DRI-311 for week of 11-04-12: Natural and Unnatural Disasters

An Access Advertising EconBrief:

Natural and Unnatural Disasters

A natural disaster can wreak havoc on the economy of a city or a region. But it remains to be seen whether this is worse than the unnatural disaster created by politicians grimly determined to cope with the resulting crisis.

Hurricane Sandy stuck the U.S. East Coast last weekend. Although only a Category 1 storm – hardly of vast magnitude by historic standards – Sandy nevertheless inflicted considerable death and destruction. Among her sundry devastations were the trashing of New York City harbor and the interruption of electric power for millions of local residents.

By interdicting shipments of gasoline into the port, Sandy left inhabitants of metropolitan New York City and New Jersey temporarily out of gas. By shutting off power, the storm left many gas stations unable to open for business even if they had gas to sell. On Friday, some two-thirds of New York City gas stations were closed. On Saturday, the proportion of closures still numbered one-third.

A triumvirate of elected officials – Gov. Andrew Cuomo of New York, Gov. Chris Christie of New Jersey and Mayor Michael Bloomberg of New York City – reacted in the inimitable way of politicians everywhere when faced with a career-defining, character-revealing problem.

They ran amok.

The Political Devastation: Gasoline Rationing

Gov. Chris Christie of New Jersey is a Republican. He is highly regarded in certain right-wing circles. Once that would have testified to his economic bona fides. His reaction to Sandy and the sudden spike in scarcity of gasoline, though, was more reminiscent of the Neanderthal left.

Gov. Christie imposed gasoline rationing. This is a time-honored reaction to a decrease in supply or increase in price of something popular or important. Honored by time, that is, but not by logic. Rationing is a political means of deciding which buyer’s desires get satisfied when there’s not enough of the good to satisfy everybody. And the reason why there’s not enough is that the good’s price is not allowed to rise high enough to call forth a sufficient quantity supplied.

After all, the Law of Supply is one-half of the Laws of Supply and Demand. It says that producers will wish to produce more of any good for sale at higher prices of that good than at lower prices – all other things equal. Superimpose this Law over the Law of Demand – which says that buyers will wish to buy more of any good at lower prices of that good than at relatively higher prices, all other things equal – and you have the makings of a market. Together, the two Laws combine to generate an equilibrium price – the price at which the quantity buyers wish to purchase equals the quantity producers wish to produce for sale. This is the price towards which a competitive market will tend to gravitate and the only price that could (in principle) persist indefinitely.

Competitive markets tend to equalize the amount people want to purchase and the amount producers want to produce and sell. They do this through fluctuations in price. If a drastic decline in supply occurs – perhaps through the intervention of a disaster like Hurricane Sandy – the immediate effect of this will be a shortage of the good at the previously prevailing equilibrium price. Suddenly buyers are no longer able to get the amount of the good they previously purchased at the former price. Their dissatisfaction will goad sellers to increase production and shipments to the market in order to enjoy a higher price and increase their profits.

Gradually, as price rises ever higher, two things happen. Producers supply more and more because they are making more and more profit. Buyers wish to buy less and less as price continues to rise. Consequently, the shortage gets smaller and smaller. Ultimately – bam! – the point is reached where the amount producers ship and sell equals what buyers wish to purchase. At that point, nobody has an incentive to change their behavior further. The fewer the political and logistical constraints exist, the shorter this adjustment process will be.

If the supply disruption caused by a natural disaster were sufficiently protracted in time – something like, say, the dislocations caused by the earthquake and follow-up tsunami in Japan in 2010 – the continuing availability of supranormal profits would attract entry by new firms into the industry. The increase in supply caused by this new entry would eventually lower price until all firms were earning merely a competitive rate of return.

But Hurricane Sandy is a short-run phenomenon whose supply disruptions will be handled entirely by existing firms. Recent declines in crude oil prices have reflected a brewing worldwide recession. These declines have translated into lower gasoline prices. Refineries have accordingly cut back on production in response to this cyclical decline in demand. The trick is to get them to increase production and stand the cost of shipping product to the East Coast to meet this sizable temporary need. That is the function of the price system – one is ideally equipped to handle.

