Freedom, Society, and State - Ludwig von Mises Institute

of participants, whenever government acts, one particular
policy must be chosen for the entire society and
then imposed on those who disagree with the choice.
In contrast, argues the anarchist, when the choice
ishand led 0 nthe rna r ketc0 ere ion i s a bsentand a wid e
variety of alternatives is present, permitting not just
the majority but a multitude of minorities to get their
way as well. The distinction between democracy and the
market can be illustrated by the following example.
Assume that three individuals, Larry, Curly and
Moe, are trying to determine the "correct" amount of
life insurance coverage. After examining the benefits
of the coverage and comparing them to the costs, each
individual would arrive at an amount of coverage which,
all things considered, would maximize his utility.
It is likely that the optimum, or equilibrium level,
w0 u I d d iff e r for e a chi n d i v i d ua I • Sin c e La r r y has a
large family and a risky occupation, being a window
washer on a skyscrapper, he desires considerable coverage.
Moe, on the other hand, is single and has terminalea
nee r. G i v e n his rna r ita1sta t usan d the e x orb i ­
tant premiums, he desires only a minimum amount. Curly
is an accountant with a small family. He desires an
intermediate amount. Their optimal insurance levels
are depicted in Fig. 1. The solid sloping lines simply
indicate that one's utilitv declines as one moves awav
from one's optimum. - -
Utility U
Curly Larry
low------------------> high
Figure 1: Optimum Coverage Levels
If insurance were supplied on the market, Larry
would purchase more than Curly and Curly more than Moe.
E 8 C h w0 U 1 d 8 d jus t his pur c has e s s 0 a s t 0 rna x i rn i z e his
ut iIi tv. But if the issue were decided democratical lv,
only Curly would obtain his optImum. If a candidate
took a position at or near Moe's optimum he would be
defeated by a candidate taking a position at or near
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