How Free Markets Distribute Resources

October 11, 2012 1

Mandeville, LA – Exclusive Transcript – If the government is running the show, what the government will do, after it meets and thinks about it for six months, a year, two years, is it will order either the cessation of the manufacturing of the product, or it will order the recall of all those products that certain people are using so it can distribute it, in its infinite wisdom, to those that it thinks are more worthy of having it. In other words, they won’t actually deal with the problem because they can’t. In a marketplace, if compound X is necessary for manufacturing the product and you can’t get compound X, industry or the methodology of the market will either find a way to replace compound X or will redesign the product so that you don’t need compound X to make it anymore. It can allocate the resources in real time, as must be done in order to meet efficiency in the production of goods. This is boilerplate Austrian economic theory. Check out the rest in today’s transcript…

Begin Mike Church Show Transcript

Mike: What ObamaCare is going to do, and what all corporatism does, is it misallocates resources. It is the misallocation of resources that is at issue here. When a marketplace, using supply and demand, is not allocating the resources and there isn’t a natural tug on supply and demand and a consequence — because there are unseen consequences for every action — only a free market can possibly have the tools or the ability to react to that and then to adjust. Let’s just say there’s a product chain and one item that is necessary to manufacturing a product, let’s say it becomes really difficult to obtain, or impossible to obtain. You can’t make the product any longer unless you have compound X.

If the government is running the show, what the government will do, after it meets and thinks about it for six months, a year, two years, is it will order either the cessation of the manufacturing of the product, or it will order the recall of all those products that certain people are using so it can distribute it, in its infinite wisdom, to those that it thinks are more worthy of having it. In other words, they won’t actually deal with the problem because they can’t. In a marketplace, if compound X is necessary for manufacturing the product and you can’t get compound X, industry or the methodology of the market will either find a way to replace compound X or will redesign the product so that you don’t need compound X to make it anymore. It can allocate the resources in real time, as must be done in order to meet efficiency in the production of goods. This is boilerplate Austrian economic theory. I didn’t even have to take any college courses. I just picked this up from reading Mises and Hayek and Rothbard and Haslett and Roepke and many other great men that have written about this.

This is common sense. I hope it sounded like it was common sense. Governments can’t do these things, which is why you should not empower them to administer things. For example, why on Earth does the Postal Service still continue to exist? We know that the resources and the equipment that are necessary to efficiently move items of mail or shipments from point A to point B are now almost all controlled by and used by private industry. The point is, you don’t need the mail any longer. Everything the U.S. Postal Service does can now be done by FedEx, United Parcel Service, DHL, name your service, Conway Freight or Old Dominion or ABF or any of the trucking lines. We can get things from point A to point B without the postal service.

You could say that we need to have a postal service so that government transmissions can be ensured and official business of the government can still be sent, but do you need the monstrosity that the U.S. Postal Service is today? Once upon a time it was necessary. It discharged its function well before it had unions and before it became just another teat-suckling bureaucracy. I don’t mean any offense to you postal workers; please don’t take it that way. In real time, FedEx can adjust its rate. In real time, FedEx can adjust to crisis. In real time, FedEx can figure out how to buy out RPS and make it their ground service. They could do all these things because they have control over the means of production. They can adjust where they need to as the marketplace and as supplies that are available tell them that they must, just like with the cost of fuel.

If you had a real airline industry that was actually run by airlines and there were no federal subsidies, no federal traffic controllers, no federal marshals or any of this other BS that we’re stuck with here today, you would have a very different landscape for travel today. I would suggest to you that much of the leisure travel that is so heavily subsidized by our government and puts us in debt today would not occur. People would be compelled to think long and hard and plan very diligently to travel great distances. I don’t want to say it would be more difficult, but it would not be done at a subsidy price. Would there emerge different ways to do things? I’d say so. We’d probably be more telecommuting than we are today. Because we have a subsidy here, everybody thinks they’re entitled to travel to Aunt Bernice’s house for any holiday, any day of the week, because they can get a ticket from William Shatner for $99. William Shatner can only offer that ticket for $99 if the federal subsidies continue. The airline is the most subsidized industry in the country.

This is what’s going to happen with medicine. It’s already happened with medicine. Somebody called the other day, [mocking] “What do I do about a $420,000 heart procedure? My buddy has to keep his job because he has to have health insurance to pay for the procedure.” Had the people that invented the $420,000 heart procedure, they would have had to have considered: Is there a market for the 420 grand it’s going to cost to fix this guy’s valve? If they determine [mocking] “Dude, that’s gonna cost half a million dollars per” and the only market for that is if you can convince enough people to buy heart valve replacement insurance policies, or whatever the equivalent of that would be, then that avenue of medical research probably would not have happened. Today, it is unsustainable. We’re not going to have millions of us standing in line for one half-million-dollar heart procedure. We cannot afford it. If you can’t afford it, what makes you think an insurance company can afford it for everyone? The point is that the think never would have been developed. What would have been developed would have been able to be sold at market so that the person needing heart treatment could have afforded it. That’s how a market distributes resources and services.

If you want to fix healthcare, you have to swear off all government entities. All of them must be abolished, all of them, either that or they must be totally separate from the private market. As Hayek said, that’s impossible to do. Once you erect a government entity in an industry, because it will create its own mischief, its own inefficiencies, then it will expand and it will begin to consume other nongovernmental parts of that industry until you have 2012 $420,000 heart procedures that never could have happened if people actually had to pay for them.

End Mike Church Show Transcript