This is all well and good using hypotheticals about bread.
I grew up a few miles from a major nuclear plant. There was a nonzero risk that there would be a serious problem with this power plant. As it turned out, two out of three reactors were eventually decomissioned.
Individuals can make subjective assessments of the risks of living near a nuclear plant and can make rational decisions accordingly.
But the truth is, no one can truly and accurately assess the probability of an incident and more importantly, predict its magnitude. If something terrible had happened to Indian Point, it would have delivered more than disutility just to a single rational actor who made the choice to live a few miles from the plant. In fact, it is hard to imagine just where the disutility would end. Should someone living a hundred miles away have considered the possible impacts of a nuclear disaster?
Given humankind’s extremely poor track record at predicting both the likelihood and the magnitude of rare events, this is not at all reasonable. Given the potentially enormous costs to individual and social welfare when certain mishaps do occur, society has a vested and collective interest in mitigating both the risks and the magnitudes of these kinds of events.
Consumers aren’t just powerless sheep. But we do make lots of decisions based on the best information at the time that are just plain wrong without realizing just how large the disutility might be. We simply do not know what we do not know, and as such, have a massive interest in mitigating this. It is inefficient to do so individually, hence we form institutions. We do in fact have all the power, but it is much better excercised collectively than individually. This is not ideology: this is fact. Our society has adopted these institutions because of the massive externalities and unknown and unevaluable risks that industrial society has engendered.
We actually have an excellent laboratory to study what happens in an effectively unregulated market - China. They do not have a government monopoly on regulation, and I’m unaware of laws prohibiting private testing of privately manufactured products. I’m unaware of private testing facilities used by a mass of people springing up. I wonder if the babies who died from tainted formula - or who did not thrive because filler was put in instead of nutrients - deserved it because their parents were inadequate assessors of risk. I also wonder if a transaction where a baby dies is maximally efficient, ever.
I suspect that even here, if this ever happened, there would be big problems. Just as 60 years of telephones being of absurdly high quality made consumers overestimate the quality of those on the open market, in a suddenly deregulated market consumers would overestimate the safety of food and medicine, and fail to see the need for paying for what they got before at no apparent cost.
I think very few of the economic disasters would have happened if people actually acted as if they were perfect economic actors. Building policy on the assumption that they are (like Greenspan’s assumption that Wall Street was not greedy) seems to frequently lead to chaos.
Meltdown of a nuclear power plant seems like the biggest, baddest, most honkin’ public externality I can think of. Other than an asteroid hitting the Earth, maybe. I certainly think other mechanisms than free-market decision making are worthwhile. I would never argue against you in this regard.
Question for you: You mention (correctly) that no can truly assess the probability of a major catastrophe. I agree with that.
So why would any one think a government employee could do that? I know you didn’t say that, but that’s often the the logical next step in many people’s thinking. Wow, this looks risky. So let’s turn it over to government employees. They’ll know what to do. What sense does that make? That was the point of my original post, way back in page 1.
Power can be collectivized via means other than the monopoly use of force. It can be exercised via voluntary participation, and contribution of resources, to those efforts that require collectivized scale.
Actually, you are. Your theory, which you mentioned in your earlier post, is that:
So the theory that you put forth is that the free market can take on the role of screening products. The counterargument to that theory is that the free market has never done that.
The questions you should be asking youself are:
[ul][li]Why don’t free markets do what you think they should do?[]If free markets don’t do what you think they should do, is that a problem with your theory or with reality?[]If your theory has been demonstrated through emperical evidence not to work, why do you continue to apply it?[/li][/ul]
The problem with relying on voluntary participation is what’s known in economics as the free rider problem. In my earlier example I pointed out that my cancer screening business would fail becasue of free riders.
Any business that produces a public good (a public good is one that anyone can benefit from without paying) results in a free rider problem. The government can work around the free rider problem by requiring participation.
Let me ask you this question: which of the following roles are legitimate roles of the government:
[ul][li]Providing a framework of enforcement for contracts that two parties enter into voluntarilly[]Providing national defense[]Providing public security (i.e., police force)[*]Providing public education[/li]
[/ul]
My next question is, why are those legitimate roles of the government?
But if you pay for it yourself, the raters can just as easily give phony ratings in return for kickbacks from the producers. In the end it comes down to the ability to verify the rating. This is completely independent from how the testing is payed for.
But running the rating agencies themselves just on the off chance that someone will find it usefull… somehow that is less expensive?
Exactly. You can point back and forth all day at the imperfections in the market and the imperfections in the regulation, but the question is what reason is there to assume that the regulations can improve anything? (except for situations with externalities of corse… not that I think that’s a valid reason for regulation, just that it’s beside the point of the current examples)
right… so by what magic does the government do a better job of this impossible task?
