David Friedman On Why Free Markets Work Better Than Government Bureaucracies

See Learning from Evidence: Not.

"This morning I listened to a commencement address by a former judge. It struck me as an interesting example of the failure to modify beliefs on the basis of evidence.

The speaker began by saying that every American had a legal right to health care, education, financial aid. He took for granted, and obviously approved of, one of the major changes in America over the course of the past century, the shift from a system where almost all goods and services were provided by voluntary transactions on the marketplace to one where many are provided by government, paid for by taxes, allocated by government bureaucracy.

Much of his talk dealt with his own experience with the latter system, the result of his and his wife taking responsibility for, eventually adopting, a young relative with severe autism and related developmental disabilities. Under existing law, she was entitled to a wide range of medical and educational services. When he tried to obtain those services for her, however, he found himself involved in a tangled web of bureaucracy, detailed and inconsistent rules, phone conversations with a computer on the other end. He suspected that insofar as he finally succeeded in working his way through that tangle to a successful outcome, it was at least in part because a federal judge was better able to get attention and favorable treatment from government bureaucrats than most other people would have been. He concluded that the young law graduates to whom he was speaking should devote their lives, at least in part, to seeing that poor Americans got from the government the things to which they were legally entitled.

It apparently did not occur to him that the contrast between his experience in getting services provided by government and his experience buying groceries on the private market, where you simply pay your money and walk out with what you have bought, might say something about the relative workability of the two systems for providing goods and services. Nor that if a system introduced in large part on the theory that it would even out differences between rich and poor turned out to serve higher status people much better than lower status people, perhaps the theory was wrong, perhaps government production and distribution was creating, rather than eliminating, inequality. When a judge goes to the grocery store, he gets the same groceries at the same price as anyone else.

His conclusion was that these were real problems with the existing system, and the solution was to make that system work better. Institutions which, on the evidence of his own first-hand experience, were still functioning badly seventy or eighty years after they were first designed and built, were to be reformed by the wave of a magic wand with the aid of lots of well intentioned young lawyers inspired by a commencement address.

The experience reminded me of a passage by George Orwell that I recently read. Orwell spent his final months in a private hospital, attempting to recover from the tuberculosis that ultimately killed him. Commenting on the difference between that and the (presumably government supported, although he does not say) hospital he had been in earlier, he wrote:

"The routine here ... is quite different from that at Hairmyres Hospital. Although everyone at Hairmyres was most kind & considerate to me—quite astonishingly so, indeed—one cannot help feeling at every moment the difference in the texture of life when one is paying one's own keep."

Orwell was a convinced socialist. One cannot tell from the comment whether it occurred to him that he was observing one of the advantages of the free market.

That observation would not, of course, have been a sufficient reason for him to have changed his views; he could reasonably enough have pointed out that a few years earlier, before the success of Animal Farm, he could not have afforded the private hospital, and the public one was considerably better than nothing. But one would like to know whether he thought about the question, whether, if he had lived a few years longer and considered the implications of a variety of observed contradictions between his socialist beliefs and his experiences, his beliefs might have changed.

Unfortunately, he didn't."