Of all the people, Atrios has an interesting take on no-call list legislation:
I see that little Jonah Goldberg and various other libertarian-conservatives/conservative-libertarians are all in a muddle about the new national do not call list as they sorta like the desired effect but are horrified that there isn´t any market solution to the problem.
This is rather silly. This is a market solution, though not in the way people like Goldberg tend to see it, where there is some explicit financial transaction. Instead, what the government has done is clarified and/or redefined property rights, depending on how you look at it.
Previously, you didn´t own the right to determine who did or didn´t cause the telephone in your home to ring. Well, you could do the equivalent of putting up fences by having various electronic gizmos and caller ID or whatnot, but no one could be prosecuted for climbing over those fences. Now the federal government has strengthened your ownership of your phone by enforcing your ability to exclude certain classes of callers.
Is this really an extension of property rights as Atrios suggests? It’s actually an interesting argument. Furthermore, if we accept that we ‘own’ and have legal protections on channels of communication, it does have an interesting set of reprecussions. Would this also mean that the government could take legal action against spammers? There are some interesting issues with this concept, but it is an interesting view of the subject. Atrios also suggests an interesting new marketing idea:
Of course, nothing is now stopping you from selling or renting that particular asset you now have – perhaps we can look forward to companies offering people money to take themselves off the no call list and then marketing that list to telemarketers…
Again, if I were getting a small stipend for my troubles, it would be less annoying to recieve those solitictation calls. Depending on what the benefits would be, this might be a valid way of doing things.
Is it so strange for people (in general, not just Jay or conservatives) to realize that the free market can’t be trusted to provide all services? I mean, that’s why we set a cap on the interest that can be legally charged on loans, for instance.
The free market is great for setting prices for stuff that people don’t desprately need. But everybody needs food and a place to live (and they need it right away, usually), and as a result, the free market gouges people on these items. Therefore I don’t think the rental housing market should be totally free. I mean, we’ve been in a recession for 2-3 years now and there’s no sign that rents are down at all.
Clearly rent reacts to the market far too slowly to trust the free market to provide housing for people at rents they can afford.
Sorry, this was supposed to be more about the failures of the free market but I think rent is by far the most spectacular failure.
Rent control is actually a good example of why regulations don’t work. One of the biggest reasons why rents are so high in major cities like Minneapolis and New York is because of rent control policies. By capping the amount owners can charge for rent, it creates an economic burden on non-rent controlled housing.
The cost of building and maintaining housing is the same no matter if the housing is subsidized by the government or not. The subsidized housing is losing money, and owners can either let their buildings become slums, or they can pass the additional costs on to other owners.
Adding to the whole problem are the restrictions on new construction that keep many of the small players on the housing market. New housing technologies have to pass through a whole series of hurdles before approval, which only delays more efficient low-income housing.
Every regulation has a cost, and the consumer pays for it somewhere. If there were to be an easing of these regulations the housing market would reach a market equilibrium and the overall cost of housing would decrease. Not only that, but construction woule ease the housing crunch in many major cities.
Regulations tend to create wide disparities in the market which distort real prices. (Milton Friedman won the Nobel Prize in economics for exploring this theory – his book Free to Choose is a great introduction to why markets work better than regulation.) Markets are designed on the principle that people are self-interested, and that’s why markets work.
Markets are designed on the principle that people are self-interested, and that’s why markets work.
That simply assumes that the greedy algorhythm is the one that provides the best results. Any mathematician can tell you that’s not always the case. People acting in their own self-interest doesn’t always lead to a situation that’s best for everybody. Read some game theory, sometime.
It’s this irrational, blind trust in the free market that prevents regulation where it would be succesful.
Regulation is fine to a point, however it has to be considered as the last possible option. Just about everyone (with the exception of hardcore Randian libertarians) will grant the government certain rights to regulate certain things. The real issue is where to draw the line.
Furthermore, the whole point of markets is based on game theory. Every player is assumed to be self-interested, and will try to maximize their own results. The folly of regulation is assuming that the government really is a neutral party when it has its own interests – mainly consolidating more power for itself. At best that leads to bureaucracy, and at worst totalitarianism. Or as I like to put it: if you choose never to eat at McDonalds nothing will happen to you. If you choose not to pay your taxes, you end up in jail. Or as Adam Smith himself said (far more eloquently than I) "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard for their own interest."
You apparently missed my point – you certainly didn’t comment on it – so I’ll repeat it – self-interested or “selfish” algorhythms, like the free market, often do not represent the solution that does the most good for the most people.
Game theory was developed in part because mathematicians recognized that Adam Smith’s economic theory was not wholly accurate. Sometimes a group of self-interested individuals block each other (ala the classic “Prisoner’s Dilemma”) instead of working together – thus, each individual recieves a worse outcome than if they had worked together.
So, it is in fact inaccurate to say that free markets are based on game theory. In fact, game theory was developed to point out that the free market is not always the best solution.
Actually, it’s odd you mention that, as someone had just pointed me to this interesting article on the Prisoner’s Dilemma. It’s a heady article, but it does a good job of explaining how policies like rent controls actually produce Prisoner’s Dilemma-style problems.
