The Benefits of Legal and Self Discovery

By: Alexander Cartwright ‘13

The committee on the Judiciary is currently debating a bill that would follow at least 12 states and several cities in outlawing the latest marijuana substitute, K2 or spice. K2 is typically used as incense, composed of herbs and a few synthetic compounds, and designed to replicate marijuana when smoked, except its legal. While banning a substance that people abuse may help some people, allowing K2 to be legal would incentivize producers to create safer versions, but the government does not know if the good of prohibition will outweigh the bad of a few people abusing drugs; in fact, it is nearly impossible for them to know the answer.

Over the past year and a half K2 has become an enormously popular marijuana substitute. As more people began using K2 instead of other drugs, we have learned some its negative side effects: high blood pressure, seizures, and hallucinations just to name a few. K2 users were becoming more and more frequent in hospitals, and when an Indiana 18 year old smoked enough K2 to have a hallucination that provoked him to end his life, law makers decided to capitalize on the opportunity to justify K2’s prohibition. K2 has taken at least three lives, and has sent hundreds to hospitals all while scientists know relatively little about the long term health effects of its synthetic compounds- is that enough to justify prohibition? At least 12 states and several cities think so.

Despite all the social ills the ‘drug’ seems to be causing, outlawing it will not deter consumer’s demand. Nor will outlawing K2 incentivize scientific research on its synthetic compounds so that we can fully understand their effects on our health. If left legal, entrepreneurs could try to profit from creating safer versions of K2, and competition between these producers would only lead to more effective, less harmful drugs. Competition in an illegal market would not be nearly as effective. Furthermore, prohibition will not stop consumer demand, and there is no reason why producers would not innovate a new, potentially more dangerous, substitute.

During the legislative process, our representatives will no doubt debate the costs and benefits to outlawing K2. Obviously, there are costs and benefits to allowing consumers to buy K2, but how do we know when the costs are high enough to outweigh the benefits and legitimize prohibition?

We have a mechanism for determining the best decision: competition. Nobel Prize Winning Economist F.A Hayek calls competition “a discovery procedure,” and he couldn’t be more correct. When we have a hot-dog eating contest, we do not know who is the best hot-dog-eater, (who can eat the most) so we have a competition. If we knew who the best hot-dog-eater was, then having a contest would be pretty silly, so we have a contest to discover who is the best- competition is a discovery process.

As elementary as competition seems, without it we couldn’t make every day decisions. Consider choosing between 2 brands of razors in Wal-Mart. By buying the razor that works best, I send a signal to all the razor companies about which price and razor characteristics I prefer. Being able to choose the best razor signals information about my preferences which producers use to make better razors and maximize profits. For example, I did not know that I really wanted the razor with the AAA battery that vibrates and shaves closer, but by watching my consumption patterns, corporations knew consumers wanted a close shave, and innovated a way to make that happen at a low cost. By allowing consumers and producers to exchange knowledge, competition literally leads to the creation of knowledge- about what products consumers will prefer. Without competition in the razor industry, there would be only one, un-innovative, razor on the market leaving me without the opportunity to choose the best product, and signal to innovators what kind of razor would be best.

Competition provides us with ever innovative and ever cheaper products, but it also provides us with choice, without which we couldn’t decide if something is best. Without competition, I wouldn’t know a 4-blade razor was the best choice not only because lack of competition does not give companies the incentive to innovate a razor with more than one blade, but also because there would be no 3 blade razor to compare it to- my friends majoring in philosophy would say that without a ‘contrast class’ we cannot say the buying the 4-blade razor is advantageous. In other words, the only reason I know the 4-blade razor is the best, is because I know it is better than the competing 3-blade razor.

Unlike the competitive market for goods and services, the government is by definition a monopoly. When the government creates a law, we simply can’t choose to follow one we like better since there could be legal consequences. As a monopoly, laws that our legislature creates are not subject to competition from other laws, and without competition- a discovery process- we can’t know if the government is making the best decision when it comes to weighing costs and benefits, like in the prohibition debate over K2.

The government does not lack innovative minds; in fact, I am sure congress will drag in a diverse group of experts to testify about K2. But, it will not matter how many experts testify in front of committees, how altruistic our representatives are, or even how well our politicians represent their constituents views, without competition they cannot ‘discover’ whether it would be best to outlaw K2- it’s systematically impossible.