There is no rationale for intercession by government into the process, either in the short run or the long run. The stated justification for government rationing is always the same. It is to prevent the price from rising “too high,” to prevent the good from becoming “unaffordable,” to preserve “equity” and “fairness,” to prevent sellers from “exploiting an emergency” to earn “windfall profits” or “obscene profits” or “profiteering” or “putting profits above people” or “earning profits off the backs of the disadvantaged victims.” None of the quoted phrases have any objective meaning or definition. All of them are emotive terms designed to evoke terror or pity or outrage in an observer without having to meet any analytical standard of proof. In short, they are the rhetorical currency of the politician.

In this case, Gov. Christie announced a formula for gasoline rationing. He announced it with the utmost gravity despite the fact that it was entirely whimsical. It was the “odd-even” formula. New Jersey motorists whose license plates ended in an odd number could legally acquire gasoline only on odd-numbered days of the week. Owners of plates ending in even numbers bought on even-numbered days.

Competitive markets allow price to move to the level necessary to equate the quantity supplied and the quantity demanded of the good in question. Rationing has the specific intent of preventing price from increasing to the level it would otherwise reach. Rationing deliberately strives to preserve the condition of shortage. Of course, it does so in the name of “fairness.” But then, what political atrocity isn’t committed under some noble-sounding pretext or another?

More Political Devastation: “Free” Gasoline

Not to be outdone by a neighboring politician, Gov. Andrew Cuomo of New York state elbowed his way into the act with an executive announcement of his own. No less august an agency than the Department of Defense – presumably taking a break from its successful prosecution of various wars or “wars” – was riding to the rescue. It would establish mobile fueling stations in New York City and Long Island, with gas supplied by the federal government.

“And the good news is,” the governor concluded triumphantly, “it’s going to be free.” What a triumph for the NannyState! State disaster relief provided free by the federal government herself! (Of course, there would be a 10-gallon limit on purchases – the Governor was countering Christie’s proposal with his own differentiated rationing product.)

Unfortunately, the best-laid economic plans of bureaucrats gang aft agley. In fact, they gang invariably agley. It apparently never occurred to these master planners to worry about what people would do at the prospect of “free” gasoline.

What they did at the Freeport Armory in Long Island was to line up, some 1,000 strong, waiting for the station to open. But when it did, they learned that it would be eight hours until the gasoline itself arrived. At another mobile station in Queens, would-be buyers formed a line that stretched for 20 blocks.

Needless to say, the public was not happy when it felt the strings on that “free gas” offer. One caption on a picture of the resulting turmoil read: “Tempers flared after people camped out all night, waiting for their turn at the pump…” Teacher and gasoline consumer Lauren Popkoff commented, “There’s just so many people getting very frustrated. People don’t know what to do.”

At length, the State Division of Military Affairs intervened with a plea that the public eschew the mobile stations until additional gasoline supplies arrive. Now the government had to order the public to avoid the special gas stations it had set up especially to relieve their “gasoline poverty.” It finally fell to the State Division of Military Affairs (!) to administer this fiasco, which lent just the right comic-opera touch to the proceedings.

There’s No Such Thing As A Free Lunch – Or Free Gasoline

Students often react reflexively to tales like this with responses such as, “Well, at least the people got their gas free.” Of course, this is arrant nonsense. We are so habituated to smoothly functioning markets that we see ourselves driving up to a pump, getting out, pumping gas and leaving – all within a short span of time. This is the implicit context within which we define our notion of “free gasoline.”

Significant time spent queuing – let alone marathon waits of eight hours or more – changes this picture completely. Now we must face the fact that the true economic price of gas also includes the opportunity cost of the time spent acquiring it. That is represented by the value of our time – either our labor time or our leisure time.

