A Driving Metaphor for Free-Markets

The following is from a lecture given by economic educator Paul Heyne at Montana State University in 1982. (Chapter3, “Income and Ethics in the Market System,” in “Are Economists Basically Immoral?” and Other Essays on Economics, Ethics, and Religion by Paul Heyne.) It offers a fascinating metaphor for the free-market economy.

Radical Individualism

It’s [the traffic system] a radically individualist system, to begin with. Drivers sit in their own vehicles, cut off from any communication with the other drivers who surround them, pass them, meet them, and cross their path. There are citizens-band radios, of course, but it’s my impression that drivers use them to communicate with people who aren’t close by and whom they don’t expect to encounter. I’ve seen no evidence that drivers use citizens-band radios to work out problems of potential conflict on the freeways during the rush hour, or generally while driving in urban areas.

On the contrary, drivers formulate their plans quite independently, with no knowledge of the plans that have been or will be made by others whom they’re going to encounter. Each of us decides what time to leave for work and what route to take, and we do so without even consulting anyone else. The choice of both ends and means s made by individual drivers who characteristically don’t have the slightest inkling of what others are going to do. There is currently no grand plan, no overarching design constructed by the Department of Commuting to make sure that you and I aren’t planning to occupy the identical road space at the same time. (The urban traffic system, in short, is not like the air traffic control system.)

Individualism, Selfishness and Concentration

Now one could correctly say of this system, as Adam Smith said about investors in his day: Each person intends only his own gain. But is that selfish? Is it selfish of me, while driving, to focus exclusively on getting to my chosen destination as quickly as is consistent with my person well-being? Is it selfish of me to ignore completely, not even to think about, the welfare of other drivers? If in fact I start to wonder where other drivers are going and whether their missions might be more urgent than mine, I’m beginning to daydream, and I become to that extent a greater menace not only to my own welfare but also to the welfare of other drivers in my immediate environment. An important insight emerges from this: Responsible, ethical behavior will often require an exclusive preoccupation with the technical task at hand. Driving in traffic is an example that we will all concede. So is the act of performing surgical operations; surgeons don’t operate on close friends or relatives, because the personal relationship could easily introduce considerations irrelevant to the task at hand and inimical to success.

Might this also be true of most activity in the market? We’ll return to that question.

Morality or Muddle?

Meanwhile, let’s note in the traffic situation what harm is likely to be done by people who decide to insert “morality” into their decisions. What will a driver accomplish if he refrains from advancing when the light turns green, perhaps because he's running early and suspects that some in the cross-traffic are running late ? He will almost certainly not persuade the cross-traffic to go on red; he will delay people behind him, who could well be on much more urgent missions than his own; and he will increase the likelihood of an accident by introducing substantial new uncertainties into the calculations of drivers who are observing and trying to anticipate his erratic behavior. And, of course, if everyone decided to be “unselfish” in this manner, traffic would come to a halt, as drivers regularly got out of their vehicles to discuss the relative urgency of their current goals and to insist that the welfare of others be advanced before their own.

Is this also generally true of ordinary market activity, that it would come to a halt, at enormous cost to all participants, if they were all to act consistently on the principle of advancing the welfare of the most needy or the most worthy – rather than focusing on the accomplishment of their own personal goals? To that question, too, we’ll want to return.

The Rules of the Game

I have not mentioned a very important aspect of traffic systems: They are not systems of complete anarchy. There are definite rules of the game that must be obeyed by participants if the system is to work. Drive to the right, stop for red lights, stay close to the legal speed limit, and, above all, do not touch the cars around you. We even have rules for suspending the rules. Everyone stops and yields to vehicles with sirens and flashing lights, and uniformed police officers may trump all the rules. (32-34)

Heyne goes on to point out that some rules are somewhat arbitrary (driving on the right) but necessary for clarity and stability … so people can react and cooperate with the actions of others. Then he writes:

Parallel Definitions

Let me now try to summarize in one sentence the social system for moving traffic with which we are all familiar. It is a system in which individuals pursue their own interests on the basis of the situation they perceive, obeying a few clear and stable rules of the game.

And let me follow that up with an equally brief definition of capitalism, or a free-market economy. It is also a social system in which individuals pursue their own interests on the basis of the situation they perceive, obeying a few clear and stable rules of the game.  (35)

No metaphor is perfect. Pushed too far they will fall apart. Yet one of the things I thought about when reading this is that the traffic system works great … as long as you have a car. What about those who are without cars? It is true that capitalism is a rising tide that lifts all boats … but only those who have boats get lifted. What if you don’t have the resources (human, financial, or otherwise) to participate? That doesn’t mean you fault the system because some aren’t in it, but if we are talking about justice for all, a simple expansion of capitalism and free-markets won’t help everyone.

Comments

[Travis Greene]

This is a good metaphor in some ways, but the flaw is, of course, that somebody had to build the roads in the first place.

Additionally, drivers do, in fact, communicate with each other about their intentions all the time. Turn signals, waves, nods...I may not decline to go on the green light, but I've certainly allowed many people into traffic ahead of me, pulled over to let folks around, and so forth. There is such a thing as driving courtesy, and it's very important to the system.

Further, as you say, not everybody has a car. And we also have (publicly subsidized) buses, bicycle trails, etc. So maybe the best thing about this metaphor is that it reveals how truly complicated economics are. Nothing is as radically individualist as anyone claims.

[Michael W. Kruse]

The infrastructure would be put in place through taxes and fees. There are parallel examples to keeping a market economy operating as well.

That drivers communicate and negotiate specific circumstances that affect them personally really doesn't address Heyne's metaphor. The issue is that none of us are in constant communication with everyone in our proximity, collaboratively trying to decide what is in the common interest of all drivers, or engaging in ethical debate over who should be given primacy based on their present mission. When the occasional question of what to do arises in traffic, we usually resolve it through courtesy. Acting with courtesy toward others in pursuit of you individual aims is courtesy ... not communal action. I don't thinking bicycles or walking really impacts the metaphor.

Buses are interesting. If buses are available, we still pick which ones to take based on our individualist concerns of where we need to be and when. It is just that a group of riders turns over the traffic negotiation to one driver rather than doing it themselves. That driver, is still operating on individualist mindset of getting from point A to B, and not worrying about the overall common good of traffic flow.

But here is the challenge with buses and other mass transportation: you need a mass of people. There must be a high concentration of people all making relatively similar transportation destination and timing decisions. When they choose to take the bus or subway it is an individualist decision based on the merits one ascribes to various options. Thus, while the vehicles may be managed and run by a centralized entity, they function in the metaphor no differently than the individual driver.

[Dave Hackett]

Michael, Paul Heyne was my favorite professor at the University of Washington during my undergrad econ degree studies. I took small upperclass seminars with him. We discovered both of us were PKs, he a Lutheran and I a Presbyterian. We delighted in ruminating on an economic way of understanding The Fall. He was a gracious, accessible professor, one I will never forget.

[Michael W. Kruse]

Very cool. Never met him but I love his writing.