Libertarians traditionally do a terrible job of explaining why socialism can’t work. Which is to say: we’re great at explaining it to other libertarians, but we think we can talk to our Bernie Sanders-supporter friends the same way. If you’re talking to someone who doesn’t already understand the problem, and you just say something like "in a socialist environment there can’t be market prices," you have to realize that person will think that’s a feature, not a bug. Most of us libertarians know about the socialist calculation problem, but to the wider audience it’s pretty esoteric stuff; it’s not just plainly intuitive to most people that the absence of market prices causes discoördination in production. Either way, it seems like ultimately you have some guy deciding what products, and how many, to make. Can’t we just put those successful entrepreneurs — the Bill Gateses and Jeff Bezoses of the world — in charge of the planning boards and have it work just fine?
This, of course, is where libertarians tend to fall down. We’re great at extolling the virtues of the entrepreneur, but, in a very significant sense, we miss the most important element: what’s critical about entrepreneurs is not that they make amazing, successful things, but that they’re able to fail in a controlled manner. When a product fails on the market, only the entrepreneur and those closely connected to him suffer, which is important for two reasons: first because it means that random people, uninvolved with the failed project, don’t have to bear the cost of the failure, and second because, by concentrating that cost on the people responsible, the failure is made immediately apparent, and the pressure to cease failing is substantial. Amazon’s Fire Phone, by all accounts, was a neat piece of technology, but nobody cared enough to buy one, and Amazon cut it loose after a few months of disappointing performance. Microsoft’s Windows 8 suffered a similar poor reception, which encouraged the company to proceed in a new direction (and quite swiftly!) with its replacement. While the successes are, of course, the ultimate goal of the market economy — the production of goods and services people want — the only thing that makes those successes possible is the market’s robust failure mechanism. When governments attempt to "soften the blow" of failure by socializing the losses, that not only creates a massive injustice (as innocent people unconnected to the failure are now forced to pay for it), but it also encourages businesses to linger in failed products and failed practices longer than they should.
By the time an economy is entirely socialist, of course, it’s no longer even possible to determine when a product is a failure. This seems a bit unlikely just stated baldly like that, but all we have to do to see the truth of it is look at the socialist sectors of the American economy. What, for example, would constitute a failure condition for the TSA? We already know that the agency only catches 5% of prohibited weapons smuggled through checkpoints. Is this just a "growing pain" that can be smoothed out of a successful product, or is this a complete failure? The government has decided to dump $7.6 billion into the TSA next year — up almost half a billion dollars over the previous year. Clearly the government doesn’t consider this a failed product that should be shut down so the resources can be freed up for other things, and that’s in very large part because the people making the decisions do not, in any significant way, actually suffer the pain of the failure. Peter Neffenger, the administrator of the TSA, is not personally on the hook for that $7.6 billion. He doesn’t have to answer to angry investors who want to know when they’re going to see their money again.
Too frequently, we libertarians present the socialist problem as being one of being unable to produce enough stuff. This is certainly the most visible result of the issue — that famous seventy-year "drought" that struck the Ukraine coincidentally for the entire lifetime of the Soviet Union, for example — but there’s also a definite problem of producing too much stuff that nobody actually wants. Witness China’s infamous "ghost cities," produced in huge quantities by a planning board that figured that all those millions of rural people would love to live in the city if only more cities were available. It’s not that private entrepreneurs can’t construct buildings that nobody wants to move into; that happens all the time. But the pain of failure stops it before it grows into an entire empty city — and certainly long before the country is smothered in them!
It’s not enough to know how many units have been produced, or even how many units have been sold. Nintendo’s sold about fifteen million or so of its current-generation console, the Wii U. Is that a success? It seems like a lot to me! I know I’ve never bought fifteen million of anything. If the government were running Nintendo, it would probably look at those sales and conclude that fifteen million people are "depending" on continued support of the Wii U, and that’s a lot of potential voters! Privately-owned Nintendo, of course, has concluded that the Wii U has not sold — and perhaps more to the point, is not currently selling — enough units to justify continued investment, and is rapidly deprecating it in favor of its next venture. This is exactly the point. Private actors, who have to pay the cost for their failures, are able to identify when it’s time to cut losses, and how to launch a new product that, with any luck, will be more desirable to a larger number of people. Microsoft didn’t keep its reviled "Bob" limping around for years, after all, constantly throwing good money after bad.
When socialists talk about competition, they often criticize it as being "wasteful." They view the products that failed as so much squandered capital that could have been spent in more productive ways, but they have the pony behind the chariot here: obviously, the creators of those failed products did not know in advance what was going to happen. They believed their products would succeed. Some people at Nintendo believed they could sell a hundred million Wii Us — those people weren’t being "wasteful," they were just wrong. They, and the company that employed them, suffered for being wrong, but the rest of us did not. Given that no socialist to date has invented a magical way to prevent people from ever being wrong, this seems like about the best way to handle the phenomenon.
That is the crux of the matter: people are going to continue to make mistakes. They are going to continue to be wrong. It’s not that the people who go into government lack the wonderful entrepreneurial insights of the private sector; replacing them with smarter technocrats, more moral technocrats, or Donald Trumpian business types who will "run government like a business" won’t achieve a thing. The core problem is that a socialist economy divorces actors from the consequences of their actions. This seems at first blush like it’s more humane — why not insulate people from suffering? — but in reality it encourages people to persist in failure, and, before you know it, thirty million people starve to death. The only way to prevent that from happening is for people who are wrong to discover that they’re wrong — swiftly, unambiguously, and painfully.
Also consider that if I were video game czar, you’d all be stuck with the Wii U anyhow because I really like it.
I find the biggest problem with the libertarian movement to be the inability to sell people on our ideas. We tend to know the facts, and have a handle on the logic, but can’t persuade people who aren’t at least partially in our camp to begin with. I’ve decided recently that it is just as important for us to study guys like Dale Carnegie and Zig Ziglar as it is to study Rothbard and Hoppe. The right message is worthless if it is delivered the wrong way.
Agreed. We’re a bit too insular, I think — we’re good at talking to other libertarians, but have an alarming tendency to assume that non-libertarians think the same way and have the same priorities.