BUCKSHOT FOR A SOCIALIST FRIEND

A man that’d expict to thrain lobsters to fly in a year is called a lunatic; but a man that thinks men can be tu-rrned into angels by an iliction is called a rayformer and remains at large.


MR. DOOLEY

You object that even if private property institutions work perfectly, they are still unfair. Consumers vote for the goods they want produced by spending money on them. Incomes are unequal, so some have more votes than others. The ideal democratic socialist society, on the other hand, allocates resources democratically, each person having one vote. It is therefore superior to the ideal capitalist society.

The analogy between spending and voting is imperfect. Equality aside, spending is a much superior—paradoxically, a much more egalitarian—way of allocating resources. A dollar, once spent, cannot be spent again, leaving you less to spend on something else. Your vote can be used over and over.

Contrast the relationship between two men, one having an income of $40,000 a year and one of $20,000, with the relationship between two men, one part of a political faction with forty votes, one part of a faction with twenty.

Bidding for necessities, the richer man outbids the poorer; if there were only enough food on the market for one man, it would be the poorer who would starve. But when the richer man is bidding for luxuries and the poorer man for necessities, the poorer man wins. Suppose the richer man, having bought enough flour to make bread for himself, wishes to buy the rest of the flour on the market to make paper mache for his children’s Halloween masks. The poorer man still does not have anything to eat; he is willing to use as much of his income as necessary to bid for the flour. He gets the flour, and at much less than $20,000. The richer man already has used half his income buying flour for bread (since there too, he was bidding against the poor). His remaining income is barely equal to that of the poorer man, and he certainly is not going to spend all of it, or even a substantial fraction, for Halloween masks.

Now consider the same situation with votes. The man with the larger faction votes to have the flour given to him and his allies for bread. Then he votes to have the remaining flour given to them for making paper mache. He wins both times, forty to twenty. Since voting is much more of an all-or-nothing thing than spending, such inequalities as do exist have much greater effects. This may explain why in our society, where the poor are also politically weak, they do far worse on things provided by the government, such as schooling and police protection, than on those sold privately, such as food and clothes.

Political institutions such as congressional log rolling have developed to mitigate the all-or-nothing features of voting. A congressman indicates how important his bill is to his constituents by how many votes on other bills he is willing to trade for support on his. This is an extremely crude and approximate substitute for the market, an attempt to represent, by bargaining among a few hundred men on a few thousand issues, the multitudinous diversity of two hundred million lives.

Could political institutions be created that would completely solve this problem? That question was investigated at considerable length by Ludwig von Mises in the 1920s; his arguments are in Socialism: An Economic and Sociological Analysis and, in a popularized form, in Henry Hazlitt’s novel Time Will Run Back. The answer is no. By the time a democratic socialist has modified socialism sufficiently to make its political control mechanisms as accurate and sensitive as the economic control mechanisms of capitalism, he has reinvented capitalism. As the Yugoslavs have discovered.

II

You concede everything I say about the corruption of regulatory agencies into servants of the special interests they regulate and about the redistribution by government from poor to rich. I regard that as evidence against the institution of public property. You regard it as evidence against the institution of private property. You argue that it is the inequality of income, power, and status in this private-property society that corrupts the elements of public property within it. It is only because some are richer than others that they have the power to make government steal from those others for their benefit.

But stealing from the poor to benefit the not poor is by no means the only stealing the government does. Consider the CAB. By fixing airline fares well above their market price, it benefits the airlines, which is to say their stockholders and employees, at the expense of airline passengers. By preventing the formation of new airlines, it benefits stockholders of existing firms at the cost of the potential stockholders, customers, and employees of the new airlines that might have been formed.

Airline passengers are not poor. Some are doubtless richer than the average stockholder of an airline and many are richer than the average airline employee. How is it that they find themselves on the wrong end of a government transfer?

The answer can best be understood in terms of what economists call externalities. An externality is an effect of my actions which benefits or harms someone whom I cannot charge for the benefit or need not recompense for the loss. If, for instance, I burn leaves on my lawn and the smoke bothers my neighbors, I am imposing a cost on them which they cannot force me to pay for. I may burn the leaves even if the real cost of doing so, including my neighbors’ watering eyes, is larger than the cost of having them hauled away. This, as the opponents of capitalism correctly argue, is an imperfection in the functioning of a capitalist economy.

Externalities play an enormously greater role in institutions controlled by voting. If I invest time and energy in discovering which candidate will make the best President, the benefit of that investment, if any, is spread evenly among 200 million people. That is an externality of 99.9999995 percent. Unless it is obvious how I should vote, it is not worth the time and trouble to be a well informed voter except on issues where I get a disproportionately large fraction of the benefit. Situations, in other words, where I am part of a special interest.

Consider the CAB again. In order for me, an occasional airline passenger, to do anything about it, I would have to keep track of how every member of the board voted, by whom he was appointed and how my congressmen voted on every bill connected with airline regulation. Having done so, the chance that my vote or any pressure I might try to bring to bear on my congressmen or the President would alter the situation is one in millions. And if I am successful, all I get is a saving of a hundred dollars or so a year in lower air fares. It isn’t worth it. For the airline industry the same research, backed by enormously larger resources in votes and money, brings a return of many millions of dollars. For them it is worth it. It is not that they are richer than all airline passengers combined; they are not. But they are concentrated and we are dispersed.

Special interest politics is a simple game. A hundred people sit in a circle, each with his pocket full of pennies. A politician walks around the outside of the circle, taking a penny from each person. No one minds; who cares about a penny? When he has gotten all the way around the circle, the politician throws fifty cents down in front of one person, who is overjoyed at the unexpected windfall. The process is repeated, ending with a different person. After a hundred rounds everyone is a hundred cents poorer, fifty cents richer, and happy.

III

You object that capitalism works too well, that more efficient means of production drive out less efficient, leaving everyone with sterile and repetitive jobs in a soul-killing environment.

More efficient means of production do drive out less efficient means, but your definition of efficiency is too narrow. If under one arrangement a worker produces a dollar an hour more than under another but the conditions are so much worse that he will gladly accept a wage of two dollars an hour less to work under the other, which is more efficient? For both the employer, who saves more on wages than he loses on production, and the worker, the physically less productive arrangement is the more efficient. The efficiency of capitalism takes account of nonmonetary as well as monetary costs and products.

IV

In the ideal socialist state power will not attract power freaks. People who make decisions will show no slightest bias toward their own interests. There will be no way for a clever man to bend the institutions to serve his own ends. And the rivers will run uphill.