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VIDEO: Why Wouldn’t You Save a Drowning Child? by Matt Zwolinski

Would you lose $500 to save a drowning child? We explore a thought experiment that just may save someone’s life.

Imagine you’re walking to work in the morning down a quiet rural road to the side of the road there’s a pond and pass by every day. Only today, something is different. Today you see a small child in that pond.

He is alone, he’s flailing his arms, and if you don’t act quickly it looks like he is going to drown. Luckily, the pond is shallow. You can wade in, grab the child, and bring him to safety without putting yourself in any danger at all.

Unluckily, you’re wearing a very expensive set of clothes, and there just isn’t enough time to take them off. So even though saving the child is perfectly safe, it is going to cost you at least $500 to replace your suit and shoes. There’s no one else around, so the decision is yours alone to make.

Do you wade in, save the child, and ruin your expensive clothes? Or do you decide that $500 just too high a price to pay for the life of someone you don’t even know and walk on by.

If you’re like most people, the answer is obvious. Of course you save the child. Anyone that would would let us small child die just to keep their nice clothes from getting wet would be a moral monster. As peter singer, the philosopher who originated this drowning child thought experiment argued, if you had the power to prevent something really bad from happening to someone else just by suffering something merely slightly bad yourself, then “taking the hit” is the right thing to do.

Now of course most of us will never come across a drowning child on her way to work but all of us do find ourselves living in a world where over six million children die each year from preventable causes. And while none of us have the power to help all of those children, almost all of us have the power to help some of them. By donating a small amount of money much less than $500 to an effective charity through a site like GiveWell.org, you could literally save someone’s life. But that brings up another question.

How do we make sure aid efforts do the most good and the least harm?

Matt Zwolinski
Matt Zwolinski

Matt Zwolinski is an Associate Professor of Philosophy at the University of San Diego. He is also a co-director of USD’s Institute for Law and Philosophy, a member of the editorial board of Business Ethics Quarterly, and a blogger for Bleeding Heart Libertarians.

Capitalists Have a Better Plan: Why Decentralized Planning Is Superior to Bureaucracy and Socialism by Robert P. Murphy

To early 20th-century intellectuals, capitalism looked like anarchy. Why, they wondered, would we trust deliberative, conscious guidance when building a house but not when building an economy?

It was fashionable among these socialist intellectuals to espouse “planning” as a much more rational way to organize economic activity. (F.A. Hayek wrote a famous essay on the phenomenon.) But this emphasis on central planning was utterly confused both conceptually and empirically.

Ludwig von Mises made the most obvious rejoinder, pointing out that there is “planning” in the market economy, too. The difference is that the planning isdecentralized in a market, spread out among millions of entrepreneurs and resource owners, including workers. Thus, in the debate between socialism and capitalism, the question isn’t, “Should there be economic planning?” Rather, the question is, “Should we restrict the plan design to a few supposed experts put in place through the political process, or should we throw open the floodgates and receive input from millions of people who may know something vital?”

This second question came to be known as the “knowledge problem.” Hayek pointed out that in the real world, information is dispersed among myriad individuals. For example, a factory manager in Boise might know very particular facts about the machines on his assembly line, which socialist planners in DC could not possibly take into account when directing the nation’s productive resources. Hayek argued that the price system in a market economy could be viewed as a giant “system of telecommunications,” rapidly transmitting just the essential bits of knowledge from one localized node to the others. Such a “web” arrangement (my term) avoided a bureaucratic hierarchy in which every bit of information had to flow up through the chain of command, be processed by the expert leaders, and then flow back down to the subordinates.

Complementary to Hayek’s now-better-known problem of dispersed knowledge, Mises stressed the calculation problem of socialist planning. Even if we conceded for the sake of argument that the socialist planners had access to all of the latest technical information regarding the resources and engineering know-how at their disposal, they still couldn’t rationally “plan” their society’s economic activities. They would be “groping in the dark.”

By definition, under socialism, one group (the people running the state, if we are talking about a political manifestation) owns all of the important productive resources — the factories, forests, farmland, oil deposits, cargo ships, railroads, warehouses, utilities, and so on. Thus, there can be no truly competitive markets in the “means of production” (to use Karl Marx’s term), meaning that there are no genuine prices for these items.

