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Economic systems today exist in a multitude of different shapes, colours and sizes. They all, however, have an indisputable presence of homogeneity in their central objectives. As Henry Simons states in his Economic Policy for a Free Society, “There is in America no important disagreement as to the proper objectives of economic policy – larger real income, greater regularity of production and employment, reduction of inequality, preservation of democratic institutions.” The veering point in the diversity of these systems lies in the way in which they seek to obtain these goals, and the relative success or failure in each arena of the modern economic objective. The focal point of this paper is the examination of equity and efficiency in a host of different economic scenarios. In 1934, during The Great Depression, a man named Henry C. Simons put pen to paper and created one of the most controversial works of his time. An Economic Policy for a Free Society underlined the causes of the failure of the economy, and sought to create a program of positive action by which the Government could implement a system of laissez faire to the betterment of the economy. To take Simons anachronistically out of context is dangerous – this pamphlet was written at a time when so-called capitalism had failed, and people were crying out for a new system of managed economic action. Simons objected vehemently to this call to socialism, saying, “The real enemies of liberty in this country are the naïve advocates of managed economy or national planning… Indeed, it seems clear that none of the precious “freedoms” which our generation has inherited can be extended, or even maintained, apart from an essential freedom of enterprise…” At the same time, Simons did not propose a system of “doing-nothing.” His intent was to enforce Government-backed policies aimed at sustaining an economic climate suitable for the propagation of both democracy and capitalism, without the necessity of regulating “the heart of the contract.” Keystone points in this positive policy would be the maintenance of competition within the various industries, the intelligent control of currency (both the quantity and value of), the strict definition of property rights, and other non-viable social welfare activities. Simons lived in an era in which competition was almost extinct. The market-place was heavily polluted with monopoly and monopsony, which he called “the great enemies of democracy.” These large, efficiently organized groups wielded wide-spread and terrible power over the community, exploiting them for profit. At a glimpse, this would appear to be but an instance of equity being sacrificed for efficiency, but on closer scrutiny, the latter was as scarce to be found as the former. An economy’s efficiency is calibrated by it’s ability to utilise scarce resources to achieve innumerable needs, these needs being demonstrated by the corpus of the society as a whole, as a factor of their demonstrated demand. In a monopolistic economy, this “market power” is wielded by a handful of large bodies rather than by the society as a whole, and it results in the absence of productive employment of these scarce resources. As Simons says, “Monopoly thus means the exclusion of available resources for uses which, on the market-value standard, are more important, and, therefore, means diversion of resources to less important uses.” To conclude, Simons saw the capitalism of his time as a diseased animal, albeit one that required medicine rather than euthanasia. He called for a increased levels of competition, which could only be achieved by bringing down the monopolies. Monopolies result in less market power in the hands of the people, resulting, in turn, in lowered levels of output, inefficient production of “forced” goods, and higher prices (often called monopoly rent) which amounts to nothing but pure excess profit.
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