A quote from today's column by David Limbaugh (the saner brother) and a few comments from me

[fpb]

No central planning-type guru is as smart at allocating scarce resources as a free market pricing mechanism.(David Limbaugh, Townhall.com, 6 January 2009

Comments

[cerebresque]

I won't deny that you have a point, because I'm fairly certain that I'd agree with you on the harmful externalities of most of the things in question.

On the other hand, I would still hold that this is less an issue of free market vs. central planning (how we get what we want), but rather an issue of morality (what we ought to want). Assuming, arguendo, that we can address the latter by legislatively banning pornography, drugs, etc. from the sphere of what we ought to want or at least what we can be able to get, then that's really orthogonal to the question of how we allocate resources in the remaining economy. And I would argue that you can thus ban pornography and drugs and still have a free market in goods, just like we can ban murder-for-hire and still have a free market in services.

(On the gripping hand, given the history of Prohibition and the War on Drugs [which, if you'll permit me, I'll use as examples because I happen to know more about the drug trade than the pornography industry], it looks like there's a convincing argument to be made that we actually can't, practically speaking, legislatively ban such things from the sphere of wants and able-to-gets, since the people who don't pay attention to the free-market lessons don't appear to pay attention to the law, either; and that thus we're stuck with the externalities either way, and so we might as well pick the policy that doesn't require gratuitously intrusive enforcement, a billions-a-year budget, and the enablement of unsavory Columbian thugs, et. al.

The externalities of the regulation and of the regulation driving the trade underground into the criminal markets only might actually be worse than those of the trade itself, in short, and maybe we'd be better off with the externalities of the hypothetical GlaxoSmithKline Recreational Products Division than with those of the Norte del Valle Cartel and the police powers [no-knock warrants, civil asset forfeiture, etc.] ginned up to oppose them.

But now this is going off into what's really a side issue to the free markets question...)

[fpb]

I do not think that it is alien to the matter of free markets. The point is that you admit government intervention into the markets, limiting or preventing the supply of a widely saleable good, because such a good is not just immoral in itself - that, I tend to agree, would be no business of the State - but because its consequences make it socially damaging. At that point, you have admitted the right of the state to control the markets in order to restrict or prevent the circulation of socially damaging goods. After that, how and where to interene in the markets is merely a question of practicality and, above all, of preferences. You may decide. for instance, that it s socially necessary to favour public transport over individual car driving and structure taxation and legislation to that purpose. Or you may decide it is better to favour the car industry, Either way, you are intervening in the market; and indeed you cannot avoid it, because such a thing as neutral taxation does not exist. The State has to tax; and, having to tax, it is bound to make significant choices. The State would be remiss if it did not have policies for the future of the country; and those will inevitably affect markets.