Publisher's Note: This post appears here courtesy of the John Locke Foundation. The author of this post is Jon Sanders.
"To an economist,"
- Market decisions are voluntary and based in buyers and sellers exchanging their own property at prices they mutually agree upon - that is basic economics
- Using executive orders, taxpayer money, and planning sessions and rulemaking by multiple state agencies with input from politically allied outside groups, Gov. Roy Cooper seeks to make North Carolina transition to electric trucks and buses
- Cooper calls this flurry of central planning "market-driven," but it's the cardinal opposite and would leave North Carolinians worse off
wrote James D. Gwartney, Richard L. Stroup, and Russel S. Sobel in their economic principles textbook Economics: Public and Private Choice, "a market is not a physical location, but an abstract concept that encompasses the forces generated by the buying and selling decisions of economic participants."
Market decisions are voluntary and based in buyers and sellers exchanging their own property at prices they mutually agree upon, as Donald J. Boudreaux wrote for Econlib's "Basic Concepts, The Marketplace"
collection. Boudreaux discussed prices and the critical importance of "the institution of private property with its associated duties and rights, including the duty to avoid physically harming and taking other people's property, and the right to exchange property and its fruits at terms agreed on voluntarily."
The market is a basic concept of economics. Knowing it, one can easily see that a market economy is necessarily the opposite of a command economy, where people have no ultimate control over their own property (including their money) and can be forced to buy or sell against their will - or prevented from selling or buying as they wish - and at prices dictated to them, all on the whims of an autocratic government central planner.
For an industry transition to be market-driven, then, it absolutely must not be forced by government coercion using the involuntary transfer of other people's property (including their money) or the prevention of voluntary transfers of people's property. Being market-driven automatically precludes government central planning.
Market-driven vs. dictated by an autocrat
Here is an example of a transition that would not be market-driven.
Suppose a head of state favors Product B in an industry where the overwhelming market choice is Product A. If the head of state respects market freedom, upholds his oath of office to protect the rights of his fellow citizens, and has enough humility to realize that his preference might not prevail in the market, he might be content to pursue Product B in his capacity as a consumer and tell others why he thinks Product B is superior. Perhaps the market could evolve to favor his preference.
If he sadly lacks those traits, however, we could witness these acts instead:
- The head of state orders his functionaries to ratchet up the proportion of Product B sold in the state, forcing less and less Product A to be sold - and to work with his political allies to determine how quickly to force up Product B sales and close out Product A sales by this process
- The head of state orders his functionaries to direct money taken from government subjects to go to providing infrastructure for Product B, rewarding people who buy and sell Product B, redirecting productive labor and capital to Product B sales, and finding and rewarding political allies in this effort
- The head of state orders his functionaries to direct money taken from government subjects to his political allies and to politically favored businesses to promote Product B
- The head of state orders his functionaries to produce propaganda for this effort with the aid of his political allies - and to advertise that there is money taken from government subjects available to anyone willing to become his political allies in this effort
- The head of state orders his functionaries to determine how much infrastructure the state must build through money taken from government subjects in order to support Product B
- The head of state orders his functionaries to have the state replace state-owned Product A with Product B
- The head of state orders his functionaries to create special bestowals of state honor and favoritism for those who partner with him in this effort
The state in this example isn't some dreary Communist backwater or totalitarian relic of the old Soviet bloc. It's not some corrupt banana republic setting for a Bond movie. It's North Carolina.
The head of state is Gov. Roy Cooper. Product A (the market choice) is standard trucks and buses, and Product B is electric trucks and buses ("zero-emission vehicles,"
or ZEVs). The order is his October 25, 2022 Executive Order (EO) on "Growing North Carolina's Zero-Emissions Vehicle Market."
The list above corresponds to the section numbers of Cooper's EO and states their practical effects.*
Cooper's office issued a press release praising the order in the headline as "Supporting the Market-Driven Transition to Zero-Emission Trucks and Buses."
Market-driven? No one even remotely familiar with basic economics could read that list or Cooper's EO and think it was a market process. It is straight-up central planning foolishness.
Rather than countless voluntary transactions and untold numbers of individual choices revealing how trucking will evolve in North Carolina and how the evolving needs of trucking will be met, Cooper supposes he and his functionaries would direct this whole, enormously complex system. Nobody could do such a thing, not Cooper or anyone else. The attempt will be a fiasco with far-reaching repercussions.
How are resources allocated? Market decisions or random chance/dictated choice
Boudreaux warned of this outcome based on resource allocation. Markets work exceptionally well at allocating the trillions of resources in the world to useful, beneficial ways, when mathematically nearly every combination of them would be useless. But what about nonmarket methods of allocation?
Random chance clearly will not work. Nor will central planning-which is really just a camouflaged method of relying on random chance. It is impossible for a central planning body even to survey the full set of possible resource arrangements, much less to rank these according to how well each will serve human purposes.
It's odd that Cooper speaks of his orders support a "market-driven transition"
when the change he is trying to drive is transforming North Carolina to a command economy. If the trucking market does (freely) transition to ZEVs, market participants will allocate their own resources to anticipating and meeting infrastructure needs all by themselves, much more thoroughly and quickly than government planners.
Rather than freely made market choices producing as if "by an invisible hand"
the best allocation of people's resources to the collective betterment of society, Cooper would substitute the visible fist of the autocrat. In his hubris, he would take a one-in-some-trillions chance of picking a better allocation of goods and thinking it would work.
People in command economies - except those in power or their cronies - get progressively poorer and worse off. Here, such a massive disruption in North Carolina's trucking industry would upset delicate supply chains, damage the trucking industry, harm truckers and their families, and raise the costs of food and necessities even more on North Carolinians.
For example, Section 5 of Cooper's EO states the following:
Section 5. Zero-Emission Vehicle Infrastructure Needs Assessment
NCDOT, in partnership with NCDEQ, the NCUC, and other Cabinet agencies, shall develop a North Carolina ZEV Infrastructure Needs Assessment ("Needs Assessment") that evaluates charging and fueling needs to support successful implementation of the North Carolina ACT program and the achievement of ZEV adoption targets established in Executive Order No. 246. The Needs Assessment shall include, but is not limited to, an evaluation of the number, type, distribution, and cost of chargers and other fueling stations needed to achieve North Carolina's ZEV goals while accounting for the importance of ensuring a convenient, reliable, affordable, and equitable ZEV infrastructure network throughout the state including rural areas. The Needs Assessment shall be completed for the N.C. Climate Change Interagency Council to submit to the Governor within eleven (11) months of the signing of this Executive Order.
The summary of practical effects given here is:
5. The head of state orders his functionaries to determine how much infrastructure the state must build through redirected money from government subjects in order to support Product B