;(ili)ri(mJ itwo(ld th(s seem that the A(strian analysis is s('erior to that of the neo6classical school on )oth 'ractical andtheoretical "ro(nds. The sol(tion offered )y 8an"e to Mises challen"e3 was )ased ('on the re'lication of aframewor9 of analysis which )oth Haye9 and Mises e@'licitly reected. The model of ca'italism which 8an"e (sedwas a m(ch easier model to d('licate than that ado'ted )y the A(strians3 and was a model which does notre'resent how the mar9et wor9s. The central thr(st of Haye9s res'onse was to deny the 'ossi)ility of a socialisteconomy achie$in" the same le$el of ac;(isition and (se of 9nowled"e as is achie$ed in a ca'italist economy. 4o(r elements are a''arent in Haye9s theory of 9nowled"e. These are that

information is im'erfect3 decentralised3 im'ossi)le to collect in any com'rehensi$emanner3 and that it is im'ossi)le to select with certainty (st what information will'ro$e rele$ant to ones 'roect. These 'ro)lems affect )oth central 'lanners andmar9et a"ents3 and 're$ent )oth from attainin" 'erfect res(ltsJ the stren"th ofHaye9s defence of ca'italism de'ends ('on the e@tent to which he can show that9nowled"e will )e )etter collected and (tilised in a ca'italist society than in asocialist one. Haye9 considers se$eral factors to s(""est that the 9nowled"e 'ro)lem militates in fa$o(r ofca'italism. 4irstly3 and most cr(cially3indi$id(al mar9et a"ents do not ha$e to res'ond to as$ast an array of information as a central 'lanner does. &eterminin" the 'rice of a'rod(ct3 in the way 8an"e s(""ests3 re;(ires the 'lanner to acc(m(late informationfrom across the economy #which3 de'endin" ('on tradin" relations3 can mean (' tothe size of the world7 re"ardin" the 'rod(ct concerned. The information re;(iredincl(des the scarcity of the 'rod(ct relati$e to demand and relati$e to other'rod(cts which co(ld )e s()stit(ted for it3 the #chan"in"7 n(m)er of (ses to whichthe 'rod(ct can5will )e '(t3 and localised $ariations in demand to"ether or otherfactors #e.". trans'ort costs etc.7 which affect the social cost of the (se of a 'rod(ctwithin a locality. ?ne m(st f(rther remem)er that the acc(racy of this information is cr(cial to determinin"what 'rimary 'rod(cts sho(ld "o into ma9in" a secondary 'rod(ct. Miscalc(lation as to the a''ro'riate 'rice for a'rod(ct can res(lt in a 'rod(ct )ein" (sed to ma9e a "ood when another 'rod(ct wo(ld )e )etter (sed in its 'lace3

th(s creatin" a mis6allocation of reso(rces.n contrast to a central 'lanner3 who has to ma9e#after ha$in" collected and 'rocessed information7 an a(thoritati$e decision as tothe 'rice at which to sell a 'rod(ct3 mar9et a"ents each try to sell their 'rod(ct at a'rice they select. They recei$e a reward in 'ro'ortion to their s(ccess at settin" amar9et clearin" 'rice and are a)le to res'ond to localised and s'ecific information

with immediate effect. ?f co(rse3 as Haye9s o''osition to static e;(ili)ri(m theory s(""ests3themar9et can incorrectly set the 'rice for a 'rod(ct and the mar9et can fail to clear asa res(lt. !hen information or its 'rocessin" are 'oor and dise ;(ili)ri(m res(lts #or is li9ely to res(lt if action isnot ta9en7an incenti$e is 'rod(ced in the mar9et for the dis'ersal of the rele$antinformation )y those who are 'arty to it. As Haye9 states %where only a few 9nowof a new fact3 the m(ch mali"ned s'ec(lators will see to it that the rele$antinformation will ra'idly )e s'read )y an a''ro'riate chan"e of 'rices.* S(chs'ec(lators are rewarded for acc(rately assessin" f(t(re mar9et acti$ity3 and 'enalised for inacc(rately assessin"it. Their actions con$ey small 'ieces of information thro("h the 'rice mechanism to which 'rod(cers #who needne$er 9now of the (nderlyin" ca(se )ehind the 'rice chan"e7 can res'ond.

6arket comple*ities make central planning impossibleennedy !1#ose'h -.3 %A Better !ay to De"(late3* Hoo$er nstit(te3 Policy

De$iew +.103 htt'55www.hoo$er.or"5'()lications5'olicy6re$iew5article5G0G55M9oo7MECH ?4 !HAT is wron" with "o$ernment is str(ct(ral. The traditional a''roach to"o$ernment stresses a to'6down mana"ement style that may ha$e )eena''ro'riate in the 10s and 1/0s )(t is increasin"ly o)solete in a world of ra'idchan"e and increased com'etition. Pro"rams that centralize control and limitindi$id(al discretion m(st necessarily resort to com'le@ r(les. n the a)sence ofcom'etition3 centralization has made it easier to co6o't "o$ernment a"encies andhas led to a 'rofo(nd ri"idity in )(rea(cratic str(ct(res. t has also 're$ented
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im'ortant sectors of the economy from res'ondin" to mar9et forces. Modern society isnot well s(ited to traditional "o$ernment. conomic and social instit(tions are increasin"lycom'le@. The flow of information from the mar9ets is too "reat and toodifferentiated to )e mana"ed from the to'.


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Centrali)ation fails -- subsidies are delivered to suppliers not consumers#ho lack purchasing po#er

ennedy !1#ose'h -.3 %A Better !ay to De"(late3* Hoo$er nstit(te3 PolicyDe$iew +.103 htt'55www.hoo$er.or"5'()lications5'olicy6re$iew5article5G0G55M9oo7Sometimes the "o$ernmentallows 'ri$ate mar9ets to o'erate )(t deli$ers lar"es()sidies to some 'artici'ants in order to s9ew the final res(lt. P()lic trans'ortation

is hea$ily s(''orted )y federal s()sidies3 as is low6income ho(sin". Es(ally3 theses()sidies are deli$ered not to cons(mers who lac9 '(rchasin" 'ower3 )(t tos(''liers of ser$ices that the "o$ernment thin9s are in short s(''ly . Beca(se theircons(mers contin(e to lac9 the '(rchasin" 'ower to sho' elsewhere3 s(''lierscontin(e to lac9 an incenti$e to deli$er the ser$ices efficiently and in "ood ;(ality. A'ri$ate mono'oly has re'laced a "o$ernment one. Centralizin" the deli$ery of s()sidies also allows 'oliticalfa$oritism rather than mar9et forces to "(ide the distri)(tion of f(nds. To try to 're$ent this3 the "o$ernment often

hea$ily re"(lates the (se of these s()sidies3 introd(cin" f(rther com'[email protected] deli$ery of $o(chers tothose who lac9 '(rchasin" 'ower "i$es reci'ients direct mar9et 'ower and allowsother s(''liers to enter the mar9et3 'ro$idin" "reater choice. t also red(ces theneed for hea$y re"(lation

