Posted on 02/09/2011 5:24:19 AM PST by Kaslin
You are our Ruler. An entrepreneur tells you he wants to create something he calls a "skating rink." Young and old will strap blades to their feet and speed through an oval arena, weaving patterns as moods strike them.
You'd probably say, "We need regulation -- skating stoplights, speed limits, turn signals -- and a rink director to police the skaters. You can't expect skaters to navigate the rink on their own."
And yet they do. They spontaneously create their own order.
At last month's State of the Union, President Obama said America needs more passenger trains. How does he know? For years, politicians promised that more of us will want to commute by train, but it doesn't happen. People like their cars. Some subsidized trains cost so much per commuter that it would be cheaper to buy them taxi rides.
The grand schemes of the politicians fail and fail again.
By contrast, the private sector, despite harassment from government, gives us better stuff for less money -- without central planning. It's called a spontaneous order.
Lawrence Reed, of the Foundation for Economic Education, explains it this way:
"Spontaneous order is what happens when you leave people alone -- when entrepreneurs ... see the desires of people ... and then provide for them.
"They respond to market signals, to prices. Prices tell them what's needed and how urgently and where. And it's infinitely better and more productive than relying on a handful of elites in some distant bureaucracy."
This idea is not intuitive. Good things will happen if we leave people alone? Some of us are stupid -- Obama and his advisers are smart. It's intuitive to think they should make decisions for the wider group.
"No," Reed responded. "In a market society, the bits of information that are needed to make things work -- to result in the production of things that people want -- are interspersed throughout the economy. What brings them together are forces of supply and demand, of changing prices."
Prices are information.
The personal-computer revolution is a great example of spontaneous order.
"No politician, no bureaucrat, no central planner, no academic sat behind a desk before that happened, before Silicon Valley emerged and planned it," Reed added. "It happened because of private entrepreneurs responding to market opportunities. And one of the great virtues of that is if they don't get it right, they lose their shirts. The market sends a signal to do something else. When politicians get it wrong, you and I pay the price.
"We have this engrained habit of thinking that if somebody plans it, if somebody lays down the law and writes the rules, order will follow," he continued. "And the absence of those things will somehow lead to chaos. But what you often get when you try to enforce mandates and restrictions from a distant bureaucracy is planned chaos, as the great economist Ludwig on Mises once said. We have to rely more upon what emerges spontaneously because it represents individuals' personal tastes and choices, not those of distant politicians."
Another way to understand spontaneous order is to think about the simple pencil. Leonard Read, who established the Foundation for Economic Education, wrote an essay titled, "I, Pencil," which began, "(N)o single person on the face of this earth knows how to make (a pencil)."
That sounds absurd -- but think about it. No one person can make a pencil. Vast numbers of people participate in making the materials that become a pencil: the wood, the brass, the graphite, the rubber for the eraser, the paint and so on. Then go back another step, to the people who make the saws and machinery that are used to make the materials that go into a pencil. And before that, people mine iron to make the steel that makes the machines that make the materials that go into a pencil. It's all without central direction, without these people even knowing they are all working ultimately to make pencils. Thousands of people mining, melting, cutting, assembling, packing, selling, shipping -- and yet you can buy pencils for a few pennies each.
That's spontaneous order, and it's replicated with every product we buy, no matter how complex.
The mind boggles.
Great essay.
Where’s Willi?
I am retarded when it comes to numbers, etc. How do prices give the information? How does one read them? Just asking, for those of you who do get this, I know it’s right, I just want to get it too.
Willie!
I know someone employed by the RR. On Christmas he gets a bonus equal to about a quarter of my annual income.
Perhaps I am misunderstanding your question, but I would offer this example:
If you have a steady job, would you choose to rent a car from Hertz everyday so that you could commute? Or would you purchase a car for yourself? Renting is expensive, so I think you would probably purchase a car. The price gives you the information that owning a vehicle makes more sense than renting one for very frequent use.
Conversely, if you took a business trip to Chicago for a week, would you buy a car when you got to O'Hare? Or would you rent? The price tells you that renting for the week is smarter.
Trains cost billions of dollars and don't really give consumers what they want. That's all the information you need.
I’m still waiting for him to propose a high speed stagecoach.
Pray for America
>> Great essay.
Yeah, it turned out very well, although I was starting to wonder where he was going with the ice skating analogy in an essay about passenger rail.
