essence of the economic order is the price system. Without it, as
Ludwig von Mises demonstrated in 1920, society is doomed to mass
the KGB and the Gulag couldn't entirely wipe out the price system,
so the U. S. S. R. managed to stagger along, but only through suffering
own Gosplan, the U.S. Congress, hasn't been as extreme, thanks to
the American people and our traditions of liberty. But it's still
the biggest collection of economic meddlers and ignoramuses west
the price system functions freely, it brings supply and demand into
rough equality, ensuring that resources are put to their most-valued
uses. To the extent that government meddles with prices, it creates
waste, hampers entrepreneurship, and makes people poorer. That's
true with energy and natural resources; perverting the price system
even makes our drug problems worse.
tomatoes for whatever reason become scarcer, their price goes
up, which tells consumers to eat less. If more tomatoes come on
the market, their price goes down, telling consumers they can eat
more. Prices thus constitute a system of resource conservation.
Congressmen pretend exactly like Soviet central planners to
know economic values without prices, as we can see in the recent
frenzy over oil prices. They denounced "price gouging" while planning
tax gouging, including new energy taxes designed to raise the price
recent hysteria over African elephant tusks was another problem
of prices and property rights. If people were allowed to raise elephants
and sell their tusks as even the socialist government of Zimbabwe
pointed out there would be no more and no fewer elephant tusks
than there should be. The same principle applies to all other resources.
If left in common ownership, there will be misuse. If put in private
hands, we will have the right amount: supply will meet demand.
example of market response in the animal market was the Cayman Turtle
Farm in the British West Indies. The green sea turtle was considered
endangered, thanks to overharvesting due to common ownership. The
farm was able to hatch eggs and bring the hatchlings to maturity
at a far higher rate than in nature. Its stock grew to 80,000 green
turtles. But the environmentalists hated the Cayman Turtle Farm,
since in their view it is morally wrong to profit from wildlife,
and they drove the farm out of business. The green turtle is again
on the endangered species list.
justify government intervention in the price system because of "public
goods" and "externalities. "
public good is supposed to be something we all want, but can't get
unless government provides Environmentalists claim everyone wants
national parks, for example, but the market won't provide them,
so the government must. But how can we know, independent of the
market, that everyone does want these expensive parks? Or how many
parks of what sort?
could take a survey, but that doesn't tell us the intensity of demand.
More important, it's not enough to know that people want, for example,
diamonds. We would have to know if they are willing to give up other
things to obtain them, and we can only know that by watching their
actions in a free market.
we realize that only the market can give us economic information,
the alleged problem of public goods disappears. Absent government
prohibitions and subsidies, or competition from "free" parks, the
market will ensure that we have exactly the number and type of parks
that the American people want, and are willing to pay for.
externality is a side effect. Your neighbors' attractive new garden
is a positive externality; their barking dog is a negative one,
One is a blessing, the other an irritant, but you voluntarily purchase
claim, for example, that trash is a negative externality of consuming,
so they advocate government suppression of "wasteful" consumption.
Yet the free market handles this justly and efficiently through
property rights. Privatize everything and the externalities are
"internalized," that is, those who ought to bear the costs do.
a product such as drugs illegal hampers this process. Given the
incentives, there are no measures severe enough to suppress the
trade. Even within the federal prisons, where the criminals are
all in cages, there's a lucrative drug market.
Bush administration official says that one of his goals is to raise
drug prices. But what do higher drug prices mean? Higher profits
for the drug dealers.
economics teaches that if the price of drugs is driven higher, and
the costs of production and consumer demand remain the same, drug
producers and distributors can pocket the difference. In economic
jargon, the marginal revenue of drug sales already outstrips the
marginal cost of production by an artificially huge margin. Profit
differentials reach 2,000% in some drug markets!
prices also mean that users will steal more money to buy their drugs more robbings, beatings, killings, and break-ins in cities across
America. Last year drug users stole more than $7 billion from innocent
Americans. Higher prices will guarantee an increase in that figure.
high murder rate in the inner-cities is also a direct result of
drug laws that make the peaceful settlement of disputes impossible.
Drug laws have insured the continuance of a market that relies on
violence and the threat of violence.
law enforcement is not a sufficient deterrent. Pushers already face
the prospect of imminent death when they step out onto the streets
to sell their goods. As long as a ghetto kid can earn $4,000 a week
selling drugs, he will continue to take the risk.
leaves decriminalization, which would subject the drug industry
to full market discipline. Drug prices would plummet, profits would
crash, and street crime would drop by 75% according to some estimates.
wouldn't create a utopia, but that is not one of our options. Once
the violence stops, we can focus our energies and resources on private
treatment for those who want to stop, and private anti-drug education
for the young.
we should not spend any public money on treatment or education.
Some liberal legalizers want the billions now spent on enforcement
channeled into government-run clinics. About 80% of treated addicts
return to drugs within a year, however, showing that the problem
is not lack of treatment.
people are natural addicts, who will harm themselves with drugs.
There's nothing the rest of us can do about it, except prevent them through decriminalization from spreading their misery to the
rest of society.
would be nice to have another choice, but the laws of economics
do not allow us one.