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An Alternative to the Master Builder Analogy

An Alternative to the Master Builder Analogy

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e_room_matt Posted: Tue, Sep 28 2010 1:30 AM

Three aliens from outer space (Keynes, Greenspan, and Mises) stumble upon the planet Earth.  The first thing they notice about Earth is that the planet contains a massive network of roads containing millions of cars with millions of drivers traveling at various speeds and in various directions.

 After a period of observation all three conclude that each car is headed for a particular destination for a particular reason, and, generally speaking, the more of the drivers reach their respective destination, the happier and better off everybody seems to be.
 
Alien Keynes is absolutely agast.  "These drivers all at traveling with completely selfish intentions; some at breakneck speeds and without any concern for travel plans of the other drivers.  This is a disaster waiting to happen.  It is only a matter of time till the whole system grinds to a halt as the most selfish drivers start causing a complete crash of the entire road system."
 
With heroic intentions Alien Keynes flys down to earth and seizes control of the system.  He immediately institutes a slew of new road rules and harsh punative measures for anything he regards as selfish driving.  After his new measures are implemented, however, he is disappointed to discover that remarkably fewer people are driving than there once were, and the people seem less happy than they did before.  The solution to this problem seems obvious to him.  "We need more cars on the road," says Keynes. 
 
He immediately beginnings throwing people into cars; any drivers and cars he can find, regardless of their driving condition or need.  He doesn't even care where they drive or if they even have a relavent destination to travel to.  "As long as more drivers reach more destinations, the people will be happer and everyone will be better off." 
 
The results of this policy are a complete disaster.  There are traffic jams everywhere.  Keynes responds by throwing even more cars and drivers onto the road.  Eventually the people begin an uproar as they have noticed that they are getting to far fewer destinations than they used to compared to the amount of time they are spending driving. 
 
Alien Greenspan flies down and removes Alien Keynes from control.  "These people were better off before you got here," he says.  He removes many of Keynes new rules and threats of punishment.  The system seems to improve a little but things are still far less efficient than they were to start with.  The solution to this problem seems obvious to him. "We need to adjust the speed limit, that way more drivers get to more destinations faster, and the people will be happy and better off."  With millions of miles of roads before him, the idea of adjusting the speed limit of each individual road and turn in the system seems downright impossible.  So he simply declares that all speed limit signs should be increased by 50%.  Along some residential roads, this results in speed limits being changed from 20 miles-an-hour to 30.  Along the interstates however, there is a far more dramatic effect, with speed limits increasing from 70 miles an hour to 105. 
 
For a brief moment Greenspan is pleased, everybody really seems to be moving fast!  But to his disappointment, large numbers of accidents begin to happen across the system.  The worst appears to be the interestates where many of the drivers are unable stop in time to avoid massive multi-car pileups and damage is far more catastrophic. 
 
Greenspan is concerned.  Many cars aren't getting to their destinations.  People are unhappy.  He increases the speed limit again under the hopes that maybe the few drivers that survive unscathed can make the extra trips necessary at higher speeds to compensate.  Interstate speed limits are now up to 140 miles per hour.  There are even more accidents. 
 
Greenspan is in a full panic.  Cars aren't getting to their destinations are than there are far fewer driveable cars than there used to be.  In desparation he pays anybody to get any car, in any drivable condition, out of their garage and start driving.  He also refuses to let any damaged car to stop driving, so long as it is still mobile.  In some cases, he teleports a few select drivers directly to preferential destinations when they seemed incapable of reaching them in the wrecks they were driving.  He removes stop signs, stop lights, any thing else he thinks might be slowing the system down.  He orders many cars to start driving in places where physical roads do not even exist to drive upon.  The entire system becomes a complete discordinated mess with many of the best roads completely shut down with uncleared accidents and unqualified drivers; while others feature sports cars traveling on dirt roads that lead nowhere at a suicidal speeds.
 
Alien Keynes returns and begins arguing with Greenspan about who offers the better solution to the mess. 
 
In desparation, Alien Mises finally arrives on the scene and tries to restore sanity.  "These people were so much better off before we got here.  Stop changing speed limits, don't you see these are not arbitrary numbers?  They matter and are vital to the proper coordination of the system.  And quit throwing more cars and drivers onto the road.  The road already has all the cars and drivers it needs.  The ones you are adding are less qualified and less useful than the ones that were already there anyway.  They just clog of the system and make it take longer for people to reach their destinations.  The most important thing we can do is stop everything and clear all this wreckage so people can get back to driving normally.  Let them judge for themselves what drivers and cars are qualified to resume driving at that point, and what destinations are worth driving to."
 
Greenspan and Keynes shoot Mises and continue arguing.
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chloe732 replied on Tue, Sep 28 2010 10:46 PM

Bummer ending. frown

You seem to be pointing toward laissez-faire as an alternative to interventions of various kinds, but that is not what the master builder analogy is about.  Malinvestment, the essence of Mises's analogy, is a tough concept to explain. 

"The market is a process." - Ludwig von Mises, as related by Israel Kirzner.   "Capital formation is a beautiful thing" - Chloe732.

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Azure replied on Wed, Sep 29 2010 12:16 AM

In some cases, he teleports a few select drivers directly to preferential destinations when they seemed incapable of reaching them in the wrecks they were driving.

This is how the story really ends:

Alien Entrepreneur comes down and sells all the humans devices that let them teleport for huge profits at very low prices. The humans turn their cars into scrap and leave the roads to be abandoned.

Greenspan and Keynes stare in amazement.

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