# When has government intervention harmed a service or economic sector? **URL:** \ **Category:** Great Debates\ **Created:** [September 4, 2009, 10:53am UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844 "2009-09-04T10:53:18Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 4, 2009, 10:53am UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/1 "2009-09-04T10:53:18Z")
Well, it’s a question of fact, but it seems like a GD topic anyway. When has government entered a sector & made it less effective? When has government entered a sector & made it less efficient? When has government entered a sector & made it more expensive? I’ve been trying to think of a case, but apparently, I’ve been so indoctrinated by Krugman that I can’t even imagine one. This is worrying, so help me out here. And saying “Every single time” is an automatic lose. I’d like clear historical examples for each of these, preferably multiples for each one. I hear the Reaganites claim that government intervention is bad for the economy, but I think such a claim should be backed up by historical data. There is no generality that does not contain specifics. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [September 4, 2009, 11:20am UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/2 "2009-09-04T11:20:18Z")
The most obvious examples are probably [price ceilings](http://en.wikipedia.org/wiki/Price_ceiling) that lead to [shortages](http://en.wikipedia.org/wiki/1973_oil_crisis#Price_controls_and_rationing). It’s tempting to believe you can just pass a law to keep things cheap. Rent controls leading to housing shortages and Soviet breadlines follow the same pattern–the market isn’t allowed to clear, so instead of having the good available at a higher price, the good isn’t available at all. Not exactly an improvement. For the sake of thoroughness, though, I should note that there are some situations in which a price cap can increase quantity supplied in a market. But even in those cases, it’s still a difficult target to hit. And if you relax your definitions a little, another great example is the “War on Drugs”. That’s a complete clusterfuck, both socially and economically. Government interference is supposedly justified by the terrible consequences of these dangerous substances, but that’s a bunch of horseshit. We could prevent a lot of harm by implementing a more rational system. But if you’re reading Krugman (and that’s good), you have to realize that he’s naturally focusing on those areas where private markets aren’t inefficient. It’s hardly ever necessary for him to mention the differences between efficient and inefficient private markets, but [he will indeed do so](http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/?apage=2) when the distinction needs to be clarified. And the fact is that the government would be worse than private markets in all kinds of situations. We just don’t talk about those situations because practically no one in the US sees an advantage in, say, nationalizing grocery stores. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 4, 2009, 12:20pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/3 "2009-09-04T12:20:44Z")
What I find interesting is that in both of those cases the government is trying to dictate to the private sector how to do something (or just not to). Is there a case of active government action being a bad deal? Say, civil servants doing something worse than private companies in competition? ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [September 4, 2009, 12:52pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/4 "2009-09-04T12:52:20Z")
[Maybe the steel industry?](http://www.heritage.org/research/regulation/wm78.cfm) - distorts market prices and removes incentives to innovate [Possibly the corn industry.](http://www.accidentalhedonist.com/index.php/2006/01/24/tariffs_and_subsidies_the_literal_cost_o) - artifically increase production of High Fructose Corn Syrup and all the negatives that go with it. Any time the government enters some industry, by definition it either generally reders it less efficient or more profitable at the expense of something else. ---
**Author:** ![Sinaijon](https://avatars.discourse-cdn.com/v4/letter/s/dc4da7/32.png) [@Sinaijon](https://boards.straightdope.com/u/Sinaijon)\ **Post date:** [September 4, 2009, 1:31pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/5 "2009-09-04T13:31:57Z")
> [@foolsguinea](#): > > Is there a case of active government action being a bad deal? Say, civil servants doing something worse than private companies in competition? I don’t think you find explicit examples of this. In the US, anyway, governement action tends to be in 1 of 3 places. 1) There isn’t an existing market (no private company in the first place), 2) the private company already failed, and the government took over (GM, etc), both of these are excluded from your criteria. The third is eminent domain, which would probably qualify. Locally there was some successful business (pizza joint, tire store, etc) properties that were condemned. The property was then sold to build senior citizen condos, which then completely failed. I’m sure there are more examples. ---
**Author:** ![footballisplayedwithyourfeet](https://avatars.discourse-cdn.com/v4/letter/f/9f8e36/32.png) [@footballisplayedwithyourfeet](https://boards.straightdope.com/u/footballisplayedwithyourfeet)\ **Post date:** [September 4, 2009, 1:35pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/6 "2009-09-04T13:35:27Z")
Don’t forget the passive ways in which government can hurt sectors: free trade (or lack of tarrifs) probably hurts most manifacturing sctors. ---