Dr. Ross points out that if free market solutions didn’t work, society would have never formed in the first place. Societies existed on the idea of the mutual exchange of goods long before anyone came up with the concept of government. There are, of course, limits to the free market, and there is a room for government. Evolution itself is an example of this – the animals that best cooperated in a truly free market system with no rules whatsoever are the animals that tended to prosper. Granted, that kind of Social Darwinism isn’t what capitalism is all about, but the organizing principle is the same.
Friedman does a much better job of explaining all of this than I can (which probably explains why he has a Nobel Prize and I don’t…) which is why I highly recommend finding a copy of his book Free to Choose. It’s a bit dated, but the theory behind it is as important now as it was then.
It’s actually funny that you bring up evolution in this discussion, as a lot of the more succesful aminals are the ones that developed social structures to eliminate or suppress competition for resources among peers. Bee hives, for instance.
As you say there’s room for metafree market entities. And I think the free market is the best for determining the price of nonessentials. But when it comes to the things that human beings need to live, I just don’t think it’s safe to totally trust the wims of the free market.
Hmm… I have an answer to your concern, but it’s much longer than I want to post as a comment… and it was something I was thinking of posting for the Blogathon at the end of the month. Suffice it to say, you’ll get a very detailed response as to why the free market works even for essentials, but I’m going to be cruel and make you wait for it… at least for a while.
I look forward to refuting it.
When the minimum wage isn’t enough for one adult to both pay the rent and eat food or have health insurance, there’s something imbalanced about the free market. And remember, the free market relies on competition through consumer choice. When consumers have no choice – as often is the case with rental housing – competition doesn’t exist, and the market is biased in favor of the seller.
Increased housing would alleviate this problem, to an extent. But in this economy, who’s going to take that risk?
All this talk about how evil capitalists must be stopped and how government must provide for all our needs scares me.
My grandmother lived in Germany until 1938. I remember her telling me about how Hitler came to power. She told me that the reason Hitler become chancellor of Germany was because he promised people everything. He told them that the reason that they were poor was because of the rich capitalists (Jews) that were exploiting them. He said that things like work and bread should be controlled by the government so everyone could get their fair share. People were happy to vote for him because they said that he was a hero for the working class.
By the time the gas chambers were build they were so dependent on him that they didn’t care what he really was. They had their jobs and their bread, and they didn’t care that 6 million were being killed right in front of them.
Everyone says that it couldn’t happen here. Grandmother always told me that it could happen anywhere, and the people who would make it happen would do it by promising people that they were more just and more fair than the people in charge.
Maybe government health care and food and welfare and all that won’t bring on the next Hitler. But it will make it that much easier for some evil person to take control.
If we are all dependent on the government for everything we need, we can never be free. Help the poor, but help the poor yourselves. Government is only their for the lazy who want to help people with somebody elses money while sit back and watch tv. If people spend half the time they spend on their asses in front of the idiot box working in a soup kitchen or spending time with the elderly there would be no need for welfare. Government is a crutch for the weak of character who want to do good with someone else’s dollar. There is nothing moral about doing good by proxy. If only people would start taking responsibility rather than passing the buck we might have the kind of country our founding fathers wanted us to be.
Wow. Make one comment about how the free market is not a cure-all panacea for all of society’s ills, and the conservative bulldogs slip right out of the woodwork, calling you a Nazi.
Look, it’s pretty simple. What’s the best state of a free market for a consumer? Lots of competition. (Just to be clear, I totally love competition. Competition is a great thing.) But what’s the purpose of a corporation? To outcompete the competition. In fact, that’s the necessary outcome of competition – somebody wins and the competition is over. When that happens, that’s a monopoly, which everybody agrees is bad.
So, to make it simpler: Competition (which everybody agrees is good) leads, necessarily, to monopoly (which everyone agrees is bad). So, how can you trust a totally free market enough to rely on it for the things you absolutely need to live? It would take a reckless disregard for human life to do so. But then, looking at the state of the working poor in this country I guess that disregard is something you conservatives aren’t lacking in.
The point of government regulation is to preserve an eternal state of competition. Sometimes that means holding back whoever is in the lead, or helping those who are behind, or both. The best free market is the one that’s like a race where nobody is allowed to reach the finish line.
I should amend the above comments to refer not only to corporations, but to businesspeople in general. It’s just that corporations are usually the only ones in danger of succeeding in the capitalist struggle.
Like I said, I have nothing against the free market competition. To the contrary. It’s just that it’s a very, very bad thing when somebody wins the competition.
Except the competition can’t really be won because the game doesn’t have an end.
Take Ford for instance. For years they had a virtual monopoly on automobiles until General Motors came along. Then there was a rough duopoly between the two until about the 1970’s when the Japanese automakers hit the scene. Right now there’s more competition in automobiles then ever before, thanks to global reductions in trade barriers. (And many of those Japanese automobiles are made in the US, employing thousands of US workers.)
IBM is even a better example. Until the mid 1980’s they were the absolute leader in mainframe computers. They had the kind of leverage in the industry that Microsoft has now. Except they got big and lazy, and now they’re scrambling for marketshare with Compaq, Sun, Apple, and a host of smaller companies.
