Saturday, September 3, 2011

The Fallacy of Regulations

While nearly everyone wants to be successful, make lots of money, and become wealthy; no one likes to prospect of people becoming wealthy at others expense. To the extent that a wealthy person has made his or her money by cheating taxpayers or gouging consumers, aggregated wealth invites enmity and class warfare. Conventional wisdom suggests rules are needed to prevent unfair business practices and protect consumers. It's OK to make a lot of money if you play by the rules, but not if you cheat.

The problem is that these rules and ostensible consumer protections are written by a government which everyone has a constitutional right to petition. It is intuitive that those with more money are better positioned to petition the government than those with less. Therefore the regulations written will be influenced the most by the very people that they are to regulate. Simply holding the position that it is the job of government to regulate the economy is an open invitation for moneyed interests to influence those regulations to benefit them, rather than the consumer they are ostensibly meant to protect. Such regulations end up protecting entrenched business interests from competition at the expense of consumers. Even if campaigns were completely publicly funded, moneyed interests would still prevail due to their increased ability to hire lobbyists and fund advertising campaigns. The very notion that government should regulate the market rather than allow the alleged excesses of the free market guarantees, regardless of which party is in power, that the worst sort of crony capitalism (called crapitalism in a previous post) will occur. The only way to avoid subsidies, bailouts, tax breaks, and other backroom deals that transfer wealth from the less affluent to the wealthy is to subject business to all the risks of loss they would experience from bad business practices in a truly free and competitive market.