Do they have a brain? If yes, then I’d say we’re all better off if they use it.
And as Rumsfeld has taught us all… government handles such problems better than we could
There is a difference between working collectively, and having an institution act on behalf of everyone else with no reason to justify why their judgements are superior to that of any individual. I am only asking for that reason.
Yet all the regulations failed to prevent the tainted goods from reaching consumers here. Again, the question, what reason is there to assume government regulation is benificial in combating information asymmetry?
So the reason government regulation is necessary is because of… government regulation. Wow, I’m convinced.
I appologize if I was unclear, but that ‘theory’ was just my understanding of the implications of the theories already presented in this thread and, it seemed, generally agreed upon by both those who advocate regulation and those who don’t. Those who advocate regulation and those who don’t also generally agree that the market isn’t perfect. I don’t think this contradicts the theories already presented or my understanding of their implications since nobody has claimed the market could do a flawless job of screening, and I have repeatedly pointed out, in reference to the ‘theory’ of mine, that it is reliant on the consumers to value the information, and the screeners to verify their results to consumers.
I am not saying that the market works perfectly. I’m not even saying it works better than regulation (well, I’m not trying to say it, but I guess it’s obvious that’s how I see it)
What I am trying to do is ask a simple question which has been repeatedly skipped over:
Can anyone explain why the market would fail to correct information imbalances on its own, but the government would succeed?
Or (in your example) the buisness can work around the free rider problem by choosing a buisness structure which does not rely on the restriction of information. The advantage of this is that since participation remains volintary, resources are less likely to be wasted by forcing people to participate in something which is of no value. One reason after another has been presented why this wouldn’t work, and each and every one may be correct. But the reasons are equaly applicable to the buisness model example you’ve given, and to the government regulation solution you offer.
This is moving the goalposts to avoid having to concede a point. The point is that China, a country with less onerous product safety regulation than the US and no legal barriers to private for-profit regulatory organizations, notoriously has a much worse product safety record than the US. China is indeed a libertarian laboratory as far as consumer safety protections are concerned, and the results are, to say the least, not inspiring.
You avoid acknowledging that fact by changing the subject to “Well, some of those tainted goods made it over here before we spotted them, so I guess our regulation isn’t any good either, huh?”
Yes, in fact that’s been done a few times in this thread.
Here’s the major problem with that–those structures probably don’t exist. For example, explain to me how the public sector can provide national defense.
And don’t just wave your hands and proclaim that according to your theory it could happen. Provide one specific historical example of such a thing actually working.
No, you’re misunderstanding the problem. Centuries of experience have taught us that businesses can’t work around the problem. Once again, you’re deciding that these things should happen but ignoring the centuries of evidence that they don’t.
To be honest, I’m getting tired of repeating the same thing in different ways, so let’s put the onus on you: Please provide me one specific historical example of a free market functioning the way you say it will. Or better yet, provide a reasonable, specific, business case for a company that provides the sort of information you say a business should provide-heck, maybe you could make a fortune out of this.
I was only trying to draw attention to the fact that you have not provided any evidence that the regulations here have combatted the problem more effectively than the market forces have there.
Also, a foreign country is a poor laboratory because there too many other factors which are not controlled.
Damn. I mist be all over the map on this. I tend to believe that most people are good, but that there are some bad guys (conservative). I also believe we all have a capacity for good or evil (liberal) and it’s our choices that matter. I also think some bad guys (who maybe were not ALL bad) can go good, given a choice and opportunity (but some choose not to).
Guns- a good guy won’t go bad just because he has a gun (or knife, or nuclear device in the basement). I consider the “liberal” idea that sooner or later we would all start klling unless we are tightly controlled, to be an affront and an insult. I don’t believe in being limited or punished for something I might do in some make believe future (conservative).
Drugs - Some people get hooked on some weird shit. By now, there is enough evidence that “it won’t happen to me. I can quit any time” just isn’t true. So that means you were stupid. Not evil, just stupid. Besides, which drug is it? Crack is illegal (bad). Booze is legal (good). But it was illegal during the twenties (it was bad then). If you get stoned at home, stay there, and don’t hurt anyone, it’s less of a problem. If you go robbing stealing and killing to support your habit, you go to jail. If a stoner goes for treatment, gets clean, and stays clean, that should count for something. But the chance to do that should be there. (liberal?)
Everyone makes bad or stupid choices sometimes. Fortunately, we “get away” with not causing harm. The ones who keep doing the same thing and keep causing harm should be dealt with (conservative I guess).
Saying so does not make it so.
Other than externalities (which don’t apply to the examples given) no explanation has been offered for the market’s failure which would not be equaly problematic for a regulatory solution.
I figured you might think that… that’s why I gave an example which, based on the theories which seemed to be agreed upon here, should work.
Uhh… no.
