Solving Problems in a Free Society

After I wrote about the Age of Tranquility (the period before there were drug laws in America), I received the following email:

A frightening thought – if the clock were to be turned back, free access to drugs once again.

In earlier times these things simply evolved, no fuss or feathers. As you say, they were there, people used them as such (a bit like glue used to be in my own childhood, something used to stick fingers to balsa wood; it never occurred to us to sniff it). Today the mentality is different.

Now there is too much mystique – take the lid off and the box would explode? If these drugs are as addictive as claimed, and they suddenly became freely available … brrrrrrrr.

I understand the concept of freedom, to destroy oneself if one chooses; I also believe that the majority of people are decent and have common sense. A country with a small population might be able to absorb such an experiment, but your country with its unique mindset ("Bomb everybody to make the world safe") couldn’t handle it.

I can see why it would be easy to believe this. Much the same fears were expressed when the repeal of Alcohol Prohibition was being considered in the early 1930s – even though Prohibition had been in force only a little over a decade. There was talk that America would become a nation of drunks – that the people who had been teetotalers before Prohibition would now be tempted to give it a try, and that the old customs that restrained people voluntarily would no longer be respected.

Of course, when Prohibition ended, people celebrated happily for a few weeks – and then life returned to pre-Prohibition normality. The gang wars were over, no one had to risk his life drinking bathtub gin anymore, and police corruption diminished rapidly. The celebrations were about more than just the availability of legal booze; they cheered the return of peace and freedom.

Planned Economy or Freedom?

A similar situation occurred at the end of World War II.

As the war was winding down in 1945, there was a great deal of hand-wringing over the problem of 10 million GIs coming home from war and looking for jobs. How could the economy handle such a huge, sudden influx of labor? The Common Wisdom predicted another Great Depression. (Actually, the first one had never ended, since very few people saw their standard of living increase during the war.)

When the war ended, Congress set to work to create a giant plan to control the transition to a peacetime economy, work the returning soldiers into the labor force without disruption, and generally save us from chaos and destitution.

But, instead, one of those miracles happened that don’t come around very often: Congress argued so long over the plan that it was never implemented. So the U.S. economy had to fend for itself – and fend it did. The ex-servicemen found jobs, the economy took off upward, and the Great Depression was finally over after 16 years.

The Congressmen and pundits, never having studied economics seriously, were unaware of Say’s Law. Stated simply it is: Any new supply is accompanied by an equivalent new demand. In other words, any new entrant into the labor force also brings with himself a demand for products and services at least equal to the employment he seeks. So when 10 million more workers were available and seeking jobs, there was now new demand that was equal to 10 million people, requiring 10 million more people to produce the products and services necessary to meet that demand. In short, a new job for each new worker.

The only problem involved was the matching of new workers to the new jobs that were created by the new demand of people who hadn’t been in the market for new refrigerators when they were sitting in foxholes in places like Italy and Wake Island. How was the matching-up going to be handled?

Well – guess what – people who knew how to handle such things suddenly appeared out of nowhere, made their services available for a profit, and the entire transition was over within a year after the end of the war. The economy really boomed for the first time since 1929.

The Principle

The principle here is: Whatever the problem in a free market, it will be a profitable opportunity for someone who knows how to fix it.

Whatever difficulty you think might occur in a free market – people afraid to buy products for fear they’re unsafe, no way to raise the money for some huge project, people insecure for some reason – it represents an opportunity for someone to solve the problem and make a profit for himself. The bigger the problem, the bigger the payoff for solving it, and the more people who will turn their attention to solving it – including a lot of very smart people who previously had not had an interest in the subject, especially not before there was a free market to reward them for taking an interest.

The transition to a society of legalized drugs is a different problem from the economic transition after World War II. But the solution is always the same: more liberty and less government. Free people will sort things out because they have to in order to get what they want; politicians know only how to play political games.

We don’t have to know how everything will be handled in a free society. All we have to know is that free people have much more incentive to solve problems than do politicians whose own livelihood and life savings are never on the line.

February 10, 2005