Sunday, November 6, 2011

The Destruction of the Free Market

Thanks to government intervention, we have a tremendous distortion of the free market that impacts us everyday. This invidious government policy encourages centralized planning instead of market-based pricing. It lets gigantic entities roam the country breaching contracts and committing torts, while ex ante capping their liability.

This policy, if it wasn't clear, is the government's decision to allow people to form corporations. Certainly seems like one of the greatest "restraints" of free markets I can think of. Funny, though,  that when conservatives scream about how government regulations destroy markets, they often fail to mention this one government intervention they're most certainly fond of.

The vast majority of people, of course, realize that this policy makes some sense. Corporations, for instance, do encourage central planning--firms don't allocate goods to internal departments based on price--but they also lower transactions costs by limiting the need to sign a contract for everything (Imagine if you had to sign a contract every time you wanted to print at your law firm). Most people would agree the trade-off is worth it.

One would hope, then, that rather than viewing any given policy proposal under the heuristic that any government regulation is per se bad, we could evaluate each individually on its merits. Especially given that many, if not most, "regulations" endorsed by liberals are designed to facilitate more efficient markets (for instance, by making people pay for their externalities). But, big surprise, politicians captured by forces attempting to prevent the freedom of markets have filled the public with dumbed-down rhetoric about the evils of government that have prevented any more nuanced debate from emerging. And the other side has, unfortunately, done almost nothing about it.

If anyone has ideas, I'm all ears.

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