I’m starting another thread about this, because I think it’s important to get people to understand where conservatives are coming from, and the other conservatism thread is already 5 pages long and veering all over the map.
From my perspective, there are two major ideas that draw me to the conclusion that limited government and free markets is the correct way to organize a society. The primary propoents of these ideas are Milton Friedman and F.A. Hayek, both of whom are Nobel laureates in economics.
There are many reasons to distrust government, but these two concepts are ‘slam dunks’ in my opinion.
The Problem of Information
This was the area Hayek spent much of his life studying and explaining. The basic idea is that central planning of an economy can not possibly work, because A) the information requirements are vast, and beyond the capability of even the most complex and efficient central authority. And B) much of the information is hidden, and unknowable by a central authority.
Markets work like a massively parallel supercomputer, with the price system being the information bus. Decision-marking is decentralized, and prices give individuals the information they need to make optimal decisions. Central planners want to take this supercomputer and replace it with a central ‘processor’ that has to operate with only a tiny fraction of the data the supercomputer has. It is inherently less efficient, and always will be.
For an example of the complexity of markets, read this short classic essay: I, Pencil. I’ll refer to it several times in this discussion.
In Hayek’s view, the fundamental problem with government interference is that, because it is made in ignorance of all the potential ramifications and interactions, it distorts the marketplace. This distortion unbalances things, and forces the government to either increase its interference to try to correct the imbalances, or to withdraw the initial regulation.
For example, let’s say the government decides that poor people can’t afford fruit, so it mandates a price cap on fresh fruit. But if prices are lower, demand for fruit goes up, and the incentive to provide supply goes down. So now the fruit growers complain. So the government offers tax breaks or subsidies for fruit farmers. Now we have a second intervention. And of course, shortages of fruit appear, forcing government to intervene again to stimulate supply with greater subsidy. Now farmers in other areas complain that fruit farmers are getting an unfair advantage, and lobby for their own subsidies. In the meantime, some fruit farmers take the subsidies, but sell their fruit in non-price capped markets. So now the government has to put export restrictions on fruit farmers. Read “I, Pencil”, and think about all the interrelations and coordinations that get distorted or broken when a command impulse is made, and you get a sense for how intractible this becomes.
When the only tool a government has for controlling an economy is regulation, the only way it can fix the problems of regulation is to add still more regulations, or withdraw the original. In this way, regulated economies grow without bound until they become fascist or totalitarian, or they are forced to begin rolling back regulations. Hayek explains this effect in detail in one of the most famous books in economics, The Road to Serfdom, which should really be considered a must-read for anyone on the right or left who is interested in understanding the arguments of either side. This book, by the way, has had a tremendous influence on the modern world. Margarat Thatcher cited it as one of her prime influences in her sweeping reforms in Britain, it was a major influence on Ronald Reagan and other conservatives who followed, and it was a hugely popular underground work in Eastern Europe and pushed people like Vaclav Havel and Vaclav Klaus into fighting for reforms in their country.