John Stossel on 'Rinkonomics': Forget Leaders, You Should Be in Charge

Oct. 16, 2008— -- There's tremendous excitement about this year's election. Each candidate says his new administration would solve America's problems, from cutting taxes and balancing the federal budget to guaranteeing health care and creating jobs. But can a president really do all those things?

At this year's conventions, supporters from both parties seemed to think so. At the Republican National Convention, voters for John McCain were confident that their candidate would "get things done in Washington" and "bring peace and stability to the United States." Supporters for Barack Obama said that he would "give us back our freedom, our trust" and that "workers' lives will improve and all of our kids and grandkids will have a better life."

"We actually think that some people can do magic," said David Boaz, executive vice president of the Cato Institute, a libertarian think tank in Washington, D.C. "It's like we believe that when one man is chosen to be president, suddenly he rises above all the rest of us."

'Government Should Do More'

For one, Oprah Winfrey seems to have that kind of opinion of Obama. At an Obama rally, her introduction sounded almost biblical. "He is the one," she said in December. "He is the one."

Said Cato's Boaz: "They think politicians can do anything. They think politicians can give us health care, give us better lives, give us better jobs. Politicians can't do most of that stuff."

Take energy independence. Every president since Richard Nixon (1969 to 1974) has promised to move us toward independence from foreign energy sources. Nixon promised it would happen by 1980, President Ford by 1985. But the country is no closer to energy independence today.

Still, Obama says he would end oil imports from the Middle East and Venezuela in 10 years and McCain promises "strategic independence" by 2025.

Politicians say what they think people want to hear and people want to believe them, observers say.

"It's kind of an instinctive reaction: Government should do more on health care," Boaz said. "Government should do more for the elderly. Government should do more for children. But a president can't fix all the problems in your life."

Indeed, most of life works best when people are in charge.

Rinkonomics: the Skating Rink Analogy

Consider a skating rink. Imagine telling someone who'd never been to a skating rink that people strap blades to their feet and all of them -- old people, young people, good skaters, bad skaters -- speed around on slippery ice. They'd say, "No, you can't do that! It would be a catastrophe! You need to plan this! Someone needs to be in charge!"

But as economist Daniel Klein notes in his essay "Rinkonomics," skating rinks work harmoniously without planning. It's something economists call spontaneous order. Skaters look out for themselves. They're each left to do their own thing and, surprisingly, they rarely crash.

Nature is full of spontaneous order: schools of fish moving together, a productive ant colony where every ant does its own thing, a flock of birds darting through the air moving as a single unit.

"We don't notice there are many things in our lives that work beautifully and smoothly as if they were organized but without an organizer," said George Mason University economist Russ Roberts, author of the new book "The Price of Everything."

The Planners vs. the Individuals

Humans require some predictable and understandable rules, like the rules children learn in kindergarten: Don't hit other people, don't take their stuff and don't break promises. But most of life is governed by spontaneous order. People choose their jobs, hobbies, lovers, recreation and most of the best things in life, not the government.

The order that comes spontaneously works much better than the order that comes when a central authority plans, because the planners can never account for or predict the great myriad individual needs and interests.

The old Soviet Union is an example of what happens when government tries to plan the economy: The planner doesn't plan for enough of the right things, which results in shortages. Many Soviets waited in lines for hours of every day.

When we tried to "govern" the skating rink by shouting orders with a bullhorn, things got worse. Skaters hated it. Some fell down. I suppose a politician would say we failed at "leading" the rink because we're not smart enough, or don't know enough about skating. We asked Olympic gold medalist Brian Boitano to take the bullhorn. He didn't do any better.

Skaters at the rink hated our direction. "It kind of ruins the fun of it," one woman said. "I don't wanna do it then if someone's telling you what to do."

The moral: Intuition leads us to think that complex problems require centrally planned solutions, but political decision-making is rarely the answer. Life works best when we govern ourselves.

20/20's Tori Ueltschi contributed to this report.