"I believe that regulation is necessary to prevent upstream producers from dumping their cost of doing business on the little guy downstream."
Who do you think should pay those costs of doing business?
Yes, I know that it is a complicated mess of producers having to pass costs on to consumers, etc. And I know that regulation is fraught with bureaucratic headache. But our rivers don't catch on fire these days.
The tragedy of the commons is a real phenomenon. We've passed a lot of the cost down to our great grandchildren already.
I'm not going to pretend for a moment that there aren't serious problems with regulation. But please don't pretend that a free market is a complete panacea, either.
I do not pretend the free market is a panacea. A free market is the only way to go with 90% of the goods and services out there right now, so there is no pretending.
Every government regulation started out with good intentions. Every government regulation has been turned in to a legal nightmare that is one of the primary forces driving our manufacturing base overseas.
Never forget that government never solves problems, it manages them. If a division of government was to solve a problem it is in charge of, that division would be out of work.
But the question still stands. Who do you think should pay the costs of supplying and operating a business if not the customers of that business?
P.S. Flaming rivers do not come from a free market.
My problem with the 'free market' argument is twofold:
1. All consumers are not created equal. Some will have more money than others, allowing them more freedom of choice in economic decisions - which is the lynchpin of the free market, as I understand it. (Voting with your wallet.)
2. It is not always in the best interest of the business to be transparent to the consumer, therefore the consumer may not be able to make a truly informed choice.
Of course, I'm sure these arguments have been levied (much more competently by better-read people than I) against arguments for the free market in the past, so I'd like to hear the counter-argument for what I consider fundamental weaknesses.
Here are your fundamental weaknesses."1. All consumers are not created equal."
This is a fact that no one and no amount of regulation is going to change. I wouldn't change it if I could because that is called socialism or communism depending on far you push it. Neither option worked out well for nations that tried it.
Here is another fundamental flaw. In a regulated economy the options for the underdog to get ahead are severely limited. In a free market economy everyone has the same opportunity to pursue what ever business they choose.
They will sink or swim on their own merit which is as it should be. If I happen to find myself as the underdog, I would like to have the option of clawing my way up the food chain.". It is not always in the best interest of the business to be transparent to the consumer, therefore the consumer may not be able to make a truly informed choice."
Why should any business have to be transparent to the consumer? I'm not sure what that has to do with a free market economy.
As for making an informed decision, you have got to be kidding me!
In this day and age? If you really believe that a consumer cannot find out about a product or a dealer let me take your hand and lead you to a couple examples:
For products, I selected Canon Cameras (I shoot a Canon EOS-20D) All you have to do is Google "Canon camera ratings."
For dealer ratings check out these web sights: Bizrate
Or just Google the name of the business along with the word "complaints" or "ratings."
The US consumer has never had this kind of access to information and reviews on consumer products and dealers.Edited at 2008-07-22 10:43 pm (UTC)
1. I totally agree that it is not the place of the market or the government to make sure that all consumers are created equal. Competition and market forces are vital.
2. Sure, you can find out about how well a product performs. But that's not what's being discussed.
Actually, bustylis wrote: "2. It is not always in the best interest of the business to be transparent to the consumer, therefore the consumer may not be able to make a truly informed choice."
I was responding to that statement.
True, but I was speaking of a different kind of transparency and so, I believe, was she.
Okay, I missed it. What kind of transparency do you have in mind?
Well, if a company is engaging in something I consider inethical (insider trading, using child labor, polluting a water supply), how am I supposed to know so I can refuse to buy their products (and tell everyone else to)?
Are you seriously suggesting that the consumer would benefit from completely deregulated medicine or food? I'm fine with the FDA requiring a degree of rigor rather than letting companies determine how much testing is needed for their products by selling it to people.
If you were the underdog, you might be stuck buying products from a company that saves you money by using unsavory business practices, like letting you be a lab rat for their new drug. Regulation doesn't hamper the underdogs, it protects them.
Looking back you will see that I said 90% of the goods and services in this country should be hands off by the government.
The medical, insurance and banking industries are not part of that 90%. So we agree in principal. However, again anything the government does will be done to a fault.
With the FDA we are talking keeping potentially life saving experimental drugs out of the hands of near terminal patients. Patients that have been fully informed of the nature of the drugs, all the risks involved and who are going to die within three months for sure without it.
The FDA is very necessary. But they two need guidance when it comes to common sense.
Burning rivers come directly from an unregulated market. If a business can reduce its cost of doing business by disposing of hazardous materials into a river or the air, it will certainly do so - to do otherwise would be irresponsible to stock holders because it would not maximize profit.
The first clean water laws in this country were passed before we were even a country, an attempt by those downstream on the Hudson to stop those upstream from dumping their sewage and tanning wastes into the river and hopelessly fouling it for the downstream folks. The problem of producers foisting a portion of their goods on the general public has been around for a very long time.
Who should pay for it? In the long run, the consumer. I should pay what it really costs to build a car or grow a potato, if I'm the one driving that car or eating that potato. I don't know how we get there, though. The car company is too large and complicated for me to track down how the subcontractor who chromes the bumper disposes of his waste products. If I buy that potato in the grocery store, I don't have the ability to determine if the farmer used DDT on his crops. Even if I do investigate, how can I be sure the farmer or the subcontractor are telling the truth?
Right now, the consumer does not pay. The taxpayer pays, which means that the cost of my car is spread out over millions of people, whether I buy a Prius or a Humvee. That's not right.
Unfortunately, it's probably not avoidable. We are a global economy, and that makes too many layers between me and the guy who's taking home $5 million or more a year.
Can you look at what just happened to a deregulated mortgage industry and seriously tell me that manufacturers would police themselves just fine?
The fact is that it does not matter which books the revenue comes out of, it still comes from you and I. If the government raises a tax or a fee on industry or business, they do not eat that cost. neither would I.
Those taxes and fees are passed along in the price. In the end the consumer ends up picking up the tab on all the taxes from the raw materials stage to cash register.
As for the mortgage industry, it is government regulations that lead us into the sub-prime mess. The Democratic led congress at the time twisted the arms of lenders because "only the rich" could afford to buy houses. You see, those mean old hard hearted money changers refused to make loans that carried too much risk.
Our congress, righteously outraged that not everyone could afford the American dream, tackled the problem with legislation and regulation. the forced the lenders to come up with programs to get less advantaged people, also written as "higher risk" mortgages written. The rest is history.
But again, anything the government does in the private sector will be done to a fault. For a tiny slice of that concept, take a look at some of the toys you and I grew up with. Toys that have either quietly vanished from the market place (Thing Maker, Vac-u-Form, Mighty Moe) or been sued out of existence. (Lawn darts, the Original Easy Bake Oven.)
We must accept some personal responsibility for our own actions. If you place your ladder on soft mud against a rusted rain gutter mounted on rotting and termite eaten eaves three stories above that mud and then put on a dazzling display of Newtonian physics, why should the government spank the ladder maker?
The same applies to the extraordinarily dim parent that would hand a set of lawn darts to a couple six years olds and tell them to go outside and play.
And these are just a couple among thousands of examples of what happens every time government steps in to solve a private sector problem.
However, I think you are mistaking a free market economy for a no rules economy. I am not in favor of a no rules economy. There should be and need to be reasonable regulations and oversight on things like pollution and safety.
Edited at 2008-07-23 01:26 pm (UTC)
It sounds like, in the end, we are much closer on this than initially appeared. I don't have the time or energy to dissect the mortgage crisis just now - we'll save that for another day!