Let's because I'm an all or nothing type of guy if you haven't figured that one out.
Okay. My view on economic freedom is based on a fundamental principle that I hold to be true; That people should have as much freedom as is possible as long as it does not interfere with the rights and freedom of others. This is also the principle I apply to form my views in regard to social freedom.
So the question about when economic freedom should be limited is answered very simply: when the exercise of that freedom interferes with the rights of others. We can think of specific examples, like fraud and so forth. But what about when exercising your freedom does violate the rights of others even though you do not mean them to? Economics has a term for that: externality.
You just can't let go of those "externalities" can you?
I suspected that bringing them up would lure ML into this discussion. Welcome, Matt.
For the folks playing at home, "In economics, an
externality is an impact on any party not directly involved in an economic decision." (Wikipedia). And to illustrate this concept I like to use gasoline (metaphorically speaking):
To start, what is the costs associated with gasoline? Well, there is the cost to survey land and find land with oil in it. There is the cost to pump that oil out of a well. There is another cost to refine it into gasoline. And there is yet more costs with transporting it around the world to your local neighborhood gas station. These are all costs that you pay for when you buy a gallon of gasoline, adding a small but reasonable profit for each step along the way. But are there any other costs we can think of? Well, when you consume that gasoline you create air pollution. As does the refinery when they made the gasoline. But, these costs are not covered by the money you paid to the gas station. Instead, they are born by everybody. And because they are not part of the capitalist transaction, they are called external costs, or
externality for short.
So, should something be done about them, and if so, what?
Well, the first part of that question is easy to answer. Yes, of course. If left unchecked, these externalities will mount and exhaust the resources and ecosystems which support them. This is yet another extremely important concept to understand in economics:
The tragedy of the commons. "The Tragedy of the Commons is the title of an influential article written by Garrett Hardin, first published in the journal Science in 1968. The article describes a dilemma in which multiple individuals acting independently in their own self-interest can ultimately destroy a shared resource even where it is clear that it is not in anyone's long term interest for this to happen." (Wikipedia).
Seeing that something should be done about externalities, the question becomes "what'? Well, I think this is a problem that is best addressed through government. Milton Friedman, an economist and one of my personal heroes, stated it best:
The legitimate role for government is in so far as it can to, to control and check negative externalities. But in doing so just as there’s nothing that’s all black and all white there are never clean cases. Because government involvement is itself an externality. Government cannot involve in checking something without imposing costs on somebody. It has to raise money for taxes. It has to interfere with their freedom. And so each case has to be considered more or less as in terms of a balance sheet. Here are the problems, advantage costs, here are the benefits. You need a cost benefit analysis.
And in general it’s only where there are serious externalities where you can really make a case for government involved. And in general also wherever possible government should be involved by setting a fee on the activity concerned. And that is something else that has increasingly developed. You have a markets now in pollution abatement. So that for example in the case of the stream where somebody is putting something in. Your best procedure is to try to impose a charge on the disposition of the garbage rather than to try to regulate the details of how the garbage is disposed of.
I think taxation of activities that generate externalities to the extent necessary to address those externalities are a legitimate use of government. However, any taxation that goes beyond that is an unreasonable abridgment of economic freedom.
What if I can best help others by redistributing their wealth to the community? By gunpoint if necessary?
Your anarchist fantasy breaks down once someone with a lot of guns and/or followers rolls in.
Oh, I also believe that another legitimate role for government is to provide for the common defense.
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Topic: Economic Freedom (Read 5405 times)