Because of these unavoidable facts, Mises argued, no socialist ruler could evaluate the efficiency of his economic plan, even after the fact. He would have a list of the inputs into a certain process — so many tons of steel, rubber, wood, and man-hours of various types of labor. He could contrast the inputs with the outputs they produced — so many houses or cars or bottles of soda. But how would the socialist planner know if this transformation made sense? How would the socialist planner know if he should continue with this operation in the future, rather than expanding it or shrinking it? Would a different use of those same resources produce a better result? The simple answer is that he would have no idea. Without market prices, there is no nonarbitrary way of comparing the resources used up in a particular process with the goods or services produced.

In contrast, the profit-and-loss test provides critical feedback in the market economy. The entrepreneur can ask accountants to attach money prices to the resources used up, and the goods and services produced, by a particular process. Although not perfect, such a method at least provides guidance. Loosely speaking, a profitable enterprise is one that directs scarce resources into the channel that the consumers value the most, as demonstrated through their spending decisions.

In contrast, what does it mean if a particular business operation isunprofitable? It means that its customers are not willing to spend enough money on the output to recoup the monetary expenses (including interest) necessary to buy the inputs. But the reason those inputs had certain market prices attached to them is that other operations were bidding on them, too. Thus, in Mises’s interpretation, an unprofitable business enterprise is siphoning away resources from channels where consumers would prefer (indirectly and implicitly) that the resources be deployed.

We must never forget that the economic problem is not to ask, “Will devoting these scarce resources to project X make at least some people better off, compared to doing nothing with these resources?” Rather, the true economic problem is to ask, “Will devoting these scarce resources to project X make people better off compared to using the resources in some other project Y?”

To answer this question, we need a way of reducing heterogeneous inputs and outputs into a common denominator: money prices. This is why Mises stressed the primacy of private property and the use of sound money as pillars of rational resource allocation.

Robert P. Murphy
Robert P. Murphy

Robert P. Murphy has a PhD in economics from NYU. He is the author of The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to The Great Depression and the New Deal.

Hillary Clinton’s Ideological Vortex of Power and Planning by Jeffrey A. Tucker

Just trust her. Truly, just trust her: to know precisely how much energy we ought to use, where it should come from, how it should be generated, how we should get from here to there, and the effects that her plan will have on the global — the global! — climate, not just in the near term but decades or a century from now.

If you do this, you will have embraced “science,” “reality,” “truth,” and “innovation,” and, also, “our children.” If you don’t go along, you not only reject all those good things; you are probably also a “denier,” the catch-all epithet for anyone doubtful that the brilliance of Hillary Clinton and her czars know better than the rest of humanity how to manage their energy needs into the future.

Hillary’s campaign seems designed to prove that F.A. Hayek was a prophet.

That brilliant economist spent 50 years explaining, in book after book, that the greatest danger humanity faced, now and always, was a presumption on the part of intellectuals, politicians, and bureaucrats that they know better than the emergent and evolving wisdom of social forces.

This presumption might seem like science but it is really pretense. Civilization arises from, is protected by, and advances through the dispersed knowledge of billions of individual decision makers and the institutions that arise from them.

Hayek called the issue he was investigating the knowledge problem. Society needs to know how to use scarce resources, how to navigate a world of uncertainty, how to form rules that turn struggle into peace. It is a problem solved through freedom alone. No ruler, no scientist, no intellectual can substitute for the evolving process of decentralized decision making and trial and error.

The message is bad news for people like Hillary, who is supposed to embody the ideology called “liberalism” in America. Yet it is anything but liberal. It seems to know only one way forward: more top-down control. That’s a tough sell in times when everything good so obviously comes from anything but government, and, meanwhile, governments are responsible for every failing sector from health to education to foreign wars.

But here’s the problem. People like Hillary Clinton are stuck in an ideological vortex with no way out. Government planning is their thing, and they refuse to recognize its failures. So they press on and on, even to the point of preposterous implausibility, such as the claim that government can know everything that is necessary to know in order to plan the entire energy sector with the aim of managing the climate of the world.

Economist Donald Boudreaux puts matters this way: “why should someone who cannot ensure the proper use of a single private server be trusted with the colossal power necessary to design and to oversee the remaking of a trillion-plus dollar sector of the U.S. economy (a sector, by the way, in which this person has zero experience)?”

With this presumption comes the inevitable hypocrisy.

After unveiling her plan to ration energy use and plaster the country with solar panels, Ms. Clinton boarded a private jet that uses more fuel in one flight hour than I use in a year. “The aircraft, a Dassault model Falcon 900B, burns 347 gallons of fuel per hour,” wrote the muckraker who did a public service in exposing this. “The Trump-esque transportation costs $5,850 per hour to rent, according to the website of Executive Fliteways, the company that owns it.”

