Why does socialism fail?

Because it doesn’t use a free price system.

Too many underestimate or simply don’t understand the power, complexity and mundane simplicity, of a free price system.

Economists should understand this and spend a great deal more time educating the rest of us of its wonders. But, I’m not sure as many economists appreciate it enough.

A free price system conveys pertinent information better than anything else we have.

It does so by keeping the benefits and costs close together — for the most part — so individuals can decide if the benefits are worth the costs and make trade-offs, accordingly.

This is like a driver of a car watching the road. If the car drifts left, the driver sees it and steers a little right. If you buy a cup of coffee that wasn’t worth the price, you probably won’t buy it again.

Socialism separates benefits from costs. Those receiving the benefits will not give those benefits up easily if those benefits aren’t worth the cost because they are far removed from those costs.

This is human nature. I’ve worked for companies go between providing coffee for employees and not providing it. Even though coffee doesn’t cost much, employees always hated losing the free coffee.

Another problem with socialism is that those covering the costs stop producing because they don’t see the benefits.

This isn’t as evil and selfish as it may sound.

Maybe you’ve done something well beyond your job description at work and someone else got the credit so you aren’t as willing to go the extra mile next time.

Maybe you’ve seen children playing. One kid is building with blocks and the other is knocking down the first kid’s creations. It’s not long before the first kid decides it’s not worth investing the time to build something just so the other kid can have the pleasure of knocking it down.

Not having a good price system is  like a driver not being able to see. The car eventually drifts off the road and crashes. This is the failure of socialism.

It’s not about getting the right people in charge. Even the best drivers can’t drive blindfolded.

Not convinced? Consider our economy. The parts of it that seem to have the most problems are the parts that don’t operate in a free price system, especially education and health care.

In both, the benefits are removed from the costs to a large degree.

Advertisements

Comments

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s