Thursday, March 23, 2017

Economists Speak with Providence Students


Researched and Written by Sophomore Libertas Scholars

Earlier this month, Providence was honored to hear a presentation from Dr. James R. Harrigan. Dr. Harrigan is a senior research fellow at Strata, in Logan, UT, and is an accomplished columnist who has written for the Wall Street Journal, Forbes, US News and World Report, and many other platforms, along with presenting at high schools all over the US.

Before hearing his presentation at Christ Presbyterian Church the Libertas Scholars were able to have an elegant lunch with Dr. Harrigan and his colleague Dr. Antony Davies at the Santa Barbara Club.

This lunch allowed the students time to get an in-depth look into the speakers' points of view. It was an incredibly informative time. Dr. Harrigan spoke highly of the lunch, saying that the girls he had lunch with were “incredibly articulate” and their talks to Providence students ended their tour on a “high note.”


After lunch the Libertas students and speakers met with the rest of the high school students at Christ Presbyterian Church to hear presentations from both Dr. Harrigan and Dr. Davies.

Dr. Harrigan’s presentation was titled, “The Knowledge Problem” and was meant to highlight the inefficiencies of central planning. He began the presentation by explaining Socrates’ approach to knowledge. One of Socrates’ most famous quotes is, “There is one thing that I know:  and that is that I know that I know nothing.”Socrates understood that everyone is ignorant until they decide to seek answers, and even then they will never know everything. Accepting this ignorance is key to growing one's knowledge.

Dr. Harrigan then drew parallels with modern politicians, stating that, “Donald Trump doesn’t roll out of bed and admit what he doesn't know.” Politicians want to govern people and have power yet they can't admit what they don't know, and therefore cannot improve.

The next section of the presentation connected to the message behind I Pencil. I Pencil, by Leonard Read, explains how even something as simple as the pencil cannot be made by one person because of the complexity of the ingredients. The wood, graphite, rubber, and metal are all sourced out and are then purchased when they are needed. No one person can make a pencil, despite it being a relatively mundane object.  This idea can be applied to many different objects such as a toaster, a car, or even a turkey sandwich. In the bigger picture it applies to the idea that central planners can never know all the information relating to a task and therefore will not be successful.

For example, in the Soviet Union central planners asked shoemakers to make a certain amount of shoes for a certain set price. In response the shoemakers made millions of cheap shoes with poor materials all in the same model without much diversity in size. They made enough shoes for all citizens of the Soviet Union yet the many of these shoes ended up in landfills and the lines for foreign shoes were very long. This is because the citizens didn't want the shoes made by central planners who didn't factor in comfort or individuality and were waiting to get a pair of foreign shoes which had much more variety in both size and style.

Struggles that go along with authoritarian power can be found in any world power, including America. Though government is a necessary evil, if it is too powerful it destroys systems' abilities to come about organically. One example of this is when a group of 50 deaf children were dropped off in an orphanage in Nicaragua. They were given food, shelter, and clothing but they still couldn't communicate with each other. It was out of this necessity that they created their own language in order to communicate. The orphanage created an environment in which the deaf children were able to form a new language organically. When government intervenes through central planning it takes away this ability to form the best possible option organically. Because these central planners can never have all the information about peoples' needs and motivations, any solution that they come up with will be inherently worse than an organic solution because central planners simply don't have all of the information. The best solutions arise when the people are allowed to make the decisions that best benefit themselves.  

For the second half of the event we listened to Dr. Antony Davies.  Davies has written two books, Equality and Public Policy and Principles of Microeconomics, and several acclaimed academic articles. He currently writes for many newspapers and magazines on assorted economic issues and gives lectures with Dr. James R. Harrigan. After being set up by Dr. Harrigan's talk, Dr. Davies took the stage.

He began his lecture with a simulation. Students got into pairs and each pair was given a small chart. On the chart was a list of colors and across from each color was a number. The goal was to make your pairing as happy as possible by obtaining colors that were equivalent to higher happy points than other colors. While difficult to explain, the simulation was extremely simple in its message -- centralized government cannot and will not make you as "happy" or free as possible. In the first half of the simulation three "benevolent dictators" were tasked with handing out five color cards to each group based on what the groups asked for.