Fortunately, introducing competition, the discovery process, into law is not beyond our experience or our established institutions. When judicial institutions, utilizing common law, make rulings that uphold old precedents or establish new ones, the law becomes better and better at executing its intended purpose. In the court room, judges are able to choose between the costs and benefits a law has imposed on both parties and make a ruling that establishes a precedent, or unverifiable principle that can perfected over time. Parties seeking to utility maximize by suing each other, and judges seeking to utility maximize by establishing the best precedent possible, will lead to better law. Different cases give judges the option to chose between what types of precedent should be created, and after many different cases judge’s choices create knowledge about what type of precedent works best. Furthermore, different precedents can apply to different districts, which allows for even more competition.

We can continue to scream our individual preferences to congress about what they should do, but systematically it is nearly impossible for them to make the best decision outside of pure luck. Should we legalize K2? I have no idea; in fact the knowledge we need to know too much such a decision might not even exist, which is why we need competition. Just as we use competition to discover the best ways to use allocate our resources, justice should be a discovery process too.

If you want to take away Liberty, the burden of proof is on you: In Response to Mr. Turpin’s “The Libertarian Ideology is a Joke”

     Alexander C. Cartwright’ 13 – Opinion Editor & Dylan DelliSanti ’14 – Opinion Columnist

                Christopher Turpin’s recent opinion piece, “The Libertarian Ideology is a Joke,” actually made a rather stunning case for a libertarian ideology. In his opinion piece he claimed that: “people are not infinitely smart or wise,” “man is fallible”, “we need laws,” and he implied that governments are often willing to sacrifice trade relationships for war.  We must take these claims as a given, for they are, in reality, true. However, Mr. Turpin has reached very different conclusions, than the libertarians, given these facts.

                 Mr. Turpin claims “people are not infinitely smart or wise.” We certainly agree. Man does not have perfect knowledge. He does not, nor can he possibly, know everything there is to know in the world. In fact, in 1945, Nobel laureate economist F.A. Hayek published “The Use of Knowledge in Society.” Hayek argues that each individual possess only a small fraction of all the information that exists in society. This is called circumstantial knowledge, and one of the keys to the success of any societal arrangement is how well it can turn this circumstantial knowledge into an efficient allocation of resources. The free market is able to do this through the pricing mechanism. Hayek calls prices “incentives wrapped in knowledge” since they communicate marginal values and provide signals for good profit-maximizing entrepreneurs. Not only is it impossible for us to “centrally plan” the use of all knowledge, but we don’t need to. Our collective knowledge, when coordinated through prices, can do more than any single individual.

Each morning when we take out our pencils to practice drawing supply and demand graphs before Economics class, we benefit from the efforts of the millions of people that made the pencil, yet we have no idea how to produce one. The pencil has wood that was cut down with a chainsaw, designed by an engineer, powered by gasoline, which was made via crude oil, which was extracted from the ground. The pencil also has a rubber eraser that was farmed, imported, sold…we could literally continue this process without end. Even though the number of people contributing to making one simple no. 2 pencil is essentially uncountable, we need not centralize knowledge and coordinate everything between them because all these resources are allocated via a spontaneous order: the product of human action, but not human design. You are right Mr. Turpin, no one can know it all, which is why we need free markets.

Mr. Turpin also claims that man is fallible and makes mistakes, which is true as well. Mr. Turpin asks what will happen when people believe they are acting in their own interests, when really they are not- they will learn! The Spontaneous order emerges stronger.  In 1985 Coca-Cola  changed its drink formula and introduced “New Coke.”  Despite successful field research, once “New Coke” hit the market, sales dropped. Even former Cuban dictator and avid Coke drinker, Fidel Castro, criticized the formula change (ironically, he blamed it on “capitalist decadence). However, hard working, profit maximizing, entrepreneurial, ( and “selfish”- for Mr. Turpin’s sake), Coca-Cola executives resurrected the original Coca-Cola formula, which left us with the Coca-cola Classic we now have today. Sometimes innovations are good and sometimes they simply are not, but without the market, we simply cannot know. You are right Mr. Turpin, people will make mistakes, which is why we need free-markets, so that we can distinguish successes from failures.

