Voice For Liberty

Category: Free markets

  • Pickens changes his mind, again

    Energy investor T. Boone Pickens has changed his mind about government subsidy of energy markets — again.

    Until recently Pickens has been promoting federal legislation titled H.R. 1380: New Alternative Transportation to Give Americans Solutions Act of 2011, or NAT GAS act. The bill provides a variety of subsidies, implemented through tax credits, to producers and users of natural gas. The goal is to promote the use of natural gas for a transportation fuel, particularly for long-haul trucks.

    Now, according to reporting in Politico, Pickens said about the transition to natural gas “It’s going to happen, and you don’t have to have Washington do it, thank God.”

    Later in the article Pickens is quoted as saying “You don’t have to have a tax credit; it’s going to happen.”

    Before promoting subsidies for natural gas as a transportation fuel, Pickens actively promoted wind power, another form of energy production that receives government subsidy. In 2008 Pickens ordered 667 wind turbines worth $2 billion from General Electric. Now, in the Politico article, he concedes he lost a lot of money on this venture.

    His plan, at that time, was to use wind power to generate electricity, and the natural gas saved would be used to power transportation. But there’s another relationship between wind power and gas, and it stems from the unreliability and variability of wind power. It’s difficult to quickly adjust the output of most power plants. But natural gas turbine plants are an exception. Kansas recently saw one of its major electric utilities complete a new natural gas power plant. The need for the plant was at least partly created by its investment in wind: A document produced by Westar titled The Greenhouse Gas Challenge noted the “Construction of the 665 MW natural gas-fired Emporia Energy Center, providing the ability to efficiently follow the variability of wind generation.” In another document announcing a request for a rate increase it stated “Our Emporia Energy Center is excellent for following the variability of wind production.”

    At the time of these investments by Pickens and Westar, the price of natural gas was high. Now it is low — so low, and the prospects for future low prices certain enough — that Pickens has abandoned his wind farm projects. Even with all the subsidy granted to wind power, it’s cheaper to generate electricity with gas.

    Let’s hope this is the last time Pickens develops a plan to tap the federal taxpayer to pay for his plans.

  • Minimum wage increase not a solution

    Those who advocate for a higher minimum wage law appear to have the best interests of workers as their concern. But as is almost always the case when government intervenes into markets, the unintended consequences create more harm than good.

    In the case of the federal minimum wage, we need to remember that this law — as well-intentioned as it may be — is not the solution to unemployment or raising the standard of living of workers.

    The great appeal of a higher minimum wage mandated by an act of Congress is that it seems like a simple and harmless way to increase the wellbeing of low-wage workers. Those who were earning less than the new lawful wage and keep their jobs after the increase are happy. They are grateful to the lawmakers, labor leaders, newspaper editorialists, and others who pleaded for the higher minimum wage. News stories will report their good fortune.

    That’s the visible effect of raising the minimum wage. But to understand the entire issue, we must look for the unseen effects. Milton Friedman explained in Capitalism and Freedom:

    Minimum wage laws are about as clear a case as one can find of a measure the effects of which are precisely the opposite of those intended by the men of good will who support it. Many proponents of minimum wage laws quite properly deplore extremely low rates; they regard them as a sign of poverty; and they hope, by outlawing wage rates below some specified level, to reduce poverty. In fact, insofar as minimum wage laws have any effect at all, their effect is clearly to increase poverty. The state can legislate a minimum wage rate. It can hardly require employers to hire at that minimum all who were formerly employed at wages below the minimum. … The effect of the minimum wage is therefore to make unemployment higher than it otherwise would be.

    The not-so-visible effect of the higher wage law is that demand for labor will be reduced. Those workers whose productivity — as measured by the give and take of supply and demand — lies below the new lawful wage rate are in danger of losing their jobs. The minimum wage law says if you hire someone you must pay them a certain minimum amount. The law can’t compel you to hire someone, nor can it force employers to keep workers on the payroll.

