All of this has me wondering: what if New Coke, Crystal Pepsi, and failed McDonald’s menu items had been government programs? The reaction might have been swift (people took to the streets after the Supreme Court overturned Roe v. Wade, for example) but it probably would have taken a lot longer for these companies to correct their mistakes, if they did at all. In the meantime, valuable land, labor, and capital would have been tied up in producing products hardly anybody wanted. They would have been difficult to get rid of because each would have had a vocal constituency trying to protect it (I have fond memories of McDonald’s chicken fajitas and would love to see them return). The government regulators would have been poorly positioned to decide because they would not have faced direct costs or enjoyed direct benefits. In a market economy, profits and losses give us pretty reliable guidance as to when we’re using resources wisely or wastefully.
Markets get things very wrong very frequently, but they make effective use of decentralized “knowledge of the particular circumstances of time and place” and provide very swift, easy-to-interpret feedback in the form of profits and losses. There is no analog to a share price or an earnings report to discipline governments, and thus “temporary” agencies like the Small Business Administration live on, while unambiguous incursions against liberty and wastes of resources like the Transportation Security Administration it seems we will always have with us.
[I actually liked Crystal Pepsi, and it led to a legendary and hilarious debate with my beloved godmother, who was a Pepsi traditionalist. Ah, fond memories. — Ed]
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