Knowledge And Decisions

The diversity of personal tastes insures that no given institution will become the answer to a human problem in the market. The need for food, housing, or other desiderata can be met in a sweeping range of ways. Some of the methods most preferred by some will be the most abhorred by others. Responsiveness to individual diversity means that market processes necessarily produce “chaotic” results from the point of view of any single given scale of values. No matter which particular way you think people should be housed or fed (or their other needs met) the market will not do it just that way, because the market is not a particular set of institutions. People who are convinced that their values are best — not only for themselves but for others — must necessarily be offended by many things that happen in a market economy, whether those people’s values are religious, communistic, white supremacist, or racially integrationist. The diversity of tastes satisfied by a market may be its greatest economic achievement, but it is also its greatest political vulnerability.

Decision making through any kind of process involves costs created by the decision-making process itself, quite aside from those costs created by the particular decisions reached. Achieving agreement or resolution of opposing views is never free. Nor should these “transactions costs,” as economists call them, be thought of as minor incidental expenses. The transactions costs of choosing a new emperor of the Roman Empire often included tens of thousands of lives and the destruction of whole cities and surrounding countrysides in battles among contenders. The devotion of many rational and public-spirited men of later times to the principle of royal succession, which might seem at first to be only an irrational special privilege, is more easily understood against an historical background of astronomical transactions costs in choosing national leaders. Even one who felt that a given king (or kings in general) had only average intelligence, or even somewhat below average intelligence, might still reasonably choose to bear with royal succession if he felt that the likely differences in leadership were not worth the carnage involved in alternative political processes available at the time.

The rise of modern conditions — notably literacy and mass communications — made democratic and constitutional methods of changing national leadership possible. It does not make agreement on issues a free good, however. Again, the tendency to proceed directly to the “solution” of “problems” from some given viewpoint or given set of values overlooks the crucial point that the diversity of viewpoints and values means that costs of concurrence and the amount of concurrence made necessary by different policies can vary enormously. The net difference between policy x and policy y may be far less than the cost of choosing, or one policy may require far more consensus than the other. The Godlike approach to social policy ignores both the diversity of values and the cost of agreement among human beings. The political and/or economic systems which involve less control from higher authorities reduce the costs of concurrence — which can range all the way up to concentration camps and genocide. To those who feel that their values are the values, the less controlled systems necessarily present a spectacle of “chaos,” simply because such systems respond to a diversity of values. The more successfully such systems respond to diversity, the more “chaos” there will be, by definition, according to the standards of any specific set of values — other than diversity or freedom as values. Looked at another way, the more self-righteous observers there are, the more chaos (and “waste”) will be seen.