The case for the market
If the state is seeking to promote (following Bentham) ‘the greatest
happiness of the greatest number’, it should not lose sight of the fact
that only individuals can judge their own happiness.
The argument of the early economists (since endorsed by
fashionable neo-liberal conservative commentators such as Milton
Friedman (Friedman and Friedman, 1980) and Hayek (1979)) is that
with only a finite amount of real resources, a centralised deployment
of resources by the state will almost certainly result in waste. If we
each have an equal amount of real resources with which to achieve
satisfaction, some will achieve more satisfaction from buying fishing
rods or fashionable clothes, others from the purchase of fast cars, or
the consumption of malt whisky. For the state to allocate everyone
equal amounts of fishing equipment, cars, clothes and whisky, and
proceed on the assumption that all citizens want the same, will lead to
dissatisfaction and waste. Thus fishing enthusiasts may find the
concrete they wanted to be used to dam a river has been used to
construct a bridge over it to somewhere they did not wish to go.
Fashion enthusiasts find themselves allocated rayon pants when they
aspired to a woollen kilt (or whatever is fashionable at the time).
Sporting motorists may be issued with Trabant motor cars incapable
of reaching the speeds they wish to attain, whilst teetotallers throw
away in disgust an allocation of malt whisky which their neighbours
would savour with relish. The state cannot achieve the level of
information and efficiency required to satisfy individual consumer
needs.
If this account of a fully centralised planned economy be dismissed
as an exaggerated fantasy, an examination of the experience of the
Soviet economy suggests it is not so far from the truth (Fainsod, 1963;
Nove, 1980). In the Soviet model in the Stalinist era, consumers were
paid in money and could dispose of their incomes largely as they
pleased, while the goods available in the shops were determined by the
operation of a somewhat arbitrary national plan, and prices bore little
relationship to the cost of production. Since managers were rewarded
for over-fulfilling their plan quotas rather than making profits, but
might well not have official access to the necessary raw materials, they
might resort to such expedients as making all their shoes in small sizes
so as to minimise the use of raw materials. That large-footed cus-
tomers could not obtain shoes, and the shops were congested with212 POLICIES