We Have A Serious Unicorn Problem

Release Date
November 22, 2016

Topic

Basic Economics Economics
Description

It’s easy to imagine a perfect system, one in which all are taken care of, where our cars  run on recycled emissions, and where everyone can afford healthcare, but we too easily fall into “unicorn traps” with this sort of thinking. Professor Michael Munger of Duke University explains:

Munger “Unicorn Governance” (article): A more in-depth explaination of the unicorn problem from Michael Munger.
“A Vindication of Natural Liberty” (article): Using satire, Edmund Burke argues against the idea of “the state of nature.” 
“The Man of System” (book passage): In this passage from Theory of Moral Sentiments, Adam Smith discusses planned economies versus spontaneous order.
William Keech and Michael Munger, “The Anatomy of Government Failure” (academic paper): This paper by William Keech and Michael Munger discusses government failure. 

    1. I have an idea for a new mass transit system. It’s based on unicorn power. They will pull the wagons through the streets and carry the passengers. The reason this is so great is that unicorns are extremely strong and so they can pull lots of passengers. They only eat rainbows, and we have plenty of those. Most important they have low emissions. Unicorn farts smell like fresh strawberries and that’s good for the environment and smelly cities. A pure win. You might object of course that there’s a problem with my plan. Unicorns don’t actually exist, ah, but they do. Unicorns clearly exist. Just close your eyes, think of one. I bet your vision of a unicorn is pretty close to mine; a pretty white horse with an orange horn on his forehead, surrounded by rainbows. Must be lunch time.

      The point is that it’s easy for you to imagine a unicorn and it’s a lot like the unicorn that I imagine. We have a shared vision. Now that may sound silly when we say it about unicorns, but that’s exactly how many people think of actual public solutions to real-world problems. They imagine that the government will have the information that it needs and act to serve the public good. Take healthcare for example. People imagined that it would be easy to create a new program to make insurance both universal and cheaper, but the details didn’t live up to what we imagined. That’s always true of government action in the real world. We think those are mistakes, aberrations, we’ll get it right next time if we just choose better people and make those urgently needed reforms.

      If your notion of government comes from the policies you can imagine, then criticisms of actual politicians and actual bureaucrats seem beside the point. The ideal system of government is, well, ideal. The mistake that many advocates for liberty make is to try to defend their own unicorn; perfect markets. That’s no more realistic than an imaginary state and it’s no more useful as an argument for organizing society. Markets often make mistakes too. People really do suffer from poverty and lack of healthcare. Markets are useful not because markets are perfect, but because the world is imperfect. Markets provide information about resources through prices and about what products we should make through profits and losses. Those signals are far from perfect, but they’re the best source of information we’ve got. Markets are better than relying on the unicorns that we can only imagine.