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Regulation & The Free Market

A sustainable free market has no regulation.

  • Cheese.

    Votes: 0 0.0%

  • Total voters
    35
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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Why wouldn't that be taken into account on the very first time it happened?

And really for Mach's example the person really has to be out to kill people to continue to do it.

I don't know why, but these sorts of analysis happen in the world world with harmful results.
 
That's correct, the financial meltdown was a result of the deregulation of the financial sector. Without regulation capitalism becomes a cancer and will eventually eat itself alive.

While I'm for some, very limited, regulation on the market - especially in the areas of health & safety, I think it could also very easily be argued that government involvement in the financial sector was a primary cause of the financial meltdown. Fannie Mae/Freddie Mac aka the Federal Gov't set up the lending requirements and the money supply propping up a false market. And, the Federal Gov't lends money to banks which affects everything banks do. Banks are no longer business enterprises which invest their own money in projects or people they think will be a good risk and make a good return for the bank. Instead, in effect, the government controls who will or who won't be determined to be a good risk, it controls the approximate rates that can be used in most traditional lending, and it controls the amount of the loans that can be made for most projects. It has almost total control in the housing market, but it also has most of the control in the commercial lending market as well. And, the government controls/heavily influences the bond market, too, which affects everything else.

The large, artificial, market bubbles that occasionally burst typically are either 1.) the result of government involvement or 2.) the lack of information in the market.

The best way to regulate the free market is through education of the public.
 
The large, artificial, market bubbles that occasionally burst typically are either 1.) the result of government involvement or 2.) the lack of information in the market.

The best way to regulate the free market is through education of the public.

No amount of education is going to remove human herd behavior, its instinctual.
 
No amount of education is going to remove human herd behavior, its instinctual.

True, but I didn't mean "education" as in schooling. I was thinking about specific education about specific events. The media can call attention to poor working environments, the President can call attention to poor policy issues, individuals can form groups to boycott particular products or practices, public or private "watch dogs" can educate about products or practices as well.

If political agenda and government didn't play as big a roll in the market, then supply and demand could do its thing more effectively and efficiently so long as the public had access to the information it needed to make informed decisions.
 
True, but I didn't mean "education" as in schooling. I was thinking about specific education about specific events. The media can call attention to poor working environments, the President can call attention to poor policy issues, individuals can form groups to boycott particular products or practices, public or private "watch dogs" can educate about products or practices as well.

If political agenda and government didn't play as big a roll in the market, then supply and demand could do its thing more effectively and efficiently so long as the public had access to the information it needed to make informed decisions.

Maybe, I am skeptical in your faith in human rationality. One thing history has taught us is that our rationality fights with all sorts of psychological, behavioral, emotional, and physical factors.

Emotional and other factors will always be at play in these kinds of decisions, from business owners who hold onto the family business for too long due to their love of it to people who are overly predispositioned towards risk taking. Not that these behaviors are bad in and of themselves, but they can be maladaptive to a particular environment or scenario. Simply relying on people without expertise will not work, people are not smart enough in general for that (since nobody is good at everything), which is why we have bubbles in the first place. The best we can ever do is to listen to experts as it is unrealistic to expect everyone to be good at everything and then say its their fault if they fail to live up to that unrealistic ideal.
 
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assuming that enforcement of contract etc. is a regulation; yes, free markets require some level of regulation.
 
Maybe, I am skeptical in your faith in human rationality. One thing history has taught us is that our rationality fights with all sorts of psychological, behavioral, emotional, and physical factors.

Emotional and other factors will always be at play in these kinds of decisions, from business owners who hold onto the family business for too long due to their love of it to people who are overly predispositioned towards risk taking. Not that these behaviors are bad in and of themselves, but they can be maladaptive to a particular environment or scenario. Simply relying on people without expertise will not work, people are not smart enough in general for that (since nobody is good at everything), which is why we have bubbles in the first place. The best we can ever do is to listen to experts as it is unrealistic to expect everyone to be good at everything and then say its their fault if they fail to live up to that unrealistic ideal.

isn't it interesting how two people can look at the same information and come to such different conclusions. the lessons I draw from what you describe is that if we can barely trust people to govern themselves, we certainly cannot trust them to govern others.
 
isn't it interesting how two people can look at the same information and come to such different conclusions. the lessons I draw from what you describe is that if we can barely trust people to govern themselves, we certainly cannot trust them to govern others.

