Libertarian Part 2: Fiscally Conservative

Governments are expensive, inefficient, and distort markets

3 Key Takeaways

1. Nothing in this world is free
2. Competition drives efficiency
3. Regulation increases costs

Introduction

This is a four part essay introducing Libertarian philosophy. The case is always two fold: moral consistency (socially liberal) and economic prosperity (fiscally conservative). Part 1 lays out the moral argument and explains how self-ownership is the primary universal right we have as humans. Followed to its logical conclusion, self-ownership is not compatible with government because the government uses the threat of aggression to support its very existence through taxes.

When first hearing an argument against all government, most people jump to questions such as who will build roads, collect garbage, provide police, staff the judicial system, etc. These basic pillars of government can be very tedious to unpack without real world examples. They go deep into core Libertarian theory and require dedicated literature. Therefore I have decided to not cover them here and instead provide links in the appendix to other sources that specifically address each topic.

Instead, this section focuses on the basic principles of free market capitalism. I analyze the actual expense of government, I then discuss the opportunity cost of government, followed by a demonstration of how government regulation interferes with the proper allocation of resources. The second part of this article, applies these three principles to a few examples such as education, health care, and global warming.

Part 3 is a continuation of the free market argument using the history of the United States as a backdrop. Part 4 concludes by reflecting on a changed mindset while also making the case for a social safety net in a stateless society.

Government is very expensive

As mentioned in part 1, my foray into politics started as a staunch Democrat. I had a strong passion and desire to help those most in need and solve the biggest problems facing our planet. It was obvious we needed a better health care system. I had worked with under privileged kids, and witnessed the massive issues in education. I was (am) very worried about the environment and thought of ways the government could limit pollution. I had dreams of self-sustaining social programs that would shelter and provide for those most in need. The Democrats seemed to share the same priorities, recognizing the problems just as I did.

So what happened? Did I stop caring? Have I walked the “well worn path” and turned into the selfish greedy capitalist that I swore to never become? Quite the contrary. In my very first Economics class, the teacher wrote on the board: TINSTAAFL.

“There is no such thing as a free lunch”

Anytime you hear phrases similar to, “there is not enough demand in the economy”, “we need to increase consumption to drive the economy”, etc. you are speaking to someone who does not understand basic economics. Demand is infinite, supply is finite. We must first produce goods (supply) before we can consume goods (demand). Consumption does not drive economic growth, production does! This all stems from a very basic economic concept: resources are scarce (nothing is free).

Health care for all, free education, a living wage, a social safety net, free child care, environmental protectionism… these all sound like wonderful ideas. Unfortunately, these programs cost a lot of money (especially when administered by government). In 2019, the US Government collected $3.5 trillion in taxes, borrowed another $1 trillion, to spend a whopping $4.5 trillion! That is “Trillion”, with a “T”. In today’s economy we throw around a trillion like it’s nothing! Pleases view this image to see what a trillion dollars actually looks like. Now multiply that by 4.5 (or by 7 for 2020 COVID budget)!

Still, people may argue this is a small price to support the most vulnerable people in society. We have the money don’t we? However, that ignores the absolute failure of these programs, and fails to consider the opportunity cost. How could this money have been spent better?

The issue is two fold. Nothing is free and the government does not have any money. Resources are scarce. When the government spends money, it has to take it (by force) from its citizens, borrow in the market, or print the money and destroy purchasing power. Yes, printing money destroys purchasing power despite the flawed arguments supporting Modern Monetary Theory (MMT), which is neither modern or a theory (it is been tried many times before with ultimate failure).

Putting MMT aside, anything the government does requires funding. Therefore, government spending diverts resources from the private sector into the less efficient public sector. As the government grows bigger it takes away resources from the private sector. There is only so much money to go around. Are the social issues mentioned above important? Absolutely! But there is not enough money to pay for all those programs, nor is government incentivized to solve these problems (more on this below). With limited funding, which program do you prioritize? Is it education, food security, health care? Can you get consensus about which program doesn’t make the cut?

At this point, most people call on the rich to pay their “fair share”. How can Jeff Bezos have $100 billion while children go hungry in the street. There are three primary issues with this argument.