What is an hour of your time worth? Back east, eight dollars an hour is a low wage. Yet that means that the 10 gallons of “free gas” cost customers at the Freeport Armory in Long Island a minimum of $6.40 per gallon – and that’s just the price for a minimum-wage customer who was first in line. Customers who were last in line might easily have “paid” double that much. If they were people with decent jobs, paying $20-50 per hour – they might have paid six or seven times that much. It is odd that the egalitarian left wing, obsessed with the concept of discrimination, has never worried about the differential pricing effects of rationing. Perhaps the right wing should coin a slogan for these cases – something like “people, not politics” or “reason, not rationing.”

Go back to September 11, 2001. On that day, “runs” on gasoline stations were not uncommon. Quite a few motorists anticipated widespread dislocations and disruptions resulting from terrorism – at this point, the scale, scope and source of the attacks were unknown. Long lines formed at the pumps, which game a few enterprising station owners the brainstorm of charging ultra-high prices of $5 per gallon for “no-waiting” gasoline. Predictably, this gave rise to cries of discrimination and price-gouging. But these entrepreneurs were solving the problem and making us better off. They simply allowed the public to sort itself into those people with low-valued time – who waiting in line at Quik-Trip or at oil-company stations – and those with high-valued time – who paid $5 per gallon to avoid paying much more in lost time at work or lost leisure.

The contrast between these two types of response is instructive. Government takes arbitrary actions that are mandatory and coercive and take no account whatsoever of individual differences and preferences. They are designed purely to serve the interests of politicians and bureaucrats. The private market takes actions tailored to the interests of the different customer groups they serve. Those actions allow customers to maximize their own welfare by meeting their own needs and tailoring their actions to the differing prices and values they confront at each point in time. Entrepreneurs act this way not necessarily because they are noble and altruistic – they may or may not be – but because they have to serve their customers well in order to survive commercially and prosper.

Anti-Price Gouging Laws Gouge Consumers

It is easy to laugh at the comical antics of chief executives – mayors, governors and presidents. They are chosen more for their personalities and political instincts than for their analytical skills. But attorneys general and legislators are mostly lawyers who are supposedly trained analysts. They craft, pass and enforce complex legislation. These are people whose mental faculties are finely honed. Yet when they open their mouths on economics, they become blithering idiots.

Beginning immediately after 9/11, state legislatures began to pass anti-price-gouging bills, ostensibly designed to protect consumers against high prices in emergencies. In New Jersey, businesses were forbidden from raising prices more than 10% within 30 days of a declared emergency. In New YorkState, merchants could not charge “unconscionably excessive price[s]” for “vital and necessary” goods. As to what constitutes “unconscionably excessive,” the law remained mute.

And sure enough, no sooner has Sandy made landfall than the respective AGs went into their act. New Jersey Attorney General Jeffrey Chiesa: “Anyone violating the law will find the penalties they face far outweigh the profits of taking unfair advantage of their fellow New Jerseyans during a time of great need.” Just to make sure that people knew the government meant business, it had previously hit a gas station with a $50,000 fine for raising its price by 16% during Hurricane Irene.

This reminded economist Benjamin Powell of the famous directive of Roman emperor Diocletian in 301 A. D. The emperor instituted a maximum price for bread and threatened violators with death. Powell noted that the chief result of this was an absence of bread. And “much as the Roman threat of death couldn’t force producers to bring products to the market, neither can New Jersey’s excessive fines.”

The one thing Northeasterners want most is gasoline. Prosecuting producers who supply it will not encourage them in this pursuit. And a theoretical right to obtain unlimited free quantities of a good of which there is no supply is not worth a tinker’s dam to consumers.

And Then There Was Bloomberg

Hovering over the crisis like a Big Brother was Mayor Michael Bloomberg of New York City. It isn’t often that Mayor Bloomberg is upstaged in a public controversy, but in this case he was technically outranked by Gov. Cuomo. Still, he managed to get his rhetorical licks in. On Saturday, he announced that the gas shortages should be over “in a couple more days,” when the Port of New York City was reopened. But as recently as Wednesday, November 6, Huffington Post still carried accounts of the shortage. Offers to trade sex for gas were popping up on Craig’s List.

