Everyone who argues for the free market over government involvement in the economy has heard this common comeback: “Who will build the roads?” Sometimes, the question is sincere and deserves to be answered with patience.
Much of the time, however, it is the dismissal of a complex argument and is intended to close off discussion with a glib victory.
It is annoying to answer and re-answer the same question for decades, but it is important to do so because the question “Who will build the roads?” captures a key obstacle to achieving a free economy. Namely, many people believe the private sector is either incapable of producing the goods and services society needs or that it would produce them in a destructive manner; for example, the profit-driven free market would produce such an expensive health system that the poor would be left to die.
“Who will build the roads?” There are many ways to answer this question. The Austrian economist Murray Rothbard liked to address the question by drawing a parallel. Rothbard’s approach on this issue has been famously called “The Fable of the Shoes.” If government had always enjoyed a monopoly on producing shoes, he observed, then someone who argued to privatize shoe-making would be viewed as heartless or moronic or both. “How could you!” defenders of the shoe monopoly would cry. “You must be opposed to the public and to poor people wearing shoes! And who would supply shoes … if the government got out of the business? Tell us that! Be constructive! It’s easy to be negative and smart-alecky about government; but tell us who would supply shoes?” These defenders of a government shoe monopoly would have so closely identified government with shoe-making that an attack upon its monopoly would have become an attack on shoe-making itself and upon shoe wearers.
Rothbard’s response of offering a parallel between shoe-making and road-building is powerful for several reasons.
First, it reveals an emotional dynamic that often underlies what should be a purely economic question. This hidden bias may be an honest one because it is easy for people to innocently pick up the assumptions and attitudes of their culture. If the questioner realizes his own hidden bias, however, he is more likely to listen to counterarguments.
Second, the “Fable of the Shoes” shifts the ground of argument and places the burden of proof onto the questioner. Remember: The burden of proof is on the person making an assertion. In most cases, the road questioner is implicitly stating that roads require central planning and tax-funding. Instead of going on the defensive, the free-market advocate should ask, “I don’t understand why free-market roads would be a problem. Why do you think they would be?” After all, like shoes, private roads have been common throughout history. If there is a reason they can’t occur in our society — at least, a reason that doesn’t come from government obstacles — then the burden is on the questioner to demonstrate why this moment in history is different than any other.
Third, Rothbard appeals to common knowledge. From infancy, everyone has experienced private-sector shoe-making; it is undeniable proof of how an important service is provided without government. And it is further fuel for the free-market advocate to ask, “In principle, why would free-market roads be different from free-market shoes?”
Fourth, the fable deflates the alleged dilemma of poor people going shoeless. In the free-market shoe zone that is America, next to no one is shoeless. For one thing, the charities that proliferate in prosperity distribute free clothing. But most of all, in a free market, a dazzling variety of shoes are mass manufactured, which makes them cheaper and more available in new and used forms, and more likely to be discarded by those who buy shoes frequently. At worst, some people will wear decent second-hand shoes; this is not the fault of freedom but of the inevitable poverty that occurs in every society. The incredible productivity caused by the profit incentive makes it far more likely for the poor to have shoes in America than in a communist country.
Complex systems
Shoe-making is a simple service/good compared to many others. And the same person who is convinced by “The Fable of the Shoes” may balk at the private sector controlling complex economic systems without government regulation. Governments around the world are now poised to hyper-regulate complex systems that are currently either free market or a hybrid of free market and government control due to the creeping intrusion of law; artificial intelligence, the Internet, and cryptocurrency are examples. With free-market cryptocurrency, governments want to assert an outright monopoly by issuing Central Bank Digital Currencies and eliminating free-market ones, if possible.
Objections to private-sector control grow even louder when the complex system involves an essential good or service. In economics, essential goods are physical items that consumers require to sustain health or life, like pharmaceuticals. “We are no longer discussing footwear,” skeptics will declare. “Without health and safety standards imposed on pharmaceutical companies, they will produce shoddy or dangerous drugs. Or the goods will be priced out of the reach of many of the people who need them most.” Because medicines are essential and some consumers could be excluded, advocates of government control maintain that such goods are too important to remain in private hands. The opposite is true, and this is ground on which the free market must be vigorously defended.
Again, there are many counterarguments on how the profit motive protects the public. Companies live or die on their reputations, which are difficult to regain if damaged by producing dangerous drugs. Reputations are essential because profit-hungry companies want to outcompete their rivals and grab a larger market share. Unless the company has governmental protection, there is always the risk of huge lawsuits if pharmaceuticals are negligently produced or misrepresented. Free-market economists can also point to the role of neutral and dependent third parties who rate and report on businesses; this is a privately created warranty of safety, quality, or performance. These are a mere sampling of the counterarguments available.
The USP
But, again, as with the shoe-making example, the best counter-argument on the drug issue is an existence proof; namely, a free-market pharmaceutical venture that was a roaring success. Happily, there are many. Consider just one. Almost everyone in North America has prescription drugs, vitamins, or similar supplements on their bathroom shelf with the initials USP somewhere on the label. The initials are a certification of quality from the United States Pharmacopeial Convention. USP is a fascinating example of how the free market can and does provide the complex standards upon which people’s health and life depend.
The USP was privately established as a nonprofit organization in 1820 when 11 physicians joined together to protect their patients from inconsistent and low-quality drugs. Back then, most drugs were assembled from recipes by individual pharmacists who had to trust the accuracy of their recipes, their skill at “cooking” drugs, and the quality of their ingredients. This means the drugs produced varied widely in quality, dosage, and ingredients. Moreover, many of the ingredients were untested on human beings so there was little science behind their use. Patients were often harmed, and they sometimes died from inaccurate doses or other quality-control issues. Shortly after forming, the USP began to publish the results of its lab analyses and other research on drugs through the United States Pharmacopeia, which became the authoritative compendium of drugs and drug usage, not only in America but through much of the world. The compendium includes standardized indications, dosage recommendations, warnings, contraindications, and off-label uses. The USP organization actively reached out to pharmacists and pharmaceutical schools to spread these drug standards, with incredible success. Rather than being indifferent to the public welfare, the overwhelming majority of medical people did not want patients to die from taking their advice.
This article was originally published in the June 2024 issue of Future of Freedom.