    The people who lose their jobs are dispersed. A few workers here; a few there. They may not know who is to blame for their situation. Newspaper and television reporters will not seek these people, as they are largely invisible, especially so in the case of the people who are not hired because of the higher minimum wage level.

    Some things employers do to compensate for higher labor costs include these:

    • Reduce non-wage benefits such as health insurance.
    • Eliminate overtime hours that many employees rely on.
    • Substitute machines for labor. We might see more self-service checkout lanes at supermarkets and more use of automated telephone response systems, for example.
    • Use illegal labor. Examples include paying employees under the table, or requiring work off-the-clock.
    • Some employers may be more willing to bear the risks of using undocumented workers who can’t complain that they aren’t being paid the minimum wage.
    • Some employers may decide that the risks and hassles of being in business aren’t worth it anymore, and will close shop.

    Solution to low wages

    If we are truly concerned about the plight of low-wage and low-skilled workers we can face some realities and deal with them openly. The primary reality is that some people are not able to produce output that our economy values highly. These workers are not very productive. Passing a law that requires employers to pay them more doesn’t change the fact that their productivity is low. But there are ways to increase productivity.

    One way to increase workers’ productivity is through education. Unfortunately, there is ample evidence that our public education system is not producing graduates with the skills needed for well-paying jobs. But this is a problem that can be fixed.

    Another way to increase wages is to encourage more capital investment. But capital is a dirty word to liberals, as it conjures up images of rich people earning income from the labors of others. But as the economist Walter E. Williams says, ask yourself this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference between the two is that the man using the backhoe is more productive, although the worker using the shovel is undoubtedly working harder. But it is productivity, not work effort, that is valued. That productivity is provided by capital — the savings that someone accumulated (instead of spending on immediate consumption or taxes) and invested in a way that increased the output of workers and our economy.

    These savers and investors are not necessarily wealthy people. Anyone who defers current consumption in order to save and invest — no matter how small the amount — provides capital to industry.

    Education and capital accumulation are the two best ways to increase the productivity and the wages of workers. Ironically, the people who are most vocal about raising wages through legislative fiat are also usually opposed to meaningful education reform and school choice, insisting on more resources being poured into the present system. They also usually support higher taxes on both individuals and business, which makes it harder to accumulate capital. These people and organizations should examine the effects of the policies they promote, as they are not in alignment with their stated goals.

    Minimum wage as competitive weapon

    We also need to examine the motivations of those calling for a higher minimum wage. Sometimes they see a way gain a competitive advantage.

    In 2005 Walmart came out in favor of raising the national minimum wage. Providing an example of how regulation is pitched as needed for the common good, Walmart’s CEO said that he was concerned for the plight of working families, and that he thought the current minimum wage of $5.15 per hour was too low. If Walmart — a company the political left loves to hate as much as any other — can be in favor of increased regulation of the workplace, can regulation be a good thing? Had Walmart discovered the joys of big government?

    The answer is yes. Walmart discovered a way of using government regulation as a competitive weapon. This is often the motivation for business support of regulation. In the case of Walmart, it was already paying its employees well over the current minimum wage. At the time, some sources thought that the minimum wage could be raised as much as 50 percent and not cause Walmart any additional cost — its employees already made that much.

    But its competitors didn’t pay wages that high. If the minimum wage rose very much, these competitors to Walmart would be forced to increase their wages. Their costs would rise. Their ability to compete with Walmart would be harmed.

    In short, Walmart supported government regulation in the form of a higher minimum wage as a way to impose higher costs on its competitors. It found a way to compete outside the marketplace. And it did it while appearing noble.

  • Crony Chronicles: I Want To Be A Crony

    Cronyism? “It’s like having a best friend who gives you other peoples’ stuff,” says the young girl to the approval of her friend.

    We in Wichita know just how this works, and when given a chance, voters reject it.