A reliable byproduct of any durable program of rationing is the appearance of black (illicit) markets. Technically, the motivation for black markets arises due to the condition of shortage. When price is not allowed to rise and eliminate the shortage, this creates a permanent condition in which the maximum price buyers are willing to pay exceeds the legal price suppliers currently receive at the shortage-constrained price. Buyers have an incentive to offer a higher-than-legal price to get more of the good; producers have an incentive to violate the law by supplying more to the market at prices above the legal level. Thus, the dance floor is prepared for the black-market tango.

Sex-for-gas is somewhat irregular, but by no means outré. After all, a cash transaction would be traceable, at least theoretically, but sexual barter is much more difficult to trace and prove.

Rationing By Price vs. Non-Price Rationing

Supply disruptions create a situation in which a limited quantity must be allocated among many buyers. Economics suggests that there is a good and a bad way to do that. The good way is to ration the demand of many buyers using price. The bad way is to ration demand by queue, by coupon or by some other non-price method.

Rationing by price has certain key advantages. Among these are: 1. the ability of price to rise is an inherent advantage to the supply of the commodity, since it gives producers an incentive to supply the good. And in cases like Sandy’s, that is exactly what exasperated consumers want most – they want the good in question. 2. A higher price gives buyers the incentive to conserve and allows each buyer to take his or her own particular circumstances into account. A poor consumer, for example, may nonetheless need to purchase a large amount of the good and may want to pay a high price to do it. 3. In order to maximize utility or satisfaction in an ordinary marketplace setting, a consumer equalizes his personal rate of tradeoff for the good to that offered by the market. That is to say, he buys the amount of any good that equates its marginal value or benefit to its marginal cost or price. All consumers face the same price for a good; all consumers equalize their personal rates of tradeoff to that offered by the market. Since two (or more) things that are equal to the same third thing are equal to each other, that means that marketplace exchange guided by money prices achieves the same ideal outcome that would otherwise require an impossible amount of time and effort to reach using barter exchange without money. In contrast, rationing frustrates this outcome by driving a wedge between consumers’ personal rates of tradeoff. This encourages black markets and criminality.

This analysis is a staple of microeconomics textbooks, the kind used to teach undergraduates in hundreds of U.S. colleges and universities. Economists testify to its validity as expert witnesses in court cases of various kinds – regulatory, antitrust, civil and criminal.

Venality or Stupidity?

There is a venerable maxim governing motivation and behavior: “Never ascribe to venality that which can be explained by mere stupidity.” In a world of imperfectly distributed information and intractable subjective perception, this is a sound rule of thumb.

Yet the continual refusal of politicians, regulators and lawmakers to take seriously the best-established principles of economic theory and logic – while embracing only the quack remedies of macroeconomics – cannot any longer be put off to mere stupidity. People who are smart enough to gerrymander legislative districts to cement their incumbency and bury their mistakes in legislation numbering thousands of pages cannot be written off as simply too stupid to master basic economics.

This means that they must have ulterior motives for acting as they do. Since their actions harm the constituents they are sworn to help, those motives are clearly anything but benign.

The logical motivation would be to deliberately thwart suppliers in order to leave constituents at the mercy of government. By making the public dependent on government, the minions of government protect the permanence of their own positions by enhancing their budgets and the scope of their power.

Natural vs. Unnatural Disaster

Natural disasters are bad enough. When the free market is given free play to cope with them, their effects can be mitigated. But when politicians, lawmakers and bureaucrats are allowed to use them as vehicles to serve their own interests at the public’s expense, the long-run harm of the resulting unnatural disaster rivals that of its natural counterpart.

DRI-424: The War on Big Soda

Some moments in the course of human events bear the imprint of destiny, as plain as if stamped by the USDA. Such a moment was last week’s announcement by New York City’s Mayor Michael Bloomberg of a ban on commercial sales of high-calorie beverage servings in excess of 16 ounces.

