PDA

View Full Version : Was arguing with someone over free market vs government regulation




nodeal
12-13-2010, 02:57 PM
I tend to get into these debates because I have emotion invested in my philosophy of limited government.

Anyway, we were arguing over markets and business. My point was how government does more harm than good, his was obviously the opposite. However, his argument did lead to an interesting point that kind of caught me off guard...

He was saying government intervention is important because it prevents company A from putting rat meat in their sandwiches; prevents company B from leaving their kitchen dirty; and prevents company C from producing a car that is prone to exploding on the highway. Overall, his argument was that with government intervention in the market place, consumers are able to be confident in the standard of the product they are buying, because they know there are laws in place forcing these business to maintain a degree of safety.

My argument was that the free market is capable of handling this. Who's going to buy a rat meat sandwich? Who's going to eat from a place that still has food stuck to their utensils? Who's going to purchase an automobile from a car manufacturer that has exploding cars? Profit incentive would motivate all these businesses NOT to do these things because they would lose business if their standards were so low.

However, my friend responded with an interesting point. With laws, all you need to do is make one law and the problem is fixed.

For example: If Company A causes a problem -- the market punishes them.

A few years later Company B causes the same problem -- the market punishes them.

A few years later company C causes the same problem -- the market punishes them.

His point was that the market constantly needs to correct the same problems, as opposed to laws which are on the books forever. If a law was made after company A caused a problem, then companies B and C would never have had the chance to cause the same problem. Sure, the market can punish all these companies for the same problem they all caused, but wouldn't it be better for the market to punish Company A, and then a law be enacted to prevent any company from causing the same problems again?

I found this an interesting point and, quite frankly, didn't have a response that could appease neither him nor me. SO can you free market buffs help me out here? Why are free-market corrections BETTER than laws, especially when considering the argument my friend has proposed.

acptulsa
12-13-2010, 03:06 PM
Well, for a number of reasons.

The market is more democratic than the government of a republic. Nothing is more democratic than a free market. Also, nothing responds more quickly, especially in the Internet Age. Laws never seem to get repealed, but the free market is always up to date. So, if you have a problem with cereal fillers in hamburgers and people getting cheated, first the free market fixes the problem by almost putting the offenders out of business, then government passes a law and closes the barn after the cow is gone, then someone invents the 'veggie burger' and discovers its illegal. Where has your free market gone?

You know, I'm not completely against laws, though I am indeed libertarian. Often, my point in these arguments has less to do with 'law or no law?' than 'federal, state or local?' That said, government just never seems to get the job done. Ignorant consumers do sometimes also cause the free market to fail us, admittedly. But compare their track records.

1000-points-of-fright
12-13-2010, 03:12 PM
However, my friend responded with an interesting point. With laws, all you need to do is make one law and the problem is fixed.

You mean like the drug war? Or murder?

1000-points-of-fright
12-13-2010, 03:14 PM
I tend to get into these debates because I have emotion invested in my philosophy of limited government.

That's a problem. Philosophy and policy should always be based in rationality and logic.

Inkblots
12-13-2010, 03:17 PM
Briefly, the market is a more reliable of enforcer of quality and safety than government regulation. Free-market certification agencies (e.g. the Good House-keeping Seal of Approval) will become discredited and go out of business if they certify a faulty, dangerous, or unsatisfactory product, whether out of carelessness or corruption by bribery. They will also have a strong and continuing incentive to regularly and thoroughly review their ratings, lest their competitors become more trusted and gain market share.

On the other hand, one need only look at the recent news reports of the failings of SEC oversight of securities traded during the bubble, or the MMS's oversight of drilling operations in the Gulf to see that government inspection and regulatory agencies, lacking any competition and profit motive, frequently are sluggish or inattentive in providing oversight, and are prone to corruption and collusion between the regulators and the regulated. And each time a scandal like this breaks out, maybe a few people lose their jobs, but the same agencies and institutional cultures remain in place, and are basically still trusted, because after all, we can trust the government, right?

