BOOK REVIEW:THE MISSION of the Institute of Economic Affairs is to analyse and expound the role of markets in solving economic and social problems. Consequently the contributors to this book all share a jaundiced view of government intervention. Needless to say, the nanny state is anathema to them, writes Michael Casey

Prohibitions
edited by John Meadowcroft;
Institute of Economic Affairs; €15.80

It is unusual for a group of academics to share an ideology to this extent and the conclusions of the various chapters have a less than captivating predictability, ie the market knows best. Nevertheless, this book is provocative in parts because the market solution to some of the problems of public policy are controversial to say the least.

It is interesting to note that, while the authors believe in free markets, they do not believe in free-for-all markets. In other words, "proper" markets must be based on the rule of law, tort and private property. This immediately raises a difficulty. Suppose the rule of law, tort and private property is biased in favour of the wealthy - which, historically, is a reasonable hypothesis - then how can poor people have equal access to the market? This is not addressed.

The book asks whether the state should prohibit or outlaw alcohol, professional boxing, firearms, pornography, prostitution, "harmful" advertisements, drugs etc. The answer is "not at all" or "as little as possible". General principles are adduced in support of a laissez-faire approach, eg freedom of voluntary contracts, freedom of expression as a basic human right, and the unacceptability of harming third parties.

On the basis of these principles and given the primacy of markets, the prohibition of alcohol in the 1920s was seen as a fiasco which led to crime and political corruption. The hoped-for increase in economic efficiency did not materialise. In fact, the Great Depression put paid to all such hopes.

The fact that boxing is banned in a few countries (Sweden, Norway, Cuba) does not persuade the author of the relevant chapter. Even though inflicting harm is the purpose of the sport, participants are aware of the risks and a ban would infringe their human rights. In any case the mortality rate for boxers is low - 90 times less than for skydivers and jockeys.

Much the same argument applies to bans on handguns. The evidence shows that countries which introduced prohibitions, including Ireland, did not reduce the murder rate. In fact, murders increased in those countries. The author of course cannot deal properly with the counterfactual, ie would the trend have been better or worse without the prohibition? We don't know.

Pornography is seen as freedom of expression and, with the exception of child pornography, there should be no question of prohibition. The US supreme court's criminalisation of "obscenity" is seen as subjective and inappropriate. The issue of degradation to women is dismissed on the grounds that women make rational choices to engage in pornography and, indeed, prostitution. Prohibiting these activities would infringe the rights of women and treat them as second-class citizens. These conclusions might not appeal to feminists.

Recreational drugs should also be legalised, as should gambling. There is some discussion of whether addicts can behave rationally or in a voluntary way, but addiction is seen as the exception and not the norm. As far as prescription drugs are concerned, the author criticises the US Food and Drug Administration for delays in approving drugs. In general, the market or laissez-faire solution is again the preferred one.

Perhaps the most contentious chapter is the one which advocates the selling of body parts for transplantation. The benefits would outweigh the costs and the market would decide on the allocation of organs in a fair and objective way. There is a logic to all of this, but the question is whether politicians or society at large have the stomach for it. Perhaps logic only goes so far and then comes up against societies' moral and other codes, which may not always be rational in a strict sense.

Presumably the authors of this book would have no difficulty with abortion on demand or with duelling, say. If duellists were adult and rational and the contest fair, there would be nothing wrong with settling disputes in that manner. By the same token, euthanasia should presumably be a matter of individual choice.

In another forum, a follower of Margaret Thatcher once argued that the laws against drink driving should be revoked. He argued that drink driving was part of British culture and should be safeguarded even if some lives were lost. The benefits to society as a whole were greater than the costs of a few lives.

Perhaps the contributors to Prohibitions would not go this far. The logic of many of their arguments is impeccable but ignores emotional common sense. There is a bland assumption that the market knows better than Nanny and also knows best. The trouble is that, to work well, markets have to meet stringent conditions, eg perfect information, competition, contestability etc. These conditions often do not exist in practice.

Why, for example, have financial markets (which satisfy most of these conditions) collapsed yet again? Why are there so many devastating market failures in virtually every capitalist economy? Academics should look harder at the evidence - or at least publish books which include other ideologies.