The government fails -- profit motives are the only effective incentive forprogressennedy !1#ose'h -.3 %A Better !ay to De"(late3* Hoo$er nstit(te3 PolicyDe$iew +.103 htt'55www.hoo$er.or"5'()lications5'olicy6re$iew5article5G0G55M9oo7

TH PD?B8M !TH many "o$ernment standards is that nothin" e;(i$alent to the'rofit moti$e constantly dri$es them to add $al(e to society or ens(res that theyres'ond to new de$elo'ments. Ma9in" com'liance $ol(ntary is the )est way toens(re that ;(ality standards reflect im'ro$ements that cons(mers are willin" to'ay for. ?ften the main )enefit to ha$in" a standard de'ends $ery little on the act(al standard chosen. Mostof the )enefits come from the mere fact that a sin"le standard or set of standardsim'ro$es mar9et coordination )y "i$in" e$eryone the same set of e@'ectations.
http://www.hoover.org/publications/policy-review/article/7073http://www.hoover.org/publications/policy-review/article/7073http://www.hoover.org/publications/policy-review/article/7073http://www.hoover.org/publications/policy-review/article/7073


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;inks / Govt 0ntervention

0ntervention in the free market forces the government into a cycle ofcontinuous intrusion -- distorts the market, destroys individualliberty, and turns the case

Cro#ley, 1.Mana"in" &irector of the Macdonald68a(rier nstit(te3 a national'()lic 'olicy thin9 tan9 )ased in ?ttawa. He was also the fo(ndin" President of theAtlantic nstit(te for Mar9et St(dies #AMS73 a '()lic 'olicy thin9 tan9 )ased inAtlantic Canada. #Brian 8ee3 %The Man !ho Chan"ed $eryoneOs 8ife*3 TheMacdonald68a(rier nstit(te3 20123http4###macdonaldlauriercafilespdf5ayek-Commentary-6ay-.!1.pdf, Callahan&This too3 Haye9 co(ntered3 is a del(sion. S(''ly and demand3and the 'rices that s(mmarize it3re'resent a $ast and ti"htly interwo$en comm(nication networ9 . De'lace one 'artof the networ9 with false information V that is 3 with )(rea(cratsO notions of what theinformation sho(ld )e3 as o''osed to what 'eo'leOs actions indicate it is V and the networ9 startsto (nra$el. The effect is $ery slow and almost im'erce'ti)le at first3 )(t a"ain3 there is thatincon$enient lon" r(n. Haye9 ar"(ed forcef(lly that the conse;(ence of e$en $ery limitedinter$ention wo(ld )e a "rowin" demand for e$er more inter$ention. S(''ose3 fore@am'le3 that the "o$ernment decides that it wo(ld )e "ood for childrenOs health if moremil9 were dr(n9)y families. Most 'eo'le wo(ld a"ree that this was a worthy o)ecti$e.The"o$ernment decides that the )est co(rse is to set the 'rice of mil93 )y )(rea(craticorder3 at a lower 'rice than it is offered on the mar9et . Presto Chea'er mil9 a''earsin the stores. B(tof co(rse two contradictory effects res(ltfrom s(ch action. ?n the one hand3 asthe "o$ernment intended3 demand is stim(lated More mil9 is dr(n9 than )efore. B(t the (nintendedconse;(ence is thatmar"inal mil9 'rod(cers3 those who were (st ma9in" it at the ori"inal mil9'rice3 are dri$en o(t of )(siness3 ta9in" a 'art of the s(''ly o(t of the mar9et.Shorta"es res(lt.+ow the "o$ernment has a choice t can either withdraw its ori"inal

inter$ention3

which (n)alanced the e;(ili)ri(m )etween the demand for and thes(''ly of mil93or it can allow itself to )e drawn f(rther into s()stit(tin" its own(d"ment for the mar9etOs. 4or e@am'le3 it can try to lower farmersO costs3 )y controllin" the 'rices ofthin"s li9e feed3 cattle3 and farmland. ?r it can 'ay farmers more and s()sidize the 'ricedifference with ta@ dollars. ?r it can nationalize the farms3 th(s eliminatin" wastef(l 'rofit. ?r it cancoerce farmers to 'rod(ce mil9 at a loss.B(t each one of these res'onses )rin"sf(rther (ndesira)le conse;(ences. Mil9 la9es emer"e that m(st )e stored or d(m'ed on internationalmar9ets3 as "o$ernment tries to stim(late mil9 'rod(ction )y s()sidies and other ind(stries or"anize 'olitically toha$e themsel$es declared essential to '()lic health so that they3 too3 can recei$e s()sidies. ?r s(''liers of farmin'(ts withdraw from )(siness )eca(se3 (nder controlled 'rices3 they canOt s(r$i$e either. ?r )(rea(crats '(t on"(m)oots and mil9 the cows accordin" to the sched(le laid down in their collecti$e a"reement. ?r mil9 farms are

a)andoned )y im'o$erished farmers3 and s(''ly colla'ses o$er time.The circle of disco6ordinationwidens with e$ery t(rn of the inter$entionist screw. Haye9Os critics claimed that he ar"(ed thatthe sli"htest inter$ention led a(tomatically and ine$ita)ly to totalitarianism3 )(t he said nothin" of the sort. !hat

he said was that each inter$ention forces "o$ernment to ma9e a choice ither )e drawninto e$er more inter$ention than was intended at the o(tset3 or withdraw theori"inal inter$ention. There is no e;(ili)ri(m 'oint?ne is either swe't alon" )y thelo"ic of inter$ention3 which leads to lar"e losses of freedom )y tiny de"rees3 or onet(rns )ac9. Strictly limited or s(r"ically tar"eted inter$ention3 whether it )ea"ric(lt(ral s()sidies3 rent controls3 mana"ed trade3 or demand mana"ement3 is amyth. +or is it any more acc(rate to say that Haye9 o''osed all forms of 'lannin". ?n the contrary3 Haye9 sawthat all of (s3 indi$id(ally3 and in the or"anizations to which we )elon"3 ha$e to 'lan