    The video is a project of Crony Chronicles, which has developed into a top-notch resource for information on this harmful disease.

  • Governor Romney is right: End the wind production tax credit

    U.S. Representative Mike Pompeo, a Republican who represents the Kansas fourth district, contributes the following article on the harm of government involvement in energy markets, wind power specifically. Pompeo has written extensively on energy; see Pompeo on energy tax simplification, Era of energy subsidies is over, and Free market energy solutions don’t jeopardize national security. He has also introduced legislation to end all tax credits for energy, H.R. 3308: Energy Freedom and Economic Prosperity Act.

    There’s been a steady drumbeat from those seeking an extension of the wind production tax credit. For many reasons, including some that former Massachusetts Gov. Mitt Romney has carefully highlighted in his opposition, this is a bad idea.

    First, an extension continues this unsettling policy trend in which citizens are asked to bear all the risks and gain none of the rewards. This socialization of risks and privatization of profits guarantees disasters, for corporate boards and even their federal overseers can become careless and, in some instances, reckless. This fact was clearly demonstrated by the Solyndra debacle — when a company with close ties to the Obama administration lost more than a half billion dollars of taxpayers’ money. At the heart of that fiasco was both the company and the administration’s indifference to the taxpayers.

    Solyndra also revealed something else damaging about federal involvement in markets: the potential for political corruption. It’s clear that the Obama administration became emotionally, and inappropriately, invested in the fortunes of one company and one sector. When that happens, the system is compromised, cronyism flourishes and corruption is inevitable.

    President Barack Obama talks about the need to “invest” in alternative energy sources. But the reality is that he is not investing his money — he’s spending yours. I’m not sure that too many Americans would choose the president to manage their retirement accounts. His record — a jobless and exceedingly shallow recovery — is not good.

    With this production tax credit extension, the wisdom of the investment is especially dubious. Wind companies and their lobbyists have, for the last year, been telling all who would listen that the expiration of the tax credit could spell doom for their industry. Obama repeats this claim regularly on the campaign trail.

    But what does that say about the industry? If you need a tax credit to compete, you are probably not that competitive.

    Moreover, the tax credit is not de minimis for either taxpayers or companies that are lobbying for it. It will cost the taxpayers more than 12 billion dollars inside the budget window. Worse, the credit is set at 2.2 cents per kilowatt hour. Just to compare, the national average for produced power is around 6 cents per kilowatt hour. That means that the wind industry gets an almost 40 percent subsidy for each unit it produces. How many companies would like that?

    You also have to remember that wind power enjoys a mandate in more than 30 states. That is, regardless of cost — or price to ratepayers — utilities must use wind or other renewables for specific amounts of power generation. So, the wind companies enjoy not only a tax credit, but a must-use mandate as well — regardless of cost.

    It would be one thing if we were running out of natural gas and confronted a real national requirement to use alternative energy. But it’s the reverse. The United States has more traditional energy resources than anywhere else on Earth, according to the Congressional Research Service. With the surge in production from the shale formations, a new Barclays report just concluded, natural gas will likely dominate wind in the marketplace for the foreseeable future.

    Even now, in places like Williston, N.D., companies are hiring everyone who can get there to work on rigs or in ancillary jobs. If the president is genuinely worried about jobs, maybe he should visit the Bakken in North Dakota, or the Marcellus in Pennsylvania or the Eagle Ford in Texas.

    Using wind power to generate electricity is not a new idea. The first windmills used to generate electricity went up in the 19th Century. The production tax credit is also not a new idea. It is now about 20 years old.

    Romney’s opposition to continuing the wind subsidy is absolutely correct. At some point, an industry has to either succeed or fail on its own merits.

    For wind companies, we are at that point now.