**Author:** ![Sinaijon](https://avatars.discourse-cdn.com/v4/letter/s/dc4da7/32.png) [@Sinaijon](https://boards.straightdope.com/u/Sinaijon)\ **Post date:** [September 4, 2009, 1:37pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/7 "2009-09-04T13:37:01Z")
I can also give examples of the corollary: private companies doing something better than the government. The Internet is the prime example of that, or land development by the railroads back in the late 1800’s, or the Homestead Act, etc. ---
**Author:** ![Digital\_Stimulus](https://avatars.discourse-cdn.com/v4/letter/d/aeb1de/32.png) [@Digital\_Stimulus](https://boards.straightdope.com/u/Digital_Stimulus)\ **Post date:** [September 4, 2009, 4:34pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/8 "2009-09-04T16:34:04Z")
> [@Sinaijon](#): > > …private companies doing something better than the government. The Internet is the prime example of that… If I understand you correctly, you’re saying that private companies “did”, or “do”, the Internet “better” than the government. Since it’s your “prime example”, can you explain? What does “better” mean here (or “do the Internet”)? What comparison, measure(s), and/or criteria are you using? I’m trying real hard, but I’m not finding any actual meaning in your statement… ---
**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\ **Post date:** [September 4, 2009, 4:57pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/9 "2009-09-04T16:57:00Z")
Be careful what you ask for. I can make a plausible argument that the government breakup of Standard Oil made the petroleum industry less efficient. You’ll notice that in any industry (think software, auto manufacturing, big media, etc.) the big players tend to get bigger while the smaller players eventually get squeezed out, or compete best in small niches. Ergo, any government antimonopoly or antitrust action pretty much by definition upsets the natural dynamic. ---
**Author:** ![sleestak](https://avatars.discourse-cdn.com/v4/letter/s/919ad9/32.png) [@sleestak](https://boards.straightdope.com/u/sleestak)\ **Post date:** [September 4, 2009, 10:20pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/10 "2009-09-04T22:20:10Z")
There is a good argument to be made that the government played a big role in the recent housing debacle. [Thomas Sowell](http://www.reason.com/news/show/133593.html)and [Peter Wallison](http://www.scoop44.com/2009/03/17/conservative-economist-wallison-forecasted-housing-crisis-ten-years-ago/comment-page-1/) among [others](http://online.wsj.com/article/SB123414310280561945.html) make this case. Slee ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 4, 2009, 11:12pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/11 "2009-09-04T23:12:21Z")
> [@msmith537](#): > > [Maybe the steel industry?](http://www.heritage.org/research/regulation/wm78.cfm) - distorts market prices and removes incentives to innovate > > [Possibly the corn industry.](http://www.accidentalhedonist.com/index.php/2006/01/24/tariffs_and_subsidies_the_literal_cost_o) - artifically increase production of High Fructose Corn Syrup and all the negatives that go with it. > > Any time the government enters some industry, by definition it either generally reders it less efficient or more profitable at the expense of something else. “Maybe,” “Possibly,” _ergo_ “By definition.”? :dubious: ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 4, 2009, 11:22pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/12 "2009-09-04T23:22:40Z")
> [@Sinaijon](#): > > I can also give examples of the corollary: private companies doing something better than the government. The Internet is the prime example of that, or land development by the railroads back in the late 1800’s, or the Homestead Act, etc. Both railroad expansion in the west & the Homestead Act were cases of government giving away land to private concerns. Hardly _laissez-faire._ And the railroad policy was seen at the time as a case of profound political corruption, & not really proven the best. \_ What strikes me is that all of these cases are suddenly tentative. “It can be interpreted…” But in debates, the supposed principle is stated as if it were absolute, unquestionable historical truth; as if clear examples of this have happened repeatedly in history, & every last time it were just screamingly obvious. Apparently not. So maybe we don’t know for certain that the private sector is always always better? Actually, I knew that already. But you seem indefinite about even a few specific cases where it was better. I would prefer a case-by-case approach: Is this something the market can do, given a careful analysis of market dynamics? Or something it can’t? Or something the market could do, but government can do better? ---
**Author:** ![Cat\_Whisperer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cat_whisperer/32/4839_2.png) [@Cat\_Whisperer](https://boards.straightdope.com/u/Cat_Whisperer)\ **Post date:** [September 4, 2009, 11:22pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/13 "2009-09-04T23:22:57Z")
Example one - [The Canadian Wheat Board.](http://www.cbc.ca/news/background/agriculture/cwb.html) Wheat farmers in western Canada are required to sell their wheat and barley to the CWB. If they can get better prices than the CWB, too bad. Example two - the [National Energy Plan of the 1980’s](http://en.wikipedia.org/wiki/National_Energy_Program), a Federal plan that was to: > [@](#): > > redistribute revenue from the [oil] industry and lessen the cost of oil for Eastern Canada It is estimated that it directly cost Alberta between 50-100 billion dollars and 50,000 jobs, not to mention the continuing ill-will towards Ontario. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 4, 2009, 11:29pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/14 "2009-09-04T23:29:48Z")