Every public-policy proposal has virtues and drawbacks. But historic significance is often gauged more by reaction to the proposal than by its intrinsic worth. This applies to Mayor Bloomberg’s so-called “Big Soda Ban” (hereinafter, BSB) – a reference to the oversized servings at which the measure is targeted.

While the measure itself has attracted widespread reaction, it has mostly been visceral and superficial. Yet it is the BSB’s implications, rather than its literal impact, that should concern us most. They tell us how far down the road to serfdom we have come.

BSB and its Effects

On May 31, 2012, Mayor Bloomberg announced that he would propose a ban on 16-ounce or larger servings of beverages containing 25 or more calories per 8 ounces of volume in restaurants, delicatessens, arenas and by street vendors. Curiously, convenience and grocery stores are exempted from the proposal. Calorie content in beverages results from adding carbohydrates in the form of various sugars, so the incidence of the ban falls on large servings of sugared drinks. Violators of the ban would face $200 fines.

The ostensible intent of the ban is to reduce the incidence of obesity among New Yorkers. The rationale apparently runs as follows: carbohydrates contain calories and large amounts of sugared drinks contain large amounts of calories – therefore, banning large servings will reduce consumption of sugared drinks, thereby lowering total calorie consumption, resulting in weight loss.

If only life were that simple. But then, if life were that simple, totalitarian countries would be the happiest and most prosperous nations.

Opposition to the Mayor’s proposal was full-throated and immediate. One vocal contingent highlighted the futility of the BSB by listing its omissions. For example, the proposal left untouched sugared beverages like fruit juices, which contain naturally occurring fructose as well as added sucrose. Milk shakes and malts were unmentioned; these contain not only sugar but high concentrations of fat, and are offered in large servings. Alcoholic drinks, which contain very high concentrations of nutritionally dubious sugars like maltose, were ignored.

Another common reaction noted the ease with which BSB could be evaded. The proposal does not prevent consumers from buying multiple smaller servings, either simultaneously or in succession. Indeed, the Mayor’s focus on restaurants and delis seems especially quixotic since the custom is to provide (one or more) free refills, thereby vitiating the need to order the larger serving in the first place. Meanwhile, convenience stores – where marketing gimmicks like Quik Trip’s “Big Gulp” were devised precisely to counter competition from fast-food and sit-down restaurants – can blithely continue supersizing their beverage offerings as before.

Recognition of BSB’s clumsiness and incompetence seems to have dulled appreciation of the pain it would inflict. One potential advantage of larger orders is economy; for example, you might well pay a lower price for one 16-ounce soda than the combined price for two 8-ounce drinks. Not any more! It is easier to make one visit to a concession stand than two – oops, too bad. The fact that some types of businesses are harmed (arenas, street vendors) relative to others (convenience stores) is more evidence of the gains and losses randomly distributed by the BSB.

Opposition to the BSB is miles wide but only inches deep. The unspoken consensus seems to be, “This plan is so confused and contradictory that it will never work.” This holds open the possibility that a better plan – perhaps more comprehensive and coercive in nature – would succeed. Few people are willing to come right out and say that Mayor Bloomberg had no right to act as he did – either because he trespassed on the sacred domain of individual choice or because he exceeded the constitutional powers granted a municipal executive.

Government as All-Purpose Problem Solver

The BSB further cements a widely shared perception of government as all-purpose problem solver, the Mr. Fix-It of First Resort. We associate this attitude with the Left. The plain truth is, however, that liberals and socialists are an underwhelming minority. Our current complacency with government intervention of all sorts could never have developed without tacit acceptance by conservatives.

The latent disposition was always there. From its earliest days, modern conservatism often deserted free trade in favor of tariffs and quotas. Anti-communism resigned the movement to the permanence of a lavish, wasteful Pentagon, fighting its way through red tape. The drug war and consequent evolution of local police toward paramilitarism were tolerated as part of a cultural pushback against the permissive Left.

