There is a conceit—even among free market zealots—that markets are regrettably optimal. That is, man is a tragic, selfish creature, and since he can’t be depended upon to be noble, markets are the best bad way to channel his selfishness towards prosocial ends. The implication is that we might achieve a yet higher plane of goodness if only we weren’t selfish. If everyone were Mother Theresa, the thinking goes, then we could cast aside markets, and communism would actually work. Textbooks hint that the Soviet Union might have succeeded if only a solution had been found for shirking. This thinking is wrong, and in fact it undersells the beauty of markets. Taking philanthropy seriously on its own terms reveals a fatal flaw. Consider the following thought experiment:
Tomorrow, all 7.8 billion humans wake up with the heart of Mother Theresa. Each of us knows no higher want than the eradication of unhappiness in others. We fly from our beds like eusocial hymenoptera, off to address the most urgent need of the hour.
But where to go? It occurs to you that your neighborhood is home to a few homeless. You rush downstairs with cans of soup, only to find that everyone else had the same idea, and the neighborhood vagrant has a feast spread out before him. You rush back inside with an idea: you will read the news, find the worst thing happening in the world, and set off to help.
What’s this? No internet connection. The guy who unlocks the doors at the factory that makes the screw that holds a wire to a flange in some esoteric piece of telecom equipment didn’t come to work today, because—abjuring mere money—he set off to look for subjects of charity in his neighborhood. Very well, you find yesterday’s newspaper, which relates deaths of despair in Africa. You will fly there and roll up your sleeves! Oh, but you can’t call an Uber to the airport, because the drivers have all embarked on their own Crusades of goodness.
Nobody whose job is not directly connected to extinguishing want shows up to work. The ones that do show up can’t agree on how to triage the world’s infinite ills. Should pilots fly aid to drought victims in Kenya or flood victims in Bangladesh? Should they fly books to 1000 students, or vaccines to 100? In the absence of prices, there are no scales in which to hang these weights.
You can see where this ends up. Supply chains evaporate. Long term planning becomes impossible. Billions starve, until the population is reduced to self-sufficient enclaves small enough to be encompassed in the philanthropist’s ken. Society is no larger than the distance travelled by a cry of anguish, or by a rider bearing bad news. Little capital is accumulated. And this is not because nobody cares. Remember, in our thought experiment everyone has a bleeding heart. The reason little capital is accumulated is that without prices extending their mycelium through time and space, the largest projects that can be envisioned are those that fit in a single human mind. Nobody, famously, knows how to make a pencil, which means that nobody in a world without prices can know if a pencil is worth making.
But wherever there are markets—wherever there are property rights—a cry of anguish can travel any distance. Every market participant is linked to every other on the spider web of commerce. Jiggle a bit, and everyone else jiggles too. Makers of infant formula in the US need never have heard of India; they need only see that prices are rising, which spurs them to add more capacity, to investigate new methods of production, etc. Users of dairy in other industries are subtly encouraged to find cheaper substitutes. Only markets—which unite signals and incentives in the form of prices—can solve unknown wants. And only by solving unknown wants can a society grow larger and more complicated than a clan of pastoralists laying up fodder against the coming cold. Markets are not regrettably amoral; they are extravagantly moral. Thank god there are not more Mother Theresas, else we might all starve.
The Problem with Charity
To what extent does it follow, then, that Mother Teresa was an evil, selfish woman?
Unless, of course, we farm out our philanthropic urges to monopolist-in-philanthropist's clothing - Bill Gates. 😏 He'll do it all for us. Is doing it all for us. For the small price of freedom and sovereignty...