1. As discussed in part 1, once taxes are considered morally acceptable, the rate of taxation becomes completely arbitrary. Furthermore, even if we taxed the 1% at 100% it still would not cover the cost. So what is the proper tax rate? Most would agree that 100% taxation doesn’t work because that is essentially slavery. What about 90%, 80%, 40%? How much theft is acceptable? My answer is 0% and that is not arbitrary. People argue about 30% vs 50% with no consistent framework to agree an acceptable outcome.

2. The rich already pay well more than their “fair share”. Data shows that the top 10% of earners paid 70% of Federal Income taxes with 97% of federal income taxes paid by the top 50% of income earners. There is a great allegory about ten friends drinking beer that perfectly demonstrates the lopsided tax system. Is it really “fair” that they pay even more?

3. As taxes increase, the whole economy starts to shrink as businesses and entrepreneurs lose incentive to provide additional value. If the top tax rate is set at 90%, then that means business owners only keep $10 of every $100 of profit. Would Jeff Bezos had continued expanding Amazon with this incentive structure? You must be careful not to go too far or you may lose the value created by these “greedy” capitalists. This is the premise of Atlas Shrugged. The grade averaging parable is a much shorter story that shows Amazon probably would not exist with confiscatory taxes.

Higher taxes not only reduce the incentive for more production, but it sucks up valuable resources in the process. Every dollar the government spends must be taken from somewhere else. As government grows, it becomes a bigger weight on the productive output of the economy. There is no such thing as a free lunch! Most college graduates realize this when they look at their first paycheck and see how much was taken out in taxes before it even hit their bank account.

“If you’re not a liberal at twenty you have no heart, if you’re not a conservative at forty, you have no brain.” -Winston Churchill (maybe)

We all want these wonderful programs, but we want someone else to pay for them. Furthermore, is government really equipped and incentiveized to deliver? Why are government programs so expensive? Economists estimate you could solve child hunger in the US at 16% the annual cost of social security. How is $4.5 trillion not enough? To better understand this question, we must first understand what drives efficiency. The answer is a dirty word these days: profits.

Government is inefficient

The public sector is inefficient because there is no competition and no profit mechanism. The government does not have to earn taxes, it takes them by force. On the other hand, companies must compete for customers and win business by delivering a superior good at a lower cost.

In today’s world, companies are often derided for their constant pursuit of profits. It is important to remember that profits are a critical signal in economics. Profits show that a company is doing something deemed valuable by the market. More importantly, it demonstrates this value is being delivered efficiently. Companies that cannot earn a profit will fail. The government does not have this signaling mechanism or the risk of failure.

Politicians get elected by making promises which they almost always fail to deliver. Companies on the other hand are only rewarded after they deliver an exceptional product at a fair price. If the price is too high, competitors will enter the market and capture the profits. For this reason, private companies are constantly innovating and improving to reduce cost and increase quality. That is, until government regulation gets in the way (more on this below).

Technology is the shining example. Every year without fail, cell phones and computers get more powerful and less expensive. There is intense competition to constantly innovate. Costs fall and quality increases. Always, like clock work.

People may argue that we need some basic items to live but we don’t need technology, which is why we don’t need government to provide technology. This only solidifies the point. We need food, but we don’t turn over food production to the government!

“Under socialism/communism, people line up for bread. Under capitalism, there are lines and lines of bread at the grocery store for people to choose from.”

Can you imagine if government took over the tech industry? What if the government decided to produce cell phones and computers because they are too important for the private sector. What would happen? The constant innovation and improvement we have seen decade after decade would come to a screeching halt!

The government has zero incentive or ability to innovate or make things better. People say certain things are too important for the private sector, I argue they are too important to leave in the inept hands of government.

What about providing services where there is no profit to be made such as welfare? Charities and non-profits prove to be far more efficient at allocating scarce resources. Because charities cannot take money by force, they have to raise money from voluntary donors. To earn donations, they must prove their value even in the absence of profits! In a charity, every dollar is precious and will be spent as efficiently as possible, otherwise donors will look elsewhere (more on this in part 4).

What about essential industries where profit maximization could lead to the most vulnerable being left behind (such as health care)? Most people understand that government is inefficient which is why few people want government to take ownership of technology or food production. The majority look to regulation to ensure corporations are held to a moral standard. Unfortunately, by interfering in the free market with regulation, government only further drives up the cost of goods.