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constantly in order to realize o(r "oals. ach )(siness m(st ha$e a 'lan of how todisco$er what cons(mers want3 of how to ma9e them aware of what the )(sinessoffers3 of what in$estments to ma9e3 of how to finance them3 and so forth. Theeconomy is constit(ted of myriad little 'lannin" or"anizations3 each dealin" with amana"ea)ly small slice of economic life. B(t3 Haye9 noted3 'lanners can only 'lan for society as awhole )y s()stit(tin" their o$erall 'lan for the 'lans of millions of indi$id(als and

or"anizations3 forcin" society to rely on a radically less com'rehensi$e stoc9 of9nowled"e3 ma9in" e$eryoneOs efforts enormo(sly less (sef(l to themsel$es andothers.

Government intervention in the marketplace has a history of failure --embracing free enterprise sustains gro#th best

=ordan 1!6 C? of The 4ederal Deser$e Ban9 in Cle$land #erry3 Ese ?f


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direct re"(lation are li9ely to )e )ased on erroneo(s information #)eca(se the re"(latorscannot (tilize the disco$ery 'rocess of 'rofit '(rs(it7 and are li9ely to )loc9 or distort the mar9etOsown delicate disco$ery 'rocess. 8et (s s(''ose that the need to re"(late isasserted on the )asis of some 'ercei$ed (ndesira)le 'henomenon arisin" fromthe (nre"(lated mar9et. 4or e@am'le3 the 'rices of certain "oods are held to )etoo hi"h#mil9 to cons(mersL73 or too low#wheat 'rices recei$ed )y farmersL7. ?r the ;(antity a$aila)leof a certain 'rod(ct is held to )e too low #medical careL7 or too hi"hO #(nsafe toysL7. And so on 8et (sima"ine#'erha's fancif(lly7 that "o$ernment decisionma9ers are moti$ated solely )y the(r"e to ind(ce a 'attern of 'henomena that faithf(lly reflects cons(mer 'references#which they )elie$e to ha$e )een somehow fr(strated )y the (ncoordinated free mar9et7. ?(r disc(ssionsho(ld ha$e made clear that these selfless3 '()lic6minded officials lac9 the meansto )e a)le to res'ond to the inn(mera)le ran9in"s of 'reference #)y cons(mers and ownersof reso(rces7 of which they may initially not )e directly aware.There is no way they can 9now thecorrect 'rice or the correct ;(antity for any 'artic(lar 'rod(ct or reso(rce.

There is nothin"#corres'ondin" to the entre'rene(rial moti$e to disco$er '(re 'rofit o''ort(nities7 thatco(ld lead them systematically to 6disco$er where fail(res of coordination in facte@ist. More serio(s is the fact that direct controls )y "o$ernment on 'rices3 ;(antities3 or;(alities of o(t'(t 'rod(ction or in'(t em'loyment may (nintentionally )loc9

acti$ities which ha$e3 as yet3 not )een s'ecifically en$isa"ed )y anyone. !herethese )loc9ed acti$ities t(rn o(t to )e entre'rene(rially 'rofita)le acti$ities#'erha's asa res(lt of (nforeseen chan"es in data73 the li9elihood of their )ein" disco$ered is then shar'lydiminished. !itho(t necessarily intendin" it3 the s'ontaneo(s disco$ery 'rocess of the freemar9et has th(s )een3 to some e@tent3 stifled or distorted. !e saw earlier how im'ortant forthe com'etiti$e6entre'rene(rial disco$ery 'rocess is the 'otential for (nfetteredentry )y 'rofit6see9in" entre'rene(rs into e@istin" mar9ets . ne$ita)ly3 "o$ernmentre"(latory restrictions )loc9 s(ch entry.n the rele$ant sense3 s(ch restrictions are anti6com'etiti$e.They tend to fr(strate the disco$eries that the com'etiti$e 'rocess is li9ely to "enerate. $enwhere "o$ernment re"(lation#'erha's ins'ired )y a mista9en ideal of com'etition in which anysi"nificant size is s(s'ect 'er se7 is desi"ned to maintain com'etition#e.". )y )loc9in" mer"ers73this too m(st )e set down as anti6com'etiti$e. 4or e@am'le3 this may )loc9 the entre'rene(rial'rocess )y which the o'tim(m scale for the 'rod(cin" firm mi"ht )e disco$ered. t is easy for com'etent"o$ernment officials to ima"ine that they 9now what is "ood for the economy. B(t thisis li9ely to mean that in the incredi)ly com'le@ economies of o(r time3 it is easy for well6meanin" indi$id(als not to realize their i"norance in s'ecific instances . 4or 'ri$ateentre'rene(rs3 the de$ice for the comm(nication of s(ch (ns(s'ected missin" information is 'ro$ided )y the

attracti$eness of the o''ort(nities for '(re 'rofit which s(ch missin" information "enerates. +ot only arere"(lators (na)le to )enefit )y s(ch 'rofit6ins'ired disco$eriesJ their directinter$ention in the mar9et'lace can hardly fail to fr(strate3 stifle3 and distort thesocially )eni"n disco$ery 'rocessthat de'ends on freedom of entry into )ranches of acti$ity for whichthe social desira)ility has not yet )een esta)lished. t follows that the harmf(l effects of re"(lation#as(d"ed from the 'ers'ecti$e of cons(mer 'references3 not from that of ar)itrarily6ado'ted canons of social

im'ortance7 are not necessarily fo(nd in 'al'a)le fail(re#as e@'ressed3 for e@am'le3 in shorta"es3

or "l(ts3 or other o)$io(s a)sences of coordination7.The harmf(l effects of re"(lation also maymanifest themsel$es in cases where there is an a)sence of coordination of which noone is aware.The 'oint is that re"(lation may )e res'onsi)le for s(ch a)sences ofcoordination not )ein" disco$ered. The mar$el of the com'etiti$e6entre'rene(rial mar9et is its a)ilityto ins'ire coordinati$e acti$ities the $ery need for which wo(ld3 in the a)sence of the mar9et3 ne$er )e re$ealed.


