Tuesday, November 19, 2013

Hayek, Rand Paul and the donuts

It’s no surprise that self-professed libertarian Rand Paul would oppose the FDA’s plan to ban trans-fats, and it’s no surprise that he would express that opposition in rhetoric that plays to his base:

"They're coming after your donuts!" Paul said in a speech in South Carolina on Monday night.  "I want to see [FDA Agents] on the treadmill, and I want to see someone from maybe OSHA lashing them while they are working on the treadmill," he jokingly added, explaining that the people making donut rules should be the first ones to live with them.

What’s interesting about Paul's comments, as Amanda Marcotte at Pandagon points out, is that they're 100 percent wrong about what’s at stake:

[W]hat makes this particular rant of his triply idiotic is the ban on trans fats isn’t about obesity.  Trans fats will simply be replaced with other fats that have the equivalent caloric level, thus the bottom line on your bottom will remain the same. The problem with trans fats is that they fuck you up on a molecular level …
 Basically, the FDA will be requiring food manufacturers to provide, for the equivalent number of calories, less damage to your actual bloodstream. This has nothing to do with how much anyone weighs, as some fat people have pretty good cholesterol levels and some skinny people have terrible cholesterol levels. Nor is this about taking away donuts or any other high calorie treat.
 Rand Paul wants his audience to believe that this shows the government thinks you’re too stupid to make your own decisions, and that shows how stupid he actually thinks his audience is.

Marcotte goes on to heap invective on what she sees as the willful myopia of dogmatic libertarianism:

It’s idiotic to ignore the fact that we live in a complex world where the things that need to be known are so numerous that no one person can hold them in their heads at all time. We divide people up and give them ownership of certain forms of knowledge and allow each other to be the authorities for it. For example, I can rattle off all sorts of shit about reproductive health off the top of my head, but I couldn’t remember what it was exactly that made trans fat so bad. So I googled it. But even that is really too big an ask if someone is trying to do something as simple as make a $2 purchase of a donut at an airport kiosk. It really is okay not to know everything about every kind of bad thing you could eat. That’s why we, as the taxpayers, hire someone to do that job for us.

What’s interesting for me is that the point Marcotte is making hearkens back to one of the godfathers of libertarianism, Friedrich Hayek.

Hayek is famous for pointing out that prices are a way to maximize the efficiency of knowledge. In a command economy, the commanding entity has to know pretty much everything about everything; in a market economy, individual actors can know what something costs without having to know why. From Wikipedia’s article on the economic calculation problem:

Money, as a means of exchange, enables buyers to compare the costs of goods without having knowledge of their underlying factors; the consumer can simply focus on his personal cost-benefit decision. The price system is therefore said to promote economically efficient use of resources by agents who may not have explicit knowledge of all of the conditions of production or supply.

Marcotte’s argument, it seems to me, is a natural extension of Hayek's. Just because there's a local market-based transaction going on, that doesn't mean informational overload and informational asymmetry have been banished. Donuts, however simple in shape, are complex objects with varying ingredients. Price and a visual once-over do not encapsulate everything a consumer would reasonably want to know before buying one, but it would be impractically burdensome for individual consumers to collect the relevant information* – once again, we're looking at "explicit knowledge of all the conditions of production." For a donut?! So it’s efficient, in a Hayekian sense, to empower government to lighten the consumer’s informational load – to make sure we don’t all need to be experts on donuts (plus, as Marcotte points out, we'd need to have the superpowers needed to recognize invisible ingredients at point-of-sale).  

By making sure that donuts resemble our everyday conception of them as “something tasty that might be a little bad for you, but not too bad,” the government smooths transactions. We can focus on taste and price, which as consumers is what we want to focus on. No hidden gotcha's. Regulation makes the price system work better, in as Hayekian a manner as you could wish for.

On purely theoretical grounds, then, Marcotte’s position is more Hayekian than a dogmatic libertarian’s. She's for improving informational efficiency, which improves economic outcomes. I don't think I've seen the point put quite that way – maybe someone has done so and I’ve missed it – but I don’t see how you can endorse Hayek’s insight in the one instance and deny it in the other.

*Yes, the consumer could ask. The seller could lie. "Ah, but then the consumer could sue for fraud." Possibly, but is it really rational to stake public health outcomes on individual consumers' propensity to litigate over a $1 bread product? 

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