Gradually, the Right discovered that big government came in downright handy in enforcing its own prejudices. That attitude emerges in support for Bloomberg, as evinced in comments like “It’s about time somebody did something about those people – I’m tired of paying high health-insurance premiums and taxes to subsidize their overeating.” A subset of the Right has given up on getting government out of health care and settled for co-opting it as their proxy nanny.

Bloomberg on Bloomberg: Grasping the Enormity of His Action

Rather than comparing Mayor Bloomberg to Huey Long, commentators have been more likely to liken him to Huey of Huey, Dewey and Louie. Reading the Mayor’s own comments on his soda ban is the surest antidote to this complacency.

“We’re not taking away anyone’s freedoms.” Exactly how does a head of government ban the sale of a popular consumption item without taking away somebody’s freedom? One suspects Mayor Bloomberg is trying to suggest that, after all, the whole issue of soft drinks is pretty trivial. But he can’t have it both ways. Elsewhere, he refers to studies showing the calorie consumption from soft drinks is a leading contributor to obesity. Now he’s trying to defuse criticism by undercutting his big point.

“It’s not something the Founding Fathers fought for.” They didn’t “fight for” soft drinks, but their writings referred specifically to the niggling, unwarranted intrusions of the British into their commerce and affairs.

“In moderation [soft drink consumption] is fine… You tend to eat all of the food in the container. If somebody put a smaller glass or plate or container in front of you, you would eat less.” By his own logic, Mayor Bloomberg would be fully justified in next limiting the physical volume of food served in restaurants, delicatessens, arenas and on street carts. Indeed, we should expect the delivery of just such limitations as soon as the BSB fails to relieve the nutritional emergency invoked to justify it. Can’t you already hear the Mayor at his press conference? “Well, the soda ban didn’t work the way we wanted to, so we had to try something stronger. When somebody puts less food in front of you, you eat less, right?”

“We’re just forcing you to think about what you’re buying.” Aside from the fact that government has no warrant or authority to force its citizens to “buy twice so they’ll think twice,” there is the implicit premise behind this claim to consider. Mayor Bloomberg’s theory of consumption – if one may so dignify his megalomaniac diktats – is that we buy and eat on impulse, so government regulators have no choice but to interdict our impulsive actions. But what makes Mayor Bloomberg – or the regulators or academicians who support him – a superior breed of human who is somehow immune to the irresistible impulses that cripple the rest of us? Come to think of it, how do we know that it isn’t Bloomberg himself who is irrationally acting on impulse? Given these comments and the surrounding analysis, that conclusion is surely indicated.

The Roots of the “Obesity Epidemic”

Mayor Bloomberg clearly understood his own action to be extreme. When the time came to justify his actions, he played the post-9/11 trump card: emergency measure. After all, we can’t just stand here and do nothing in the face of this obesity epidemic, can we?

Our reflexive deference to government has blinded us to the fact that obesity is not an epidemic. Obesity is not transmitted contagiously between individuals; it is not even an illness. It is the result of over-nutrition – too much of a good thing. Stopping an epidemic may require government coercion in order to stop the spread of contagion and administer vaccine. In contrast, government intervention in the area of obesity is not only unnecessary, it is counterproductive.

A recent Wall Street Journal editorial claimed that most obesity is caused by excess caloric intake. This would make BSB a trivial exercise since a 16-ounce soda contains fewer than 300 calories. The Journal is doubly wrong. The evidence continues to accumulate that the dominant cause of obesity is blood-sugar irregularity, not caloric excess per se. Consumption of carbohydrates that are absorbed too rapidly into the bloodstream triggers the release of insulin into the bloodstream, which in turn signals the body to store fat rather than consuming it as energy. This is the condition known as Type II diabetes. Sugared sodas can be a key contributor to this disease – if you happen to suffer from it or be predisposed to it. Carbohydrates that do not contain fiber – ranging from simple sugars to white potatoes to processed breads – are culprits. Fiber, fat and protein play the beneficial role of slowing down the conversion of carbohydrates to glucose in the bloodstream.