Government increases costs through regulation

Even the most basic understanding of the supply/demand curves shows that most fiscally liberal policy can backfire when implemented. To understand why, it helps to consider basic supply and demand curves.

As shown below, when prices rise, supply increases. For example, when the price of gold increases, more people are willing to sell their jewelry at the higher price (increasing supply - sloping up). Likewise, as prices rise, less people want jewelry at higher prices (demand falls - sloping down). Structural changes in supply and demand shift the curves left and right which changes the market clearing price (think about the entire world demanding less oil as we move towards a greener economy, this shifts the entire demand curve left). Markets strive to find the point at which supply and demand equal each other.

Figure 1: As price go up, demand falls and supply increases

The minimum wage

The minimum wage places an artificial price floor above the market clearing price. This can be seen in the chart below. If the minimum wage is set to $15 an hour then there will be more supply of people willing to work but less demand for those workers because less companies can turn a profit. This creates a surplus in supply because there is more supply then demand at that price.

Figure 2: A price ceiling makes it illegal for parties to mutually agree on a price

If a minimum wage worked, why not increase it even higher? What if the minimum wage was $20, $30, or even $40? If a business needs 100 hours of labor to produce $1050 in revenue, it can employ 2 people for 50 hours each at $10 and still make a $50 profit. If the minimum wage is set to $20 an hour this would cost the business $2000 and the business would lose $950. The business owner would now have 4 options:

1. Close
2. Fire one employee and cover the shift of the second employee to earn $1 per hour
3. Fire both employees and invest in a machine that can do the work of both employees
4. Raise prices substantially as business owners pass higher prices on to customers

Each option produces far more downside than upside.

Price ceilings

Democrats often argue that rent should be cheaper or college should be free. To win votes, politicians campaigned on establishing rent control, also known as a price ceiling. If a price floor causes a surplus, a price ceiling creates a shortage. Look no further than NYC, every rent controlled apartment is held onto for dear life, often passed from friend to friend. Everyone wants to be in a rent controlled apartment but there is just not enough supply. Worse, by holding prices low, it disincentives companies from building more apartments (not to mention the red tape and regulatory headaches).

Figure 3: A price floor creates a shortage of supply

Most politicians know these policies do not work, yet they campaign on them anyway. Again, if $15 is a good minimum wage why is $25 not better? Why not implement the policy immediately? Because the job destruction would become too obvious to hide. Politicians need votes though, and nothing works better than promising something (e.g. cheaper rent) for nothing (i.e. a vote).

Price Gouging and Hoarding

During emergencies such as hurricanes, floods, pandemics, and others, there is often heavy criticism placed on small local business who increase prices substantially. Politicians call them out as criminals taking advantage of an emergency to better themselves. However, a solid understanding of economics will flip this narrative and show these individuals as heros.

Emergencies tend to do two things simultaneously, massively shift the demand curve out (to the right) as people stock up on essentials while shifting the supply curve in (to the left) as supply chains are disrupted and goods cannot be allocated efficiently. The movement of these two curves requires a substantial increases in price in order for the market to hit equilibrium.

When these events occur, it is critical that resources are allocated efficiently and fairly. If business owners cannot raise the price of gas and water, the first customers will buy up all the inventory. Their gas tanks will be filled to the brim, while they hoard water and food. The second, third, and fourth wave of customers will be greeted with empty shelves.

Is this fair? Of course not! However, what happens if business owners increases gas to $20 a gallon and water to $5 a bottle? The first wave will not clear out all the inventory, knowing that in a few days they can come back and fill up their gas tanks at $2 a gallon. They will take only what they need to get through the emergency and leave the rest for future customers.

When business owners jack up their prices, they are ensuring everyone will get a chance to purchase the essentials, not just the lucky few who arrive first. This is exactly how the free market works to allocate resources effectively. It prevents people from hoarding goods because it becomes too expensive.

Perhaps more importantly, the surge in prices attracts resources from other areas. After a hurricane, when everything has increased in price (e.g. gas, fresh water, building materials, etc), opportunistic individuals from all over will rush to capitalize on higher prices. This surge in supply will quickly bring prices back down and balance the market. If politicians enforce price controls, this excess supply will stay in its original location and the shortage will continue much longer.

