Monday, January 30, 2006

The market promotes cooperation

Occassionally I come across a brilliant essay by the Austrian economists. This one is from Gary Gales at the Mises Economics Blog. Read the whole essay. I find the following most insightful:

In reality, however, a competitive market economy is characterized by more extensive and effective cooperation, because of the form that competition takes, than an economy controlled by the state, which is the means of achieving supposed "cooperation" by way of coercion. The reason that market competition enhances social cooperation is that it is the process by which we establish who can best cooperate with us. That is why commerce has reduced conflict-especially armed conflict-- throughout mankind's history, with greater beneficial effects, the smaller the extent that it has been hamstrung by governments. Markets reward competency, consistent, honest dealing and good faith, which are also virtues that improve the quality of every aspect of social cooperation.


. But competitive markets excel at promoting cooperation, because success in the marketplace requires extensive cooperative skills among many individuals in widely varied activities. Further, the stronger the competition for consumer patronage and in the labor market, the more cooperation develops within organizations. Just as sports teams and orchestras illustrate how fierce competition can produce outstanding cooperation, the employees of firms must cooperate to produce high quality, low cost results, or risk being outperformed by rivals. Another way to put it is that competition in the marketplace is rivalry in which the best cooperators-who cooperate more effectively with more other people--earn greater rewards.


A further problem with viewing competition and cooperation as alternative ways of organizing society is that in "cooperative" societies, there will be competition to control the supposed cooperation. No societal organization can eliminate scarcity or self-interest, and thereby none can eliminate competition. In the "cooperative" public sector, however, it takes the form of competition for control of those laws and rules which are to be imposed for their advantages over others--to extract all that is possible from others through the coercive powers of the state. So despite the imagery that all agree, allegedly cooperative benefits in fact go to some at others' expense, and the competition for that control is just the cooperation of some to win special favors by controlling the government apparatus that will enforce "cooperation" on those who are not otherwise (i.e., not really) willing. And that competition can be unbelievably ugly, as the socialist regimes of the 20th century proved.

Now, application: The Catholic Bishop's Conference of the Philippines wants to stop foreign investment in mining:

Arroyo has vigorously encouraged foreign mining corporations to invest in the country to bolster the ailing economy and create jobs in a politically difficult time... "Allowing the interest of the big mining corporations to prevail over people's right to these sources amounts to violating their right to life," the CBCP said in a two-page pastoral statement.

In the statement read by Sorsogon Bishop Arturo Bastes, the CBCP expressed alarm over the deletion of the nationalist provisions in the Constitution being pushed by the Macalanang-formed consultative commission.

If it succeeds, the move could "pave the way [for] the wholesale plunder of our national patrimony and undermine our sovereignty," the bishops warned.

"We believe that the Mining Act destroys life," the CBCP said. "The right to life of people is inseparable from their right to sources of food and livelihood."

"Furthermore, mining threatens people's health and environmental safety through the wanton dumping of waste and tailings in rivers and seas," the CBCP said.

So the CBCP wants to limit the exploitation of mineral resources - all owned by the State - to nationals. That is, the State (representing all Filipinos) cannot cooperate with the best possible cooperator; it can only cooperate with its own citizens, possibly excluding the best cooperator.

As for those wanton dumping, etc., why there are a host of regulations and controls and charges - applicable to citizen or foreigner alike - to address these.

Livelihood? Again, in the end some cooperator will have to start digging up the ground. Otherwise there will be no livelihood, just minerals lying beneath people's feet, rich and poor alike. The best livelihood will probably be generated by those who are most efficient at digging up those minerals. Again, by allowing foreigners to compete, the State is able to select the most efficient cooperator.

Do the good bishops realize this? But then their expertise is theology, isn't it?


Without Borders said...

been reading your blog lately coz im writing an in-depth articles on bloggers and blogging. nice blog. ive read the CBCP statements on mining and im aghast at their temerity to recommend an abolition of an entire industry. in response, ive written two posts recommending that environmental economists should conduct a cost-and-benefit analysis of the industry, and that the other saying the bishops went overboard in recommending for its abolition. anyway, you may want to see it if you have time

Econblogger said...

I've checked it out Dave, thanks for the link. Good journalism stuff you're posting, much better than a lot of the crap we see in the daily papers. In another post I opined that benefit-cost analysis is feasible only in a minesite-specific level. But the idea of BCA is of course sound.