Free Our Markets: A Citizens Guide to Essential Economics
The good people at the Mercatus Center have been helping me get my academic work on regulation by market forces into policy discussions. Here is a slice of the most recent effort, posted April 5 to coincide with hearings on the nomination of Scott Gottlieb to head the FDA: While safety and efficacy are important, … Continue Reading. Last week, when one of my students caught sight of me approaching on a campus walk, he pulled out his smartphone to show me a picture he had taken. That slice of modern economic life comes … Continue Reading.
A Citizens' Guide to Essential Economics | Free Our Markets
This past Christmas break I treated myself to a third? The rising generation needs to know about it, I thought, so I wrote a plug for it at Learn Liberty.
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Not only is it … Continue Reading. Learn Liberty also posted the piece.
Home Author Book Reviews Supplements. Exploitation , Marxism , Profit and loss. Private-property rights provide better incentives to use resources to create value for others than does common ownership. To illustrate this point, Baetjer compares the use and management of forests owned by government to the use and management of those owned privately by the Audubon Society. Private owners have a stake in the future value of the forest.
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The second part of the book explains some of the insights of public choice. The author correctly illustrates the most fundamental of these insights: One must understand the incentives facing people in markets and the incentives facing people in government.
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The comparison between imperfect markets and a perfect government is a false comparison. Sure, markets are imperfect, but, as Baetjer points out, government is even more imperfect.
Free Our Markets: A Citizens' Guide to Essential Economics
A discussion of regulation and licensing illustrates this point well. It is argued that regulations are the shield that protects the public from quack doctors and people selling elixirs that cure all ailments. Reality, however, tells a different story. Anticompetitive intent, regulatory capture, and the special-interest effect provide a better rationale for the existence of regulation, licensing, and government intervention.
To regulate an industry, one must have experts that know the industry. Naturally, these people come from the industry itself.
Free Our Markets
Also, companies that must comply with the regulations have a large incentive to make sure the regulations favor them. The people whom the regulations are designed to protect have little incentive to shape the regulations, nor do they have the knowledge to do so. The knowledge problem favors those being regulated, as does the phenomenon of concentrated interests and dispersed costs.
This same issue drives the special-interest effect. The author explains how this occurs in a democratic decision-making process. Special interests will always have the upper hand when regulation is left to government. Baetjer goes on to make a convincing case for the self-regulating properties of markets. This is one of those unknown aspects of markets: Hardly anyone cracks open the yellow pages and randomly picks someone from the dentist section.
Reputation is a much stronger regulator of quality than licensing. Future profits provide a powerful incentive for sellers to maintain a reputation of providing quality goods or services. The existence of many sellers is also a more effective means of ensuring quality than using government. This highlights an irony of government intervention: The Baptists are the do-gooders who sincerely want to ban something that they feel is bad for society. The bootleggers use the Baptists as cover to gain government protection for their particular enterprise.
Not only is it … Continue Reading. Learn Liberty also posted the piece.
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Home Author Book Reviews Supplements. Exploitation , Marxism , Profit and loss.
Immigration , Property rights. Minimum wage , Price fixing , Unintended consequences. Posted on April 14, by Howard Baetjer Jr. Costs of regulation , Crony capitalism , Government regulation , Private Certification , Regulation by market forces. Government regulation , Private Certification , Regulation by market forces. FDA , Government regulation , Regulation by market forces. Central economic planning , Education , Government schooling , Higher education , Job creation , Knowledge problem , Misallocation of human talent.