Markets Versus Government: Real Alternatives Versus Possibilities – OpEd


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One difference between choice in markets versus choice in government is that in markets, people choose among alternatives that already exist, whereas with government, people choose among alternatives that might exist in the future. When people cast their dollar votes, sellers in markets already have the products available, whereas when they vote at the ballot box, they are choosing among sellers (candidates) who advertise products they hope to produce if they are elected.

When George W. Bush ran for president in 2000, one of the products he offered voters was Social Security reform, but he was never able to deliver. When Barack Obama ran for president in 2008, one of the products he offered voters was health care reform, which he was able to deliver. But now that people see what the product is like, some are not so enamored with it. Unions, who campaigned hard for Obamacare, don’t want their workers covered by it, and in the news lately, many people who are unable to keep their current health insurance because it does not meet the plan’s mandates are upset. When people choose a hypothetical product that might exist in the future, they should not be surprised if the actual product does not live up to the expectations created by its promoters.

Imagine if you went to an automobile showroom to buy a car, and instead of looking at actual cars, you listened to a salesman tell you what kind of car he could have ready for you in the next few years, if you buy now. To maintain the analogy, the car you buy would not even be designed yet. The salesman would just be telling you how he hoped the design would work out. No pictures, no plans, just hope and change. Very likely, when you saw the actual car, it would not quite be what you were hoping for when you bought in. Partly, this is because it is difficult to anticipate all the trade-offs that go into designing a product, and partly it is because salespeople may have an incentive to oversell the positives and overlook the negatives.

Automobile manufacturers build the cars first and then show customers the cars they can drive today. In the political process, the products are sold before they are designed or built. That process is bound to bring disappointment to buyers.

 

This applies to the current health care debacle, but it applies to everything else government does too. Health care is just an example. In the market, doctors, hospitals, and insurers tell you, “Here is what is available to you now, if you want to buy.” People choose among real alternatives. With Obamacare, the president said, “Here’s what I hope to design for you to deliver your health care,” before it was actually designed. People were choosing among hypothetical alternatives that might not even be possible, not real-world alternatives that are already available to be chosen.

The same is true of all choices people make through politics rather than markets. Unlike politics, markets offer people real alternatives. The product is built first; then consumers choose it. With government, the product is chosen first; then government attempts to design and build. The products people choose through politics may not even be possible to build.

This is not to say government production always works out badly. The Interstate Highway System is generally considered a success. But even here, President Eisenhower sold the system before it was designed and built, whereas the cars that drive on those highways were designed and built before they were sold. We had a better idea of what we were getting when we bought the cars than when we bought the highways.

President Bush was not even able to get a Social Security reform passed, so we don’t know what its flaws might have been, or what benefits it might have produced. With Obamacare, we’ve seen lots of problems surface over the past year as the program has been rolled out.

The problems are not with Obamacare specifically, but with government production more generally. In the market, we are buying real products and get to see what we are buying before we purchase. That is one good reason for relying on the private sector rather than government.


About the author:

Randall G. Holcombe

Randall G. Holcombe is Research Fellow at The Independent Institute, DeVoe Moore Professor of Economics at Florida State University, past President of the Public Choice Society, and past President of the Society for the Development of Austrian Economics. He received his Ph.D. in economics from Virginia Tech, and has taught at Texas A&M University and Auburn University. Dr. Holcombe is also Senior Fellow at the James Madison Institute and was a member of the Florida Governor’s Council of Economic Advisors.

Visit Randall G. Holcombe's website

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