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The government doesn(t have enough kno#ledge to effectively plan theeconomy -- only embracing free enterprise solves

:mith !?6 'rofessor of 'olitical 'hiloso'hy at the Eni$ersity of St. AndrewOs #Crai"3Adam SmithOs Political Philoso'hy The n$isi)le Hand and S'ontaneo(s ?rder.Do(tled"e. 200/. catcha'man.'owwe).com5theswam'5eBoo9s5Philoso'hyZ20e)oo9s5adamZ20smithsZ20'olZ20'hiloso'hy.'df755T&!e sho(ld note at this 'oint thatHaye9 relates this ar"(ment to his )elief in the e@istence ofconcrete e'istemic limitations on the a)ility of "o$ernment to act efRciently . As we willsee in the ne@t cha'ter3 he )elie$esthat it is im'ossi)le for a "o$ernment to centralize the9nowled"e necessary to 'lan a social order in detail.This leads to the s('eriorefRciency of self ad(stment and s'ontaneo(s order formation. The tas9 of"o$ernment is restricted )y the [9nowled"e 'ro)lem3 and its lawma9in" f(nction issha'ed )y a desire to ma9e (se of the s'ontaneo(s orderin" de$ices that arisewhen indi$id(als can rely on "eneralized r(les of )eha$io(r which 'ro$ide sta)ilityof e@'ectations . As we noted in the section on the ori"in of "o$ernment the "eneralized r(les arenot rationally constr(cted )y a "o$ernment3 )(t rather re'resent artic(lations ofesta)lished o'inion. S(ch is the im'ortance of '()lic o'inion to the contin(ed e@istence of any "o$ernmentthat its actions will always )e to a certain e@tent "(ided or circ(mscri)ed )y it. f the law is to )e effecti$e in

sta)ilizin" e@'ectations and ind(cin" order3 then it m(st )e acce'ta)le to the maority of the 'o'(lation. As Haye9notes [To )ecome le"itimized3 the new r(les ha$e to o)tain the a''ro$al of society at lar"e V not )y a formal $ote3

)(t )y "rad(ally s'readin" acce'tance #888 $ol. 1/G7.


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'o'(lation now "ets more in "o$ernment )enefits than it 'ays in ta@es. !hat does it saya)o(t a society in which more than half the 'eo'le li$e at the e@'ense of the restL !orse3 thede'endent class is "rowin". The /0 'ercent will soon )e G0 'ercent. De'. Pa(l Dyan of !isconsin seems to(nderstand the threat He worries that more 'eo'le ha$e a sta9e in the welfare state than in free enter'rise. Thisis a road that Haye9 'erfectly descri)ed as Othe road to serfdom.O #Toni"ht will as9 Dyan why3 if he (nderstands

this3 he $oted for TADP and the a(to )ailo(ts.7 K(rt -onne"(t (nderstood the threat of"o$ernment6im'osed e;(ality. His short story Harrison Ber"eron 'ortrays a f(t(re inwhich no one is 'ermitted to ha$e any 'hysical or intellect(al ad$anta"e o$eranyone else.A "o$ernment Handica''er


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;inks / rivate-ublic artnerships

0ncremental government inclusion of the free market is insufficient --central planning creates moral failures and distorts the market

:layback, 116 4ellow at the Harlan nstit(te #\achary3 %Pri$atize the Hi"hways : and All Doads for ThatMatter*3 8(d$i" $on Mises nstit(te3 53 htt'55mises.or"5daily5I5Pri$atize6the6Hi"hways6and6All6Doads6for6That6Matter755D

f we tr(ly wish to ha$e21 : or any other hi"hway or roadfor that matter : finished3 thenwe o("ht to )e ad$ocatin" for com'lete 'ri$atization of the hi"hways. Pri$atizationwo(ld ens(re that the 'roect wo(ld )e finished in a timely manner3 wo(ld remo$ethe moral hazard of )(ildin" a 'ossi)ly (nnecessary hi"hway with '()lic f(nds3 andwo(ld not force e$ery indi$id(al to f(nd the 'roect3 whether they wish to (se it ornot. 8et (s )e"in with why the mar9et wo(ld )e a more efficacio(s tool for com'letin" the hi"hway. The freemar9et has 'ro$en thro("ho(t history to )e a )etter (d"e of the enter'rises than any "o$ernment. By o'enin"(' the o''ort(nity to finish Do(te 21 to 'ri$ate com'anies3 these $ent(res wo(ld)e a)le to test the mar9et to see what e@actly is necessary for the com'letion ofDo(te 21. Sho(ld a com'any decide that any hi"hway is a $ia)le $ent(re for their ownershi' and stoc9holders3

then it wo(ld )e on that com'any to )(ild a 'rod(ct that cons(mers wo(ld wish to (se. f se$eral com'anies wishedto )(ild a hi"hway3 then whiche$er com'any offered the )est 'rod(ct #i.e.3 the )est6maintained3 chea'est3 fastest

hi"hway7 wo(ld )e chosen )y cons(mers to deli$er that 'rod(ct $ia the 'rice system. !hen "o$ernmenthas a mono'oly on any mar9et3 com'etition is stifled3 and the (ltimate losers arenot only the com'anies who co(ld ha$e in$ested in a desi"nated area 3 s(ch as theSomerset Co(nty area3 )(t also =and> the cons(mers3 who are forced to settle for anoncom'etiti$e3 (s(ally s()'ar 'rod(ct. B(t central 'lanners maintain the "(ise ofcom'etition )y a(ctionin" off the ri"hts to )(ild their central 'lans. n a free6mar9etsystem3 the si"nals sent $ia the 'rice mechanism allow the mar9et to ad(st to anychan"es m(ch more ;(ic9ly and efficiently than the c(rrent centrally 'lannedmodel (nder which we o'erate.
http://mises.org/daily/5498/Privatize-the-Highways-and-All-Roads-for-That-Matterhttp://mises.org/daily/5498/Privatize-the-Highways-and-All-Roads-for-That-Matterhttp://mises.org/daily/5498/Privatize-the-Highways-and-All-Roads-for-That-Matterhttp://mises.org/daily/5498/Privatize-the-Highways-and-All-Roads-for-That-Matter


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m'acts


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m'acts V con Collapse

$eliance on central planning and government stimulus makes economiccollapse inevitable -- government stimulus is empiricallyunsuccessful

$ock#ell, !%American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent ofthe A(strian School of economics3 and chairman5C? of the 8(dwi" $on Misesnstit(te. #8lewellyn3 %The Haye9 moment*3 Mises nstit(te3 May 2003htt'55mises.or"5freemar9etdetail.as'@LcontrolNI, Callahan&Haye9 co(ntered with a defense of laissez6faire )eefed (' )y the insi"hts of the A(strian School of economics. Hehad wor9ed with 8(dwi" $on Mises in -ienna after the 'eriod in which Mises first laid o(t his )(siness cycle theory.