Cat Whisperer, are those effects bugs or features? Farm policy, at least, has reason to set standard prices rather than leaving farmers open to the vagaries of boom-bust economics. The system may not be the best possible, but it may be smarter than what farmers would do on their own. That said, I do think there have been mistakes in the US corn industry, & government was part of them. I’m just not convinced\* laissez-faire\* wouldn’t make other mistakes that’d be as bad. ---
**Author:** ![alphaboi867](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alphaboi867/32/3898_2.png) [@alphaboi867](https://boards.straightdope.com/u/alphaboi867)\ **Post date:** [September 4, 2009, 11:33pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/15 "2009-09-04T23:33:03Z")
> [@Hellestal](#): > > …We just don’t talk about those situations because practically no one in the US sees an advantage in, say, nationalizing grocery stores. Many states do in fact have government run [liquor stores](http://www.lcb.state.pa.us/). ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 4, 2009, 11:39pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/16 "2009-09-04T23:39:19Z")
> [@foolsguinea](#): > > Is there a case of active government action being a bad deal? Say, civil servants doing something worse than private companies in competition? > [@Sinaijon](#): > > I don’t think you find explicit examples of this. In the US, anyway, governement action tends to be in 1 of 3 places. 1) There isn’t an existing market (no private company in the first place), 2) the private company already failed, and the government took over (GM, etc), both of these are excluded from your criteria. Forgive me, I was unclear. I don’t mean just cases where a civil agency is competing against a private outfit in the same market. I mean, are there cases where _civil servants_ are doing something less well than _private companies would in competition with each other_? That could be in the absence of a public sector operation. > [@](#): > > The third is eminent domain, which would probably qualify. Locally there was some successful business (pizza joint, tire store, etc) properties that were condemned. The property was then sold to build senior citizen condos, which then completely failed. I’m sure there are more examples. Ah, or _Kelo v. New London_! Yes, great example. Of course, that’s not generalizable. It’s not a takeover of a sector, just a case of forcing an individual to sell his land that another might benefit. There are cases where eminent domain has done good (like building universities & hospitals). So it’s not proof of general government incompetence. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 4, 2009, 11:43pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/17 "2009-09-04T23:43:36Z")
> [@kunilou](#): > > Be careful what you ask for. I can make a plausible argument that the government breakup of Standard Oil made the petroleum industry less efficient. I wait with bated breath. > [@](#): > > You’ll notice that in any industry (think software, auto manufacturing, big media, etc.) the big players tend to get bigger while the smaller players eventually get squeezed out, or compete best in small niches. Ergo, any government antimonopoly or antitrust action pretty much by definition upsets the natural dynamic. Is that “natural dynamic” the growth of private market dominance? Does good government require a submission to that natural dynamic any more than good architecture requires submission to the natural dynamic of rocks falling? 😕 ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 4, 2009, 11:49pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/18 "2009-09-04T23:49:27Z")
> [@sleestak](#): > > There is a good argument to be made that the government played a big role in the recent housing debacle. [Thomas Sowell](http://www.reason.com/news/show/133593.html)and [Peter Wallison](http://www.scoop44.com/2009/03/17/conservative-economist-wallison-forecasted-housing-crisis-ten-years-ago/comment-page-1/) among [others](http://online.wsj.com/article/SB123414310280561945.html) make this case. > > Slee I think it did, in a way, by changing regulations. But what would have happened in a _laissez-faire_ system? Seems like the historical change was a change from one government-overseen paradigm to another, or a few tweaks to a given paradigm, not a takeover of a classically liberal economy. Ill effects of changing a system already informed by New Deal policies don’t necessarily argue for a change to a non-New Deal system. Also, Thomas Sowell has to work pretty hard for me to take him seriously, sorry. I’ve seen him engage in fallacious & just plain ignorant argument (even by my low & almost trollish standards) too much. Skimmed Wallison. His argument is assuming an answer the question I’m asking. Using that as a cite feels like question-begging. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 4, 2009, 11:55pm UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/19 "2009-09-04T23:55:05Z")
> [@foolsguinea](#): > > The railroad policy was seen at the time as a case of profound political corruption, & not really proven the best. Wait, Sinaijon! I think you may have found a case of government entering a sector & making it more expensive! Even if you meant it to be the corollary. ---
**Author:** ![Oakminster](https://avatars.discourse-cdn.com/v4/letter/o/77aa72/32.png) [@Oakminster](https://boards.straightdope.com/u/Oakminster)\ **Post date:** [September 5, 2009, 1:44am UTC](https://boards.straightdope.com/t/when-has-government-intervention-harmed-a-service-or-economic-sector/508844/20 "2009-09-05T01:44:39Z")
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