nedelja, 18. september 2011

It Takes 30 Years To Make a Ham Sandwich

That's right, it took a 30 year process to bring a sandwich to the store shelf for your convenience just before you decided to walk in and grab it. You might think this is a bit of an exaggeration, it is not. Of course, the number is made up but I think it's actually much higher. And what's more, nobody knows how to make one. Do you? I certainly don't.

Here is what I do know though. For the slice of ham to end up in your sandwich, you first need a whole piece of ham, which had to be held at a cool temperature in a facility that needed years of research and development to make it cool at exactly the right temperature. Before cooling, the ham had to be cooked somewhere after it was chopped off a pig. The pig had to be raised at a farm that had to be built years ago by engineers who specialize in farm building, the farmers needed to gain knowledge for generations about how to raise pigs, they had to save money to build barns and buy fodder and so forth. The ham needed to be transported with a truck  which requires tires that again needed years of research and development, you need an internal combustion engine that had to be invented and then bettered for decades so that it could bring the ham to the sandwich packing place. To run the truck you need gasoline that had to be refined from oil, which had to be pumped out of the ground through a hole that had to be drilled with a high tech drill... You get the picture. Now these are the things I know off the top of my head. I don't know how to farm pigs, build trucks, make tires, refridgeators or how to cook a leg of a pig so that it transforms into ham. And this is just the ham part. Then there is the bread, cheese and butter, perhaps also some lettuce...

It takes millions of people and years and years of savings, investment, experimentation, development and production just to place a ham sandwich on a store shelf at the exact time and place you happen to wish for one. And the most fascinating part is that it's all done voluntarily. No one is forcing anyone to raise pigs or build trucks. People come together with their self interest, looking for a way to make a profit with the knowledge and skills they have, responding to prices and consumer demand. They produce and exchange without a central planning board or committee. They look for profit and respond to where consumers are directing them.

So what about fraud then, does that exist on the market? Of course it does. But there are several checks to prevent that very efficiently. Firstly, if you commit fraud on a regular basis, you will be caught out fairly quickly. People talk, they inquire and inform themselves, they share experiences. If you do not take good care of your customers in the long run, you are going to run out of them. That is why careless, incompetent or fraudulent entrepreneurs tend to go out of business and thereby remove themselves systematically as a risk to consumers. Also, consumers can protect themselves. They can look for third party assessments about the quality and safety of the goods they are purchasing. Absent government, people would look for stamps of approval when buying food, some sort of certificate regarding the quality and safety by an independent third party and would be willing to spend money for it according to how important they think food safety is. The only reason they do not do this today is because they expect the government to do it for them. And of course the government does a poor job at it precisely because of the lack of profit and loss incentives. If they fail to deliver, nothing happens, nobody loses money. They receive funding regardless of how successful they are because they receive it via budget allocations by political means, not from satisfied customers. In fact, if they do a poor job, they can always claim it was because of a lack of resources and demand a higher budget for next year.

So the effects are exactly the opposite. If private institutions do badly in satisfying consumer demand, if they fail, they lose money. If a government agency fails to do its job, it usually gets more money next year. The fact is you can never eliminate risk and injustice, the question is only which form of social order does the best job minimizing it – free markets and capitalism or government intervention and socialism.

The whole premise of government apologists is that because some people are sometimes corrupt, we need government to protect everyone. But who is government made up of? Angels? Gods? No, the very same people that they claim can sometimes be corrupt. So how is that going to help? The only difference is that free market organizations collect your money through voulontary exchanges, you give it up because they have something you like more than your money. The way government collects your money is by sticking a gun in your face and saying »pay up, or else...«

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