It is not uncommon for critics of the free market to allege that for-profit providers of services have an interest, not in solving problems, but rather in prolonging them. Why would the medical industry cure cancer, heart disease, or AIDS, for example, when it would just be putting itself out of business?
This argument essentially hinges on the notion that all humans who enter a trade with the purpose of making money automatically become sinister creatures with the worst of motives — rather than heroes of invention who daily improve our lives in an inestimable number of ways. That should tell us something about the mindset behind such suppositions. (Interestingly, those who make this argument typically do work in order to gain money themselves. It’s always the other guy in this straw-man approach to economics that you can’t trust.)
By comparison, those who work for a nonprofit organization — or, even better, the government — are altruists motivated only by the welfare of all mankind.
Free-market economists have an answer to this argument: competition plays a huge role in keeping people honest. While service provider A may withhold something from the market to keep prices up, service providers B, C, and D. can be counted on to undermine his actions in the hope of reaping the financial reward. So-called “predatory pricing,” a boogeyman typically discussed by lay critics, isn’t even taken seriously in academic circles. (For more on this, see Thomas Woods’s excellent book, Rollback, pages 140–146.)
Market critics never seem to be able to come up with real-world examples of their fears being realized, but somehow, they think, it’s the free market we should fear the most.
Meanwhile, the actual threats to freedom, material well-being, and market competition go completely ignored. Public Choice theorists have demonstrated that people operating within government and its bureaucracies are, like those in the private sector, also motivated largely by what they can get out of a situation. Economist James M. Buchanan, who died in January this year, is most noted for his work in this field, for which he won a Nobel Prize in 1986. More power, larger staff and budgets, greater access to media and important political figures and positions — all of these figure into the decision-making processes of politicians, bureaucrats, and other so-called “public servants.”
The key difference, of course, is that people working in government don’t face any meaningful competition; there is no real check on their personal motives. Even frequent elections pose little danger in a sphere so heavily influenced by rent-seeking cronies, special-interest groups, and irrational voters.
Due to government policies, the economy is in the tank and unemployment is through the roof. But, from the frantic media coverage of the sequester, one would think the end of the world was at hand because the rate of government growth has merely been slowed — and even then by only a miniscule amount.
A private citizen’s desire to keep more of his own money is now routinely denounced as “greed,” while endless thirst at the public trough is regarded as a virtue. And the thought of politicians or government agents actually facing legal consequences for their various deceits and destructive acts is considered downright laughable.
Polite company can happily entertain the notion that doctors benefit from illnesses, or that manufacturers happily churn out junky products, or that oil companies drive up the price of gasoline. No “serious” person, however, would even consider the possibility that policemen benefit from more laws, teachers profit from illiteracy, or that firefighters depend on burning buildings. Why not? Does the donning of a uniform or the acceptance of a taxpayer-provided paycheck somehow render a human being above the petty considerations and motives that afflict us mere mortals?
Afghanistan’s president, Hamid Karzai, thinks the U.S. government and military are benefiting from Taliban attacks in his country — so much so that he has accused the U.S. military of “colluding“ with the Taliban to keep NATO forces in Afghanistan beyond the 2014 deadline for withdrawal. That’s an outlandish accusation, one unsupported by evidence. Yet, if U.S. military officials honestly think that American interests would best be served by prolonging our military presence in Afghanistan, should we automatically assume that they wouldn’t engage in some unsavory actions if they believe that they served some alleged “greater good”? The Gulf of Tonkin incident comes to mind.
Public Choice theory shows that everyone — including bureaucrats and politicians — is influenced by incentives. If we should live in fear of our fellow man, let’s end this naïve belief in the “selflessness” of “public service.”