I was asked by a friend about my position on I-147, the initiative to repeal Montana’s ban on cyanide heap leach mining. He knows I am a strong supporter of free markets. He thought I would support repealing the ban, for it would generate jobs. He’s certainly wrong about my position, but his misunderstanding of economics is worth examining. Here goes.

Economics is often viewed as a discipline dedicated to material progress. A modern critique comes from environmental philosopher and mountaineer Jack Turner, who wrote, “The word economics makes me hiss like Tolkein’s Gollum: I hates it, I hates it, I hates it forever. For I do believe that classical economic theory ... has indeed stolen the magic ring of life.”

But I take a different view. In addition to being an engine of prosperity, free markets have two fundamentally profound and positive qualities.

Only free markets spontaneously organize the daily, voluntary interactions of millions of self-interested individuals. Nobel Prize winner Milton Friedman nailed it when he wrote, “Fundamentally, there are only two ways of coordinating the economic activities of millions. One is central direction ... [with] coercion -- the technique of the army and of the modern totalitarian state. The other is voluntary cooperation of individuals -- the technique of the marketplace.”

Ironically, Friedman is denounced for lecturing in Pinochet’s Chile. But his advice was to institute market reforms, which ultimately helped undermine Pinochet’s regime. Why? Because inevitably free markets destroy centralized control. Any society with even a modicum of political freedom uses the market process to organize its economic activity.

Here’s a second point. Better outcomes result from superior incentives, not superior people. Institutions generate incentives and information that motivate people in predictable ways. Consider this well-known example of how improving incentives rather than people achieved a noble outcome.

In the late 18th century prisoners were shipped from England to Australia. Captains were paid a specified amount for each prisoner who boarded their ships in England. Unfortunately, the death rate on these voyages was very high, with a sample from trips between 1790 and 1792 showing a death rate of 12 percent, and an appalling 37 percent on one trip. Most of the fatalities were clearly the result of overcrowding and poor nutrition. There were many pleas for ship captains to obey their moral obligations and provide humane treatment to the prisoners. But these pleas had no noticeable effect on the death rate. Finally, someone suggested improving the incentives instead of trying to improve the ship captains. How? By paying them on the basis of how many prisoners walked off their boats in Australia. The improvement was dramatic. Three ships carrying a total of 422 prisoners made the trip from England to Australia in 1793, and only one prisoner died en route. None of the ship captains became better people, but in response to better incentives they acted as if they had.

Back to I-147. Businesses have incentives to avoid the full costs of their actions. If responsible for their full costs, the things they produce may be more expensive. For example, gold mining, which can involve dynamiting entire mountains and bathing the rubble in poisonous cyanide solutions to leach out the gold, may not be profitable if ecological, aesthetic, and health costs are counted.

It is easy to see why many people confuse a pro-free market and pro-business position. Business groups and others commonly posture as defenders of the free market. But in fact, they are generally raving hypocrites who argue for special privileges and protections (e.g., automobile import quotas, steel tariffs, and condemnations of private land for industrial and commercial parks). An honest accounting would show how this special treatment costs the environment, consumers, and taxpayers dearly.

My friend Dwight Lee, an economist at the University of Georgia, sums it up nicely: “Properly understood, economics is not just a useful discipline, it is a noble one. It is concerned with promoting the highest aspirations of mankind -- harmony, cooperation, tolerance, freedom, material prosperity, and human flourishing.”