Saturday, September 17, 2005

A look at market forces...

"Let the market regulate it."

It's almost a knee jerk response to questions about regulating thing. Let the free market decide; people will vote with their dollars, right?

Well, I'm no economist, but I've thought long and hard about economics, and I've decided that the only thing that the market can perfectly regulate is the pricing and distribution of luxuries. If the free market drives the price of beluga caviar to $500 an ounce, oh, well... it's not like anyone is dying from caviar deprivation.

I'm not here to argue economic theory, however. I'm here to give a single example of why I find the notion of market regulation so distasteful.

Imagine this: you had a house in New Orleans, and it was well insured. You're going to get a hefty check from the insurance company, and right quickly, too... they don't want newspapers to claim they were slow settling a legitimate claim from Katrina! In fact, you were on a planned vacation when Katrina hit... you didn't need to evacuate.

What does the free market say you should do?

Why, apply for assistance! Get someone to pay your hotel bill and your food bill, get someone to give you money to help with relocation, and mid-term shelter, and food and clothing in the interim. The only time you wouldn't want to apply for assistance is if you can get more money doing something else.

I imagine some free-market worshippers will try to explain that no, that's not really what regulation by market forces really is, that this is somehow magically different, but anyone who does that is simply dancing around the truth.

The free market says you do what's best for you, and you don't worry about anyone else. Other people will look out for themselves, and somehow, everyone will be happier. If some suckers are willing to just give you money, just because your previous address was affected by Katrina, you take the money. In fact, to refuse to take the money is the same thing (from an economic perspective) as losing the money.

Now, I won't deny that there are many times when the free market is like democracy, "the worst system of all, except for every other method that's been tried". Too tightly regulated, or too tightly subsidized, a market place can cause problems in ways that are hard to imagine. There really are times when the free market can be cruel, but necessary.

But there are times when its cruelty is simply to the advantage of the haves, and the disadvantage of the have-nots, and the haves are just fine with that, and are glad to try to make the have-nots think it's a good deal for them, too.

And then, there are times when claiming that market forces should regulate something is clearly insanity itself.

Listen carefully when people talk about market forces, and think carefully about when market forces are the best way to handle things... but never trust anyone who pretends that market forces are the answer to (almost)everything.

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