I'm working on a paper while keeping one eye on the ESPN.com Gamecast of the Cardinals-Cubs game. It has an interesting feature in that it gives a predicted winner and estimates the probability of victory in real time. For example, it's the top of the 6th with two out, no one on, and the Cardinals winning 3-1 in St. Louis. The probabilty of a Cardinals victory is 84%. But Reed Johnson just singled, knocking the probability down to 83%. My first thought when I saw that was that someone somewhere is losing the opportunity to make gobs of money taking real-time bets on these games. Regulation prohibits it, and whether nationwide real-time wagering on sporting events would increase or decrease corruption in the sports world. On one hand, the influx of money involved might increase opportunities for corruption, but on the other hand the increased transparency might also reduce corruption. Some might argue that the recent controversies over steroids suggest that self-regulation monitoring broke down as players refused to monitor one another, but I'm not sure if it should be counted as a success or a failure. How does the rate of baseball players busted for steroids compare to the rate of government officials busted for corruption? I would guess that they compare favorably.

This illustrates how corruption in private enterprise is not a prima facie case for state power. I came across a great quote from C.S. Lewis yesterday that summarizes my views on the modern state: "Aristotle said that some people were only fit to be slaves. I do not contradict him. But I reject slavery because I see no men fit to be masters." I would rephrase this as follows: "Many people say that some people are so irresponsible or evil that they require the state's regulation, oversight, and direction, but I reject statism because I see no men (or women) fit to be their masters."

My rejection of statism is based on what we know about incentives and information. First, coercion distorts incentives, and when we give people the power to do things we like we also give them the power to do things we don't like. Hence, for example, we have people wringing their hands about the Obama administration using powers granted to the Bush administration in ways they don't like. Second, any proposal for intervention has to overcome the knowledge problem. Hayek showed that even under the best of circumstances, the absence of profits, losses, and prices means that no government official can know whether they are creating value or wasting resources. Therefore, to borrow from James Buchanan, our emphasis in designing policy should be on "the institutions of exchange, broadly considered" because it is only under these circumstances that the information needed for socially rational decision-making will emerge.