Free To Choose: a personal Statement

Who Protects the Consumer?
221
involved. Complicated rules and red tape add greatly to the time
required to build power plants whether nuclear, oil, or coal, and
to bring into production our abundant supply of coal—and
multiply the cost. These counterproductive government policies
have stifled domestic production of energy and have made us
more dependent than ever on foreign oil—despite, as President
Carter put it, "the danger of depending on a thin line of oil tankers
stretching halfway around the world."
In mid-1979, President Carter proposed a massive government
program stretching over a decade and costing $88 billion to pro-
duce synthetic fuel. Does it really make sense to commit the tax-
payers to spending, directly or indirectly, $40 or more for a
barrel of oil from shale while prohibiting the owners of domestic
wells from receiving more than $5.94 for some categories of oil?
Or, as Edward J. Mitchell put it in
a
Wall Street Journal article
( August 27, 1979), "We may well question . . . how spending
$88 billion to obtain a modest amount of $40 per barrel syn-
thetic oil in 1990 `protects' us from $20 per barrel OPEC oil
either today or in 1990."
Fuel from shale, tar sands, and so on, makes sense if and only
if that way to produce energy is cheaper than alternatives—ac-
count being taken of all costs. The most effective mechanism to
determine whether it is cheaper is the market. If it is cheaper, it
will be in the self-interest of private enterprises to exploit these
alternatives—provided they reap the benefits and bear the cost.
Private enterprises can count on reaping the benefits only if
they are confident that future prices will not be controlled. Other-
wise, they are asked to engage in a heads-you-win, tails-I-lose
gamble. That is the present situation. If the price rises, controls
and "windfall taxes" loom; if the price falls, they hold the bag.
That prospect emasculates the free market and makes President
Carter's socialist policy the only alternative.
Private enterprises will bear all the cost only if they are re-
quired to pay for environmental damage. The way to do that is
to impose effluent charges—not to have one government agency
impose arbitrary standards and then set up another to cut through
the first's red tape.
The threat of price control and regulation is the only important

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FREE TO CHOOSE: A Personal Statement
obstacle to the development of alternative fuels by private enter-
prise. It is argued that the risks are too great and the capital
costs too heavy. That is simply wrong. Risk taking is the essence
of private enterprise. Risks are not eliminated by imposing them
on the taxpayer instead of on the capitalist. And the Alaska
pipeline shows that private markets can raise massive sums for
promising projects. The capital resources of the nation are not
increased by using the tax collector rather than the stock market
to mobilize them.
The bottom line is that come what may, we the people shall
pay for the energy we consume. And we shall pay far less in
total, and have far more energy, if we pay directly and are left
free to choose for ourselves how to use energy than if we pay in-
directly through taxes and inflation and are told by government
bureaucrats how to use energy.
THE MARKET
Perfection is not of this world. There will always be shoddy prod-
ucts, quacks, con artists. But on the whole, market competition,
when it is permitted to work, protects the consumer better than
do the alternative government mechanisms that have been in-
creasingly superimposed on the market.
As Adam Smith said in the quotation with which we began
this chapter, competition does not protect the consumer because
businessmen are more soft-hearted than the bureaucrats or be-
cause they are more altruistic or generous, or even because they
are more competent, but only because it is in the self-interest of
the businessman to serve the consumer.
If one storekeeper offers you goods of lower quality or of
higher price than another, you're not going to continue to patron-
ize his store. If he buys goods to sell that don't serve your needs,
you're not going to buy them. The merchants therefore search
out all over the world the products that might meet your needs
and might appeal to you. And they stand back of them because
if they don't, they're going to go out of business. When you enter
a store, no one forces you to buy. You are free to do so or go
elsewhere. That is the basic difference between the market and a

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