Friday, September 14, 2012

Schelling (Indirectly) on Rothbard

Murray Rothbard, in his most famous paper, argued, essentially, that because human beings acting in a free market optimize, there is no possibility of an intervention from "outside" improving the outcome of that optimizing for everyone.

Here is Schelling: "How well each does for himself in adapting to his social environment is not the same thing as how satisfactory a social environment they collectively create for themselves." -- Micromotives and Macrobehavior, p. 19

On a bad road, every driver will optimize his driving, given his preferences. But if the road provider offers a better road, the overall driving environment will improve.

This does not prove that governments are capable of providing such improved environments. But it does illustrate a second flaw in Rothbard's argument. (I will not rehearse the first one here: it is well known, and easy to spot.)

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