Rice County Republicans

At a recent event we talked briefly about the role that laws play in our life. Here we are talking not about the laws that we pass ourselves, but rather the laws that we deduce from observations.  For example, consider the simple law of gravity. You might remember it from science class, you know the one. We all may have fantasies about being able to overcome that law, swooping through the air like Superman. But in the end, when we DO need to swoop, we wrap ourselves in fabric, aluminum or composites, relying on good engineering rather than good imaginations.

Recently one of our own pointed out an interesting speech by a Nobel lauriet, Friedrich August von Hayek (The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1974), in which he comments, after considerable discussion of the shortcoming of the dismal science (economics):

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants. [emphasis added]

So, what fundamental belief do we have that is, perhaps, not held by everyone? It is, perhaps, the simple statement that

The forces of the free market are the best tools available to a society that needs to solve the economic problems it confronts.

This belief is driven in part by an understanding of the limits of the science that Dr. Hayek serves, and is well expressed in his speech. Just as we would prefer to fly in an airplane over stepping off a cliff based on a fantasy about flying, so would we rather rely on the market over relying on the wishful fantasy that we can run the market using the force of the government to concentrate economic decisions in the hands of a fantasy-driven political machine. Whether modern advertising mechanisms, based on the science of psychology, replace the optimizing mechanisms of the market with the non-market forces of branded marketing, now that’s a different question. And the tragedy of the commons (another overused and often poorly explained phenomena) is yet another dimension we’ll have to consider as we continue this discussion.

Meanwhile, in a similar vein — wishful thinking over reality — in a program broadcast last Thursday on MPR Midmorning we heard a long discussion of the proper wages that CEO’s should get. According to the administration, CEOs of firms taking government TARP funds should be limited to $500K per year (with stock-based bonuses available only after the TARP monies are repaid). In a long on-line conversation, all sorts of types called in to suggest one special group or another and to recommend the “proper wages” they should earn. Teachers, fire and police, CEOs, sports players, all (according to the listeners) deserve more pay than we give them.  No one pointed out that every day we vote our preferences with our sincerest form of vote, our money. If we make poor choices, that is a question that will best be solved by education, so that we can once again becomes the many hands of the market making the best decisions not because of man-made laws or marketing, but rather because of knowledge.

All that said, it is also probably true that if your business is bought by the taxpayer it is fair that we set limits on executive compensation … that’s the price of becoming an economic ward of the state. Otherwise we continue the socialization of risk and the privatization of profit that has so damaged our deservedly beloved free-market model. So we find ourselves on the same side of this issue as some of our nemesi, politics again making strange bedfellows.