The dan"er of central )an9s3 wrote Mises3 is that they e@ercise 'ower of interest rates3and can there)y distort the 'rod(ction str(ct(re of an economy . They can createartificial )ooms3 which either lead to hy'erinflation or economic )(st. Haye9 ad$ancedthis theory as the alternati$e e@'lanation for the "lo)al de'ression3 and wor9ed mi"htily all those yearsto show how the stoc9 mar9et crash was not the onset of the crisis )(t rather them(ch6needed li;(idation of a 'recedin" )oom. He f(rther showed how the actions of the

British and American "o$ernments were 'rolon"in" the crisis. n the "reat de)ates of the'eriod3 it was said that Haye9 had lost to the +ew conomics of Keynes and his followers. t was more 'recisely tr(ethat the Keynesians had won not )y ha$in" )etter ar"(ment )(t force of "o$ernment 'olicy. The Misesians andHaye9ians of the time decided that they wo(ld fi"ht the )attle of ideas and th(s s'ran" (' a host of instit(tionsthat wo(ld contin(e the wor9 of li)erty3 des'ite all 'olitical im'ediments. n a series of lect(res named in honor ofHaye9 and s(''orted )y Mises nstit(te mem)ers3 the s'irit of those years at the 8ondon School of conomics is

)ac9.The Mises6Haye9 e@'lanation for economic )ooms and )(sts is recei$in" all newattention d(rin" this c(rrent 'eriod of recession and mar9et meltdown. The (s(alKeynesian 'rescri'tions for more cons(mer s'endin"3 e$er chea'er credit3 and"o$ernment s'endin" ha$e done nothin" to sol$e the 'ro)lems in the ES3 (ro'e3or a'an. The series )e"ins with lect(res )y Do"er !.


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m'acts V n$ironment

:#elling government control allo#s for environmental degradation --market forces create more sustainable practices

@erlau et al 1!6 Senior 4ellow at the Center for economic freedom #ohn3 8i)erateto Stim(late. Com'etiti$e nter'rise nstit(te. 2010. cei.or"5sites5defa(lt5files5CZ206Z208i)erateZ20toZ20Stim(late.'df755T&Pri$ate stewardshi' and mar9ets 'lay a critical role in land and nat(ral reso(rceconser$ation. M(ch of Americas land and other nat(ral reso(rces ha$e s(ffered)eca(se "o$ernment ownershi' enco(ra"es mismana"ement and o$er(se3 )eca(seno indi$id(al has a lon"6term sta9e in 'rotectin" reso(rces owned in common. naddition3'()lic lands are mana"ed )ased on 'olitical 'riorities that often 'rod(cemis"(ided 'olitical mana"ement decisions. @am'les incl(de the de$astationca(sed )y (ncontrolled forest fires3 o$er"razin"3 and destr(ction of s'ecies andha)itat. , 8awma9ers sho(ld consider mar9et'lace incenti$es and 'ri$ate 'ro'erty6)ased a''roaches toenco(ra"e land and nat(ral reso(rce conser$ation. , @istin" laws im'ede 'ri$ate conser$ation )y ma9in" 'ro'erty

owners lose (se of their land. These laws sho(ld )e reformed. These incl(de meas(res in the ndan"ered S'eciesAct3 wetlands re"(lations3 and 'otential in$asi$e s'ecies laws. , 8awma9ers sho(ld loo9 for ways to'ri$atize reso(rces owned in common to allow 'ri$ate conser$ation . Areas in which thishas )een done s(ccessf(lly )(t co(ld )e e@'anded incl(de the esta)lishment of fishin" ri"hts3 'ri$atization of coralreefs3 and 'ri$atization of s'ecies and their ha)itats in 'ri$ate wildlife ref("es.


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m'acts V thics

"ree market key to ethics:irico, 1!American Doman Catholic 'riest and the fo(nder of the Acton nstit(tefor the St(dy of Deli"ion and 8i)erty. He is a well69nown 'olitical and c(lt(ralcommentator. #De$erend Do)ert3 %The Moral Basis for conomic 8i)erty*3 Herita"e4o(ndation3 (ly 13 20103 htt'55www.herita"e.or"5research5re'orts5201050G5the6moral6)asis6for6economic6li)erty, Callahan&The thics of Ca'italism 4ar from ha$in" achie$ed $ictory3 the economic order of li)erty is in a'recario(s 'osition. ts (tility has )een demonstrated time and a"ain3 and $ery few res'onsi)le intellect(alsor cler"ymen are willin" '()licly to s(''ort concrete and radical alternati$es to the mar9et economy. f democratic

ca'italism has won the day3 so )e it. The )i" )attles o$er ideolo"y may )e o$er3 tho("h recent 'olicy'ro'osals that centralize and increase "o$ernment control s(""est that the;(estion is not entirely settled in o(r 'olitics. This m(ch we can 9nowThe )i" )attles o$ermorality in '()lic life ha$e (st )e"(n. t is3 moreo$er3 entirely e$ident that in this de)ate on themorality of economic systems3 the ad$ocates of the mar9et economy do not yet ha$e the (''er hand. Too often3

economists ref(se to s'ea9 in normati$e terms3 and they often act as if they sho(ld not.Those who are

char"ed with 'rono(ncin" on morality in '()lic life do not ha$e stron" sym'athieswith the ethic of ca'italism:if they are sym'athetic to it at all. Most 'eo'le are content tosettle with a system that seems to reconcile the %ethics* of socialism with the 'rod(cti$ity of ca'italism. Uet

'olitical economy and ethics sho(ld )e and m(st )e reconciled. f we contin(e to'romote an %ethics* of socialism3 it will e$ent(ally endan"er instit(tions thats(''ort the 'rod(cti$e ca'acity of ca'italism. t is not a tri$ial fact that e$ery ste' away from thefree mar9et is a ste' away from $ol(ntarism and that e$ery ste' toward inter$entionism is a ste' away from li)erty.

