Last week, in Reason online, Managing editor Jesse Walker wrote a one man Q and A about all things Somali pirates. It’s a useful introduction to the ongoing phenomenon over there, culminating in a quasi-Hayekian lesson that intervention breeds unintended consequences, and that the best policy might be just to “butt out” and let useful institutions evolve “incrementally, experimentally, and at the initiative of the people directly affected.”
Good advice.
However, as Jude Blanchette pointed out, one point in Walker’s piece doesn’t make as much sense. Walker writes, after discussing U.S. humanitarian intervention:
But when the troops pulled out, didn’t everything go to pot?
You’ve got it backwards. The U.S./U.N. intervention made things worse: It undercut local farmers by dumping free food into circulation . . .
Here, Walker has fallen into an error described nicely by Henry Hazlitt in Economics in One Lesson:
The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.
Certainly, from the point of view of a Somali farmer, free food dumped into circulation is a very bad policy. And that policy no doubt had the effects described in the piece Walker linked to (e.g., “food prices falling in a bottomless tumble”). However, from a Somali consumer’s point of view, free food is pretty wonderful.
At first, the drop in food prices was considered a measure of the success of the famine relief program, showing that enough food had arrived in Somalia to break the monopoly of the hoarders and bring prices to a point where the middle and lower middle class could afford to buy. The falling prices also served as a disincentive to looting, since the bags of pilfered relief food no longer brought in the same kinds of cash windfalls as before.
Seems like a pretty good deal. Imagine if China decided to drop a bunch of free cars into the U.S. Most of us would agree that that would be fantastic. After all, we’d no longer have to spend our scarce resources on automobiles. All of the labor and capital used to produce cars for American consumption could instead be used elsewhere, making us all wealthier in the process. It’s unlikely that Walker would object to those free cars on the grounds that U.S. auto manufacturers would be hurt, or to the sun on the grounds that candlemakers would suffer. However, he employs the same reasoning here.
Bastiat made the point that if the “secret desires” of producers were made into law, everyone would suffer:
The sail would take the place of steam, the oar would replace the sail, and it in turn would have to yield to the wagon, the latter to the mule, and the mule to the packman. Wool would ban cotton, cotton would ban wool, and so on, until the scarcity of all things made man himself disappear from the face of the earth.
On the other hand, Bastiat argued that “the immediate self-interest of the consumer . . . is in perfect harmony with the general interest, i.e., with what the well-being of mankind requires,” because
He wants the seasons to be propitious for all the crops; more and more wonderful inventions to bring a greater number of products and satisfactions within his reach; time and labor to be saved; distances to be wiped out; the spirit of peace and justice to permit lessening the burden of taxes; and tariff walls of every sort to fall.
All of this, of course, is just the standard libertarian critique against “anti-dumping laws,” and it shouldn’t matter from an economics perspective that it’s the U.S. government doing the dumping rather than a foreign firm. The proper way to analyze the issue is not from the perspective of Somali farmers, who are surely hurt, but from the perspective of consumers, who are made better off by cheaper food. The situation before the U.S. intervention was bleak:
. . . food was so scarce in Somalia that tens of thousands of people were dying of starvation, and the United Nations estimated that another 1.5 million people were in danger of death. Unscrupulous merchants speculated on the shortages, hoarding food to inflate profits and sending prices 500 times above normal.
And while the U.S. aid probably had other unintended consequences, and Somalia is certainly no utopia, free food for hungry people doesn’t seem so bad.
As Bastiat put it, “A man’s happiness and well-being are not measured by his efforts but by his satisfactions, and this holds equally true of society in the aggregate.”
Great article Greg, your best work on here yet.
Thanks!
So are you saying that when free food is given to a group then that group is Hazlitt's unidentified Group B? I think you have that reversed. To me, the free food recipients are clearly Hazlitt's identified Group A while the farmers are the unidentified Group B.The problem with UN aid to a place like Somalia is that it gives factions something to fight over. One side is going to want to become a state so that it can be in charge of distributing the aid.
Nicky, In this case, you're right: the “unidentified” group is indeed the Somali farmers. But just because they are the “unseen” in this case doesn't mean it's the proper group from whose perspective to analyze the issue. This is an odd case, broken window wise, because generally government programs are meant to aid the best-connected, and this intervention was meant to aid those worst-off. Hence, while the “seen and unseen” are reversed here, the analysis is the same: free food is still good for Somali consumers, even if it's bad for the farmers. Good point, though.
Somebody paid for it (or had the money used to pay for it extracted from them) at some point, though. The problem with a lot of Africa (not sure how relevant to Somalia, though) is that they kinda got into the mentality of growing cash crops for Colonialist Europe at the expense of subsistence crops. Sad situation.
Agreed. U.S. taxpayers paid for it. Just like China would have paid for the free cars given to the U.S. in my example above. The point wasn't that no one paid for it, but that Somalia as a whole was made better off, despite the fact that some Somalians were made worse.
As Hazlitt said (and I am down at my shop and don't have the book right in front of me) in using the TVA as an example. Obviously by robbing the entire country of resources to aid one small region that one small region will be better off. But we run the risk of not considering all of the unidentified groups; the farmers, the American taxpayers, the Somali women who get gangraped by the guys delivering the UN aid and on and on.
I don't think anyone would disagree with that. But Walker's point was that the “one small region” was worse off, not better.
His argument is unsustainable or, at least, Hazlitt would think so. I'm at home now and looking at the book. In the chapter on Public Works Hazlitt says pretty it clearly…”We need not go here into the merits of the TVA or public projects like it. But this time we need a special effort of the imagination, which few people seem able to make, to look at the debit side of the ledger. If taxes are taken from individuals and corporations, and spent in one particular section of the country, why should it cause surprise, why should it be regarded as a miracle, if that section becomes comparatively richer? Other sections of the country, we should remember, are then comparatively poorer.”Obviously taxing Americans to feed Somalians is does not fall into the “sections of the country” definition but it's the same thing.