Mon, 15 Aug 2005

Trust Free Markets

Dikalosunh writes:

My hunch is that, if low food production is a chronic but cyclical problem, the government should (and should be encourage to) put in place a system for subsidizing grain purchases in lean times - the temporary subsidization would not distort the market too much overall, I suspect.

Alas, it would completely distort the market. You see what happens is that farmers need to sell their grain every year, because they need to get cash out to purchase resources to plant new grain. The price that farmers will get changes from year to year depending on the amount of grain grown and brought to market. And yet customers don't want to have to pay huge amounts of money for grain products one year, and small amounts the next year. You end up with a situation where rich people pay the farmers a smaller total, and charge the customers of grain products a larger total, and smooth out the difference.

I suggest that many people have a problem with this because you have rich people getting richer on the backs of farmers and consumers. The only thing that can make it fair and just is when you have the competition that only free markets can create.

Trying to reproduce this process through government action cannot possibly work, because government players 1) don't have the freedom to risk taxpayer's money (and that is as it should be), 2) don't have the information that the prices produced by free market competition, and 3) government employees have zero incentive to succeed and all the incentive to not fail. "Success" and "not failing" are completely different things.

I want to be clear here: I don't worship free markets, just as I don't worship my automobile engine. I am confident that my automobile engine will get me to the places I need to go. That's not worship, that's just confidence. I feel the same way about free markets, because ultimately, the engine that drives free markets are individual's decisions, backed up by their expectations of success or failure. I don't trust systems, I don't trust magic wands, but I do trust people.

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