Freeman

ARTICLE

Mutual Accommodation

Private Property Enables the Best Uses of Resources

MAY 01, 2000 by DONALD BOUDREAUX

In The Future and Its Enemies, Virginia Postrel notes the astonishing fact that if you thoroughly shuffle an ordinary deck of 52 playing cards, chances are practically 100 percent that the resulting arrangement of cards has never before existed. Never. Every time you shuffle a deck, you produce an arrangement of cards that exists for the first time in history.

The arithmetic works out that way. For a very small number of items, the number of possible arrangements is small. Three items, for example, can be arranged only six different ways. But the number of possible arrange ments grows very large very quickly. The number of different ways to arrange five items is 120 . . . for ten items it’s 3,628,800 . . . for fifteen items it’s 1,307,674,368,000.

The number of different ways to arrange 52 items is 8.06667 times 10 to the 67th power. This is a big number. No human can comprehend its enormousness. By way of comparison, the number of possible ways to arrange a mere 20 items is 2,432,902,008,176,640,000—a number larger than the total number of seconds that have elapsed since the beginning of time ten billion years ago—and this number is Lilliputian compared to 8.06667.

A Multitude of Options

What’s the significance of these facts about numbers? Consider the number of different resources available in the world—my labor, your labor, your land, oil, tungsten, cedar, coffee beans, chickens, rivers, the Empire State Building, Windows 2000, the wharves at Houston, the classrooms at Oxford, the airport at Miami, and on and on and on. No one can possibly count all of the different productive resources available for our use. But we can be sure that this number is at least in the tens of billions.

When you reflect on how incomprehensibly large is the number of ways to arrange a deck containing a mere 52 cards, the mind boggles at the number of different ways to arrange all the world’s resources.

Of course, the vast majority of these ways are useless. For example, one possible arrangement would have me holding a scalpel in an operating room as I prepare to perform heart surgery on a patient. This would be a regrettable arrangement, for I have no medical training. A drink made of vermouth mixed with kerosene and served in a sugar cone would be another unfortunate combination—as would a steel mill whose receiving docks are loaded not with iron ore but with bales of cotton.

If our world were random—if resources combined together haphazardly, as if a giant took them all into his hands and tossed them down like so many dice—it’s a virtual certainty that the resulting combination of resources would be useless. Unless this chance arrangement were quickly rearranged according to some productive logic, nothing worthwhile would be produced. We would all starve to death. Because only a tiny fraction of possible arrangements serves human ends, any arrangement will be useless if it is chosen randomly or with inadequate knowledge of how each and every resource might be productively combined with each other.

Bottom-Up, Not Top-Down

How, then, to select from all the possible arrangements of resources those relatively few that serve human ends? Central planning won’t do. To see why, assume that there aren’t tens of billions of resources in the world, but a mere 20. Again, the number of possible ways to arrange 20 resources is greater than the number of seconds that have existed since the beginning of time. No human intelligence can even survey all of these possible arrangements, much less evaluate the objective properties of each arrangement. (For example, will this seed corn grow better on plot of land A or on plot of land B? Will Bill Gates be more effective at designing computer software or designing women’s lingerie?) When you add to this impossibility the central planner’s immensely greater difficulty of learning each person’s tastes, preferences, and dreams, the prospect of having a person or committee select wisely from among the 2,432,902,008,176,640,000 possible arrangements of only 20 resources is revealed as utterly futile. Imagine, then, the impossibility of this task given that the world’s resources number in the tens of billions.

And yet, we witness all around us an arrangement of resources that’s productive and serves human goals. Cotton bales are not delivered to steel factories; Bill Gates does not design women’s lingerie; television cabinets are not made of caramel. Today’s arrangement of resources might not be perfect, but it is vastly superior to most of the trillions upon trillions of other possible arrangements.

How have we managed to get one of the minuscule number of arrangements that work? The answer is private property—a social institution that encourages mutual accommodation.

Private property eliminates the possibility that resource arrangements will be random, for each resource owner chooses a course of action only if it promises rewards to the owner that exceed the rewards promised by all other available courses. For each consumer, this means spending money on those items that best satisfy his individual tastes. For each producer, this means finding those uses that promise the highest profit. Because profit in free markets comes from satisfying as many consumers as possible, each producer is forever on the lookout for better ways to use his resources to satisfy consumers.

Put differently, a private-property regime rejects top-down direction from government. Instead, decisions about how each resource is to be used are left in the hands of each resource owner, who surveys the economic landscape within his purview to see if and how he can better deploy the resources at his disposal in ways that make the resources of other people more valuable. If he succeeds, his resources as well as those of countless others are made more valuable. Because private property gives to each resource owner (including people who own nothing but their own labor) both the power to reject offers that are unattractive relative to other options, and the incentive to use their resources in ways that do most to help others, the result is a system of peaceful, mutual accommodation.

Hayek rightly called this result a “marvel.” It is a breathtakingly complex and productive arrangement of countless resources. This arrangement emerged over time (and is still emerging) as the result of billions upon billions of individual, daily, small decisions made by people seeking to better employ their resources and labor in ways that other people find helpful. Despite being unplanned, the order itself is governed by a strict logic—that of mutual accommodation—a logic contained only in the institution of private property.

ASSOCIATED ISSUE

May 2000

ABOUT

DONALD BOUDREAUX

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

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