New problems do not demand new solutions: The principle of least disruption

Abstract

The conference has highlighted the alternative responses to energy and other resource supply disruptions: the laissez faire or free market approach vs. that of command and control government intervention. Economists at the conference tended to defend the virtues of the market response; administrators tended to defend centralized government decision making. This paper argues that the correct response is to minimize disruption in existing institutional arrangements: that existing mechanisms and institutions tend to work better in new situations than do new mechanisms and institutional arrangements. Thus the reason command and control regulation tends to fail in emergencies is that it requires consumers and producers to depart from their normal patterns of behavior. The Federal Aviation Administration overcame the effects of the air traffic controllers' strike not by optimally rescheduling all flights, but by maintaining the old schedules to the maximum possible degree and allowing customary pilot and airline behaviour to play a major role. The free market, however, is not without limitations. Certain goods and services are not ordinarily subject to price and cannot be allocated by the market; uncompensated price increases and accompanying redistributions of wealth in disruption episodes may not be acceptable to the majority of people.