Notice how rarely it is mentioned that the US military, with hundreds of bases in over a hundred countries, is the worst single polluter on the planet. If we really believe in human-caused climate change, this might be a good place to start cutting back. But no, there’s not a word about this in any of Hillary’s plans. Government gets to do what it must do. The rest of us are supposed to pay the price, bicycling to work and powering our homes with sunshine and windmills.

When I first read about her energy plan, my response was: Why would any self-interested politician make the need for reduced living standards a centerpiece of her campaign? After all, her speech was made in a setting piled high with bicycles (oddly reminiscent of Mao’s China), while demanding a precise path forward for energy and everything that uses it (oddly reminiscent of Lenin’s first speech after he took control of Russian economic life).

As it turns out, people aren’t that interested. Sure, most people tell pollsters that they favor renewable energy to stop climate change. You have to say that or else risk being denounced as a denier. On the other hand, it seems like very few people really care enough to forgo the benefits of modern life, which is probably what will save civilization itself from plans like hers. Note that days after release, her pompous video only had only 54K views — pathetic given her celebrity and how much money her campaign is spending, but encouraging that nobody seems to put much stock in her plan for our future.

It’s extraordinary how quickly one branch of the political class has leapt from the delicate and ever-changing science of climate monitoring to the absolute certainty that extreme and extremely specific application of government force is the way to deal with it. Writes Max Borders: “The sacralization of climate is being used as a great loophole in the rule of law, an apology for bad science (and even worse economics), and an excuse to do anything and everything to have and keep power.”

The last point is critical. Everything done in the name of public policy in our lifetimes has become a handful of dust, yielding little more than unpayable debts and unworkable programs, and leaving in its wake an apparatus of compulsion and control that robs society of its inherent genius.

What to do? Give up? That’s not an option for these people. Instead, they find a new frontier for their schemes, a new rationale to sustain a failed model of social and economic organization.

I can think of no better words of rebuke but the closing of Hayek’s Nobel speech in 1974:

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible.

He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.

There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, “dizzy with success”, to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will.

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.

Yes, it surely ought to.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World. Follow on Twitter and Like on Facebook.

Who Will Protect Us from Tainted Food Trucks? by B.K. Marcus

My Haitian babysitter told me to get into the car, an old sedan with peeling paint, driven by a stranger. She’d hailed it, like a cab, and it pulled over for us, like a cab, but it didn’t look like a cab.

“I thought you said we were taking a taxi,” I said.

“This is a taxi.” She pushed me into the back seat.

“It doesn’t look like a taxi,” I whispered.

“Real taxis don’t come into this neighborhood,” she said. “This is a gypsy.”

I thought she was describing the ethnicity of the driver. Only later, listening to radio news reports about city police campaigns against gypsy cab drivers did I understand that my babysitter had dragged me into a mobile version of the black market.

That brief ride through a 1970s New York City ghetto was my only time in a gypsy cab: a bewildered little boy forced into the car of a man I didn’t know. It felt dangerous in a way that even hitchhiking in the Middle East when I was a teenager did not.

So why do I use Uber and Lyft without hesitation? Why do I prefer gray-market ride sharing with unlicensed strangers to hailing a municipally sanctioned taxi?

At this point, my confidence is based on past experience: the dozens of Uber drivers I’ve had were far more pleasant than the hundreds of cab drivers I’ve ridden with. But even my very first time with Uber, I got in without hesitation.

Peer-to-peer apps have made reputation markets real and robust — at least in certain corners of the service economy. Uber drivers have far greater incentive to make me happy than any cab driver ever has. More than their tip depends on it: the rating I give them can affect their future earnings.

Cab companies could have adopted reputation apps years ago as a way to outdo their competitors. But they weren’t worried about competition. City licensing often creates a protective cartel for current cabbies. That’s why Uber and Lyft became so popular so fast: the market — meaning everyone looking for a ride — wanted what the cab industry felt no need to offer us.

Will food trucks be the next service to escape the archaic model of licensing and regulation?

“Illegal Food Trucks Worry Health Officials,” reports the Herald-Sun of Durham, North Carolina. “Unlicensed food trucks operating illegally in Durham have health officials concerned that customers could end up getting sick.”