t s'ea9s to the essence of what it means to act $irt(o(sly. A moral ar"(ment for economic li)ertysho(ld not shrin9 from its own lo"ical im'lications3 howe$er 'olitically (nfashiona)le. Anim'erati$e a"ainst theft and in fa$or of the sec(rity of 'ri$ate 'ro'erty m(st alsos(""est ca(tion a)o(t ta@es a)o$e the minimal le$el necessary for the r(le of law .4reedom of contract m(st incl(de the freedom not to contract. 4reedom of association m(st incl(dethe freedom not to associate.Toleration of indi$id(al differences m(st incl(detolerances for the ine;(ality in wealth that will )e the (na$oida)le res(lt . And a moralitythat fa$ors $irt(e in the conte@t of li)erty m(st allow room for 'ersonal moral fail(re and an (nderstandin" of the

difference )etween $ice and crime. t is sometimes said that no one dreams of ca'italism. This too m(st chan"e.Di"htly (nderstood3 ca'italism is sim'ly the name for the economiccom'onent of the nat(ral order of li)erty . t means e@'ansi$e ownershi' of 'ro'erty3fair and e;(al r(les for all3 economic sec(rity thro("h 'ros'erity3 strict adherence tothe )o(ndaries of ownershi'3 o''ort(nity for charity3 wise reso(rce (se3 creati$ity3"rowth3 de$elo'ment3 'ros'erity3 a)(ndance.Most of all3 it means the economica''lication of the 'rinci'le that e$ery h(man 'erson has di"nity and sho(ld ha$ethat di"nity res'ected. t is a dream worthy of o(r s'irit(al ima"inations.
http://www.heritage.org/research/reports/2010/07/the-moral-basis-for-economic-libertyhttp://www.heritage.org/research/reports/2010/07/the-moral-basis-for-economic-libertyhttp://www.heritage.org/research/reports/2010/07/the-moral-basis-for-economic-libertyhttp://www.heritage.org/research/reports/2010/07/the-moral-basis-for-economic-liberty


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m'acts V 4reedom

Government intervention creates a bureaucratic nightmare that results inauthoritarianism and destroys individual liberty

@ernhol), >?Professor emerit(s at Basel Eni$ersity3 Switzerland. His wor9 foc(seson monetary economics3 real ca'ital theory3 and '()lic choice. He is a mem)er ofthe Academic Ad$isory Board of the


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4e(dalism and dictator shi' or oli"archy wo(ld3 of co(rse3 contin(e to callthemsel$es democracies.

0ntervention in the marketplace destroys the distinction bet#eengovernment and la#, destroying individual freedom

Gamble, A2British a(thor and academic. Since an(ary 200G he has )een

Professor of Politics at the Eni$ersity of Cam)rid"e. Pre$io(sly he wor9ed in the&e'artment of Politics at the Eni$ersity of Sheffield #1G6200G7. d(cated initiallyat Bri"hton Colle"e3 as an (nder"rad(ate he read economics at Cam)rid"e3 )efore"ainin" his MA in 'olitical theory from the Eni$ersity of &(rham.#Andrew3 %The 4reeconomy and the Stron" State V The Dise of the Social Mar9et conomy*3 SocialistDe"ister3 1G3 htt's55tw'l6li)rary6(toronto6ca.'[email protected]).(mich.ed(5inde@.'h'5sr$5article5$iew5I1, Callahan&&emocracy therefore enco(ra"es e$er "reater )(rea(cratic interference with the'ri$ile"ed 'ri$aAte s'here:the s'here of mar9et relationshi's )etween indi$id(als As)(rea(cracyrises3 so the law declines:the second of Haye9Os )asic distinctions. He does not s(""est that )(rea(cracycan )e dis'ensed with #his tho("ht is ne$er (to'ian in that sense73 )(t he does ar"(e that for li)erty toflo(rish the realm of law m(st dominate the realm of )(rea(cracy.


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m'acts V Totalitarianism

Central 'lannin" fails and 'a$es the way for totalitarianism 66 the s'ontaneo(s ordersol$es )etter.

6arks >


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m'acts V T(rns Case

Central trans'ortation 'lannin" fails 66 incom'lete information e@'lains decades offederal fail(res.

;ove and Co*, 21--llinois6)ased cons(ltants who s'ecialize in trans'ortation3'ri$atization3 and the economics of the '()lic sector. #ean and !endell3 %4alse&reams and Bro9en Promises

The !astef(l 4ederal n$estment in Er)an Mass Transit*3 1051G3htt'55www.cato.or"5'()s5'as5'a61/2.html755M+early half the 'lans re$iewedhere are not cost effecti$e in meetin" trans'ortation"oals. These 'lans rely hea$ily on )eha$ioral tools s(ch asland6(se re"(lation3 s()sidiesto denseor mi@ed6(se de$elo'ments3 and constr(ction of e@'ensi$e rail transit lines.+early I0 years of e@'erience with s(ch tools has shown that they are e@'ensi$e)(t 'ro$ide ne"li"i)le trans'ortation )enefits. 8on"6ran"e trans'ortation 'lannin"necessarily de'ends on (ncertain forecasts. Planners also set ;(alitati$e "oals s(chas %$i)rant comm(nities* and ;(antifia)le )(t incom'ara)le "oals s(ch as%'rotectin" historic reso(rces.* S(ch $a"aries res(lt in a 'oliticized 'rocess thatcannot ho'e to find the most effecti$e trans'ortation sol(tions. Th(s3 lon"6ran"e'lannin" has contri)(ted to3 rather than 're$ented3 the he@t('lin" of con"estionAmerican (r)an areas ha$e s(ffered since 12. deally3 the federal "o$ernmentsho(ld not )e in the )(siness of f(ndin" local trans'ortation and dictatin" localtrans'ortation 'olicies.At the least3 Con"ress sho(ld re'eal lon"6ran"e trans'ortation 'lannin"re;(irements in the ne@t rea(thorization of federal s(rface trans'ortation f(ndin". nstead3 metro'olitantrans'ortation or"anizations sho(ld foc(s 'lannin" on the short term # years73 and concentrate on ;(antifia)lefactors that are directly related to trans'ortation3 incl(din" safety and con"estion relief.


