≡ Menu

Quotation of the Day…

… is from page 25 of my friend and teacher Randall Holcombe’s superb 1995 book, Public Policy and the Quality of Life:

The fundamental principle behind the market mechanism is voluntary exchange; the fundamental principle behind government policies is coercion. Because nobody is forced to trade in markets, exchange takes place only when all parties to the exchange believe that they benefit. Thus, participants in exchanges have an incentive to make what they have to exchange be as valuable to others as possible. If all parties to a potential exchange do not agree that everyone benefits, then no exchange will take place. The government, however, enacts policies and then forces individuals to comply. Thus, whereas market participants want to create as much value for others as they can (because they get more in return that way), those who abide by government policies simply follow regulations and have no incentive to consider the effects of their actions on others.

DBx: Notice the excellent subtle point revealed by this passage. The common belief is that each individual acting in markets thinks only about himself or herself – see this recent Quotation of the Day – while politics and the state offer a forum for each person to act with other people in mind.

In reality, persons who act in markets while thinking little or nothing of others will earn, at best, only low incomes. Persons who gain political power – while they usually must cooperate with some other people to acquire and maintain that power – are largely free to exercise that power without thinking or caring about others. “Other people” are objects to farmed or ordered about. Because other people must obey or be caged or executed, those with power have no real incentive to actually take into consideration the well-being of other people.