The more businesses are forced to internalize costs, the more they care about efficiency.

[darth_cabal]

The other day, on NPR, I listened to a debate between two men regarding the usefulness of government. The first man was arguing that government is inherently incompetent and that we would be better off if we trusted in corporations, which are more efficient and more effective. The second was arguing that people who believe government to be

Comments

[angua9]

The idea that the best regulation is no regulation seems very totally-ignoring-real-life-observation to me. There are all sorts of reasons that regulation is needed. Besides the different sorts of negative externalities/tragedy of the commons reasons you describe here, there's the natural tendency of industries to collude and form monopolies, vicious feedback cycles, natural monopolies, information asymmetries, barriers to entry, and all kinds of moral hazard. And it used to be understood by even the most rabid capitalists how much corporations need governments for things like courts of recourse, the rule of law, stability, and a strong and flexible currency. Today's crazed libertarians seem to have forgotten this completely.

Unfettered, unregulated economies are like the mob, or perhaps Russia at present. They really don't work that well at all! Good regulation is like good rules and refereeing in sports - it keeps the game flowing and raises everyone's performance to a higher level. From all that I've read and observed, regulation

[darth_cabal]

Exactly. When people who feel exploited and desperate lack a legal means of defending their interests and addressing wrongs, they don't just throw their hands up and say "Oh well!" They find an alternative. Historically, that alternative tends to involved arson and guillotines.

As you point out, profits and innovation do not long survive when contracts and patents cannot be enforced, and to suggest that government should interfere to protect corporations but not to protect people is callous and short-sighted at best.

[therealdcv]

We need regulation of business. Deregulation creates nothing but headaches. Frankly, I think we also need some sort of subsidies so our business can compete in the foreign market where other businesses are subsidized. Otherwise they aren't playing on an even field.

[kayfin]

It's not efficient to employ children to create products from substandard materials, then spend vast amounts of fuel, time, and manpower to transport those items halfway around the world. The only reason such methods seem efficient is because the end product is cheap, and the only reason the end product is cheap is because many of the costs of production have been exported.I know it's not exactly what your post is about but something in this paragraph just awoke one of my pet leviathan-hates and you know how hard those are to rock back off to sleep once they're awake

[romq]

When I finally read this post I was going to answer about how I had come round from being a libertarian with a very small l to left of centre. I think I am what you'd call a 3rd wayer. (I think I've mentioned something like this to you some time ago? *shrugs)

Then the shit hit the hippo's tail before I did. I remembered this post and wanted to come back to it but kept being distracted.

Wouldn't you love to hear this debate again with the same two blokes today?

[darth_cabal]

LOL I had completely forgotten about this post until you pointed it out! It does now seem a tad prescient.

I have a lot of sympathy for free traders, as it tends to be the most efficient method of allocating resources, but I worry sometimes that people don't seem to recognize the danger of market failures. One of the worst market failures is in the exchange of information, and I would say that that played an enormous role in the current credit crisis. Half the people in the banking industry would have a hard time explaining all the interest rate policies of a credit card, never mind credit default swaps. How, then, are the the majority of the people who have a stake in the banking industry to monitor the situation? They can't. A certain amount of regulation is necessary--a canary in the mineshaft of the economy.

It's sort of like the idea that capitalism is the best system out there, but that it's likely to result in guillotines and torches unless there's a veneer of socialism to smooth the harsher edges.