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The Efficient Society: Why Canada Is as Close to Utopia as It Gets

by Joseph Heath

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Feb 28, 2017 10:18AM

“The goal of an efficient society, and of our economy generally, is to satisfy people’s needs, or to satisfy as many needs as possible given the available resources. The advantage of the price system is that it produces an observable “image” of these needs. Again, recall the example of the infrared camera, which detects frequencies that are normally invisible to the eye and converts them to the visible spectrum. The system of needs, like infrared radiation, is invisible. The market takes these needs and converts them into something that is observable—prices. But whenever there are externalities, the image gets a bit skewed. Some of the needs get missed. As a result, the picture that emerges will be distorted; it may even be missing entire sections. Since this picture is what we use to determine what to produce, flaws in the image will lead us into systematic inefficiencies. We will waste resources producing stuff that we don’t really want, instead of other stuff that we do want.”
― Joseph Heath, The Efficient Society: Why Canada Is As Close To Utopia As It Gets

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“Ironically, it is often the most tough-minded, no-nonsense right-wingers who go all soft when it comes to economic competition. People who would never be so naïve as to suggest that athletes might “voluntarily” refrain from taking steroids will turn around and push for “industry self-regulation” over government intervention, as if corporations might just choose to stop polluting or refrain from producing false advertising. It’s difficult to imagine a more total misunderstanding of the underlying dynamic of capitalism. Part of the problem involves the familiar failure to distinguish between the virtues of the market and the virtues of particular firms in the market. When the competition is staged just right, corporations will deliver unparalleled levels of efficiency. But it is almost never in a particular firm’s interest to produce at a level that will generate efficient outcomes for society as a whole. Companies are forced to operate efficiently by the rules of the competition. If they can find any way around these rules, they will naturally go for it.”
― Joseph Heath, The Efficient Society: Why Canada Is As Close To Utopia As It Gets

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“The so-called “Goulash capitalism” episode in Hungary clearly illustrated the problem. In 1994, shortly after the privatization of agriculture and food production, the country was swept by an epidemic of lead poisoning. After searching far and wide for the cause, doctors and scientists finally tracked down the source of the problem. Manufacturers of paprika—a staple of Hungarian cuisine—had been grinding up old paint, much of it lead-based, and adding it to the spice in order to improve its colour. The practice was so widespread that Hungarian officials were forced to order all the paprika in the country removed from store shelves and destroyed. At the time, no laws were in place to prevent such a catastrophe, simply because it had not occurred to anyone that this kind of thing would happen. Under communism, in which firms had no competition, no one had any incentive to poison their customers, and so consumer protection laws were unnecessary. In making the transition to the market, policy-makers assumed that producers would compete with one another to produce the best-quality paprika. They didn’t realize that producers would compete only to produce the best-looking paprika.”
― Joseph Heath, The Efficient Society: Why Canada Is As Close To Utopia As It Gets

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“The key concept is efficiency. The primary function of the Canadian welfare state is not to redistribute wealth— it does almost none of that. Government is involved in the economy because, in many cases, the state is able to deliver goods and services more efficiently than the market. From highways and pest control to health insurance and pensions, government is able to get the job done better. Thus the welfare state, far from being an unstable compromise between capitalism and socialism, is a perfectly logical arrangement—one that is designed to promote the overall efficiency of our economy.”
― Joseph Heath, The Efficient Society: Why Canada Is As Close To Utopia As It Gets

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“In any case, Locke argued that we all have a natural set of property rights and can happily go about our business trading with each other and creating all sorts of prosperity. Only much later do we get together and form governments in order to eliminate certain “inconveniences” associated with the state of nature. This sets up the basic contrasts: economy = natural; government = artificial. The impact of this type of thinking can be truly disastrous. No one knows this better than economic planners in Eastern Europe, who were unlucky enough to ask a bunch of American economists for advice on how to make the transition from communism to capitalism. Naturally, the Americans had no experience in these matters, but they did have an overarching ideology that stipulated that markets are nothing more than the expression of our natural “propensity to truck and barter.” So their advice to the East Europeans was quite simple— don’t do anything. Just destroy all your existing public institutions and markets will magically pop up and take their place. Nothing could be easier. Any country foolish enough to take this advice quickly found that when it scaled back the government’s role, what it wound up with was rampant criminality, not orderly markets.”
― Joseph Heath, The Efficient Society: Why Canada Is As Close To Utopia As It Gets

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