Summary: What I’m going to share today starts with something posted by Brian in response to Part 3 of my Going To Hell in a Handbasket series. My response contains some important information, but is buried so deeply among hundreds of other comments that I thought I should create an entire post around it. Here’s how it started: Bill, I really liked the live video chat on facebook. I think it is a much better way for you to communicate information than through writing on this blog (though I still really like this blog). It’s just easier to tell what someone means when you see how they are saying something instead of just the words they are saying. Definitely do more video chats! I have an economics question for you if you feel like taking the time. Harry Browne brings up an example in his book about the more expensive cost of using recycled paper vs. new paper. Browne explains this means that the resources consumed in recycling paper are more valuable to the market than the resources consumed in making new paper (aka trees). So basically the market should go with new paper since trees are less valuable than all the things that go into recycling paper. What I struggle to understand is how you can judge the value of trees solely by their price in the market. Say we discovered that cutting down trees significantly affected oxygen levels that were unhealthy for people. How would the free market naturally account for this to make trees more valuable? To me it seems regulations making trees more expensive would be the only way, yet I know this undermines the whole concept of the free market. Sorry for the long question, but I had to ask it because this has been burning on my mind, as I’m really interested in understanding the libertarian viewpoint. FROM BILL: First of all, you are assuming that what the green people say is true, that trees are disappearing. This is far from true. I don’t have the stats right in front of me, but (and this is a result of the market, too, as a matter of fact) timber companies plant more trees than they cut, and have for a long time. It’s in their interest to do so. The only place this isn’t true is in the Amazon, where socialists and other central planners are in control. This is the real reason why the trees in the Amazon are disappearing. It was BEFORE capitalism (or, as I said, in places where resources are controlled by central planners) that people—including tribal people like the Mayans, Aztecs, etc., but also including Europeans, Asians, etc—would cut down all the trees in a certain place for one reason or another, until they were all gone, and then move on to another spot and do it again. Modern people in a capitalist society have a vested interest in maintaining and husbanding resources, and they do. So, first of all, we are not running out of trees. Not by a longshot. The question about how the value of something is determined is an important one. Here is the answer: people determine the value of each commodity, service, item, or whatever, by their willingness to part with resources to have it. When you have resources of some kind, and you want something else, you do what everyone else does: you decide if you want to hang onto your current resources (which is often money, but could be other things, or even time) or trade it for something else. In other words, what is the item in question worth to you? How much of your resources are you willing to part with to have it? If you don’t think something is valuable enough to trade resources for, it must not be that valuable–to you. Billions of collective decisions about what is valuable, and how valuable, determine the value of items–at least in a market economy. In a command economy, with central planning, someone else decides for you what you should want, and how much you should want it and therefore pay for it (whether in money, other resources, time, or something else). This is highly inefficient and a huge waste to a soci[...]