Prices give information in that they determine a significant portion of the demand for a product. If they're too high for the perceived value no one buys the product, and the company goes out of business. There was a thread last year about some little boutique grocery in boston that went out of business charging $7.00 a dozen for eggs and $60.00 a lb for beef. It made news because th owner publicly blogged that it was the fault of her (mostly nonexistent) customers for failing to appreciate just how special her stuff was. She obviously failed to read the price signal that she was getting from her customers.
"public" ie government transportation is a commodity with a severely distorted price signal. If the fully loaded price were charged no one would ride it, so politicians in order to continue to buy votes of the employees of the enterprise loot taxpayer dollars and bestow them pelf on their "public" transport system. Read Bastiat's what is seen and not seen and consider trains to be like the broken window.
I love riding the train and I think passenger rail should come back, but it has to be commercially feasible (and there are places where it can be). That is, it has to go from one place to another where enough people actually want or need to go, and it has to have enough commercial potential to attract private investment as well.
While people pay for their own individual cars, all our highways, bridges and other automobile infrastructure are paid for by our tax dollars, at one level or another. So I don’t see why it’s worse for this to be the case with trains. There are certainly rail projects that are just pork, but there are also boondoggle roads and bridges to nowhere, built simply to provide pork for a constituency. Both highways and railroads have got to have a real reason for being, and not just as spending projects.
Also, I don’t see why people believe trains and cars are mutually exclusive. Cars and airlines coexist perfectly well, and trains are simply another part of our transportation system, especially now that air travel has become so overloaded and cumbersome. People can use trains for distance travel (and rent a car when they get where they are going, just as air travellers do) or use them to travel into densely populated areas (and take a taxi from the station to their destination, the way people do in New York or most big cities). I don’t see why it’s an either/or.
Increasing prices (P) signal increasing demand (D) from the market. Conversely, decreasing prices signal decreasing demand. Supply adjusts accordingly to meet the demand at a new price point.
I never read the essay, “I, Pencil.” This is truly frightening. We are allowing pencils to be a product of chaos. Overcoming this must be made a top priority.
First we need a federal mandate that all pencil makers be taken over by an appropriate bureaucracy, say, the Department of Education.
Next, all pencilmakers must be federalized immediately. This will insure their permanence. The logical next step is to seperate each of the materials into agencies, one for wood, one for lead, and so forth. A pencil czar will insure that all of these departments work together effectively.
Finally the President must mandate production and control usage. There is substantial waste and fraud of pencils. They are often left unsharpened and children are injured trying to sharpen them with penknives. A special self sharpening pencil for children is required. This is a perfect task for NASA. They certainly do not want all those bits of wood and carbon floating around in a space capsule.
Follow up legislation will be needed to insure that government pencils are required in all hand writing. There will be Tea Party extremists who will call for boycotting government made pencils. To overcome this pens and ballpoints must be outlawed. Indelible pencils will have to be developed, more work for NASA.
The pencil mandate could easily become one of the largest and most effective government bureaucracies, touching every aspect of social communication and private scrivening. With proper legislation, mandates and enforcement pencils can become a source of income to the government surpassing health care.
It is time we recognized the need for central planning for the lowly pencil. Truly it will become a source of pride that the US government knows how to make a pencil.
A huge skating rink from Detroit to Houston? :-)
(We can supply the ice!)
They tell you what people will pay for a service or product. If they won't pay, no matter how marvelous your idea, it probably isn't going to work. And that's valuable information.
Railroads are for freight hauling, period!!! Americans are never going to abandon their cars, the highway system is excellent and the airlines have the nation covered from all sides. Money spent on “high speed rail” is a waste. But, then again, anything Obama does is a total & useless waste!! Just another hateful scheme by POTUS Obama and his anti-American Democrat Party to bring our great country down!!!
Here is the main fact: Passenger Rail in America is dead..
I don’t think I’d want to take a train for everyday commuting. There’s no freedom in it, and there are plenty of stories about people being mugged on commuter trains. When gas prices were so high, I decided to try the park ‘n ride, taking the bus to work. I found that it was tough running errands at luch time and I kept getting sick. Buses are rolling dens of germs.
And so there are practical reasons we prefer our cars. They are safer than public transportation and you don’t have to worry about other passengers coughing on you.
In these hard times wouldn’t it be wonderful if all government doles were in the form of pencils that the recipients could sell? This would provide an immediate boost of 100% employment and end welfare and unemployment with the stroke of an indelible pencil.
The mind boggles.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.