We know all this thanks to the pioneering efforts of Robert Atkins, whose low-carbohydrate diet was introduced almost forth years ago. Atkins was demonized by the nutrition establishment and his diet was panned as unsafe. Meanwhile, the authorities – including the federal government – promoted carbohydrates as the staple of a healthy diet and our primary source of energy. But so many people lost so much weight on the Atkins diet that private researchers were forced to study it. Atkins’ grasp of the underlying science may have been uncertain, but his central principle – that it was not dietary fat consumption but rather carbohydrates that promoted obesity – was vindicated by time and testing.

The devaluation of carbohydrates has been accompanied by a revaluation of fat and protein. We now strongly suspect that low-fat diets may actually be dangerous for those who overproduce a certain type of LDL cholesterol. Protein is once again assuming its rightful place as energy source and building block of muscle. One corollary to this is that meat is no longer verboten.

Hayek on the Rule of Experts

Decades ago, Nobel laureate F. A. Hayek insisted that central governments could not successfully plan an economy, even with the aid of experts in the various industries and professions. The information necessary to coordinate supply and demand was not centralized in the hands of government or a few experts, but rather decentralized in the minds of billions of individual producers and consumers. Only a free market process could unlock it and render it effective.

The new learning on diabetes and obesity is one locus classicus of a Hayekian market process at work. An entrepreneur like Atkins refuses to swallow the conventional thinking of government nutritionists. He puts forward a new hypothesis. The establishment experts loathe it, but consumers love it. It receives the truest of all tests – the market test – and the clamor of consumers forces the reevaluation of the product by researchers.

Milton Friedman once compared the actions of government bureaucrats to that of leader ducks who fly at the head of a V-formation until they look back and notice that their followers have deserted them. Then they scramble to catch up to the formation and resume their place at the head. That is what establishment nutritionists have done. The ones outside government have adopted Atkins’ ideas, or variants of them, without giving Atkins credit for them. The ones inside government or academia are calling for government regulation of consumers’ nutritional choices before everybody becomes aware that government regulation is superfluous at best and deleterious at worst.

Another illustrative case is cancer research. For decades progress was painfully slow. Scientists began to make headway when they tumbled to the fact that cancer is not one disease but many. Even more illuminating is the fact that individuals react to the disease and respond to treatments differently. The best way to proceed is to allow each of us to craft our own therapy in partnership with our personal physician and oncologist. Instead, the federal government and FDA have persisted in imposing a “one-size-fits-all” approach on cancer patients, using tests of statistical significance to gauge the success of cancer drugs and condition their approval. The pretense that doctors treat statistical populations rather than individual patients has killed many thousands of patients prematurely. Now that effective treatments are on the horizon, the prospect of a rising death toll is triggering a veritable mutiny among the community of cancer patients and physicians.

It is not coercion and control by central governments that will overcome obesity and diabetes. Government was a principal stumbling block to enlightenment in these areas. The free market is now succeeding where government failed.

Politics vs. Markets

Mayor Bloomberg is not guided by science or free markets. Instead, he heeds the dictates of politics. In markets, individual patients and their doctors have the strongest possible incentives to find out what actually works and act upon it – patients because their happiness depends on it and doctors because their livelihood depends on it.

But incentives in politics do not lie with uncovering the truth about obesity and diabetes. Millions of Americans are losing weight and controlling their diabetes, but the measure of this success will be taken only gradually over a period of years in the medical journals and epidemiology data. By then, Mayor Bloomberg will be dead or out of politics. The truth will do him no good. He is interested only in what will win him votes in the short-term present – which means looking as busy as possible and pressing the emotional hot buttons of the electorate. And he has succeeded, judging from the numbers of people pounding their fists and yelling, “Somebody is finally DOING something about those gluttons who are getting fat on my dime!”

