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AS TIME GOES BY

A few comparisons

So far we can't see major differences between what governments propose and the products Free Markets plan to offer, cost-wise. This is so because we are only at the initial stages of this process. If we want to understand the full picture, we need to move forward in time and analyze how the proposed solutions behave in real life, but before we do so, a few comparisons:

As we explained before, we can only compare proposals within the shorter timeframe imposed by the Free Market, thus, we are only comparing up to year 5.

Issue Cost: this has not changed because governments haven't altered their thinking whereby Free Markets don't care as they are focused in the price they may be able to sell their product at.

Ongoing Solution Cost: same rationale applies as for the Issue Cost.

Early Action Solution Cost vs. Estimated Customer Acceptable Price: here we can see that the government proposed cost is roughly the same as the Free Market proposed price, although the latter is presented as a range. This is a typical scenario where initially the Free Market proposed price may be more expensive (i.e. no government "subsidies"), the same (rare coincidence) or cheaper (i.e. Free Market efficiencies rule over Government inefficiencies).

Viewed under this light, there is no reason not to go with the governmental proposal since it seems reasonable, under "societal" control and far better defined than the Free Market price range. And it does indeed seem so!

Now that we understand where we stand at the beginning, we can move forward in time.

Government Boondoggles

Over time things begin to change dramatically between the original governmental proposal and the actual cost. This change has to do with a number of factors, some of them being:

• Governmental manufacturing inefficiency
• Governmental bureaucracy
• Governmental arbitrary pricing
• Tax changes (i.e. increases)
• Political changes in points of view
• Erroneous politically-driven initiatives
• Politically driven pseudo-solutions
• De-funding
• Built-in delays and races to catch-up
• Project mis-management and cost overruns
• Bloated organizations
• No Free Market-driven technological improvements
• And many others

As a consequence of all those factors, the actual cost of the solution implemented by governments typically skyrockets.  We can see the consequences in the following graph:

The difference between the Actual Solution Cost and the proposed Early Action Solution Cost is massive, and this "extra" cost comes directly out of your pocket. This is what governments actually deliver in real life.

A Step Too Far

But what happens when for some reason the Issue Costs skyrockets (e.g. a famine out of control) or when they collapse down to nothing because the Issue has been solved (e.g. Free Market-based farming)? Take a look below:

From this graph it is obvious that when costs skyrocket not only the Actual Solution Cost ceases to have any resemblance to its previous trend, but it skyrockets beyond any proportion and oscillates widely. In other words, governments are inflexible and don't know how to respond to changes because everything has been pre-planned and it is now fixed (see for example Why Large Government Projects Fail). Thus, they panic and do the only thing they know how to do: throw money at the problem. Yes. Your money. Don't believe us? Good! Next time something like this happens in your country, just observe how the government buckles and bends over the "political pressure" imposed by "the people" to "do something".

And what happens when the Issue becomes a non-event? Massive government spending continues for a long time simply because, again, everything has been pre-planned and in such plans the Issue did not disappear. Thus, the project having its own inertia, continues with complete disregard of the state of the Issue. Don't believe us? Good! Ask yourself (or even better, do the research), when was the last time that a government project has been closed or de-funded on a timely basis? Things like this just don't happen. They continue to burn money. Yes. Your money.

Eventually, a politician here or there discovers that this money can better be utilized for his/her "pet solution project" (i.e. vote buying) and therefore they transfer this funding out and finally! the project dies. However, by then, people couldn't care less and the Issue has long become a non-event. And that's how projects die.

Free Market Operations

In the Free Market things are vastly different. As we previously mentioned a few thousand times, free markets are profit-driven, and this makes a remarkable difference. Let's begin with the problems. Yes, private enterprises also suffer from:

• Manufacturing inefficiency
• Bureaucracy
• Changes in customer's points of view
• Erroneous driven initiatives
• De-funding
• Built-in delays and races to catch-up
• Project mis-management and cost overruns
• Bloated organizations
• And many others

However, you may have noticed that this list is shorter than the government list. This is so because enterprises do not concern themselves with non-productive processes, thus, they have the tendency to minimize them. Private enterprises are also much more efficient because efficiency improves profits. This means that when there is a problem in manufacturing, it gets solved quickly. And we mean really quickly! There are no political points of view or selected committees or lengthy "consideration periods" or "study requirements" or none of that nonsense. Enterprises typically look at the problem, gather sufficient information to make a decision and away they go.

Free Markets also include competition and massive Free Market driven technological improvements… which lower manufacturing costs… which foster competition… which lower manufacturing costs… see the negative feedback loop in action? All for your convenience and wallet protection and wellbeing. All of this determines the final outcome which can be seen in the graph below:

There are two remarkable things in this graph. The first one is the low cost of the Actual Solution Market Price. The second is that this cost is so low that we can't even see what's going on. For that, we need to magnify this variable by adding a secondary axis to the graph thus getting:

Which will require a bit of an explanation. But don't despair, it is a good explanation!

Phase #1: during this phase the Free Market delivers a price which is very much as planned during the initial proposal. There are no surprises here with the exception that… the Free Market delivered a price which was very much as planned during the initial proposal!

Phase #2: This timeframe is beyond what the initial Free Market proposal covered and for a good reason. As you can see, the actual price is dropping! No, this is not a plotting mistake but an everyday effect that you could experience should there be no inflation (i.e. no government printing, this is, creation of money out of thin air). This is dis-inflation or deflation at work. The good stuff and not the bad boogeyman that governments were and are selling you day in and day out. Yes. The actual cost of the Free Market solution is becoming cheaper and cheaper. This phenomenon reflects several initiatives such as mass production, manufacturing efficiencies and technology improvements.

Phase #3: In this phase an unexpected increase happens to the cost of the Issue. In line with that, the Free Market responds by adjusting its price accordingly (i.e. a jump up), simply because its costs have gone up and also because there is probably a higher demand. However, following the initial jump, the price continues to decline for the same reasons it did in Phase #2, even though the cost of the Issue continues to climb.

Phase #4: in this phase the Issue disappears and in line with this fact, the Free Market ceases providing the Solution almost immediately. This actually makes a lot of sense because although there are plenty of plans in place and ongoing, they are exclusively profit-driven. Should those plans continue, they will create significant loses immediately because they would be generating a product nobody will buy. Thus, they are mercilessly shut down as soon as possible.

Note: please see the Glossary if you are unfamiliar with certain words.