I was talking with a conservative colleague yesterday about regulations. He made some interesting points about how some regulation improved efficiency for consumers, and the market, since anyone would be afraid to do anything without at least a little assurance of some standards (don’t want to drive somewhere unfamiliar, might be water in gasoline, don’t want to make sure appliances won’t burn down house, etc.) He conceded that at some point too much regulation would be a bad thing, but some should exist. Is there any articles that address this contention? Maybe just some talking points you folks can come up with (besides morality)?
In a free market, it is within the interests of the company to respond to the wants of the customer, and so that acts as an internal regulatory system.
I tried to explain that, but he is convinced that monopolies would arise and adopt a sort of “love it, or leave it” mentality to their customers. He seemed unreceptive to my arguments of the wild competition in unbridled markets would naturally prevent monopolies. He also countered that if the risks in investment were so high, nobody would invest.
Government regulations are without exception, all based on economic fallacies. Those who advocate for them are almost always, among other things, oblivious to the crucial roll of profits and their corollary - losses.
What do you think about this simulated dialogue between a Statist and you?
Statist: There needs to be a law that forces producer X (say car manufacture) to install safety feature Y(say airbags). many lives can be saved blah blah blah…
You: Why? Why must you force the producer to install airbags? Why should he not install them on his own, assuming the consumer is asking for them and is willing to pay for them?
Case 1: Show absurdity of his argument
Statist: The producer wants to make a profit! He couldn’t care less about the safety of the consumer. Why should he install airbags if he can save on the costs of airbags and make a larger profit?
You: So why does he care about performance? Why should the producer not also “save” on the costs of the engine and not install one? Why does he care about comfort? Why should he not save on the costs of cushioned seats, or an AC unit, or even perhaps a radio? Actually, it seems that the producer can profit most by not installing anything and giving the consumer only his new car keys.
case 2: Show the economic fallacies in his argument
Statist: The producer will install the bare minimum in order to maximize his profits. Mandating airbags is a sacrifice that the producer will have to make. He will profit less, but we will have safer cars. The common good is better served.
You: You fail to realize that:
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capital is scarce
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trade offs between the different things that can be produced must be constantly made.
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The capital required to produce anything is scarce and it is limited by the amount of savings available. If capital is used for airbags, it cannot be used for something else. So if one is to advocate for the mandatory production of airbags, one must also specify what is not to be produced instead.
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In the unhampered market economy, the entrepreneur determines what is to be produced and what is not, but he is completely subject to the wishes of the consumers. He has every incentive, due to the profit motive, to maximize the value of his final product, as is determined by the buying and abstention from buying of the consumers. With coercive regulations, you have simply substituted the discretion of entrepreneurs for dictatorial commands issued by bureaucrats. You have indirectly transfered some of the control over production from consumers to bureaucrats.
The question then, is always the same: who should decide on what to produce or what not to produce? Dictators or consumers? The government or the market?
His argument is that unrestrained, raw capitalism would reduce efficiency/take a lot of time to have to check the minutiae of every product you purchase. Also, it would depress exchange, as people would be aware of the increase amount of risk involved.
I like this one.
His argument seems to be based on placing a value on efficiency, rather than preservation of life.
Consumer reports anyone? Competition? Insurance?
That’s what I advocated, then he countered with “how can you trust them”? To which I replied, “well you know we can’t trust government”! But he still believes that the state is more accountable to the people, and that it would be next to impossible to read a consumer report on everything you purchase or utilize on a daily basis.
McDonald’s isn’t going to start putting arsenic in their burgers tomorrow if regulation is removed. They have spent years and billions of dollars marketing themselves in a positive light. If they start putting out a shoddy product consumers will go elsewhere, so they will be acting against their own interests.
This guy sounds like a left winger. He appears to think businesses don’t exist to meet consumer demands but instead to screw people out of their money, which of course is a myopic way to run a business.
All the “the businessman will exploit consumers” arguments are easily turned to absurd by showing that they are in fact completely analogous to “employees will exploit employers” in the mechanism of exchange.
If he thinks that everything he buys today in the market has been inspected by government regulators then you should immediately deliver to him the “bad” news that it just ain’t so. It is still the market that protects him, fortunately!
But his false sense of security is exactly one of the greatest detrimental effects of government regulations. Consumers become less interested and cautious. The competitive advantage of producer’s ability to sell safety is lowered because people start to equate minimum government mandates with safety. They start patronizing producers simply by relying on government licenses and they put all competitors on the same leveling field in terms of safety. Safety becomes compromised and not enhanced. The result is contrary to your friend’s objectives.
He doesn’t understand what efficiency is. He is forced to pay for things that people would not want if they were given the choice. How can this be efficient?
Also, consumers can and do pay for extra safety measures if they so choose. Private agencies that inspect products, provide stamps of approvals, provide information to consumers about various products, do exist and will exist even more in the absence of government monopolizing this industry and squandering precious scarce resources. The point is that consumers can always have their consumer protection agencies whenever they are ready to pay for such agencies.
