We say that individuals are responsible for their actions. Libertarianism teaches this. Christianity teaches this. There is no plea bargaining on judgment day. There are no corporate defenses. “The devil made me do it” will not hold up in that court.
We should explain economics in terms of individuals’ decisions. We should also explain politics this way, too.
MICRO AND MACRO
We distinguish between microeconomics and macroeconomics. Microeconomics has to do with individual decision-making in a private property system. Macroeconomics has to do with how an entire economy functions.
Austrian School economics teaches that we should begin to study macroeconomics by studying microeconomics. Macroeconomics can be explained only as the outcome of microeconomics. What an individual does in a private property legal order can be explained in terms of economic theory: profit and loss. What the entire economy does can also be explained in terms of individual profit and loss. Any system of macroeconomics whose defenders assert its autonomy from microeconomics is an illusion. Cause and effect in economic theory begin with individual decision-making.
The question is this: Who holds the hammer? Who has final authority: the customer with money or the business with products? The Austrian School is clear: the customer with money, which is the most marketable commodity. Money is the hammer.
In politics, the hammer is the vote. Votes are sanctions: positive and negative. They determine in the aggregate which politician wins and which politician loses. In this sense, micro and macro are unified.
But there is a fundamental difference between market sanctions and political sanctions. This difference is best understood in terms of selling your vote. You can exercise your vote for expected future returns from the government, but you are not legally allowed to sell your vote because a particular politician pays you money. That would be illegal. The idea of “one man, one vote” is very different from “one man, one dollar.” A man is allowed to collect as many dollars as he can persuade other people to give to him, by gift or exchange. This is not true of political voting. It is never the case of “one man, multiple votes” for the same candidate, except in Cook County, Illinois, where your vote counts and counts and counts (Dick Gregory).
The free market’s system of positive and negative sanctions, which we call profit and loss, governs microeconomics. It does not operate in the same way in the field of politics. Politics has to do with judicial sanctions, which are mandatory: legalized violence. Market profit and loss have to do with economic sanctions, which are not mandatory. A government official can legally tell you what to do. Company CEOs cannot tell you what to do. You can take it or leave it.
So, when we look at how civil government operates, it is a mistake conceptually to go from inside the government (a bureaucrat) to outside (the masses). An individual bureaucrat can create havoc in the life of an individual citizen. To be the victim of bureaucratic action is usually very expensive. Even if you are innocent, it will cost you a small fortune to defend yourself. The bureaucrat knows this.
On the other hand, the bureaucrat also knows that if he takes on a major corporation, he is going to face the best legal talent in the world. He is likely to lose the case. Negative judicial sanctions are more likely imposed by the defendant than the plaintiff. The bureaucrat who launches the attack on a major American corporation, and then loses in a court, is going to find his career in big trouble. So, the micro decision of the bureaucrat regarding a particular individual citizen is going to be very different from the micro decision of the bureaucrat regarding a major American corporation. The risks are higher in the second case. The cost-benefit analysis favors doing nothing in this circumstance.
In a free market, there is not much coordination among sellers, and not much coordination among buyers. The outcomes are dependent upon individual decisions made by customers. Lots of customers make lots of individual decisions, and out of these decisions will come winners and losers among the sellers. But the sellers cannot determine the outcome. It is not determined in a court of law. The free market is not the same as the state.
The free market involves widely dispersed markets. A particular good may be sold in 1,000+ outlets. It is sold online: one sale, one market. It is available everywhere. The more volume of sales there is, the greater the income to the company.
This is not true of government agencies. A bureaucrat has to take a specific person to court in a specific jurisdiction. Everything has to go through one court. Then the case goes up the chain of appeals courts. One bureaucrat’s decision ties up agency resources and court resources. The bureaucracy has to make its entire case in one court. All of its resources must be concentrated on this single court.
This is completely different from the free market, in which the court of public opinion is broad and decentralized. In the case of a business, the decision of one customer not to buy the product is not a life-and-death decision. In the case of a bureaucrat who brings a case against an individual, it can be a life-and-death decision with respect to his career. He can lose his career if he makes a fool of himself in a specific court in a specific case. So, the goal of the bureaucrat is to prosecute only those cases which the bureaucrat believes he is likely to win. All of the other cases, he ignores. All of the other prosecutions, he ignores. All of the other risks that he might take, he ignores. He bets it all on one case in one court.
There are multiple bureaucrats, but one bureaucrat can handle only a few cases at the time. In contrast, a corporation can make 1,000 sales a day, or 10,000 sales a day. It can ramp up production to respond to increased customer demand. It can go from micro to macro simply by adding to production. This is not true of a bureaucrat, who must win his case in a specific court. He may get a legal precedent, but this precedent applies only in a specific jurisdiction. Furthermore, if some other company decides the precedent does not apply to it, the agency has to start the entire process over again.
The range of decision-making for a bureaucrat is extremely limited. The range of decision-making for a corporate CEO is enormous. The CEO decides how many units of production should be attempted. This number can be huge. It can influence customer decisions in multiple markets. There will be feedback from consumers to corporate sales programs. Success in one region may not make or break a particular product line’s profitability.
What I am trying to get at is this: decentralization is not a threat to businesses. They love to sell lots of products in many markets. Decentralization is a threat to a government bureaucrat, because he has jurisdiction over a limited region. Then he has to get a conviction in a specific court. All of this takes money. All of it takes time. All of this can be drawn out for months or years by deep-pocket defendants.