The Corner

Once More On The Free Market

I thought some folks might be interested in the following excerpt from Steven Landsburg’s outstanding book, The Armchair Economist. It nicely captures how free market economics, rightly understood, cannot be utopian:

Economics is the science of competing preferences. Environmentalism goes beyond science when it elevates matters of preference to matters of morality. A proposal to pave a wilderness and put up a parking lot is an occasion for conflict between those who prefer wilderness and those who prefer convenient parking. In the ensuing struggle, each side attempts to impose its preferences by manipulating the political and economic systems. Because one side must win and one side must lose, the battle is hard-fought and sometimes bitter. All of this is to be expected….

….Economics forces us to confront a fundamental symmetry. The conflict arises because each side wants to allocate the same resource in a different way. Jack wants his woodland at the expense of Jill’s parking space and Jill wants her parking space at the expense of Jack’s woodland. That formulation is morally neutral and should serve as a warning against assigning exalted moral status to either Jack or Jill.

The symmetries run deeper. Environmentalists claim that wilderness should take precedence over parking because a decision to pave is “irrevocable.” Of course they are right, but they overlook the fact that a decision not to pave is equally irrevocable. Unless we pave today, my opportunity to park tomorrow is lost as irretrievably as tomorrow itself will be lost. The ability to park in a more distant future might be a quite inadequate substitute for that lost opportunity.

A variation on the environmentalist theme is that we owe the wilderness option not to ourselves but to future generations. But do we have any reason to think that future generations will prefer inheriting the wilderness to inheriting the profits from the parking lot? That is one of the first questions that would be raised in any honest scientific inquiry.

Another variation is that the parking lot’s developer is motivated by profits, not preferences. To this there are two replies. First, the developer’s profits are generated by his customers’ preferences; the ultimate conflict is not with the developer but with those who prefer to park. Second, the implication of the argument is that a preference for a profit is somehow morally inferior to a preference for a wilderness, which is just the sort of posturing that the argument was designed to avoid.

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