Additionally, when one is dealing with government regulation, the players in various industries have huge incentives to influence the legislators who are the basic source of the regulatory authority through lobbying. This results in regulations that are more often intended to protect industry than consumers. One example is the Louisiana regulation prohibiting anyone but a licensed funeral director from making and selling caskets - it serves no useful purpose besides protecting a vested interest from competition. Another example is the FDA: if a dangerous drug is approved for release by the FDA, consumers can't sue drug companies for any harm it causes, simply by virtue of its government approval.

Thus, with government regulation of industry, you may end up with inefficient, protectionist, or actively harmful regulations, and any good regulations are likely to be poorly or selectively enforced as a result of collusion or influence peddling. Only under a system of competitive, free-market regulatory authorities can such problems be ameliorated.

Hope this helps!

fisharmor
12-13-2010, 03:25 PM
Give this piece a read if you're ever bothered at getting emotional about this stuff.
http://www.lewrockwell.com/crovelli/crovelli36.1.html

The problem with regulation is that it is itself additional and unnecessary law.
So, rat meat sandwiches? It's called FRAUD and there's already a law against it.
Exploding cars? It's called a CIVIL SUIT and before we expected the nanny state to do our checking for us, it's how people sought compensation for unjust loss.

All that is accomplished by shifting the exploding car from the civil courts to criminal courts is this: it stops innovation.
It's entirely possible that a car company that tried X that caused exploding cars was doing something wrong, and that a different company, if allowed to try that, would get it right.
A civil suit awarding money to an individual, plus a recall, is very much more forgiving than what government is capable of.
With regulation in place, companies get hamstrung. They're less likely to try new things, because new things might cause problems.

Consider the Boeing 777. It had to get special dispensation from the FAA because it was the first large airliner with two engines. Well, since they had a regulation that planes over a certain size had to have four engines, does that spur companies to produce large 2-engine planes? Or does it do the opposite?
Would a small company have spent R&D money trying to figure this out, prior to the turn of the century?
Why is it that one of the gov'ts favorite toads ended up doing it?
Why do we accept the notion that it takes capital and/or political clout to rival small countries to do some pretty basic R&D?
Why do those companies need that much capital and political clout to do it?
One word, starts with 'R'....

And that's not even considering the regulation that goes on that is for no discernible purpose other than to kill a business.
I certainly can't say that what they tried to do to Toyota was on-the-level.

07041826
12-13-2010, 03:29 PM
Using your example- what if the rat burgers cost half what regular burgers cost and I enjoy the taste? Why should the government tell either party if they can engage in that kind of commerce? What if I don't mind a dirty kitchen because the money saved on constant cleaning saves me hundreds a year and customers prefer the lower costs
of my products? In fact, I know a dive taqueria in my neighborhood which has that kind of vibe but the food is dirt cheap and people love to eat there (it's packed at 2 AM) Why should the government "solve" the problem if we both agree to the terms of business? Government laws didn't stop Jack in the Box from serving up e coli, so what good are these regulations anyway?

JohnEngland
12-13-2010, 03:29 PM
To be honest, I don't really have any problem with some light government regulation. I don't think that interferes with the market in a detrimental way. My problem is when government is the producer of a good or service, or decides to ban something.

The biggest problem with government regulation, however, is that it always tends to grow and restrict the market. Furthermore, state bureaucracies can't respond as quickly when the market changes - that's just a reality of centrally-planned regulation. Look at the internet for a good example - governments sure have been taking their time in controlling the web, but the private sector has been happily regulating it since the beginning.

However, as I said in another thread, if the government wants to make sure that all food items have the ingredients listed, I've no problem with that.

nodeal
12-13-2010, 03:30 PM
Well, for a number of reasons.