  • Energy subsidies exposed

    On the campaign trail, President Barack Obama calls for an end to energy subsidies for the fossil fuel industry. It turns out, however, that this industry receives relatively little subsidy, while the president’s favored forms of energy investment — wind and solar — receive much more. Additionally, coal, oil, and gas industries paid billions in taxes to the federal government, while electricity produced by solar and wind are a cost to taxpayers.

    Saturday’s Wall Street Journal piece The Energy Subsidy Tally: Wind and solar get the most taxpayer help for the least production gathers the facts: “The nearby chart shows the assistance that each form of energy for electricity production received in 2010. The natural gas and oil industry received $2.8 billion in total subsidies, not the $4 billion Mr. Obama claims on the campaign trail, and $654 million for electric power. The biggest winner was wind, with $5 billion. Between 2007 and 2010, total energy subsidies rose 108%, but solar’s subsidies increased six-fold and wind’s were up 10-fold.”

    When looking at subsidy received per unit of power produced, the Journal found that oil, gas, and coal received $0.64 per megawatt hour, hydropower $0.82, nuclear $3.14, wind $56.39, and solar $775.64. Commented the Journal: “So for every tax dollar that goes to coal, oil and natural gas, wind gets $88 and solar $1,212. After all the hype and dollars, in 2010 wind and solar combined for 2.3% of electric generation — 2.3% for wind and 0% and a rounding error for solar. Renewables contributed 10.3% overall, though 6.2% is hydro. Some ‘investment.’”

    In Kansas, there is disagreement among elected officials over wind power. Kansas Governor Sam Brownback and U.S. Senator Jerry Moran favor the production tax credit that makes wind feasible. Together they penned an op-ed that tortures logic to defend the tax credits. Each has spoken out on his own on the national stage. See Brownback on wind, again and Wind energy split in Kansas.

    Brownback has also supported, at both federal and state levels, renewable portfolio standards. These in effect mandate the production of wind power. Recently Kansas Policy Institute produced a report that details the harmful effect of this law: “Renewable energy is more expensive than conventional energy, so government mandates are necessary to ensure that more renewable energy is purchased. However, the unseen consequences of well-intended efforts to increase energy independence are rarely considered. The authors estimate that by 2020, the average household’s electricity bill will increase by $660, approximately 12,000 fewer jobs will have been created, and business investment in the state will be $191 million less than without the mandate.” See The Economic Impact of the Kansas Renewable Portfolio Standard.

    In Wichita, Mayor Carl Brewer is recruiting wind power companies to come to Wichita. If he is successful, you can be sure it will be at great cost to Kansas and Wichita taxpayers.

    Contrast with the position taken by U.S. Representative Mike Pompeo, a Republican who represents the Kansas fourth district, which includes the Wichita metropolitan area. Recently he wrote: “Supporters of Big Wind, like President Obama, defend these enormous, multi-decade subsidies by saying they are fighting for jobs, but the facts tell a different story. Can you say ‘stimulus’? The PTC’s logic is almost identical to the President’s failed stimulus spending of $750 billion — redistribute wealth from hard-working taxpayers to politically favored industries and then visit the site and tell the employees that ‘without me as your elected leader funneling taxpayer dollars to your company, you’d be out of work.’ I call this ‘photo-op economics.’ We know better. If the industry is viable, those jobs would likely be there even without the handout. Moreover, what about the jobs lost because everyone else’s taxes went up to pay for the subsidy and to pay for the high utility bills from wind-powered energy? There will be no ribbon-cuttings for those out-of-work families.”

    Pompeo has introduced legislation in Congress that would end tax credits for all forms of energy production. See H.R. 3308: Energy Freedom and Economic Prosperity Act.

    The Energy Subsidy Tally
    Wind and solar get the most taxpayer help for the least production.

    President Obama traveled to Iowa Tuesday and touted wind energy subsidies as the path to economic recovery. Then he attacked Mitt Romney as a tool of the oil and gas industry. “So my attitude is let’s stop giving taxpayer subsidies to oil companies that don’t need them, and let’s invest in clean energy that will put people back to work right here in Iowa,” he said. “That’s a choice in this election.”