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m'acts V !arE*tinction

Government management guarantees serial policy failure -- inability toplan accurately risks #ar and the collapse of civili)ation

$ock#ell, !%American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent ofthe A(strian School of economics3 and chairman5C? of the 8(dwi" $on Misesnstit(te. #8lewellyn3 %Central Plannin" Doad Tri'*3 Mises nstit(te3 +o$em)er 2003htt'55mises.or"5freemar9etdetail.as'@LcontrolNI3 Callahan78etOs start with the )i" error.They )elie$ed that their will alone was eno("h to ma9e andrema9e a co(ntry #whether ra; or Af"hanistan7 and the world. They saw 'eo'le as'lia)le3 all e$ents as controlla)le3 and all o(tcomes as the ine$ita)le wor9in" o(t ofa well6constr(cted 'lan. Bein" the to' do"s of the worldOs only s('er'ower3 they ne$er do()ted theira)ility to dictate the terms and so they had no 'lan for what to do if thin"s went wron".This for"ets se$eralessential com'onents of the str(ct(re of reality. Peo'leOs free will is often )ac9ed )ythe willin"ness to (nderta9e enormo(s sacrifice.S(ch sacrifices are made e$ery day )y a$era"era;is. Most es'ecially it o$erloo9s certain (nderlyin" laws that limit what is 'ossi)lein h(man affairs. n the scheme of how the world wor9s3 e$en the lar"est state isonly a )it 'layer. t is ca'a)le of creatin" enormo(s chaos and transferrin" h("e amo(nts of wealth3 )(t notof controllin" e$ents themsel$es.


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of national "reatness when the Panama Canal was )(ilt3 when e$ery )(siness dis'layed a Bl(e a"le3 when e$ery

American mo(rned the death of 4K3 when e$eryone cheered the moonshot.The national moodfollowin" 611 con$inced them that this co(ld )e re$i$ed. $en more than that3 theycontin(e to con$ince themsel$es of the "reat 8incoln Myth3 a man who (sedimmoral means to (nite a co(ntry )(t somehow mana"ed to emer"e from it withthe re'(tation of a "reat li)erator3 a new fo(ndin" father . The tric93 they )elie$ed3 was to

ha$e the moral determination to inflict as m(ch $iolence as 'ossi)le in the ho'es that they wo(ld )e seen as$isionaries3 and to (tterly demoralize the enemy. n fact3 the idea of national (nity3)elo$ed )y e$erywo(ld6)e tyrant3 is somethin" to )e feared. t is not a si"n of freedom )(t of des'otism. t is themorality of the ant hea'. n any case3 the forced (nity of the !orld !ar era is lon""one.


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"aith in central planning cedes political decisionmaking authority to theelites and guarantees massive military interventions

$ock#ell, !%. American li)ertarian 'olitical commentator3 acti$ist3 'ro'onent ofthe A(strian School of economics3 and chairman5C? of the 8(dwi" $on Misesnstit(te. #8lewellyn3 %!ar and Central Plannin"*3 Mises nstit(te3 (ne 2003

htt'55mises.or"5freemar9etdetail.as'@LcontrolNII3 Callahan7The enemy weOre fi"htin" is a )it different from the one we had war6"ameda"ainst3 said


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B(t the same is tr(e for the warfare state. The rationale )ehind this a''roach in war is to con$ey tothe enemy:whether that enemy is a recession or a forei"n foe:that 'lanners really mean )(siness. n a world ofli)erty and 'eace3 the economy is always wor9in" to do more with less. +o entre'rene(r has the l(@(ry of (stthrowin" more money and la)or at a 'ro)lem. !hen the enter'rise is not 'rofita)le3 the ca'italist see9s to

economize and reassess. The e@act o''osite im'(lse dri$es the socialist 'lanner or war 'lanner. nstead ofc(ttin"3 ca'ital and la)or are o$er(tilized3 while the (nderlyin" 'lan remains(nchan"ed3 with the res(lt of increased s;(anderin" and wealth destr(ction. The definin" mar9 ofo$er(tilization is the fail(re to acco(nt for costs3 )oth in lost 'hysical reso(rces and h(man li$es. Second3 the'lanners tend to not acco(nt for the 'ossi)ility of error. The 'lanners who '(tto"ether the war on ra;3 for e@am'le3 e@'ected the troo's to )e treated asli)erators3 )(t someone 'lannin" the ra; war for"ot to consider the reality that has dominated the entire "(lfre"ion for 10 years the hatred en"endered )y deadly sanctions.The sanctions com'romised theima"e of America as a force for li)eration. B(t the war 'lanners t(rned a )lind eyeto this3 e$en after the Se'tem)er 11th terrorists s'ecifically cited the sanctions as an (nderlyin" so(rce of theirhate.This is the )i" 'ict(re that the war 'lanners missed. They failed to criticallye@amine the 'ossi)ility that the ra;is will resent the in$aders e$en more than theirown "o$ernment. Third3 'lanners nearly always fail to antici'ate the will to resist. They)elie$e that once 'eo'le ha$e the merits of the 'lan e@'lained to them3 they will "o alon" with it.The 'eo'leare the clay and the 'lanners are the masters3 so their h()ristic minds )elie$e. B(tthe tr(th is that 'eo'le are not a(tomatons and there are other forces at wor9 )esides the will ofthe 'lannin" re"ime. Peo'le resist central economic 'lans and they resist wartime 'lanstoo. The (s(al res'onse of the 'lanner when faced with resistance is to li;(idatethose who dare not "o alon". ?nce these meddlesome tro()lema9ers are eliminated3 they )elie$e3 theres(lts of the 'lan will )e"in to show. n the E9raine in the 10s3 and Cam)odia in the 1G0s3 that was 'retty

m(ch e$eryone. 4o(rth3 the 'lanners ty'ically ref(se to admit error and rather shift the)lame. !allaceOs o'en admission that somethin" was amiss was hi"hly (n(s(al. They(s(ally stic9 )y the 'lan and admit no error. The '()lic mi"ht act(ally )e more s(''orti$e if the central 'lanners

were willin" to admit error. B(t that is not the way of the 'lanners.They )elie$e that they m(st'ost(re as "ods on earth while insistin" on total deference. 4ifth3 'lanners ass(methat the world is theirs for the ma9in". The 'lanners are loath to admit that thereare forces )eyond their control3 forces li9e c(lt(re3 economics3 and the inherent