Perhaps the most drastic misconception that leads Mr. Turpin astray is his understanding that “Economists study markets, not people.” Quite simply, the people are the market. Separating the market from people is impossible. Thus, a study of the market is a study of people. One cannot exist independently of the other. The most basic textbook definitions of Economics define it as the “study of how humans produce, consume, and distribute,” or the “study of how humans allocate scarce resources.”  Mr. Turpin is correct in his analysis that markets will provide for whatever one desires, so long as entrepreneurs can make a profit doing it.  However, simply because markets will provide goods and services that some might call “immoral” is not a case against markets. The free-market is a mechanism for allocating scarce resources. It is not a system we use to distinguish what is good and bad for one’s soul.

For the sake of argument, we will accept Mr. Turpin’s claim that “people aren’t always smart,” which is why we need government. However, if people aren’t always smart how do we know who the dumb one here is? The burden of proof is on you Mr. Turpin. As far as we are concerned, Liberty is the default.

             

             

Occupy Randolph-Macon – A Satire

Alexander C. Cartwright ’13 – Opinion Editor & Dylan DelliSanti ’14 – Opinion Columnist

            The Occupy Wall Street movement has made its way to Ashland where, last week, five angry Randolph-Macon students gathered together to protest a system that they view as greedy and corrupt. Among their demands: a $100-per-hour living wage, an end to scarcity of resources, free Starbucks forever, sunshine and unicorns every Wednesday, making greed illegal, and a moratorium on the laws of physics.

            Like all good Hampden-Sydney Men, we arrived at the protest, eager to engage in the RMC students in intellectual discussion- even if we needed to introduce them to it. We quickly realized that the only point worth debating with RMC would be one over capitalism, considering the absurdity of their other demands and the superiority of the Hampden-Sydney Economics department, the Randolph-Macon students had the opportunity to learn a lot.

            One clever Randolph-Macon student protested that she did not like capitalism because it illustrates how terrible people’s values are without encouraging change. We asked her to explain, and she proceeded to argue that it is unfair for some elementary school teachers to be paid less than skilled construction workers. She concluded that  it is wrong to value something worldly and materialistic like construction instead of education, and capitalism does nothing to fix society’s gross errors.

After glancing at one another in total shock, we asked the protestor how much she had paid for her diamond earrings she was wearing. After she responded, we then asked her how much she would be willing to pay for a bottle of water, to which she responded with a price that was less than what she had paid for her diamonds. The Randolph-Macon students responses are, surprisingly, perfectly logical. We are willing to pay more for diamonds then for bottled water. However, we then proceeded to ask, “aren’t your values incorrect? Shouldn’t you value an essential fluid like water more so than a luxury, worldly, materialistic thing like a diamond?”

At this point all of the protestors seemed shocked by their own stupidity. The Randolph Macon students lacked an understanding of marginal value. We explained, prices (just like teacher salaries) do not express our total value for a product or service, just its marginal value. The marginal value of a diamond can be greater than the marginal value of a bottle of water even if our total value for diamonds is less than water. It is also true that simply because we might pay a construction worker more than an elementary school teacher does not indicate we value construction more than education, but it does indicate that the marginal utility of construction is greater than that of education.

It was obvious that the concept was beyond the intellectual capacity of the Macon students. Even though Carl Menger started the ‘Marginal Revolution’ many years ago, the Macon students continued to protest. One especially angry protester told us that, aside from marginal value, we want government spending to stimulate the economy and get people to work. We asked if building roads would be a legitimate use of government funds. The RMC students replied in the affirmative. We then asked them, if the purpose of building these roads would be to create jobs, then Milton Friedman suggested we make everyone work with spoons instead of shovels or modern equipment since this would obviously employ more people. The RMC students were unwilling to engage our argument, and instead they attempted to equate our pressed shirts and bow ties to the appropriate attire for a Wall Street executive- to which we took no offense.

As night fall set-in at the protests, and the temperature dropped below forty degrees, many of the occupiers sought refuge in their parents’ basements… ironically, where many of them will be staying for the next decade.