Free market is best solution to society’s ills

On April 5, the Mat-Su Valley Frontiersman published an opinion piece by Charles Hayes that concluded that the free market system was no good and government was necessary to correct the ills of society. There were a number of flawed examples to support this flawed conclusion.

Regretfully, we must start with an understanding that we can never correct the ills of society. We cannot have good without an opposite. Not everyone can be above average. We cannot only drink from the top of the glass.

Even children will quickly learn how to game any system. Government creates rules that then create perverse incentives and unintended consequences. Our most recent financial meltdown is a classic example of this.

Our banks were required to hold top-rated bonds. Mortgage bonds were considered top rated because they were backed by the value of a house. Houses were considered safe investments, so people were buying them, often just as an investment.

Eventually there was a sale of mortgages and no one showed up. The market had figured out the emperor had no clothes and everything came crashing down.

What happened? Government created perverse incentives, individuals worked the system for everything it was worth until the collective force of the market realized it was bogus and corrected itself. Sure, some got rich and got out in time — the same thing happens with looting during a riot.

The free market is much different than a market in which government creates many ridiculous rules intended to encourage one behavior or another. Markets consistently do a better job than any models created by economists or government. You and I might not be correct, but take a million of us, and the majority will be pretty much on target.

FDR famously created a slew of work programs to keep people busy, train a mostly rural workforce in new skills, and rebuild an economy. Today that won’t work because there are rules requiring a high minimum wage and benefit package.

Only a few with those special skills will continue to work and no one else will be able to enter the workforce. Why not allow people to work for a wage they are comfortable with?

The minimum wage is 80 percent made up of youth who are getting first jobs and learning job skills and work ethic. Many of these are individuals living in middle-class homes for whom these earnings are not a key factor in their household economy. The idea that raising the minimum wage is going to help poor people ignores the facts and hurts those it is intended to help.

There will always be “poor” people, as they are on the low end of a scale and a scale does not only have one side. Today’s poor in our society typically have television, cellphones, adequate nutrition, a roof over their head and clothing. Often their problems are self-inflicted.

Our governmental solution is to throw good money after bad. People who can’t handle life are given money to purchase their food and clothing.

No one teaches them how to purchase quality meals or what types of clothing would be appropriate for a job. We don’t teach job skills and many of these individuals don’t understand the basic grounding of getting up in the morning and appearing on time by 8 a.m. Without these basic skills a job will never be forthcoming.

The only solution is to require adherence to rules and a schedule in order to obtain the government support. However, we object if someone says we should require a drug test.

Why? You need to pass a drug test to get a job, so if you can’t pass one you should not be eligible for government support. We could require anyone who fails one to enter into a drug rehab program (this could include alcohol and tobacco) in order to qualify for benefits.

The point is, just throwing money out is not helping those who want help. For those who don’t want to help themselves, there is nothing society can ever do for them.

We, as a society, must understand that our elected officials and paid government employees are us — our neighbors and friends. They are not the “smartest” people in the room. We all make the same mistakes, but collectively we know more than any one individual.

Government is not the solution for the world’s ills, and the evidence is documented and clear that the free market remains the best arbiter of fairness and success. Government needs to limit itself to providing the guide rules and not creating incorrect incentives.

Free markets are imperfect. But they have proven to be the best system over time.

Arthur Solvang lives in Willow.