How can an agency that exists solely by government decree instead of by consumer demand, finances its activities by compulsion instead of voluntary means, and has no profit & loss mechanism to provide it with incentive and guidance to serve its consumers… how can that possibly be more efficient or accountable then the market???
Markets must be regulated. All economic problems result from a lack of regulation. Of course, when I say regulated, I mean by the forces of competition, and when I say lack of regulation, I refer to government’s ability to exempt firms from market competition.
He’s more of a “New England Republican”. Essentially just a right-hand side of the middle type.
That’s basically what most conservatives think also. How many Republicans in Congress today would support the elimination of the FDA? How about seatbelt mandates?
Bingo. My belief is that in a stateless society reliable mutualist organizations would form together in order to safely and reliably do all of the things that the government currently does which are actually important.
If I were to say, start the “Association for car safety” I would first sign a garentee to any member who joined that any losses which he recieved from failing on the part of my association would be repaid in full. During the transition period I would expect a slight waste to begin to occur, but as time progressed i would expect loss to drop to its lowest possible amount.
That’s an interesting thought, sort of a consumer insurance agency.
Like most anti-free marketeers, your friend has a strange and mechanical view of human behavior. If you buy a product and it turns out to be a dud, you won’t buy it again and you’ll tell other people not to buy it. The company would be crippled by bad reputation may be even if they eventually change their ways.
BUT, the key point is that the businessmen are aware of all these things before the fact. It would be very rare for a person (in a free market) to consider getting in the business of selling people crap. It would be even more rare for such a person to convince anybody to give him capital.
Have conservatives always been clueless about free-market theory, or is it a recent phenomenon?
Basically. I think that if people got it in their head that “no statism” was the societal rule, they would think of all sorts of way of dealing with companies. These insurance agencies could basically be big law firms that make giant contracts between their customers and businesses. They could then be related to DROs. If some business hurt someone through dangerous products, they could spank them legally with the premade contract.
There is also the option of the private city if you are really insecure. The owners of the city could just create standards and regulations and experiment until their city was worth as much as possible. I don’t think it would be statism, as the administrator would have had to earn the land, and as a consumer, I would enter any private city that didn’t have legal services EXTERNAL to the private city. This means that the city administrator owner could provide protection and regulations in order to make the city more wealthy, but any matters of contract enforcement would be dealt with by an agreed upon third party. In fact this is my favorite solution right now.
I don’t really see how this is any different than a hybrid of principality, and free city (Danzig, or Venice).
The question shouldn’t be whether regulation makes markets more efficient, but does STATE regulation make markets more efficient. I make the distinction between a private person or persons being discriminatory toward their economic activities over the State making obtuse rules over who can sell what, why, when, and where. With a private person(s), their actions are based on a reasonable standard (what do they get out of their transactions), whereas the State just applies regulation without any sort of reasoning or standard. Just food for thought. shrugs
Exactly, there are three things, all inherently linked, which you must keep in mind at all times
- The state is a human institution
This sounds silly, but it is true, the state is run by humans and therefore has no intellect or reason which a collective of humans doesn’t, merely some nice buildings, an idiots ideology which originated as being justified by god, and a bunch of guns. Therefore the only tools which the state has which a voluntary institution doesn’t have is force, why exactly force would be the best way to solve something is beyond me, especially when it is cut off from profit and loss feedback mechanisms. This is part of why I believe that minarchism CANNOT work and inherently self destructive. So long as there is a state, immediately people will jump to manipulate its power, for that is easier and more self evident to immediately achieving a goal than going through complex and plans which actually have a chance to obviously fail. Until the state is eliminated a free market is impossible for any significant period of time and innovative, voluntary solutions will not arise, I will not think about how to cooperate with people until I can stop having that big thug guy go and steal from them.
- The free market is more than merely “traditional firms”
Charity is an example of a free market, a voluntary commune is an example of the free market, voluntary community service is an example of the free market. Wherever one man works with another man voluntarily and with respect for his property rights, that is the free market, this is why I have such respect for mutualism in the original sense of the word.
The reason why most firms today are traditional firms is because of the problems above, all effort is simply poured into lobbying the government to perform the task which takes away feedback, drains resources from other areas of society, and corrupts the nature of the program itself. Furthermore because there are few examples of people pooling together resources for their combined benefit or something of the like, people, when setting out to solve a problem, do not immediately consider that an option!
- The law of political demand
You desire safety “regulation” therefore there is a demand for it. This also goes for your friend. This will NOT go away simply because the state is removed, there will be a demand for regulatory watchdog agencies just as there is a demand for packages being delivered. There was a time that the state had a monopoly on delivery, when the state monopoly was broken there was of course still a demand for package delivery and the market performed this. Any argument against the free market can instantly be turned around and pointed at the accuser because his simple worrying about the free market not being able to provide a service (which is often widely shared) shows, guess what? A demand to provide this service which the accuser is currently willing to pay for!