Problems in Society Often Created, Not Solved, by Government-Shoots from the Grassroot Institute of Hawaii – Jan. 7, 2005

article top

Are the problems in society created by the free marketplace or by government?

Many times, so many times, the problems laid at the doorstep of the free market are actually created by government. There is a specific reason, and indisputable reason, why this is true.


The real question is: When looked at in this way, the “reason” alluded to above becomes somewhat clearer. Are the problems solved (as opposed to created) by the free market, or are they solved by government?

When you, as a consumer, go to the market for any product, only you can know what it is you need. Only you can know how much you are able to spend to fulfill that need. Only the store owner can know what it cost him or her to acquire that item and what price he or she must resell it to provide it at the most competitive cost and still maintain a profitable business.

In turn, only the manufacturer of said product can know what it cost to acquire the raw components to produce it, and the capital and labor costs required to convert those raw components into the final product that that manufacturer must then sell at a reasonable cost, yet still maintain a profit in order to stay in business.

Think of the innumerable decisions that must be made in such cases. The decisions of the consumer, the retailer, the wholesaler, the manufacturer and the hidden provider of the raw materials that constitute the eventual end product. Literally thousands of decisions made on an everyday basis that culminate in you, the consumer, purchasing a product in the free market to fulfill your needs.

How well does this process operate? Walk into anything from the local supermarket to a Walmart and one can observe the breadth and scale of the efficiency of such a system. The products that line the shelves of the stores we all patronize are the result of the plethora of such individual decisions that were necessary to bring those products to those shelves.

Because the very nature of the process means that all those decisions are forever hidden from our view, we tend to overlook the fact that they have actually taken place. Yet they have, each by a person acting within the specific knowledge of his or her own field of expertise.

Now imagine any one single person trying possess all this knowledge. Imagine even a group of people trying to garner all the information necessary to bring any single such product to the consumer, let alone a store full. The innumerable decisions required would overwhelm them. There is simply no way that a given group of people can acquire the required amount of information necessary to provide goods and services to those who need them.

This truth is what really defeated the Soviet Union. It is why communism, and socialism, are forever bound to fail. It is the “reason” alluded to in the opening of this essay. It is the fly in the ointment of all central planners. There are simply too many individual decisions that have to be made for any one person, or group of people, to effectively make them all. Yet, through the cost and pricing structure of free markets, these decisions are made. And in the most efficient way possible.

This last phrase represents the most crucial aspect of all: In the most efficient way possible. This is what humanity has learned in the last 400 years or so that has taken us from brutish savagery to the contemporary marvels that most of us take for granted and a small minority abhor. This is the strength of the free market. The efficiency that gave birth to machines, to technology, to the endless profusion of modern conveniences. Each one representing an increase in the level of productive efficiency that makes the modern world possible.

None of this could have been accomplished by the conscious direction of a single person, or even a group of people. Yet this is precisely what government seeks to do. It seeks to accomplish something that is literally impossible, garner enough information to act in as efficient a manner as free markets do through the pricing mechanism. This is the “reason” alluded to at the beginning of this missive of why government is the problem and not the solution. It is simply a matter of the logistics of information.

The information required to bring products to market is far too diffuse to be acquired by any single individual or centralized group of individuals. This is a equally true in the area of education or transportation as it is in providing laundry soap or vegetables. That certain areas, such as education of transportation, have traditionally been the providence of government doesn’t mean that the superior efficiency of free markets is violated. If the private sector can provide such services so much more efficiently in other areas, why not in these?

The crux of the issue comes down to information. By the time those in government have made the decision to act based upon the information they have been able to garner, their information is already superceded, obsolete. The free market has already moved on. It is already solving problems that government doesn’t even yet know about.

Thus the solution to society’s problems isn’t in government sponsored solutions, but in getting government out of the way of free market solutions. The free market, through the information laden pricing mechanism, will solve problems long before those in government even have an inkling they exist.

”’Don Newman, senior policy analyst for the Grassroot Institute of Hawaii, Hawaii’s first and only free market public policy institute focused on individual freedom and liberty, can be reached at:”’

”’This editorial is intended to provoke thought, discussion and an examination of issues. It does not reflect official policy of the Grassroot Institute of Hawaii. See the GRIH Web site at:”’

”’ reports the real news, and prints all editorials submitted, even if they do not represent the viewpoint of the editors, as long as they are written clearly. Send editorials to”’



Daily Policy Digest


Friday, Jan. 07, 2005

With the poverty rate increasing from 11.3 percent in 2000 to 12.5 percent in 2003, there are worries that America