    There certainly is a subsidy choice in the election, but the facts are a lot different than Mr. Obama portrays them. What he isn’t telling voters is how many tax dollars his Administration has already steered to wind and solar power, and how much more subsidized they are than other forms of electricity generation.

    Continue reading at the Wall Street Journal (subscription required)

  • Kansas Economic Freedom Index, 2012 Edition

    Today marks the release of the 2012 edition of the Kansas Economic Freedom Index. The Index examines votes made by members of the Kansas Legislature based on the impact the proposed legislation has on free markets and the constitutional principles of individual liberty and limited government. Based on their votes, legislators earn scores that illuminate their support of — or opposition to — these principles of economic freedom.

    The Kansas Economic Freedom Index is produced by Americans for Prosperity–Kansas, Kansas Policy Institute, and Voice for Liberty in Wichita. It is intended to provide educational information to the public about broad economic issues that are important to the citizens of our State. The Index is the product of nonpartisan analysis, study, and research and is not intended to directly or indirectly endorse or oppose any candidate for public office. Each partner organization operates independently and has its own distinct voice in advocating for free markets and supporting the constitutional principles of individual liberty and limited government.

    The Kansas Economic Freedom Index is hosted at two sites: KansasEconomicFreedom.com and Kansas Policy Institute.

    The value of a voting index is that it shines light on what lawmakers actually do, not what they say they do. Many of the votes included in the Kansas Economic Freedom index did not generate newspaper or television coverage, but collectively these votes let us know who are the champions of economic freedom and who are its enemies.

  • Pickens’ NATGAS act sponsor defeated

    A congressional primary election served as a barometer of public sentiment on energy policy and government interventionism into free markets.

    In yesterday’s Oklahoma primary elections, Jim Bridenstine defeated 10-year incumbent John Sullivan in a Republican primary for U.S. House of Representatives, first district.

    The difference between the two candidates, as reported by the Tulsa World, boiled down to supporting or opposing H.R. 1380: New Alternative Transportation to Give Americans Solutions Act of 2011, or NAT GAS act. The bill provides a variety of subsidies, implemented through tax credits, to producers and users of natural gas. The legislation’s purpose is to promote the use of natural gas as the fuel the nation uses for transportation by converting over-the-road trucks to run on natural gas. From the story Republicans vying for 1st District seat square off civilly at event:

    On only one issue, energy policy, did Sullivan and Bridenstine substantially disagree. Sullivan touted his bill to promote natural gas vehicle fuels, while Bridenstine supports an alternative proposal.

    “Let’s get cars, trucks and buses running on natural gas,” Sullivan said. “We have an abundance of it here in the United States. It’s cheap and abundant and … it also addresses a national security issue by lessening our dependence on foreign oil.”

    Bridenstine calls Sullivan’s NatGas Act a “big-government” boondoggle because it creates a short-term subsidy to convert vehicles to natural gas.

    “We ought not let Washington, D.C., control free markets with tax subsidies,” he said.

    It wasn’t just that Sullivan supported the NATGAS bill — he was the lead sponsor. Now Oklahoma Republicans have rejected the sponsor of a large dose of harmful crony capitalism. Thank you, Oklahoma.

    Another supporter of this bill — perhaps the leading promoter — is T. Boone Pickens. He promotes this bill as a way to convert trucks to run on natural gas at no cost to the taxpayer. Except for two things: Tax credits are equivalent to spending. But they mix spending with taxation in a way that lets politicians and handout-seekers like Pickens to wrongly claim that tax credits are not cash handouts. Fortunately, not everyone falls for this seductive trap. In an excellent article on the topic that appeared in Cato Institute’s Regulation magazine, Edward D. Kleinbard explains:

    Specialists term these synthetic government spending programs “tax expenditures.” Tax expenditures are really spending programs, not tax rollbacks, because the missing tax revenues must be financed by more taxes on somebody else. Like any other form of deficit spending, a targeted tax break without a revenue offset simply means more deficits (and ultimately more taxes); a targeted tax break coupled with a specific revenue “payfor” means that one group of Americans is required to pay (in the form of higher taxes) for a subsidy to be delivered to others through the mechanism of the tax system. … Tax expenditures dissolve the boundaries between government revenues and government spending. They reduce both the coherence of the tax law and our ability to conceptualize the very size and activities of our government. (The Hidden Hand of Government Spending, Fall 2010)

    The other thing is that the NATGAS bill would likely be very expensive, much more so than claimed. The Wall Street Journal has reported on its cost: “Proponents put the cost at about $5 billion over five years, but many energy experts believe it would be multiples higher. Eight million trucks are on the road today, and if each got a $15,000 average tax credit, the price tag grows to over $100 billion.”

    Pickens appeared this Sunday on Fox News Sunday with Chris Wallace to promote NATGAS in this excerpt.

    WALLACE: All right. Let’s focus on the natural gas, though, which you’re saying cheaper. It’s cleaner. And we don’t have to ship trillions of dollars over to OPEC, to our enemies.

    Your idea is to convert this nation’s 8 million heavy duty trucks, the 18-wheelers, to natural gas.

    What does that mean for pollution? And what does that mean in terms of our dependence on foreign oil?

    PICKENS: The independence on foreign oil first. There are 250 million vehicles in America. I just want 8 million. Give me the 8 million.

    What can I do for us? If I had 8 million, that would be 3 million barrels of oil a day. We import 4.4 million barrels a day from OPEC. So, we would cut OPEC by 20 — by, we could cut them about —

    WALLACE: Sixty percent.

    PICKENS: More than 60 percent, close to 70 percent we could cut. With just 8 million, that’s it. I mean, it’s like a freebie. And it truly is.

    Pickens promotes the program as a “freebie,” despite the Journal’s reporting that it could cost over $100 billion and the fact that tax credits are real government spending.

    Troubling also is Pickens’ focus on himself: “I just want 8 million. Give me the 8 million.”

    In March an amendment to a Senate highway bill that would have implemented a version of the NATGAS act was defeated. That, coupled with the message Oklahoma voters sent, ought to put an end to NATGAS and let energy markets and consumers decide energy policy.

  • Are you in the top 1%?

    Most Americans would be surprised to learn that they are, in fact, in the top one percent of income — when the entire world is considered. It is economic freedom in America that has been responsible for this high standard of living. But America’s ranking among the countries in economic freedom has declined, and may fall further.

    View the 60-second video at Economic Freedom in 60 Seconds, or click below.

  • Myth: Markets can solve all problems without government at all

    When thinking about the difference between government action and action taken by free people trading voluntarily in markets, we find that many myths abound. Tom G. Palmer, who is Vice President for International Programs at the Atlas Economic Research Foundation, General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity, a Senior Fellow at the Cato Institute, and Director of Cato University, has written an important paper that confronts these myths about markets. The twentieth myth — Markets Can Solve All Problems without Government at All — and Palmer’s refutation is below. The complete series of myths and responses is at Twenty Myths about Markets.

    Palmer is editor of the recent book The Morality of Capitalism. He will be in Overland Park and Wichita in May speaking on the moral case for capitalism. For more information and to register for these events see The Morality of Capitalism. An eleven minute podcast of Palmer speaking on this topic is at The Morality of Capitalism.

    Myth: Markets Can Solve All Problems without Government at All

    Myth: Government is so incompetent that it can’t do anything right. The main lesson of the market is that we should always weaken government, because government is simply the opposite of the market. The less government you have, the more market you have.

