Thomas Skadeland: The North Dakota Public Service Commission Is Inherently Inefficient and Unethical

(Press Photo by Sydney Mook)

Public Service Commissioners Brian Kalk, right, Chair Julie Fedorchak, center, and Commissioner Randy Christmann listen to public comment on the proposed 87-turbine Brady Wind Farm at the Dickinson City Hall on Wednesday.

The Public Service Commission claims the ability and authority to manipulate market processes according to its idea of a planned economic order; I oppose this claim. The P.S.C. dictates which businesses may enter certain fields, how property owners may use their land, how unowned land will be used, and how individuals may establish contracts. Unless granted special privilege by the P.S.C. in exchange for excessive fees; business investment, entrepreneurialism, innovation, and economic growth are limited. The P.S.C. only restricts the natural rights of North Dakota citizens to own and control property and engage in voluntary contracts. This is both economically and ethically objectionable.

The North Dakota P.S.C. has monopoly control over specific sectors of the North Dakota economy restricting entrance into what would be competitive and innovative markets. The P.S.C. openly engages in central economic planning through restricted land development, licensure law, price fixing, government-granted monopolies, and other unjust rules and regulations. All areas of intervention administered by the Public Service Commission are damaging to economic strength and growth. It is inherently impossible for a bureaucratic institution to engage in appropriate economic calculation.

Ludwig von Mises, one of the founders of the Austrian School of Economics, explains:

“In public administration there is no connection between revenue and expenditure. The public services are spending money only; the insignificant income derived from special sources is more or less accidental. The revenue derived from customs and taxes is not “produced” by the administrative apparatus. Its source is the law, not the activities of customs officers and tax collectors. It is not the merit of a collector of internal revenue that the residents of his district are richer and pay higher taxes than those of another district. The time and effort required for the administrative handling of an income tax return are not in proportion to the amount of the taxable income it concerns.”  – (Bureaucracy)

This interventionism is also ethically repugnant. Central economic planning, i.e. economic interventionism, is an aggressive intrusion of individual human liberty. All human beings are endowed with equal human rights which include, but are not limited to, the right to life, property, and freedom of association. Any interference in these natural human rights constitutes an act of aggression against a peaceful individual and should be considered unjust and immoral. Rather from an act by an individual or an act by a government agency, this act of force is illegitimate under any society that claims to support equal human rights. The ND P.S.C. violates these basic human rights.

Both economic and ethical standards should be based on how they immediately affect the life of the individual. When the individual is kept from pursuing his or her desired goals, as long as these goals do not include the initiation of violence, inefficiency arises and there is a violation of the basic human right of peaceful human action. Each individual’s subjective valuations and preferences determine how he or she will use their time, labor, and property. When individuals are kept from acting on their personal preferences and valuations they are forced to adjust their behavior according to artificial interference in market signals. Their desired course of action is now denied to them based on the dictates of a central authority which is unfit to determine appropriate economic guidance.

The only guidance required by an economic order is that which is naturally carried out through free market exchange determined by each individual’s subjective valuations. These valuations are reached through the process of profit and loss. In a market economy it is the profit and loss of all market participants that guide economic activity.

Ludwig von Mises, the Champion of the Austrian School of Economic thought, explains:

“Now one of the main functions of profits is to shift the control of capital to those who know how to employ it in the best possible way for the satisfaction of the public. The more profits a man earns, the greater his wealth consequently becomes, the more influential does he become in the conduct of business affairs. Profit and loss are the instruments by means of which the consumers pass the direction of production activities into the hands of those who are best fit to serve them. Whatever is undertaken to curtail or to confiscate profits impairs this function. The result of such measures is to loosen the grip the consumers hold over the course of production. The economic machine becomes, from the point of view of the people, less efficient and less responsive.”

He concludes:

“It is profit and loss that force the capitalists to employ their capital for the best possible service to the consumers. It is profit and loss that make those people supreme in the conduct of business who are best fit to satisfy the public.” – (Profit and Loss)

The free market process of voluntary exchange is the only way the most efficient use of time, labor, and property will be used by each individual. In a free market economy it is this process of freedom of exchange that allows all individuals to pursue their own goals simultaneously. Although there is no such thing as a perfectly functioning economy, the most efficient economic system is the free market.

Roy E. Cordato, Professor of Economics from Auburn University, explains:

“Some plans will be uncoordinated, and inefficiencies will arise. But, it is the “natural forces” in the market itself which act to correct for these inefficiencies. It is the market concepts of price and entrepreneurial activity that ensure the diffusion of knowledge and the tendency toward efficient use of resources, i.e., “means,” in a market economy. Simply stated, it is the price system that makes available the pertinent information, and the entrepreneur – motivated by potential profits – who takes the information and uses it in a manner that tends to improve efficiency.” – (The Austrian Theory of Efficiency and the Role of Government)

It should be clear that any and all government action, including that of the Public Service Commission, can, in no way, improve economic efficiency. Whenever government interference forces individuals to carry out behavior or exchange they otherwise wouldn’t have this person is robbed of their ability to act according to their personal goals and preferences. In order for all individuals to pursue their desired goals there must be an established system respecting property rights. This system is a necessity for peaceful exchange and civil society. Any interference in the free market limits the ability of all to pursue their individual goals. The only way for government to improve efficiency is to recognize and respect individual property rights and voluntary contracts. Simply stated, government should get out of the way.