Uber surge pricing is another perfect example. A shortage of drivers causes price to rise which immediately attracts drivers from all over. Due to a general lack of economic understanding at large, this policy had bad PR and Uber had to modify its pricing mechanism. Ironically, drivers often complained they could never get there in time to capture the full surge. This perfectly demonstrates the effective pricing mechanism. Generally waiting only 10-15 minutes brought prices back down to reasonable levels. Stranded riders could obtain a ride more quickly, while drivers could rush to capture a good fare. Win-win!

Unfortunately, this effective market mechanism has bad optics. Politicians forget that resources are scarce and instead of thanking business owners for their rapid response to a crisis, they publicly admonish them for taking advantage of the crisis. People forget that nothing is free, especially during a crisis. The market must be allowed to effectively allocate resources where they are most needed.

Specific Examples

Below are specific examples that reflect the two main points outlined above: government is inefficient and regulation hurts markets. Most people recognize the government is inefficient, which is precisely why they would scoff at the notion of government taking over most industries (energy, tech, food production, etc.). Ironically, when it comes to the most critical services and industries people forget this. With most other industries, people feel more comfortable with governments leaving it to the private sector and putting the onus of regulation on government. As the examples below show, even well intentioned regulation often results in less positive outcomes.

Education

According to statistics from the Department of Education, the cost to educate a child through public school is almost twice as expensive as a private education. I have even seen articles that claim the cost is more than 3 times greater. This means that if public schools were as efficient as private ones, they could educate nearly twice as many students. Now consider the increased quality from private schools and the disparity grows further.

Take another step back, is the private education market functioning as efficiently as possible? Certainly not. Think about the model for school: 20-30 kids in a class with a teacher at the front. Text books, tests, summer vacations, etc. How much has really changed in 100 years? Can you think of one other industry that looks the same as it did 100 years ago (besides government obviously)? No? Why not? Every other sector has dealt with extreme competition and evolved accordingly. Constantly improving and innovating to stay ahead of the competition. Summer vacation was originally so that students could go home to work on farms during the warm months!

Think about your school district, how many private lower education schools have been founded in the past 20 years? I cannot think of a single one. Why? It’s outrageously expensive to start a school. Government regulation and red tape makes it nearly impossible to start a school, especially one that wants to innovate on the current model. Furthermore, any new school is competing against a free alternative, so they have to be much better but also very affordable. No competition = no innovation. This results in higher costs and lower quality.

Perhaps public education should be abolished and let private schools compete to deliver the best education possible to the poor.

What about higher education? Once again, consider the massive government intervention in the form of student loans. The government decided that everyone should get a college education and decided to guarantee student loans. There was a time that you could work your way through college as a bartender; however, federally backed loans made this impossible. The price for this guarantee was massive increases in the cost of college.

Figure 4: The dramatic increase in college costs

If free markets drive down costs and increase quality, how come college has become more expensive and quality has gone down? Simple, when people are given unlimited amounts of loans, guaranteed by the Federal government, and inescapable even in bankruptcy, the result is much higher prices. What bank would offer an English major $200,000 in loans when the average starting salary is around $38,000? The riskiness of that loan would never allow it to exist in a private market. Supply and demand. Massive increases in the supply of cash has bid up the price of a college education to absurd levels.

“If you think college is expensive now, wait until it’s free”

Now anyone can go to college, but they are left with crippling debt that massively shrinks their job prospects upon graduation. Some argue that college should be free for everyone. Obviously this would result in demand vastly outstripping supply. Further it assumes that college is actually beneficial for everyone. Unfortunately, most people graduate college with little life skills. Furthermore, universities preach a culture of acceptance and diversity, but completely lack diversity of thought and are extremely critical of free market principles. Consequently, most students graduate from college with even less understanding of basic economics than entering college.

Keynesian Economics is the most common economic theory taught at most universities; it proposes all the different ways governments can interfere in free markets to “make them better”. In the case of education, it certainly made it better for universities who have benefited from ever higher tuition, but I wonder how the students feel when they are paying off loans 10 years after they graduate.

