Don Boudreaux gets to the fundamentals of free markets

2 September 2008 Editor, The Wall Street Journal 200 Liberty Street New York, NY 10281 To the Editor: Crusading for a national "energy plan" and upset that Holman Jenkins isn't on board, T. Boone Pickens asks rhetorically: "My father used to tell me that a fool with a plan is better than a genius with no plan. So I ask, what's Mr. Jenkins's plan?" (Letters, Sept. 2). Contrary to Mr. Pickens's assumption, an economy is not simply a gigantic business firm. An economy is both incomprehensibly more complex than is even the largest multinational corporation, and it has no specific, overriding purpose comparable to a firm's goal of maximizing profits - a purpose by which the performance of each employee and each investment decision is relatively easy to evaluate. So while plans and some measure of central direction make sense for firms, comparable plans and direction for an economy are poison. They prevent the on-going decentralized experimentation from which spring not only progress that is unplanned, but progress whose details could not have been foreseen before they actually materialize. The Soviet Union famously had plans for its economy; the United States did not. Which country was the fool? Sincerely, Donald J. Boudreaux Chairman, Department of Economics George Mason University
  • Sam Basso
    Comment from: Sam Basso
    09/08/08 @ 07:59:52 am

    I feel the same about the bailout of Fannie Mae & Freddie Mac, two government-created entities that should have never been... now being bailed out by government. We probably wouldn't be in this mortgage mess if they didn't exist at all.

  • Comment from: Rossputin
    09/08/08 @ 08:04:12 am

    No doubt, Sam. Even liberals are right this time: We must not be in a situation where shareholders and executives get profits but taxpayers get losses, and particularly when those executives spend tens of millions of dollars lobbying Congress to make the situation as tilted against taxpayers as possible. FNM and FRE should be taken over, stabilized, broken up into smaller pieces, and privatized. While I don't support a continuing government guarantee, it might be necessary for some time. In that case, each of the companies must be broken up into pieces that can never be a behemoth, they must have much better oversight, and they must not be allowed to spend money on lobbying.

  • Brian
    Comment from: Brian
    09/08/08 @ 11:42:19 pm

    Boone is promoting his plan to further his financial self-interest. I don't have a problem with him getting free advertising and PR. I think the problems and solutions are misdiagnosed. The government has provided lip service and window dressing to our energy problems with the National Renewable Energy Laboratory (NREL). Since when did a government-sponsored entity do anything better or more efficiently than the private sector? And if they have all these new ideas and technologies, why haven't they been implemented to reduce our country's dependence on foreign oil? The profit potential for an alternative fuel/technology to our current petroleum-based energy system is astronomical. The inventor of this technology, his kids and grandkids would be set for life if he or she developed this and sold it on the free market. So why has our country been 'stuck on stupid' when it comes to energy? My guess is that big business and big government have blocked these new energy sources and technologies from coming onto the market to keep Big Oil's monopoly intact. That's the only conclusion that makes any sense - at least in this case.

  • Comment from: Rossputin
    09/09/08 @ 05:26:47 am

    Brian, If there's so much money in a economically-viable alternative energy source as you correctly note, do you really think that big anything would stop its development? Ross

  • Brian
    Comment from: Brian
    09/09/08 @ 02:27:15 pm

    Maybe - if they're big, slow, dumb companies who can't (or won't) invest in the changes to adapt to the production and distribution of these new technologies. Look at GM and Ford - if they'd have kicked out the unions and the lavish salary/benefit plans, and if upper management had a semblance of a clue on staying ahead of the competition, economic and energy trends, they wouldn't both be on the verge of bankruptcy. Here's the latest example in a Business Week article: "The 65 mpg car the US can't have." Ross, I see stories like this quite a bit nowadays... the only explanations I can come up with are either arrogance, stupidity, or big business/big government intervention behind the scenes. I'm very much a capitalist, and pro-free enterprise. I have a big problem with Big Business nowadays, because these companies are acting more and more like Big Government. The don't have Thomas Edisons and Henry Fords running things, but instead, too many Hank Paulsons and Ben Bernankes.