In “The Myth of the Rational Voter: Why Democracies Choose Bad Policies,” economist Bryan Caplan examines differences between the way economists and non-economists view the world.Previous columns addressed the make-work bias and the anti-foreign bias. The third economic fallacy — and the subject of this column — is the anti-market bias.Caplan described the anti-market bias as “a tendency to underestimate the economic benefits of the market mechanism.”This fallacy originates from the public’s tendency to scrutinize a business’ motives rather than its effects.Economists find the assertion “business profits are too high” to be “not a reason at all” for economic problems, according to the Survey of Americans and Economists on the Economy.Meanwhile, non-economists — and hence the majority of the voting population — see business profits as a bad thing, and even as a cause of economic problems.As far as voluntary transactions are concerned, one can only obtain profit by providing a good or service beneficial to others with a higher quality, a lower cost, and the most convenience.When selecting a candidate for office, voters must select a leader of impeccable character above the temptation to abuse his monopoly on violence for personal or short-term benefits. They must be experts on all issues and choose the bundle of policies they suspect will produce the most good — or at least the least bad.When selecting a vendor, customers need only to choose the best product at the lowest price. The profit motive and the invisible hand take care of the rest.The impossible challenge of the former has led to centuries of bad policies. The empowering freedom of the latter has led to the economic growth behind the 21st century’s prosperity.Unfortunately, the public’s anti-market bias has led to an increasingly large number of decisions to be made by the arbitrary pronouncements of the former rather than the consumer-pleasing calculations of the latter.During Hurricane Gustav, I had several relatives stay with my family. Two of them, Uncle Tim and Parrain John, will serve as examples.When they drive to Baton Rouge, they both have economic incentives to buy gasoline. Tim would enjoy some battery and dynamo-free radio, and John — a veterinarian from New Orleans — brings $500 worth of drugs that need to be kept frozen.In the leadup to the storm, Tim might value the gasoline needed to run the generator at $10. John, on the other hand, could theoretically pay as much as $499 to run the generator without losing money.Because of this difference in preferences, the pricing system will allow John to outbid Tim if there were only one gallon of gas left. While the owner of the gas station would only raise prices to increase his own profits, doing so would ensure the gasoline went to those who valued it most.On the supply side, when the gas station’s owner sees prices climbing, he will have an incentive to bring more gasoline to the market. In any realistic situation, my parrain would never have to pay $499 for a gallon of gas, for it would be worth the station owner’s while to provide more gas at a far lower cost.In fact, for more than $20 per gallon, I would siphon gas out of my own car to sell to anyone that needed it in the short-term.Not necessarily because I want to help them, but merely because I want to make some quick money.The government’s laws against price gouging — far from preventing station owners from unfairly raising prices — prevents people from negotiating an exchange above an arbitrary price.And this would result in my uncle twiddling his thumbs in front of the radio, the gas station owner losing out on an opportunity to make some extra profit and my parrain losing $500. Contrary to the anti-market bias of the public, the principles of supply and demand allow for efficient distribution of resources.
 
 
 
 
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