Even conservatives will grant the government the power to break anti-competitive monopolies. (In fact, that easily falls under the category of regulating interstate commerce.) However, those companies that are viewed as monopolies in the modern marketplace may have a lot of power, but they’re hardly Standard Oil. Clear Channel is good example of that. Right now, they have a lock on most major radio markets. Except they play nothing but crap, which means that they’re slowly losing marketshare to Internet broadcasting and satellite radio. As those start becoming cheaper and more accessible, the market for radio will drastically change. The chances of Clear Channel keeping their majority ownership status is not assured. (Although they benefit from the government’s sometimes tight-fisted control of radio spectrum and broadcast licenses – another example of government regulations encouraging distortions of the market and monopoly practices.)
You treat economics as though it’s a game to be ‘won’ or ‘lost’ when it’s an evolutionary process. If companies could control the market 100% in a free market system there would be no need to spend trillions of dollars on advertising or corporate strategy. Corporations come and go all the time – Wal-Mart didn’t exist in 1960 and by 2040 they could be as distant a memory as Montgomery Wards or Service Merchandise. A corporation has to be responsive to its customer, and if they fail, customers move elsewhere. There’s a clear pattern between deregulation of the market and increased customer choice – which is why airlines like JetBlue are beating major airlines like United and American, why Kias are outselling GM cars in some markets, and why the US has thousands of ISPs rather than the many countries whose state-run telecoms still have a monopoly on all communications. The end result of free-market competition isn’t monopoly but increased consumer freedom and choice, which is exactly what has kept the US on the top of the economic ladder for most of this century.
You clearly have a pretty narrow view of what constitutes monopoly.
All your examples of monolithic businesses succumbing to upstarts involve technology opening markets that weren’t avaliable before – Japanese automakers exploiting shipping, Apple exploiting cheap microprocessors to sell to families, Amazon utilizing the internet – and are irrelevant to, say, housing.
When you need a house, you need one where you are. There’s no way a Japanese company can offer you a Japanese house for cheaper or something. Rental housing almost always is a local monopoly.
A corporation has to be responsive to its customer, and if they fail, customers move elsewhere.
That’s great – what if they can’t? There’s nothing inherent in the free market that preserves consumer choice – to the contrary, the goal of a business is to decrease consumer choice. The internet has done much to expand consumer choice beyond geographical limitations but that doesn’t work for everything.
Actually, I’m following a project that could radically alter the housing market by creating affordable low-income housing with vastly shorter build times and far cheaper materials. (Also doing all of this without the need for government subsidies.) One of the biggest impediments to bringing low-income housing on the market: government regulation.
In order to build low-income housing it requires mounds of paperwork, environmental impact statements, permits, and other barriers to entry. All this red tape slows the rate of construction down considerably, which means that areas like the Twin Cities have a severe lack of affordable housing. There is a huge market for affordable housing in the Twin Cities and other urban areas, but that market is largely untapped because the red tape raises barriers to building new housing.
Furthermore, there’s no real monopoly on construction in the Cities. It isn’t a matter of one company leveraging monopoly power to keep new houses from being built. It’s government, using its monopoly power which is causing housing prices to rise.
Again, corporations may be intimidating, but government has the power to shoot you, and there’s no competition in government. (The Tenth Amendment says their should be, but the Tenth has been hacked away to nothing over the years.) The history of deregulation (and real deregulation – not the kind of half-asses mockery of deregulation that caused the rolling blackouts in California) shows that less government involvement creates more freedom for consumers, lower prices, and better service.
Funny, I thought it was monopolistic corporate price-fixing that caused the California electricity woes. Not exactly an argument for deregulation, in my book.
Where are you going to build this new Twin Cities housing? The suburbs? What good will that do? All the jobs are downtown, where the public transportation goes. Once again, the local nature of housing means that the market remains slanted towards the landlords. Renters have little or no choice, so the free market fails them.
You’re right, there’d be a huge market for affordable housing. But it’s not there. Instead there’s a market for overpriced, substandard housing because that’s all there is to choose from. The free market only works when consumers have options. You haven’t addressed this so I assume you agree. Now, what is inherent in the free market that you finds preserves consumer choice?
All the jobs are downtown, where the public transportation goes.
Crap, I totally meant to write something else here. 🙂 What I meant to say was, “all the jobs are downtown, but the public transportation won’t get you there from the suburbs.” Or something. I need to stop writing this stuff so late at night.
The “price-fixing” argument was completely unproven. In fact, the reason why the prices for electricity were so high was because capacity had not increased in years because of environmental regulations would not allow for new plants to be built.
In other words, California didn’t learn from Economic 101 and demand outpaced supply. When there’s high demand for a product and a small supply, the price goes through the roof. That’s exactly what happened in California.
But California capped the level of increase the power companies could charge. When the price can’t go up there’s no incentive to either produce more or cut back on usage – hence the kind of blackouts that plagued California.
It’s the most basic economics, and its shameful that policymakers failed to grasp such simple concepts and instead tried to pass it off as “greed” on the part of the energy companies when the real cause was the rank stupidity of the California state government.