I feel I must once again point out I am not trying to advocate a ‘anything government can do, the market can do better’ position. Just looking for the reason for why, in one particular example which was discussed at length here, the market would fail while the government would succeed.
First, there is not centuries of evidence that they don’t. There’s enough evidence (centuries aren’t required) that they don’t ALWAYS happen. I suppose I am misunderstanding the problem. That’s why I’m asking. I am not ignoring centuries of evidence because I have not decided that “these things should happen” I’m just pointing out that “these things should happen” according to my understanding of the theories discussed at lenth here, and apparently agreed upon by people advocating government regulation Since both sides agree that these things should happen, but often don’t, I am asking WHY these things don’t happen despite the market forces which everyone seems to agree should make them happen. As long as that question remains unanswered there’s no reason to assume that government regulation would not fail for the same reason market forces do.
Once again… no.
You are obviously not as tired of repeating yourself as you say, since you jump at the chance to repeat the refutation to an argument I have not attempted to make.
Yes and no. I’m not against providing resources to those in need for primary and secondary education. I’m against the government being the monopoly provider and delivery mechanism of the product.
Ahhh. For your next question. NOW we’re getting somewhere! The original Bill of Rights. Unalieable rights granted to us by our protector, and all that. Debates amongst our Founding Fathers. The House of Burgesses. Locke, Hobbes, Calvin…the whole gang. Great question.
Who is the “everyone” who you claim is “agreeing” that market forces “should” be able to make these things happen? AFAICT it’s only you and IdahoMauleMan here in that category.
Everybody else here seems to recognize that market failures exist, and that therefore we can’t always expect market forces to make optimal outcomes happen. So no, we don’t agree with you that the failure of markets in such cases is an unexplained mystery.
If you want evidence and a historical reference for regulation, read Upton Sinclair.
Unwavering faith in markets is the defining characteristic of conservative idealism. Markets are good and the government is bad.
Market idealists refuse to acknowledge that human behavior, monopolies, oligopolies, externalities, asymmetric information, etc., prevent ideal market conditions. The organization of markets is ignored by conservatives because conservative economic policy depends on the myth of the market.
Every discussion of market failure in which I have been involved has revolved around externalities. Perhaps you should go borrow that beginning economics textbook. I think your problem is that you don’t know what an externality is.
Nope. Every example I have given has been why it wouldn’t work, with explanation. Are we reading the same thread?
This is not a working example, as has been told to you repeatedly, with examples.
The reason was given. Repeatedly.
There is centuries of evidence that they have NEVER happened. Feel free to provide a counterexample.
Yes.
And why I answered. My answers don’t seem to have been understood though.
Wrong. No one other than you, and perhaps IdahoMuleMan, thinks they should happen.
No one agrees that they should happen. Only you are making that argument. Everyone is telling you that they *won’t * happen. I spent a lot of time typing up reasons why that won’t happen. I gave examples. I’m beginning to think I wasted my time.
The question has been answered. Again and again and again.
Without government intervention, there were no labels on food. This has been the dominant example. People cannot make informed choices without information, and the market did not provide that information. Thankfully, we have other means at our disposal.
Um, in context, that makes it the perfect laboratory!
How about after that? Are roles adopted by the government throught the actions of legitimately elected officials acting on a mandate of the people legitimate roles of government? Or is it only a legitimate role of government if it became a role of government prior to 1787?
Is it a legitimate role of government to provide social security?
Good point, if they can increase their profitability by making up test results rather than spending the money to do them. But assuming they do, in the case where the consumer pays there is no motive for being biased on the side of the producer. So, it is a problem in either case.
It wasn’t an off chance. The FDA was set up because of real problems with the unregulated situation before they were established.
I’m not sure about what definition of externality people are using at the moment. However, we have lots of examples of things spinning out of control after deregulation, or as a result of a lack of regulation.
Very little actually got here, and port inspections - possible because the regulatory mechanism was already set up - screened out a lot more. Countries like Panama with weaker regulations got hurt worse than we did. I remember the dog food issue, but I don’t recall anyone dying in the US from tainted toothpaste, but I might be wrong.
Telephones were not of high quality because of government regulation. The business model of the Bell System was to rent them, and make money each month on equipment that might sit in the homes of customers for decades. In this case, quality pays off because we didn’t have to make expensive service calls or replace the phone - for free, of course. That didn’t have to be the model - we could have used our monopoly position to sell expensive phones to customers, and try to get them to buy new ones every few years. That is still the result of regulation.
My point was that since consumers were used to phones that basically never broke, they were unable to truly evaluate the quality of the very cheap phones they found in K-Mart now.
I speak as someone who started life in the Bell System, and who went to a seminar about how to make phones less reliable. Regulation was bad and allowed for this inefficient situation, true. But that isn’t the point.
