The real case for laissez-faire is not that the individual is perfect, but that the state will do worse than the private individual, and the strength of this case has always relied more on the fallibility of the state than on the perfection of markets. Adam Smith's case for laissez-faire was grounded in the unarguable historical fact that governments often pursue policies that impoverish and slaughter their own citizenry. Human beings surely make mistakes about their own welfare, but the welfare losses created by these errors are surely second order relative to the welfare losses created by governments which not only make errors, but also pursue objectives far from welfare maximization. Individuals may procrastinate and foolishly invest, but they tend not to voluntarily enroll in concentration camps.
Saturday, 1 November 2008
Quote of the day
Edward L. Glaeser in Psychology and the Market writes,