Wednesday, June 18, 2008

Priceless Green Angst

“Paper or plastic?”

This simple question, asked with a friendly, innocent smile by the grocery store courtesy clerk (a.k.a. check-out bagger) is enough to cause shopping paralysis in a conscientious “green” consumer.

Paper biodegrades, but logging leads to the cutting of old-growth forests. Plastic ends up in landfills, but it manufacture uses less CO2-producing energy. There’s always reusable canvas bags, but how do you calculate the value of your time remembering to bring them as well as cost of purchasing them? Is this really an important enough issue to spend hours on the internet researching all the alternatives?

Multiply this quandary across a myriad of consumer choices (cardboard cartons or glass milk bottles, disposable diapers or water-intensive cleaning of cloth ones, mercury-containing compact fluorescent bulbs versus energy-sucking incandescents, biofuels and food shortages versus expensive hybrids versus less convenient mass transit) and what you end up with is green overload and angst.

How can anyone ever have the time to bike to work if they have to spend all that time researching and evaluating the costs and benefits of these everyday purchases? How is anyone supposed to figure out what is the best and most efficient use of Earth’s scarce resources?

We are all caught in the throws of economic chaos. A misplaced desire to “save the earth” has ended up destroying our best means of rational, economic (and ecologic) calculation: the free market price system.

The free market acts like a vast computer coordinating the trillions of decisions made by all participating individuals as to what resources are desired and in what quantities. Prices are the signals which integrate and harmonize the plans and decisions of each individual with the plans and decisions of everyone else*.

Free market prices reflect the sum total of demands relative to supply for every resource (along with every existing alternative use of every resource.) The profit motive assures us that the most efficient users of those reources are the most highly rewarded, and that inefficient users are penalized. For the system to function optimally, profit seekers must be free to compete and consumers must be free to choose.

Every government intervention into the free market system acts as a price distorter. Actions such as taxes, tariffs, regulations and license requirements add artificial costs, making something seem more scarce than it really is. Subsidies, price controls, tax and regulatory breaks make a resource seem more abundant than it really is. These attempts to “fix” the free market actually work to disrupt the very mechanism needed for rational economic calculation. Even with all the research you can muster trying to sort through costs, benefits, pros and cons, the current system of distorted prices will never give you more than guess work. Garbage in, garbage out. If the data you are working with to make calculations does not reflect true scarcity or abundance, there is no rational way to decide. The end result: chaos, angst.

Unhamper the market by eliminating artificial manipulations via government intervention (which really means coercion requested by some special interest group) and decisions become straight forward: profits and free competition direct resources to their most efficient uses and users. Prices reflect true supply (or if you prefer scarcity) relative to actual demand. In this way, free market prices give us the information we need to make intelligent decisions regarding the best use of resources. When you go shopping, you can then make your personal private choices by balancing your own priorities with your own scarce resources. And, every other free individual gets to do the same.

The free market helps us preserve not only our resources, but our freedom as well.

*Thank you to George Reisman for this formulation, and others, in multiple works including Capitalism (see link under Politics and Economics in sidebar.)

(Published in TIA Daily June 19, 2008)

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