Knowledge And Decisions

Often the rhetoric is preserved by such devices as referring to a firm’s retrospective percentage of sales during a given period as a share of the market they “control,” as if in some prospective sense. Metaphors and vague definitions are used to justify an expansion of government power which is neither vague nor metaphorical but very concrete. But with power as with freedom, a sufficiently wide or vague definition brings in many examples. What is crucial in judging such an example is distinguishing between (1) situations in which an individual’s options for dealing with alternative transactors are forcibly reduced or eliminated, and (2) situations in which a given transactor adds so much more to his options than anyone else that acceptance is a foregone conclusion. A monopoly or cartel reduces the consumers’ options, while a successful competitor adds to those options. Reducing consumers’ options requires not simply raising one’s own price — anyone can do that — but forcibly keeping others from entering the competition and undercutting that price. This usually requires either an exclusive franchise from the government, or some law or regulation limiting competition. These government created monopolies or cartels are the beneficiaries of governmental force, not its target. The situation of the transactor who offers better terms than others may seem to be a strange candidate for a “power” menace to be combated by government, though in reality many regulatory and antitrust activities do just that, as will be seen in Chapter 8. The point here is simply that a trade-off involving more use of force in economic decision-making is denied by depicting governmental force as merely an offset to existing private force, with no net increase.

DEMOCRACY

Democracy has been defined here by its characteristics as a process, not by its hoped for results, such as freedom, the dignity of the individual, or other benefits expected or alleged. Whatever the merits of democracy, it has its institutional limitations and operates within an area of circumstantial constraints — like all other political, economic, and other systems. The open endedness of hopes has sometimes led to the view that a majority can or should have whatever it wants — a view defined here as “the democratic fallacy.” The democratic fallacy implicitly presupposes unconstrained circumstantial options, so that if a majority does not get what it wants, it can only be a result of some denial of their democratic rights in some intentional sense. Choice through the ballot box has often been equated with choice through the market. But inherent constraints mean that democratic governments have no wider array of options to offer than anyone else — regardless of what options many may believe to exist — and that one crucial difference between ballots and prices is that prices convey effective knowledge of inherent constraints, while ballots do not. If I desire a Rolls Royce and simultaneously a normal standard of living, the price tag on the automobile immediately informs, convinces, and virtually coerces me to the conclusion that these two things are inconsistent. But if I believe simultaneously in a large military arsenal, low taxes, a balanced budget, and massive social programs, there are no constraints on my voting that way. Some time after a voting decision, it may become apparent that what was asked or promised did not in fact materialize, but this can easily be blamed on the dishonesty of political candidates, with no greater public awareness that the set of options simultaneously desired was inherently unrealizable from the outset. Instead of feedback to the voters to reduce their desired set of options to what is simultaneously realizable, the message may be to choose different persons as leaders, or different ideologies, movements, etc., in order to continue pursuing that same set of options. Indeed, when social progress is viewed retrospectively, it is often regarded as axiomatically attributable to such insistence on better things, rather than to technological and organizational advances over time which created wider arrays of options from which to choose. It is as if the historic increase in the Gross National Product was incidental to a rising living standard caused by political activity.