Health Care

Everyone knows the system is broken, so the argument is either for more or less regulation. If every other industry benefits from more competition and less regulation, why would health care be any different? People who want more regulation generally call for single-payer health care, pointing to the Canadian or European “success”. Unfortunately for the left, the examples of European success stories are vastly misunderstood, as is the case in Sweden. The Brits are surely proud of the NHS system and pay an absolute fortune for it, but anyone will tell you that the care is anything but exceptional.

The US system is very far from a free market system. This can be seen when you compare health insurance to auto insurance. In the world of auto insurance, prices decline each year, insurance plans can be very customized to meet your needs, and anytime you do need work done the prices will be made available before you purchase. Why is health insurance so much worse than auto insurance? More regulation and less competition. Remember when Obama campaigned on negotiating health care in the open. Well that did not happen because too many special interests were involved.

Entire books have been dedicated to the subject of health care reform. To avoid going down an endless rabbit hole I will simply propose three simple solutions to changing the US health care system. Following these three solutions are a few links to further reading on more detailed free market solutions.

1. Remove the tax benefit

Most people get insurance through their employer. This is not natural, we don’t get auto-insurance through our employer. It occurs because there is a major tax incentive; contributions to health care are tax deductible by employers. This equates to a gift of 40% or more. The problem is that it kills competition in the market. Instead of having individuals create their own customized set of insurance needs, companies buy a handful of packages that their employers choose for them.

Who lobbies against it: the insurance companies of course! They want to reduce competition. If employers stopped buying group insurance packages it would mean having to serve millions of customers instead of thousands. With a greatly expanded market, competition would enter to meet the demand. There are many incentives to keep this program in place, but the one group that would benefit the most from removing this incentive: individuals. See below section on “The incentives of Politicians” for more.

2. Consider malpractice only when fraud occurs

Malpractice occurs when doctors are negligent or deviate from standard practice. Not only does the cost of malpractice insurance dramatically increase the cost of doctors, but it also limits a doctors ability to try new things. When a doctor is constantly in fear of being sued, they will give standardized answers to all questions because it protects them. Remove malpractice lawsuits and you drop the cost and increase quality with greater innovation.

3. Approve drugs that demonstrate safety

Obviously privatizing the FDA and opening the market to competition would be the ultimate goal, but allowing drugs onto the market that are deemed safe would be a step in the right direction. Fewer drugs are approved each year as the FDA has gotten more strict. The cost for drug development has grown into the billions of dollars taking over a decade. If your kid is dying from cancer and there is an experimental drug that could save his life, sorry not allowed. How many lives have been lost because of this simple issue?

Who lobbies against it: big pharma. Increased cost to bring drugs to market keeps competition out. Experimental drugs would wreak havoc on their drug development pipeline.

These three solutions are merely a start to the infinite number of improvements that could be made to the US health care system. These are free market solutions that require less regulation and would have profound results. I did not even go into competition across state lines, the collusion between insurance companies and hospitals, or the fact that no one knows what anything costs when receiving medical care. In what free market would you ask someone, how much does X cost and the response is, “I have no idea you will find out after you buy it”.

Jo Jorgenson had a number of great solutions for fixing health care that were proposed in her 2020 campaign for President. Russ Roberts has a great article on health care and has interviewed several people on his podcast Econtalk including one with Keith Smith who runs a private surgery clinic that actually posts prices of procedures before they are completed. These free market solutions would lead to the best health care system in the world!

Climate Change

The climate is changing and the evidence points to humans as a driving factor. This essay is not to argue climate change, but I can say that almost every climate model dating back to 1970 has been extremely flawed. First it was “global cooling”, then “global warming”, and now just “climate change”.

Alarmists have always predicted catastrophe such as food shortages, famine, population growth, disease, and climate. The truly remarkable feat is that humans rise to the challenge and solve the biggest problems facing our planet each time. Not governments, but private companies. Instead of massive food shortages, we now have more food than ever to meet the needs of the world population. During 2020, with the economy brought to its knees by blunt government shut downs, private companies around the world produced vaccines in record time.

Under the assumption that climate change is real and potentially catastrophic, there are still several arguments against government intervention.

