Monday, September 07, 2009

So how about some interference?

There are those who say: The free market is not to be left unbound or without regulation and interference. It needs to be "regulated" or "adjusted" to some or this political agenda.

Fair enough. Free individuals and their companies need, apparently, a third party (or fourth or fifth, etc.) to push them in this or that direction for the benefit of something else than freedom, such as consumers, competition, environment, ethic standards, etc. Or so I hear.

But has anyone tried to compare the free market to nature? Nature is a finely tuned mechanism of preys and predators. There are those who are eaten, and those who eat. If those who are eaten are too many, then they eat too much vegetation, starve and die in huge numbers. If those who eat the grass-biters become too many, they will also starve. They will eat too much, kill off their prey, and starve.

In short, a finely tuned mechanism which always seeks a balance, but will never reach it for long. That's nature.

So how about the free market? Those who preach endless interference of the free market are almost without exception those who preach endless laizzes faire when it comes to nature. One system of natural law is to be left alone, but another to be heavily regulated by a huge, all-knowing central government.

Do I smell a lack of coherent thinking?

3 comments:

Anonymous said...

Um, No.

Even neoclassical economic theory itself admits of three classes of problem in which unregulated market forces will produce inefficient outcomes: in the presence of Externalities, Natural Monopolies or Public goods.

There are sound logical and mathematical reasons for supporting such regulation, in order to prevent the collapse of the market into an anti-competitive and inefficient stagnation. Cutting the string on a kite does not leave it free to soar, it falls back to earth. So too with regulation. It is important to keep firms competing, not colluding, protect public goods like clean air, and ensure open access to naturally monopolistic infrastructure assets like gas lines and electrical networks. Surely you must have at least this much education of economics?

Geir said...

Dear Anonymous,

Regulation does not provide consumer satisfaction or clean air. Private property rights in the absense of interference with them do. You can observe your own, un-regulated home, goverened at your whim, to prove my point.

Lets take two extreme examples:
- The modern financial markets are one of the most heavily regulated markets anywhere, at any time. And what a mess we are in now!
- The computer/software market is one of the freer ones (although this is changing), simply because its too technically complicated, and too innovative in its freedom, to be interfered with. And what do we have? Higher and higher quality of better of better products at a lowering prices.

You could say, "chosen examples to fit your cause", but I say: Prove that my point is wrong.

Best regards,
Geir

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