The market is more democratic than the government of a republic. Nothing is more democratic than a free market. Also, nothing responds more quickly, especially in the Internet Age. Laws never seem to get repealed, but the free market is always up to date. So, if you have a problem with cereal fillers in hamburgers and people getting cheated, first the free market fixes the problem by almost putting the offenders out of business, then government passes a law and closes the barn after the cow is gone, then someone invents the 'veggie burger' and discovers its illegal. Where has your free market gone?

You know, I'm not completely against laws, though I am indeed libertarian. Often, my point in these arguments has less to do with 'law or no law?' than 'federal, state or local?' That said, government just never seems to get the job done. Ignorant consumers do sometimes also cause the free market to fail us, admittedly. But compare their track records.

Thank you acptulsa. I am going to steal your veggie burger example, I hope you don't mind haha.

nodeal
12-13-2010, 03:31 PM
That's a problem. Philosophy and policy should always be based in rationality and logic.

You're 100% correct. It's something I need to work on.

nodeal
12-13-2010, 03:33 PM
Briefly, the market is a more reliable of enforcer of quality and safety than government regulation. Free-market certification agencies (e.g. the Good House-keeping Seal of Approval) will become discredited and go out of business if they certify a faulty, dangerous, or unsatisfactory product, whether out of carelessness or corruption by bribery. They will also have a strong and continuing incentive to regularly and thoroughly review their ratings, lest their competitors become more trusted and gain market share.

On the other hand, one need only look at the recent news reports of the failings of SEC oversight of securities traded during the bubble, or the MMS's oversight of drilling operations in the Gulf to see that government inspection and regulatory agencies, lacking any competition and profit motive, frequently are sluggish or inattentive in providing oversight, and are prone to corruption and collusion between the regulators and the regulated. And each time a scandal like this breaks out, maybe a few people lose their jobs, but the same agencies and institutional cultures remain in place, and are basically still trusted, because after all, we can trust the government, right?

Additionally, when one is dealing with government regulation, the players in various industries have huge incentives to influence the legislators who are the basic source of the regulatory authority through lobbying. This results in regulations that are more often intended to protect industry than consumers. One example is the Louisiana regulation prohibiting anyone but a licensed funeral director from making and selling caskets - it serves no useful purpose besides protecting a vested interest from competition. Another example is the FDA: if a dangerous drug is approved for release by the FDA, consumers can't sue drug companies for any harm it causes, simply by virtue of its government approval.

Thus, with government regulation of industry, you may end up with inefficient, protectionist, or actively harmful regulations, and any good regulations are likely to be poorly or selectively enforced as a result of collusion or influence peddling. Only under a system of competitive, free-market regulatory authorities can such problems be ameliorated.

Hope this helps!

Inkblots: Thank you for such detail and clarity. The points you raise are so true yet so obvious! Sometimes it's hard to think of these things on the spot when in a debate, even though you KNOW the answer is there! Thanks again.

Jordan
12-13-2010, 03:34 PM
Consider the Boeing 777. It had to get special dispensation from the FAA because it was the first large airliner with two engines. Well, since they had a regulation that planes over a certain size had to have four engines, does that spur companies to produce large 2-engine planes? Or does it do the opposite?
Would a small company have spent R&D money trying to figure this out, prior to the turn of the century?
Why is it that one of the gov'ts favorite toads ended up doing it?
Why do we accept the notion that it takes capital and/or political clout to rival small countries to do some pretty basic R&D?
Why do those companies need that much capital and political clout to do it?
One word, starts with 'R'....

And that's not even considering the regulation that goes on that is for no discernible purpose other than to kill a business.
I certainly can't say that what they tried to do to Toyota was on-the-level.

Great example.

How about another one, the new bill meant to keep cigarettes out of the hands of children. Good law, I think, kids don't need to be smoking.

So what's in the bill?

