… he might not have asked some of the questions posed in his last State of the Union address. At least that’s the gist of an Iain Murray column posted at the Heritage Foundation’s “Insider Online.”
… [T]he President asked three questions regarding domestic policy (I’ll leave the foreign policy question to others). They were:
First, how do we give everyone a fair shot at opportunity and security in this new economy?
Second, how do we make technology work for us, and not against us – especially when it comes to solving urgent challenges like climate change?
And finally, how can we make our politics reflect what’s best in us, and not what’s worst?
These three questions are best answered by three great economists, Joseph Schumpeter, Ronald Coase, and Friedrich Hayek.
First, how do we give everyone a fair shot at opportunity and security? Schumpeter’s answer would be that we must allow creative destruction. As anyone who invested in Borders Books will tell you, if someone like Amazon comes along with a better idea, then an old industry will fall and a new one, providing more opportunity than the one before, will replace it. That is the process of creative destruction. But all too often we don’t allow the process to take place. …
… Second, how do we make technology work for us? Ronald Coase has the answer there, which is allow technology to reduce transaction costs. This is what has happened in the case of Uber, which is an excellent example of how technology benefits people by reducing transaction costs. Transaction costs, which Coase originally called marketing costs, are (to put it very simply) the costs (time, money, uncertainty, etc.) involved in selling or obtaining a service. …
… Finally, how do we make politics reflect what is best in us? Friedrich Hayek would have regarded this question as exemplifying the “knowledge problem.” How do we know what is best for us collectively? Only by the revealed preferences of people acting freely in markets. No mastermind can devise a moral plan for us all.