One such official, Chris Salter, told the paper that people selling food from the back of SUVs have posed food-poisoning risks to the public for years: “Did they slaughter a chicken in their backyard and cut it up on a piece of plywood? You just don’t know.”

The solution Salter proposes, of course, is stricter policing and greater regulation. After all, if cops and bureaucrats don’t protect the public, who will?

To the generation that reads newspapers and waits in line for taxis, the argument makes sense: when you eat in a restaurant, you may not know for sure that the food is safe, but the restaurant isn’t going anywhere; even without a health inspector’s oversight, restaurant owners have an incentive to protect their reputations. It’s not hard to spread the word that you got sick eating at Big Joe’s on the corner of 1st and Main. It’s a lot less helpful to say you ate a bad fajita out of the back of a faded green RAV4 in the abandoned parking lot.

When I used to take city cabs, the seats were filthy, the driving was reckless, and the drivers ranged from sullen to rude. But I felt relatively safe. I knew I could always write down the cabby’s name and medallion number. In theory, at least, I could report him and maybe someone would wag a finger at him. That seemed better than nothing.

Licensed food trucks offer a similar assurance: “Salter’s advice to the public is to look for the health grade card at food trucks if they’re unsure whether it’s operating legally. Since 2012, food trucks have been required to display the same cards as restaurants.”

Again, even without the health inspection required to get a permit and a health grade card, food truck owners don’t want to risk customers’ health for fear of losing their permits or having to display a lackluster “health grade” on their cards.

Government licensing acts as a sort of hampered reputation market. The food SUVs have no such incentives.

As in the case of cabbies versus Uber drivers, the legitimate food truck owners are on the side of the government officials: “Many of those owners are upset because the illegal trucks skirt regulation fees and cut into their business.”

Food trucks in Durham may not yet operate as a cartel — the way they are beginning to do in New York City, for example, where the number of food-truck licenses has been frozen for years — but the complaint is typical of the established players in a protected industry: upstarts with lower costs are threatening our profit margin!

But suppose you’re a foodie with fear of salmonella. Would you rather rely on an 11-month-old government report card or just check your food-truck app to see what your fellow foodies have to say? What sort of insurance does the owner carry — what third-party assurance is available? How’s their guacamole?

Don’t like this truck’s rating? The app will guide you to the next nearest truck serving similar fare.

Salter told the Herald-Sun, “We’re not trying to keep anybody from making a living. We’re trying to be fair and to protect the public.” So why is he offering 20th-century advice to consumers in the 21st century? Might he have any interests at stake other than public safety?

No doubt health officials would counter that the sharing economy is an option only for the privileged. It’s not like everyone has a smart phone, right? Right?

Many of the illegal vendors speak only Spanish, Salter told the Herald-Sun. And “many of them can’t read, so even if we pass out documents, they can’t read them.”

So who buys questionable chicken out of the back of an SUV operated by illiterate, Spanish-speaking strangers when Durham has so many government-approved food trucks with English-speaking staff?

Might those who choose to do so be similar to those who hailed gypsy cabs in the New York City of my youth?

“Real taxis don’t come into this neighborhood,” my babysitter had told me. I didn’t need to ask why. I didn’t want to be in that area either. But folks in the bad neighborhoods still needed rides, and they were willing to pay for them. There was extra risk involved for both parties, and the drivers couldn’t make the kind of money that licensed taxi drivers made, but driving a gypsy cab was better than their next-best option, so supply and demand met in illegal exchanges that benefitted both parties.

It’s safe to assume something similar is going on at the back of some of Durham’s SUVs.

These are most likely working people on the margins of the economy who don’t have the time or the money to seek a quick lunch elsewhere. If they’re buying their food from obviously unlicensed and uninspected vendors, that suggests that the higher-scale food trucks aren’t coming to their neighborhood — or that they charge considerably more than the illegal food.

The health officials aren’t protecting these people. At best, they are limiting their options. Worse, they could be driving economic exchanges further underground, where neither the government nor the market can effectively regulate safety.

Salter implies that vendor noncompliance is the result of ignorance, but it’s more likely buyers and sellers who don’t feel especially well protected by the legal system are taking measured risks to improve each other’s lives.

And I bet plenty of them do have smart phones. What they need now isn’t more ardent government oversight; it’s more reliable reputation markets. If there isn’t already an app for that, there soon will be.

B.K. Marcus

B.K. Marcus is managing editor of the Freeman.