I was having a discussion with a friend about the free market, and I’ve pretty well convinced him how market mechanisms work to correct problems, and how they cause progression and growth, but he brought up a point that I don’t know what to say to. Basically, he says the free market is too slow/reactive. If a company releases bad meat or something like that, which kills a few people, he understands how the market will deal with it, but says that the whole situation would have been PREVENTED by some government regulation, which is obviously preferable because no one had to die.
Yes. That his thought process is too simplistic. Fear of the consequences of such actions would itself be a deterrent. But why should a company be forced not to deal in bad meat so long as it does not defraud its clients?
monopoly is ALWAYS bad. In this case your friend is advocating a monopoly on regulatory agencies by the government. If there is a demand for a body that certifies meat as being a certain quality the free market will provide it. Go look at the history of franchise restaurants sometime, this is how they got started. Before the FDA certified food these franchises popped up to guarantee a certain quality of food which is why people went to them.
In our current monopolistic system if the FDA does something bad (it does so all the time) the citizen has no recourse. You are forced to patronize the FDA with your tax dollars. In a free market situation competing firms would vie for your business by becoming a brand you trust to inspect your food. Since their entire business model relies upon public perception it would be in their best interests not to allow bad food to carry their label/guarantee.
note: the term you are looking for isn’t reactive but unreactive I think. You are referring to economic latency, the time between which information becomes available to consumers and the time it takes for that information to have an effect on the market.
"Last year&’s news reports of tainted beef focused public attention on the safety of the meat supply. In August 1997, Secretary of Agriculture Dan Glickman forced Hudson Foods to recall 25 million pounds of hamburger meat produced at the firm&’s state-of-the-art plant in Nebraska…
…Indeed, the Hudson Foods incident occurred only a year after President Clinton announced the most sweeping changes in the government&’s meat-inspection system…"
You can tell him government regulations do not prevent bad things from happening, and that there is no reason to believe they have reduced the number of incidences.
Maybe it’d be nice if that were true- but if you look back to nearly all types of those bad outbreaks- the companies themselves and other private individuals are the one’s that inform the FDA of what’s going on. Just like when there was that Salmonella outbreak in Tomatoes last year. The Tylenol scare of 82 is also a good example of the market’s effectiveness in responding to that kind of situation.
Really? If this was the case than, the regulation of business could be justified by saying that it prevents monopolies -which is and has been done all over the place-.
Monopolies are not worse or better than any other kind of business. There is only one form of a monopoly that is bad to the bone, the coercive monopoly. This monopoly exists solely beause it can trust on the coercive violence of the only power that can coerce in an economy, the state. In that way coercive monopolies can not be a part of a free market, they are a tool of mercantilism using government granted priviliges to prevent competition to arise.
a non-coercive monopoly isn’t really a monopoly. others can compete any time they want, so it isnt a monopoly. It is a monopoly when others are in some way prevented from competing.
Ask him why TSA didn’t have rigirous bag searches before 9/11. Seeing as the government has enough foresight to prevent all accidents how could they let it [9/11] happen?
Well than I am in good company, because this is how Rothbard decribes monopolies. A monopoly is simply the sole control over a specific resource or good. In itself this is no issue. In fact such a monopoly tends to inspire entrepreneurs to come up with goods to replace the monopolized one.
A monopoly becomes a threat only when it becomes a coerced monopoly. I still stay with this statement.