The Philosophy of Freedom

Commentators on BSB sometimes allude to our “freedom to choose” before dropping the subject in favor of wisecracks about “nanny Bloomberg” or diatribes against the overweight. Yet freedom should be at the heart of the debate.

Philosophers and political scientists have long argued whether freedom is a good thing for its own sake or strictly because its consequences are favorable. Or, rearranging the argument, would we value freedom so much if it did not lead to more material wealth and happiness than the alternative?

However interesting the question may be in the abstract, it is moot in the practical sense. Freedom is preferable both morally and practically. The doctrine of free will allows us to make incorrect moral choices – that is what gives morality its meaning. It surely allows us to err where only our own welfare is at stake. We are not obligated to bail out our fellow human beings out of their personal difficulties, because they would then lack the incentive necessary to pursue the good life. But we are encouraged to help those who fail through bad luck or who express sincere repentance for past misdeeds. Our voluntary choice to help others gives our decision its moral dimension.

The history of the 19th and 20th centuries is a triumph of freedom over totalitarianism, of capitalism over socialism. The positive proof lies in the victories of free trade and anti-slavery in 19th century Great Britain, the rise of U.S. capitalism, the German and Japanese economic miracles after World War II, the resurgence of the U.S. and Great Britain under Reagan and Thatcher, the rise of the Southeast Asian Tigers and the birth of economic development in India and China. The negative proof was provided by the end of communism in Soviet Russia and China, the death of fascism in German, Italy and Japan, the fall of British Socialism after World War II and the suffocation of one-party cronyism and dictatorship in Africa and South America.

In light of all this, government’s place as the default option for every choice is astonishing. Despite being wrong in theory and practice, despite an unbroken record of failure, government nevertheless continues to be tapped to handle whatever comes up. To hear Mayor Bloomberg talk, you’d swear that freedom was hopelessly incapable and government was infallible. Actually, it’s the other way round.

Steppingstones to Serfdom

As noted above, BSB seems so comically inept that it has lulled many into not taking it seriously. That is a grievous mistake, one not made by Mayor Bloomberg himself, who treats the issue with the utmost gravity. He is knowingly engaged in a step-by-step process of reducing our freedom. It began with his ban on trans fats. When nobody thought it worth their while to stop him – probably because nobody wanted to be stigmatized as being in favor of consuming a substance known to be harmful – this established a precedent that set the stage for the nextintervention, and the next and the next. As so it goes. Each new intervention sets the precedent for the next one. That is why it is always worthwhile to defend freedom, no matter how trivial the freedom being defended may seem.

Now Mayor Bloomberg is trying to stop New Yorkers from consuming soft drinks. Few consumer goods are as thoroughly American in their essence. Around the world, Coca Cola is an instantly recognizable symbol of American culture. The amount of happiness we derive from soda pop is incalculable, but palpably enormous. Arbitrarily, on the phony pretext of an epidemic, with no hope or pretense of distinguishing between those actually hurt by soft drinks and the rest, Mayor Bloomberg proposes to establish the precedent of directly meddling in his constituents’ diets.

If, as expected, the New York City Board of Health rubber-stamps the Mayor’s proposal, is there any limit to what he can do? If a city mayor can casually reduce consumer choices without any warrant or medical justification, is there any limit on what any government can do to anybody, anywhere, anytime?

The late Keynesian economist and Nobel Laureate, Paul Samuelson, of economic textbook fame, once lamented the respect accorded colleague F. A. Hayek’s cautionary polemic, The Road to Serfdom. Hayek pointedly exposed the threat to freedom posed by central economic planning and the welfare state. Where are the barbed-wire fences and concentration camps? Samuelson demanded. The West has embraced the welfare state, he maintained, but we have not lost our freedom as Hayek foresaw.

Of course, history does not repeat itself verbatim, but its great themes do recur. Samuelson died in 2009, just in time to miss seeing Mayor Bloomberg at work. From here on, Bloomberg will serve as walking rebuttal to those who doubt Hayek’s thesis.