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- Libertarian
As a former smoker, I always think of tobacco companies when I think about regulation. Their story shows the failings of both sides of the regulatory environment:
First, tobacco companies boosted their products addictive qualities -- going as far as to pump extra nicotine in -- and then covered up or just plain-old lied about the relationship to cancer. The market incentivized this behavior -- as long as the companies could avoid the consequences of the harm their products were causing, they stood to gain more profit. Without the power of government to investigate, cast light on and punish these practices, they might be going on today.
When they first started to deny it the science behind it was still iffy at best and would of been hard to prove for anyone to show the direct relationship. By the time the connection was clear their efforts were losing ground. You had some people in government that were still denying the connection but their efforts were becoming less and less effective at stopping regulations from coming down the pipes. However, the connections the industry had in government did indeed extend the process far past the point of reason like it always does with these kind of connections. This is however isn't a problem of free markets but a problem of government.
As for the taxes, they were designed to caused people to spend more than they can afford on their habit to force them to alter their behavior. It's no surprise its the result then. I do get your point though that the market did endorse this behavior but the market didn't care like it doesn't care today. If people don't care of the harm to them, then they don't care. That is their decision to make.
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