Wednesday, August 27, 2008

Why free market economics is the only rational analysis

Sadly, we live in a time where people turn to the brutal and clumsy fist of government to solve, address, tackle, and alleviate a wide range of problems.

To be rational is to use reason in guiding all human actions and decisions. Economics, by definition, is the science of decision-making, and how to go about it rationally.

All the history books show that unconstrained and free decision making (i.e capitalism and liberty) are the best institutions for individuals to rationally pursue their goals in life.

Free market economics concludes government has no role except to protect your rights and freedoms in any transaction. When this conclusion is given low priority, overlooked, diminished or in any way, ignored, free individuals lose their way and come up with all kinds of government "solutions" to issues. Like the following new tax in Britain:

Before the changes, vacant offices and shops received rate relief of 50% and industrial units gained full relief. Now all unused commercial property has to pay full business rates after a three-month period of grace for commercial premises and six months for industrial property and warehouses, adding about £1.3bn a year to government coffers.

A Treasury spokesman yesterday defended the tax reform and said it had followed the independent recommendations of experts Kate Barker and Sir Michael Lyons to encourage owners to bring empty properties back into productive use and discourage deliberate dereliction

A quick recap - the government, based on its wisdom, and independent recommendations of "experts", decides to levy a tax on landlords who have vacant premises after a few months. The intention is to pressure the landlords to lower their rents so that all properties are occupied.

The result, is predictable, just ask any free market economist what would have happened:
John Nicholls, who chairs a group representing the government-funded urban regeneration companies (URCs), said yesterday that owners are demolishing empty buildings to avoid paying the tax introduced in the most recent budget, leaving parts of the country "resembling bomb sites". Regeneration projects had been rendered unworkable, threatening jobs and new homes, he said. Some developers are simply leaving sites unfinished rather than risk liability for the tax.

"There is a lot of pre-emptive demolition going on. This is already having a visual impact - cities are beginning to look like broken teeth."

Of course the new tax would backfire ! When you impose a tax to discourage a certain kind of behaviour (owning commercial property but not renting it out immediately), individual people respond with all kinds of creative ways to avoid that tax (demolishing the building to avoid the tax).

As I said before, government solutions to an ever increasing range of "problems" are always clumsy and brutal.

These problems range from alcoholism, drugs, sickness and poor education to housing; from security at airports to online content and speech; from riding bicycles to smoking cigarettes. Why the very fact of people enjoying themselves is easily classified as a social problem.

The government solution is brutal because it is forced upon society. Often it is backed up by threats of fines, loss of property, even imprisonment.

The government solution is always clumsy because it is implemented through either;

a/ A heavily bureaucratic system, which takes a one size fits all approach, or in the case of our messy burdensome tax system, it implements a 1000 sizes built to fit 1 million confused people approach.

b/ Public servants are given tremendous new powers to make decisions, imprison, fine or punish people. i.e Security agents at airports can use their new powers to harass 80 year old travellers. Ticket inspectors can gang-bash travellers. Police can gang-bash drunk teenagers and pepper-spray crowds at the tennis.

The solution to this is very simple.

Be VERY careful what you call a "problem for government".

Problems should never be mapped across a society or enlarged. The use of aggregates, statistics is just as dangerous and foolish as taking a snap-poll of a small sample.

The bar should be set so high that the following are the only things that qualify as problems for government to deal with:
  • Theft
  • Murder
  • Assault
  • Destruction of other people's property
  • Invading armies
  • Violating agreements and contracts
  • Fraud
Alcohol fueled violence is not a definable problem for society. But acts of violence against any individual ARE MOST CERTAINLY A PROBLEM. They are a crime, to be precise. Violence against women is not a problem for society. But violence against any individual is, has been, and should always be, a crime. Hooligans hanging around the city and forming gangs is not a problem. But defacing private property with graffiti, and attacking individuals violently is a problem.

You see, society, and its associated rights cannot be reasonably defined, but the individual and their rights most certainly can.

Teenage suicide is not a problem for society or government. Drugs and substance abuse is not a problem for society or government. The cost of health care, education, fuel and groceries is not a problem for government to deal with.

These are all grave issues and problems, but they are personal. Each individual has to deal with their own issues, within their own support groups, and form their own voluntary relationships with friends and family, workers and colleagues.

Lets address the individual violation of rights and deal with crimes against a person and their property. No less and no more.