    Tom G. Palmer: Those who recognize the benefits of markets should recognize that in much of the world, perhaps all of it, the basic problem is not only that governments do too much, but also that they do too little. The former category — things that governments should not do, includes A) activities that should not be done by anyone at all, such as “ethnic cleansing,” theft of land, and creating special legal privileges for elites, and B) things that could and should be done through the voluntary interaction of firms and entrepreneurs in markets, such as manufacturing automobiles, publishing newspapers, and running restaurants. Governments should stop doing all of those things. But as they cease doing what they ought not to do, governments should start doing some of the things that would in fact increase justice and create the foundation for voluntary interaction to solve problems. In fact, there is a relation between the two: governments that spend their resources running car factories or publishing newspapers, or worse — confiscating property and creating legal privileges for the few — both undercut and diminish their abilities to provide truly valuable services that governments are able to provide. For example, governments in poorer nations rarely do a good job of providing clear legal title, not to mention securing property from takings. Legal systems are frequently inefficient, cumbersome, and lack the independence and impartiality that are necessary to facilitate voluntary transactions.

    For markets to be able to provide the framework for social coordination, property and contract must be well established in law. Governments that fail to provide those public benefits keep markets from emerging. Government can serve the public interest by exercising authority to create law and justice, not by being weak, but by being legally authoritative and at the same time limited in its powers. A weak government is not the same as a limited government. Weak unlimited governments can be tremendously dangerous because they do things that ought not to be done but do not have the authority to enforce the rules of just conduct and provide the security of life, liberty, and estate that are necessary for freedom and free market exchanges. Free markets are not the same as the sheer absence of government. Not all anarchies are attractive, after all. Free markets are made possible by efficiently administered limited governments that clearly define and impartially enforce rules of just conduct.

    It is also important to remember that there are plenty of problems that have to be solved through conscious action; it’s not enough to insist that impersonal market processes will solve all problems. In fact, as Nobel Prize winning economist Ronald Coase explained in his important work on the market and the firm, firms typically rely on conscious planning and coordination to achieve common aims, rather than on constant recourse to market exchanges, because going to the market is costly. Each contract arranged is costly to negotiate, for example, so long-term contracts are used instead to reduce contracting costs. In firms, long-term contracts substitute for spot-exchanges and include labor relations involving teamwork and conscious direction, rather than constant bidding for particular services. Firms — little islands of teamwork and planning — are able to succeed because they navigate within a wider ocean of spontaneous order through market exchanges. (The great error of the socialists was to try to manage the entire economy like one great firm; it would be a similar error not to recognize the limited role of conscious direction and teamwork within the wider spontaneous order of the market.) To the extent that markets can provide the framework of creation and enforcement of rules of just conduct, advocates of free markets should promote just that. Private security firms are often better than state police (and less violent, if for no other reason than that the cost of violence are not easily shifted to third parties, except by the state); voluntary arbitration often works far better than state courts. But recognizing that entails recognizing the central role of rules in creating markets and, thus, favoring efficient and just rules, whether provided by government or by the market, rather than merely being “anti-government.”

    Finally, it should be remembered that property and market exchange may not, by themselves, solve all problems. For example, if global warming is in fact a threat to the entire planet’s ability to sustain life, or if the ozone layer is being degraded in ways that will be harmful to life, coordinated government solutions may be the best, or perhaps the only, way to avoid disaster. Naturally, that does not mean that markets would play no role at all; markets for rights to carbon dioxide emissions might, for example, help to smooth adjustments, but those markets would first have to be established by coordination among governments. What is important to remember, however, is that deciding that a tool is not adequate and appropriate for all conceivable problems does not entail that it is not adequate and appropriate for any problems. The tool many work very well for some or even most problems. Property and markets solve many problems and should be relied on to do so; if they do not solve all, that is no reason to reject them for problems for which they do offer efficient and just solutions.

    Free markets may not solve every conceivable problem humanity might face, but they can and do produce freedom and prosperity, and there is something to be said for that.