It outlawed all flavored cigarettes except menthols.
It banned in-store advertising.
Created new taxes levied not by scale of the tobacco company, but for simply being a tobacco company. (A company that makes 1 million cigarettes per day pays the same tax as a company that makes 10. Goodbye small business.)
Limits color cigarette ads in magazines that children read

Now, what if I told you that prior to the new law, Philip Morris (the only tobacco company to support the bill) had the highest marketshare it had in decades, has only two-tone cigarette packs, was the largest cigarette company in the world, and didn't sell any cigarettes that weren't natural or menthol. Compare that to the list above.

nodeal
12-13-2010, 03:37 PM
Give this piece a read if you're ever bothered at getting emotional about this stuff.
http://www.lewrockwell.com/crovelli/crovelli36.1.html

The problem with regulation is that it is itself additional and unnecessary law.
So, rat meat sandwiches? It's called FRAUD and there's already a law against it.
Exploding cars? It's called a CIVIL SUIT and before we expected the nanny state to do our checking for us, it's how people sought compensation for unjust loss.

All that is accomplished by shifting the exploding car from the civil courts to criminal courts is this: it stops innovation.
It's entirely possible that a car company that tried X that caused exploding cars was doing something wrong, and that a different company, if allowed to try that, would get it right.
A civil suit awarding money to an individual, plus a recall, is very much more forgiving than what government is capable of.
With regulation in place, companies get hamstrung. They're less likely to try new things, because new things might cause problems.

Consider the Boeing 777. It had to get special dispensation from the FAA because it was the first large airliner with two engines. Well, since they had a regulation that planes over a certain size had to have four engines, does that spur companies to produce large 2-engine planes? Or does it do the opposite?
Would a small company have spent R&D money trying to figure this out, prior to the turn of the century?
Why is it that one of the gov'ts favorite toads ended up doing it?
Why do we accept the notion that it takes capital and/or political clout to rival small countries to do some pretty basic R&D?
Why do those companies need that much capital and political clout to do it?
One word, starts with 'R'....

And that's not even considering the regulation that goes on that is for no discernible purpose other than to kill a business.
I certainly can't say that what they tried to do to Toyota was on-the-level.

Thanks for the link and your insight. That's some valuable stuff right there.

nodeal
12-13-2010, 03:58 PM
Using your example- what if the rat burgers cost half what regular burgers cost and I enjoy the taste? Why should the government tell either party if they can engage in that kind of commerce? What if I don't mind a dirty kitchen because the money saved on constant cleaning saves me hundreds a year and customers prefer the lower costs
of my products? In fact, I know a dive taqueria in my neighborhood which has that kind of vibe but the food is dirt cheap and people love to eat there (it's packed at 2 AM) Why should the government "solve" the problem if we both agree to the terms of business? Government laws didn't stop Jack in the Box from serving up e coli, so what good are these regulations anyway?

BOOM. You said it. Such simple arguments, yet they hold the most power.

StilesBC
12-13-2010, 04:43 PM
Let's not forget the issue of complacency as well. If everyone believes the government is regulating things that could be potentially dangerous, their own skepticism takes a back seat. We become mindless consumers. So when there are new products that the government hasn't thought to regulate, people just buy it under the false assumption that it is safe without using any of the common sense that would otherwise tell them to stay away.

What do these regulations do to the private industry of consumer protection? They diminish its significance, of course. Without government "ascent" of certain products, perhaps numerous competing not-for-profit organizations would spring up to advise consumers on safety. I think that's going to happen anyway as people learn that these mediums are far more reliable than the government. But it will be slower and less effective than it would otherwise.

Lastly, regulations create massive barriers to entry. Typically, they are encouraged by established companies in order to prevent competition. As mentioned by others, the best regulation is failure. But if new companies need to pay $XXX in order to gain market access, this failure might be delayed, allowing a corrupt product to continue in the marketplace for the sole reason that there is no acceptable alternative.

