Donald Boudreaux at Cafe Hayek

…I remember back in the late 1970s or early 1980s when I first noticed that still water began to be offered for sale in single-sized bottles.  I was convinced that this product would fail.  ”Who would pay for still water in single-sized bottles when still water can be gotten for free out of water fountains and water coolers or at zero marginal cost out of faucets at home?” I reasoned.  Whether I reasoned rightly or wrongly, my prediction proved wrong.  Reason, you see, is a wonderful and necessary tool, but also one of limited power.  My reason could not reveal to me the preferences of millions of other people.  My reason could not reveal to me the ambitions and the creativity of entrepreneurs.  My reason could not reveal to me the details of an open-ended future in which people are free to spend their money – as consumers, as producers, and as investors – as they wish.

Had I been a government planner in the 1970s or early 1980s – a planner with the finest training, the highest integrity, and a most intense desire to serve my fellow citizens well – I would have counseled against directing society’s scarce resources into the production and distribution of single-sized bottled still water.  My reason would have assured me of the prudence and correctness of my decision.  And if I were such a government planner whose diktat would have been heeded, no one would ever have learned that my decision stunk.  Being prohibited by the state from being offered to consumers, still water bottled in single-sized servings would never have had the chance to grow into the multi-billion dollar industry that it is today.  That innovation passed the market test – an outcome that couldn’t have possibly occurred had not producers and consumers had the freedom actually to conduct this market test.