limits of 'ower to accom'lish its aims. The 'eo'le who 'lanned the war on ra;dismiss s(""estions that 'erha's not e$eryone in ra; is "oin" to )e o$eroyed atthe 'ros'ect of "ainin" freedom thro("h )om)in"3 destr(ction3 and martial lawadministered )y a ES military dictatorshi'.They dismiss the 'ossi)ility that reso(rces to im'ose the'lan may e$ent(ally r(n o(t. 8oo9in" to the f(t(re3 there are many 'eo'le in !ashin"ton whoha$e o'inions on how )est to mana"e a 'ost6war ra;. They ha$e 'ro)a)ly "amedthis scenario too3 and come (' with the idea that ra; needs a military dictatorshi' for a time. B(t thead$ocates of dictatorshi' always ass(me that they will )e in a 'osition to ma9e allthe decisions.They consider the $ia)ility of their own 'lan and not the 'ossi)ility that someone elseOs 'lan will're$ail. 4inally3 'lanners tend to 'ersist in i"norance.4.A. Haye9 descri)ed the $ol(ntary society asone of contin(al learnin". !e mi"ht descri)e "o$ernment 'lannin" as one in whichi"norance 'ersists no matter what.n war as in socialism3 the world wo(ld )e a m(ch safer

'lace if the 'lanners wo(ld stic9 to their "ames and lea$e real life alone. .4M


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Alternati$e


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Alt Sol$es V &emocracy

Embracing market forces ameliorates political problems and bolstersdemocracy

oopman !26 Professor of Philoso'hy at the Eni$ersity of ?re"on #Colin3 Moralsand Mar9ets 8i)eral &emocracy Thro("h &ewey and Haye9. The o(rnal ofS'ec(lati$e Philoso'hy. 15150. Proect M(se.755T&&eweyOs and Haye9Os shared 'hiloso'hical em)race of (ncertainty has tremendo(s meta'hiloso'hicalconse;(ences for how we concei$e of the wor9 of 'olitical 'hiloso'hy. ?ne s(ch conse;(ence concerns how we

o("ht to conce't(alize the 'ractical3 instit(tional3 and social tas9s of realizin" li)eral democratic (stice.Theclassical 'olitical 'hiloso'hical 'roect is that of an ideal theory of (stice that isca'a)le of )ein" instit(tionally manifested in state6)ased instit(tions and 'ractices .The e$ol(tionist 'roect anno(nced )y &ewey and Haye9 ta9es a )roader $iew in (r"in" that democratic)etterment m(st draw on a n(m)er of instit(tional mechanisms. &eweyans followin"&ewey ha$e3 howe$er3 not always realized the e@tent to which this conce'tion of democracy re;(ires ta9in"serio(sly certain nonstate 'olitical mechanisms3 s'ecifically mar9ets and cor'orations3 as forces for democracy. Haye9ian theory can )e of 'artic(lar (se herein e@'andin" &eweyansOattention toincl(de mar9ets alon"side states as some of the tools we ha$e at o(r dis'osal forthe diffic(lt wor9 of democratic melioration. This e@'ansion is to )e recommended for two 9inds ofreasons. Positi$ely3mar9ets now ha$e a ()i;(ito(s 'resence in o(r 'olitical 'rocesses3and to the e@tent that &eweyantheory i"nores them as 'otential mechanisms fordemocratic melioration3 this )ranch of theory will find itself o(t of to(ch with the'ossi)ilities for 'olitical melioration a$aila)le to (s in the 'resent. +e"ati$ely3 &eweyantheorists reco"nizin" the limitations of states ha$e th(s far concentrated their e@cl(si$e attention on comm(nity

or"anizations as forces for democratic meliorationJ )(t in an a"e of "lo)alization andnternetization the local comm(nity is increasin"ly limited in its 'otential3 andwhate$er 'otentials it does 'ossess are often )est realized in connection withmar9ets rather than in o''osition to them. These =nd Pa"e 1G> two sets ofreasons'ro$ide a warrant for chartin" o(t new directions in &eweyan theory )eyond thefamiliar 'aradi"ms of deli)eration6centric and e@'erience6centric $iews now

dominant. The 'ositi$e reasons enco(ra"e (s to mo$e )eyond deli)erati$ism3 whichtoo often i"nores the coordination of mar9ets and states d(e to a 'reference forstate6centered deli)eration as a"ainst mar9et6centered e@chan"e. The ne"ati$ereasons enco(ra"e (s to loo9 )eyond e@'erientialism3 which too often i"noresmar9ets d(e to a 'reference for face6to6face comm(nity6centered or"anizationsthat are s(''osedly distorted )y mar9et6centered e@chan"e .


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Alt Sol$es V ach nstance Key

Each rejection of government ordering and endorsement of non-aggression can help change the system

3r $u#art, 2%#&r. Mary . D(wart3 Senior Scientist at a maor 'harmace(tical firm and a formerAssistant Professor of S(r"ery at St. 8o(is Eni$ersity Medical School3 Healin" ?(r!orld The ?ther Piece of the P(zzle3htt'55www.r(wart.com5Healin"5r(wartall.html37f yo(O$e read this far3 yo( are (ndo()tedly interested in seein" at least some as'ects of non6a""ression

im'lemented. Se$eral ideas may seem more rele$ant to yo( than others. f yo( arewonderin" whether a lone indi$id(al li9e yo(rself can ma9e a difference3 'lease )e ass(red that yo( can. $enthe smallest contri)(tion can )e 'i$otal . My fa$orite story ill(stratin" this 'oint is a)o(t a )lac9smithwho failed to '(t the final nail in a horseOs shoe. 4or lac9 of a nail3 the horse lost his shoe and went lame. The rider3who was carryin" critical news to his 9in"3 had to contin(e on foot. As a res(lt3 he reached his so$erei"n too late.!itho(t this im'ortant information3 the 9in" lost the )attle he was fi"htin" and the 9in"dom fell to in$aders. Theh(m)le )lac9smith was 'i$otal to the safety of the 9in"dom. +e$er do()t that yo(r contri)(tion is (st as

im'ortant. Demem)er that the family and friends who tal9 with yo( a)o(t the win6winworld 'ossi)le thro("h non6a""ression will in t(rn tal9 to others3 who will share the"ood news. 8i9e a chain reaction3 yo(r messa"e of ho'e will s'read thro("ho(t o(r co(ntry and the world3)earin" fr(it in t

free market k

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