1. A warming climate is not 100% bad

Compared to history, we actually live in one of the coolest time periods. The Earth was much warmer when dinosaurs roamed the planet. People indicate we are in the midst of a mini-ice age today. Is it possible that any global warming could counter some of the global cooling? Is it also possible that warmer weather could open up more land for irrigation and farming, increasing food supplies? I do not have the answers to these questions, but my point is that a warmer climate doesn’t only have negative consequences. Some species may flourish. More land might become available. Would it be catastrophic to return to temperatures the Earth has already seen? Possibly, but not definitely.

2. Fossil fuels lift people out of poverty

The US greatly expanded the use of fossil fuels in the 19th and 20th centuries. During this industrialization period, millions of people were lifted out of poverty due to the use of cheap and efficient energy. Now that the US has developed and benefited from that industrialization, the US government is exerting and putting pressure on countries to move away from fossil fuels. Is this fair? Access to cheap and efficient energy will reduce poverty and provide better livelihoods for billions of people. This isn’t to say we shouldn’t strive to improve, but it must be understood what the impact of climate regulation means. If the climate is prioritized, it is at the expense of the most poor and vulnerable people globally.

3a. Advancement leads to a cleaner environment

As countries get richer, they get cleaner. Look at London and New York in the industrial age, as they grew wealthier, they got cleaner. No one wants to live with polluted air and water, but cleanliness is usually lower on the priority list than survival. Thus, it is a luxury to live in a cleaner and safer environment. If you restrict a countries access to cheap energy you will directly slow the development of that country. Instead, if countries are allowed to develop they will become cleaner faster and emit less pollutants.

3b. Technology will lead to better solutions

As economies advance, capitalism continues on its forward march to drive down cost and increase quality. Renewable energy is following a similar trajectory. It’s entirely possible that the cost for renewable energy combined with better battery technology will soon provide a cheaper energy source than fossil fuels. Someone might respond that this only occurred because governments heavily subsidized these green industries. While this may be true, it fails to recognize the massive subsidies given to fossil fuel energy sources. Without the massive subsidies (e.g. destroying public land and emitting pollution at zero cost), the cost of fossil fuels would most certainly be higher, causing the free market to find cleaner alternatives. Companies have not felt the true cost of their pollutants.

4a. Direct pollutants - privatizing lands

The tragedy of the commons is a well known theory that public land is treated worse than private land. When no one owns the land, then people treat it very poorly. Look no further than rivers and oceans to see the massive amount of trash and pollutants that litter these public areas. If all land and water was privatized then it would be cared for as such. Anyone dumping or polluting private land would be responsible for the cost. Because this land is owned publicly, no one has ultimate responsibility and thus no one has an incentive to pursue less pollution. Even in a fully privatized world, where a factory owned a river and dumped pollutants into it, eventually those pollutants would flow into someone elses river or ocean and thus the company would be liable for damages.

4b. Eminent Domain

Eminent domain makes it so that private land can be converted to public land at a price not set by the market. This was often used when building railroads during the 19th century. During the railroad boom, the country was beset by wild fires. Private railroad companies were given relief from liability and thus did not experience the true cost. This subsidy resulted in more railroads and more fires. The same is true today as companies pollute water and air. Because all land is not private, the cost of these pollutants are placed on the population at large, creating a massive subsidy for those companies that pillage the most.

The bottom line

Governments are horrendous at doing cost/benefit analysis. They only have one solution to every problem: regulation. Because of their monopoly on violence they have no incentive to improve. They collect taxes whether they fail or succeed.

“When all you have is a hammer, you treat everything like a nail.”

Considering that climate change is almost certainly real, and humans do have an impact, is regulation really the best solution? Given the considerations above, a truly free economy where all land is private, there would be less environmental damage because people would be fully responsible for the pollution they emit. Instead governments reduce the liability on companies and use blunt tools, responding far too slowly to have any meaningful impact.

For more reading on climate change in a free market, see this article on mises.org.

The incentives of politicians

To understand why most government programs fail, it is important to understand the motivation behind elected officials.

A politician is not immune to natural human desires. In fact, I would argue that people drawn to elected office are those most seeking power over others. For all of the wealth Jeff Bezos has, a government official could deem Amazon to be a monopoly that must be broken up and there is nothing he could. We all respond to incentives and all our actions are self-motivated, government officials are no different and the primary driver behind any politician is gaining power and then maintaining that power.

