I ran into this a few minutes ago over at the Freakonomics Blog and thought it was worth quoting here, mostly because it recognizes both the strength of a "free market" system, but recognizes our social responsibility to the poorest/weakest in our society.
Q: How would you summarize the “wheels of commerce” in a paragraph or two?
A: You’ve given me a killer task. But here goes: a one-paragraph abstract for Economics for Dummies.
The rest below the fold...
If a society can promote a set of legal and economic institutions in which there are 1) strong property rights, and in which 2) people are prevented from coercing each other and can only engage in mutually voluntary transactions, you are likely to have the highest-possible standards of living and the most rapid growth of living standards. This optimal outcome is only possible if there is robust competition between both buyers and sellers.
Monopolies, cartels, and other forms of “imperfect competition” can screw up the whole system, as can poorly enforced or poorly defined property rights. But economists are painfully aware that this “optimal” outcome does not guarantee equality of living standards. It only guarantees two very good things: 1) that our limited supply of resources will be directed toward producing the things that people are most willing and able to pay for, and 2) that those goods and services will be produced at the lowest possible cost.
But poor people have very little ability to pay for things, so their wants will not be satisfied under a market-based economic system. This can be grossly unfair and can be rectified by some combination of private-sector charity and/or public-sector policies regarding income redistribution.
I was struck by this since it makes a dry subject somewhat accessible and acknowledges the importance of free and competitive markets. That said, it makes a clear case for why a laissaiz-faire policy will fail - the poorest have no effective ability to affect outcomes.
The "compassionate conservative" would respond that caring for those less-fortunate is the responsibility of individuals and their (usually faith-based) private institutions. But that doesn't solve the core issue - that the poor are powerless in a free market economic system. Sending a poor person to a church food pantry doesn't make them less poor, it only makes being poor slightly more tolerable.
The intended purpose of "welfare" (and I use that term imprecisely) is to teach a man to fish rather than to give him fish. While any social service can contribute to both sides of this comparison, government-regulated assistance is uniquely able to enforce the teaching side - the side that empowers an individual to become a contributing member of society. That doesn't mean it's always (or even now) worked that way - the Clinton-era reform of the welfare system made a big positive difference - but it has more potential to do it than depending on a distributed, uncoordinated network of social agencies.
Comments welcome!