After this was announced, the quiet crowd erupted into a riot of people clamoring for different colors. Needless to say, it didn't turn out well. People were pushed around and yelled at. Some finally reached the front of the room where the dictators were only to find out they were out of cards because of crafty pairs and incorrect amounts distributed. This left us with a happiness total of zero.

The second round showed the benefits of a free market. Each group received five cards and were free to trade with whoever for whatever they wanted. While some groups were better off in the first half of the simulation, after doing some quick math, Dr. Davies showed us we were all happier overall. He even explained how he had rigged the experiment in the dictators' favor. There were far less variables than there would be in the real world and everything was at a constant. As high school students, we were able to experience the benefits of a free market and the limitations of a centralized government first hand.

After this, Dr. Davies went through the states of the United States that were more centralized or less so, displaying the real life proof that the states with freer markets on average did better, had less inequality, and were wealthier than the states that weren't as free.

To further prove his point, Davies went through several specific examples of governments overreaching and the unintended consequences of that. The most famous of these examples concerned cobras. In India, there was a cobra infestation that was becoming a serious problem. The government put out a bounty for dead cobras. At first, this plan worked. People appreciated the incentive and started killing cobras. The population of cobras went down and all seemed well, except people still wanted money. With few cobras available for slaughter, people began breeding them, only to kill them and give them to the government. Eventually the government concluded that all the cobras had been killed and removed the bounty. People began dumping their cobras into the wild when they realized that the incentive was gone and their scam was a bit too risky. This left the cobra population larger overall and the government just that much poorer.

Another of Davies' examples was that if everyone is required to wear a seat belt in the car to be safer they will feel safer. This causes them to drive less safely because they aren't as worried about their own lives. While the passenger are protected by the seat belts, the confidence given to them by the belts leaves pedestrians unprotected. There are less injuries for the people inside the car but more people are hit by cars.

A third example came from Mexico City, where air pollution was so bad that the government decided to limit the amount of cars driving in the road by permitting half of the cars drive on the even days of the week and other half on the odd days of the week. This example perfectly portrays the exact opposite response that can occur when the government oversteps its powers. People still needed to drive in Mexico, so they just bought a second car so they could drive on both days. The unintended consequences were that the amount of automobiles increased dramatically, increasing both pollution and traffic.

While there were many convincing facts and stories used in the presentation, perhaps the best example Dr. Davies used to explain free markets was more of an allegory. He described the pain of being loosely assigned a paper on a topic we hated that had to be very long. Because of the loose requirements and the assessment of the paper revolving around length, it makes sense that students who disliked the topic would do anything to cheat the system. Why not make the font size 48? Then Dr. Davies explained a different assignment. It was shorter, but the instructions were more specific. The paper was about something we were interested in. Suddenly we had motivation and the quality of the assignment went up.

One Libertas Scholar asked Davies after his talk this question: "If there are so many facts, real life examples, and just straight logic that prove the benefits of free markets and the destructiveness of a centralized government, then how was it possible that so many people support a larger, more involved government?" He explained that in a centralized government the dictators aren't always as benevolent as they were in the simulation. It is very easy to take advantage of people in a system that willingly gives power to the few and limits the many. The other reason people support a centralized government is because it seems like the obvious choice. If you don't take the time to understand why and how a smaller government is better, it is easy to be misled by the politicians promoting a large, controlling government.

Providence students were honored to spend two hours that day actually thinking and learning the benefits of free markets, but some people don't want sit down and do the same. Very simply put there are two reasons for a dispute over the best way to be free - people are corrupt and people are ignorant. Providence is grateful for the opportunity we had to hear Dr. Davies and Dr. Harrigan speak, and  we hope the lessons we learned will not be easily forgotten in an attempt to avoid becoming one of the corrupt or uninformed.
   

No comments:

Post a Comment