We already have LAWS against fraud, misrepresentation, neglect, etc. Nobody is arguing to remove those laws. To an extent we have crippled the judiciary's clout and replaced it with bureaucrats.

forsmant
12-13-2010, 05:09 PM
Government regulation too often focuses the structure of the company rather than on the product. For instance, the USDA is more worried about having a separate bathroom for their inspector than whether or not the slaughter of animals results in a clean disease free product. The focus of regulation should be to prevent fraud and to punish those who commit fraud. The USDA can shut you down if you do not operate they way the regulations say you should regardless of product quality.

akforme
12-13-2010, 05:21 PM
I just got in an argument with my dad too. I usually don't get pissed but with him I do because I feel more comfortable. My wife has to remind me that he has 70 years of statism, it's like a religion.

eugenekop
12-13-2010, 05:27 PM
I think its a matter of expectations. If you buy a car you expect that the chance it blows up is extremely small. However if a company sells you a car that has a high chance of exploding and it indeed explodes, then you can sue for criminal negligence. The same can be said about sandwiches. No one expects to buy a rat sandwich in a regular food vendor stand. If some stupid or psychopathic vendor does sell you a rat sandwich you can sue him later for damages.

Now I'm not sure whether this requires laws or regulations such as "Do not sell rat sandwiches", probably not, just a strong judicial system and some common sense.

Brian4Liberty
12-13-2010, 05:32 PM
So, rat meat sandwiches? It's called FRAUD and there's already a law against it.

Exactly. Let's enforce the simple laws that are already on the books, especially fraud.

I like to think there is a big difference between criminal laws and regulation:

Regulation: Inspections, permits, licenses, paperwork, fees, guilty until proven innocent.
Law: You get caught doing the crime, then get in trouble. Innocent until proven guilty.



On the other hand, one need only look at the recent news reports of the failings of SEC oversight of securities traded during the bubble, or the MMS's oversight of drilling operations in the Gulf to see that government inspection and regulatory agencies, lacking any competition and profit motive, frequently are sluggish or inattentive in providing oversight, and are prone to corruption and collusion between the regulators and the regulated. And each time a scandal like this breaks out, maybe a few people lose their jobs, but the same agencies and institutional cultures remain in place, and are basically still trusted, because after all, we can trust the government, right?

Additionally, when one is dealing with government regulation, the players in various industries have huge incentives to influence the legislators who are the basic source of the regulatory authority through lobbying. This results in regulations that are more often intended to protect industry than consumers. One example is the Louisiana regulation prohibiting anyone but a licensed funeral director from making and selling caskets - it serves no useful purpose besides protecting a vested interest from competition. Another example is the FDA: if a dangerous drug is approved for release by the FDA, consumers can't sue drug companies for any harm it causes, simply by virtue of its government approval.

Thus, with government regulation of industry, you may end up with inefficient, protectionist, or actively harmful regulations, and any good regulations are likely to be poorly or selectively enforced as a result of collusion or influence peddling.

And that is the biggest problem with government "regulation". You spend taxpayer money to essentially hire Al Capone to audit the mob.

agitator
12-13-2010, 05:47 PM
This thread is full of win. Thanks to all that have responded to the OP.

awake
12-13-2010, 06:10 PM
I think people are missing something here: Regulation is a device with a purpose; "business men" use it as a blunt instrument on their competitors - in most cases a direct act of aggression under false pretenses. Bigger businesses can absorb the cost while the smaller ones get put out of business in a most corrupt manner. When combined with the moral imperative of the word "safety", there is barley a means to resist the onslaught. It is simply "business men" using the government to attack other market participants. The FTC is one such racket.

nodeal
12-14-2010, 01:43 AM
You guys are seriously awesome. I love coming on here and getting things clarified. It's like a breath of fresh air reading some of the stuff you guys post! Thank you!

Eric21ND
12-14-2010, 03:55 AM
Don't get emotional when you argue with people, stay calm, cool, and collected. Confidence goes a long way in winning/persuading people. If you don't know something admit it and tell them you will look into it and get back to them.

Brian4Liberty
12-14-2010, 12:59 PM
Bigger businesses can absorb the cost while the smaller ones get put out of business in a most corrupt manner.

Yep. A tool of Corporatism.