Therein lies the advantage of expertise over things such as common sense. With institutions, we can use the power of expertise while with decentralization, that is limited.

What I posit is that noone can obtain sufficient knowledge over every area of their life, in a modern and complex world, to make good decisions about everything a person might need to. We have to rely on external knowledge and institutions. This is the difference.
 
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Maybe, I am skeptical in your faith in human rationality. One thing history has taught us is that our rationality fights with all sorts of psychological, behavioral, emotional, and physical factors.

Emotional and other factors will always be at play in these kinds of decisions, from business owners who hold onto the family business for too long due to their love of it to people who are overly predispositioned towards risk taking. Not that these behaviors are bad in and of themselves, but they can be maladaptive to a particular environment or scenario. Simply relying on people without expertise will not work, people are not smart enough in general for that (since nobody is good at everything), which is why we have bubbles in the first place. The best we can ever do is to listen to experts as it is unrealistic to expect everyone to be good at everything and then say its their fault if they fail to live up to that unrealistic ideal.

I basically agree with what you're saying so long as we're talking about very minor government regulation. I'm not supporting anarchy. Thinking of your comments about the herd mentality earlier though, my point is that if a herd of people are running off a cliff and no one says anything, they'll continue to run off the cliff. If someone yells "hey, stop running, there's a cliff ahead and people are running off it!", then the herd turns before too many people fall to their doom. If a government puts in a bunch of regulations about how to run, where to run, what it takes to turn around, etc., then even though everyone see's what's happening, it becomes very difficult to change the situation because the government changes much more slowly than the market.

Human rationality as a whole, on average, will adjust to problems with psychological, behavioral, emotional, and physical factors much more quickly than government. And, maybe more importantly, when the market handles necessary change, it will be a somewhat gradual process - with the effeciency curve for change becoming much less steep as more people change. The government takes forever to recognize the needed change, then it takes forever to debate the needed change, then it takes forever to legislate the needed change, then it takes forever for the market to understand the legislation, then it takes forever for the market to implement the legislation, then it takes time to work out the kinks because the government didn't understand the issue thoroughly. Often, by then, the market could've already adjusted if it hadn't had under the government influence to begin with.
 
Therein lies the advantage of expertise over things such as common sense. With institutions, we can use the power of expertise while with decentralization, that is limited.

the power of the "expert" certainly is. however, you identified the interplay of emotions, biases, and tendency not to question assumptions as hindrances to making good decisions - but "experts" have proven just (if not more) susceptible to these. furthermore, the kind of expert that would be necessary in order to hold, process, and analyze all the information that is necessary to make the right decisions for millions of people in any field no matter how small is far beyond human (or, so far, computer) capacity. The "expert" becomes merely a fount of one-size-fits-not-really-anybody solutions combined with the coercive power of the state.

Rule By Experts has been tried. So far, it has generally failed, and failed miserably. It's good to see that Socialism still has some proponents kicking around, however.

What I posit is that no one can obtain sufficient knowledge over every area of their life, in a modern and complex world, to make good decisions about everything a person might need to.

which is why instead we obtain sufficient knowledge of sources in order to make good decisions. I need a plumber - I go to Angie's List. I need a mutual fund - I go to Morningstar. and so on and so forth. People aren't generic interchangeable machine pieces for whom all the same rules and standards apply - we are individuals, each with our own individual talents, abilities, ambitions, and resources. Nobody knows them as well as we do, and so for the question of how cpwill will run his particulars, well it just so happens that the worlds' foremost expert in Cpwill's Life is cpwill (that's not completely true - it is his wife, but you get the gist). no outside expert can ever replicate the detailed hands-on experience and knowledge that I bring to the table when dealing matching my own resources to my own wants. I do not require someone to tell me how to go about getting my needs met, I only request that government stop making it so damn expensive and complicated.
 
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We already have spammers hacking the poll.
If you see who voted, only Henrin voted. The other 34 are "visitors", therefore, spammers
 
A free market is NOT sustainable without regulation. For example, without regulation monopolies would form and take over large sectors of the economy. There would then be essentially nothing stopping them from creating "regulations" of their own to ensure that no competitors could form. And that would be far from a free market.

