Friday, February 06, 2015

Which Do You Trust To Better Run An Economy, The Purchasing Public Or The Government?

I'd heard the story so many times that I decided to track down the primary character and confirm it.  Here's how our email exchange went, in part:
Sir, is this statement about you true?
Sometime before 1989, a Soviet official asked economist Paul Seabright who was in charge of London’s bread supply. Seabright gave him an answer that is comical but also true: ‘nobody’.
If it is true, would you please provide me some background information about it? Where/when were you asked? Do you know the official who asked this question?

The statement is basically true but the details are not. The question was put to me around 1991 or 1992 in St. Petersburg by an official of the city of St. Petersburg (so not a "Soviet" official). I mention it in the first chapter of my book "The Company of Strangers".

Best wishes,

Paul Seabright
I marvel at the idea that one person would be responsible for something that doesn't need such an overseer--but the Russian official couldn't imagine things any other way!  There are people all over the globe, though, who think government can and should dictate and regulate the market to such a degree--many of them in this country, too--but for the life me I cannot understand what flaw in their brains would cause them to against all evidence about the real world.

Here's just the latest example:
Shortages of basic products such as corn, milk and chicken have plagued Venezuela for years, creating long lines at supermarkets and pushing inflation well past the 60% mark just in the last year alone.

More recently, shortages are affecting people in the South American country in a more personal way. Venezuelan consumers complain condoms and birth control pills are nowhere to be found. Shortages that first affected the dining table have now made their way into the bedroom...

Venezuelans are turning to Mercado Libre, or Free Market. It's a website similar to eBay where consumers buy and sell all kinds of products.

One subscriber is selling a box of 36 condoms for 4,760 bolivars. That's a whopping $755 U.S. dollars at the official exchange rate. It's also 85% of the Venezuelan monthly minimum salary, currently at 5,602 bolivars.
This is a family blog so I'll avoid the temptation to make a joke about getting "blanked" by your government and needing condoms :-)


pseudotsuga said...

But...but...Darren, the unwashed masses will spend their money on the WRONG THINGS! They'll purchase things according to their OWN SELF INTEREST!
We can't have that, because then some people without less money will not have enough to do the same!
Inequality! Occupy WalMart!

maxutils said...

Here's my problem … and you have an original source, so I have no evidence to support it … but I SWEAR I heard this story in one of my undergrad econ classes, which is at latest 1988, and I was told that it was a conversation which occurred pre WWII. It in no way changes the lesson, but i'm still curious. I did some quick google searches and found nothing … but I would have heard this probably 1986.

Mike Thiac said...

Darren, bring back an oldie but a goodie, the end of the Soviet empire. A cartoon form 1990ish (I think it was in the Colorado Springs Gazette) showed two blocks, one "An American college professor"and the other "A Communist central planner" Both were saying the same thing, "Communism works because it makes full use of its resources.." The caption at the bottom says it all, "The difference? The American college professor still has a job."

maxutils said...

If i helps … the context I was given was that it was in the context of Russia's attempts to make their 5 year plans better…