In the journal article “The Rise of the Regulatory State,” authors Edward Glaeser and Andrei Shleifer argue for the effeciency of regulation over private litigation (not under all circumstances, of course).
To many libertarians–and obviously all anarcho-capitalists–there is an automatic recoil from all regulation. However, as the authors demonstrate, regulation can overcome some public goods problems (yes, Austrians, I know you consider this an economic superstition) and other economic pitfalls of private litigation.
I welcome Austrians (and others) to read the article and offer criticisms. Of course, the article itself should be the centerpiece of debate, not your immediate talking points about why regulation is bad.
First, the only change in the US Government more destructive than the various ones establishing central banks has been the one that established the direct election of Senators. This one change more than Marbury vs Madison, Dredge Scott or even the destruction of personal liberties under Lincoln has has been the hammer to wipe federalism out of the government system in the USA. Without direct election of Senators, states had the final say in all legislation and held enormous power to pick the people outside the Legislative Branches of government. After the change politicians, especially ones in small states, could sell their power as a Senator as the power to steal from larger states. And the whole mess began. (Ok it was not as bad to the government or the society as Dredge Scott but direct election of Senators really sucks anyway.)
As for regulation, the questions are always: 1. Who pays for regulation? 2. What is the real cost? The worst regulation since 1900 the Federal Reserve Act forced the lowest rungs in the econmic ladder to shoulder the burdens of inflation as bankers were allowed to make huge bets backed up by an organization who could just create money to pay off losses. In 1958 one day in a hospital was less than 3 days wages. The average person today makes 40000 per year, working 220 days or just under $190 per day. My hand surgery that took 4 hours, my father who stayed in the hospital for 7 days had a bill of 35000 or 5000 per day. That is 25 times the average wage. And just think about how much technology there is that normally reduces costs? It is absent in the system of payments to hospitals. What about legal services? Try paying a lawyer for less than $200 per hour, or over 8 times the daily wage.
Incredible. The very first reply already violated the rule I was hoping to establish: “Of course, the article itself should be the centerpiece of debate, not your immediate talking points about why regulation is bad.”
Assumption 1 (that the social cost of the accident weighted by the difference in probability is higher than the cost of precaution) is quite unrealistic. Do not forget that C includes the cost of maintaining the whole system of courts, law makers, commissions and enforcers, as well as productive time lost to undertake the certification.
More importantly, I do not see (subvertable) private courts as part of the model - if the point was to prove that the state is better than no state, then sure we need to see the effects of both regimes? To be honest, I didn’t have time to study the paper carefully, so I will be grateful if my mistake is corrected.