I think that this is the current situation and that these "Corporate Persons" are buying our politicians and judges to protect their markets and prevent competition. So much of business is Government Contracts that are political paybacks and IOUs to donors already that "what the hell do the people really have to say about what their gov't does?" Reality bites, eh?
 
the power of the "expert" certainly is. however, you identified the interplay of emotions, biases, and tendency not to question assumptions as hindrances to making good decisions - but "experts" have proven just (if not more) susceptible to these. furthermore, the kind of expert that would be necessary in order to hold, process, and analyze all the information that is necessary to make the right decisions for millions of people in any field no matter how small is far beyond human (or, so far, computer) capacity. The "expert" becomes merely a fount of one-size-fits-not-really-anybody solutions combined with the coercive power of the state.

Rule By Experts has been tried. So far, it has generally failed, and failed miserably. It's good to see that Socialism still has some proponents kicking around, however.



which is why instead we obtain sufficient knowledge of sources in order to make good decisions. I need a plumber - I go to Angie's List. I need a mutual fund - I go to Morningstar. and so on and so forth. People aren't generic interchangeable machine pieces for whom all the same rules and standards apply - we are individuals, each with our own individual talents, abilities, ambitions, and resources. Nobody knows them as well as we do, and so for the question of how cpwill will run his particulars, well it just so happens that the worlds' foremost expert in Cpwill's Life is cpwill (that's not completely true - it is his wife, but you get the gist). no outside expert can ever replicate the detailed hands-on experience and knowledge that I bring to the table when dealing matching my own resources to my own wants. I do not require someone to tell me how to go about getting my needs met, I only request that government stop making it so damn expensive and complicated.

and .. by admitting that you yourself go to an expert when you have a problem that you do not understand, you have contradicted yourself in your statement that experts are problematic for people.
 
the power of the "expert" certainly is. however, you identified the interplay of emotions, biases, and tendency not to question assumptions as hindrances to making good decisions - but "experts" have proven just (if not more) susceptible to these. furthermore, the kind of expert that would be necessary in order to hold, process, and analyze all the information that is necessary to make the right decisions for millions of people in any field no matter how small is far beyond human (or, so far, computer) capacity. The "expert" becomes merely a fount of one-size-fits-not-really-anybody solutions combined with the coercive power of the state.

Rule By Experts has been tried. So far, it has generally failed, and failed miserably. It's good to see that Socialism still has some proponents kicking around, however.

There's a big difference between the kind of "rule by experts" where the government tries to micromanage how much the grocer in Atlanta can charge for his apples, and the kind of "rule by experts" where the government is run by people with a working knowledge of basic macroeconomic principles (e.g. lowering interest rates stimulates the economy, raising interest rates hits the brakes). Although the government occasionally tries to dip into the former situation (usually with bad results), overall it's the latter situation that describes our government (which tends to work reasonably well). Throwing up our hands and declaring that "rule by experts" doesn't work is simply wrong, and goes against the empirical evidence. There are certain ways in which the "experts" in the government can absolutely influence the economy for the better.
 
and .. by admitting that you yourself go to an expert when you have a problem that you do not understand, you have contradicted yourself in your statement that experts are problematic for people.

yes, but I can pick my advisers, and hire or fire them based on how they work for me; and am free to ignore their advice if what they give me clashes with my personal situation. a government expert cannot be hired or fired, and I am forced to go to and obey him (or her) regardless of whether or not I find that they produce the best result.

the answer to a complex world is not one-size-fits-all; but let three hundred million flowers bloom.
 
There's a big difference between the kind of "rule by experts" where the government tries to micromanage how much the grocer in Atlanta can charge for his apples, and the kind of "rule by experts" where the government is run by people with a working knowledge of basic macroeconomic principles (e.g. lowering interest rates stimulates the economy, raising interest rates hits the brakes). Although the government occasionally tries to dip into the former situation (usually with bad results), overall it's the latter situation that describes our government (which tends to work reasonably well). Throwing up our hands and declaring that "rule by experts" doesn't work is simply wrong, and goes against the empirical evidence. There are certain ways in which the "experts" in the government can absolutely influence the economy for the better.

yeah, that's worked wonders lately, hasn't it?
 
I assume the OP is talking about government regulation?
 
yeah, that's worked wonders lately, hasn't it?

Actually, yes. If you track stimulus spending and quantitative easing over time, jobs growth matched up quite nicely. Unfortunately the states CUT a lot of spending from their budgets, so the overall effect of the federal stimulus was not nearly as impactful as it could have been.
 
I believe the "Free Market" system allows too much room for someone to take advantage of it. Too much regulation stalls natural society progression. I voted Free Market with some regulation.
 
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