The power of government dramatically distorts the free market. When a company can pay $10 million dollars to get extra regulation that keeps out competition, it can protect well more than $10 million in profits (sometimes even billions in profits). In many industries, lobbying offers the best return on investment available. This is not the free market at work, but instead an aberration that would never exist in a fair competitive market place. Companies have an obligation to their share holders and they would be failing to meet that obligation if they didn’t lobby the government to protect their own interest. The government makes the rules, but the private companies get politicians elected who will make rules that benefit them the most.

Take the most basic concept of the private sector with government protection. A Limited Liability Company (LLC) is a business structure created by the government to protect business owners who fail to meet their customer obligations. “Limited Liability” says it all! When would this ever occur naturally in a free market? Would customers purchase items from an entity that has limited liability? The first thing companies would compete on is demonstrating the loyalty they have to their customers, not shielding themselves from liability. But government has artificially granted this protection.

For even the rare politician that has not been corrupted by private donations and owes no favors to anyone. There is still another issue. How do they know what is best for 300 million people? That takes true arrogance! The assumption that people are too stupid to make decisions for themselves is the most condescending aspect of politicians.

“Shield a man from his folly and you fill the world with fools”

Dictating the type of health care and education available for everyone assumes you know what is best for all people. How is this even remotely possible? I often spend hours thinking about critical decisions for me and my family. It’s hard to know what is best for just me, much less millions of people? Only arrogance would make me so foolish to think I can make decisions for other people.

As a final note, anyone who still believes politicians really care about people, just ask where children fall on the prioritization list. Anytime children are brought out as a campaign platform, it’s about reducing the expense of children for their voting parents. Politicians don’t actually care about children because they do not vote! In our $4 trillion dollar annual federal budget, over half is allocated to older people, but almost nothing to children. This will come as no surprise if you understand what motivates a politician!

Wrapping up

In this article, I showed how free markets deliver better value than markets regulated and controlled by government. For the neediest members of society, examples were provided that demonstrate the role government has played in destroying the mechanism that makes free markets so successful: competition and the profit motive. I have barely scratched the surface. Entire books and careers have been dedicated to exploring just a single topic. This article was meant as an introduction only. In part 4, I will revisit the role of a social safety net in a free market economy.

I only very briefly touched on three topics. There is a rich library of resources on how the free market can address almost any issue we face. But if you step back and just look: what is the difference in regulated industries like health care and education vs more competitive ones like technology, auto-makers, supply chains, restaurants, and consumer goods? The answer is a vast difference in consumer choice, better quality and lower cost. Why would this trend not continue in the services we deem most essential? It is foolish to think that a few bureaucrats in DC can come up with the best and most innovative solutions. I trust a grass roots approach where millions of ideas are coming together to solve societies biggest problems far more than a top down approach that is mandated form out of touch politicians. The biggest problems in society are far too complex to trust governments. Better to leave them to the market.

To move beyond theory and into reality, part 3 dives into the history of the United States. I review the economic history from a free market lens and demonstrate how government has destroyed many of the things that made the US the richest country in the history of this world. I also explain how the Federal Reserve has been the major force that has enabled the massive growth of government, exploded the wealth gap, and distorted the economy beyond recognition.

Appendix

For people looking for explanations on how the free market would handle other government services such as roads, water, judicial system, etc, I would recommend the following authors and resources:

• Authors: Murray Rothbard, Ludwig Von Mises, Tom Woods, Lew Rockwell, Peter Schiff, Stefan Molyneux, Walter Block
• Websites: Mises institute, Cato institute, Libertarian Party
• Articles/Books:
  • Privatizing roads
  • Privatizing oceans
  • Governments create monopolies
  • Intellectual property
  • Dispute Resolution Organization to replace a judicial system
  • Monopolies and Natural Monopolies
  • The war on drugs
  • Gender Pay Gap and the Uber Study
  • How big oil lied to governments and pushed recycling for their own benefit
  • Practical Anarchy and Everyday Anarchy

Disclosure: The content herein is my own opinion and should not be considered financial
advice or recommendations. I am not receiving compensation for any materials produced. 
I have no business relationship with any companies mentioned.