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Regulation debate, please help.

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Malaclypse the Elder Posted: Sun, Feb 15 2009 11:58 PM

I am going to be on the deregulation side of a regulation debate in my microeconomics class soon and would really appreciate some help. My teacher is a keynesian and has already mentioned market failures such as the 19th century steel trust that the antitrust laws broke up, the De Beers diamond monopoly, and Enron and how deregulation screwed up electricity and ect. He says really big firms can afford to make a loss in the short run which will drive out competitors and then they can raise their prices later because they're a monopoly.

He has also mentioned negative externalities(ex:pollution) where resources are over-allocated and need taxes or regulation so the new price and quantity includes the cost of pollution, and positive externalities(ex:aids vaccine because people benefit from other people buying the product) where the price and and quantity is understated and needs government regulation and subsidies to fix it. He has mentioned public goods(ex:parks, national defense) as goods or services that users collectively consume and where there is no way to bar free riders, so people will wait for someone else to pay which will result in an underproduction or no production at all.

He thinks the government should encourage spending because it provides people with jobs, and when people spend less, people lose jobs which causes a chain reaction of people losing jobs and spending less. Also he said this had to do with deflation which I don't fully understand, I am assuming he means falling prices when he says deflation.

One of his slides also had this: " ... do it(social regulation: protect the interest of citizens) because of asymmetric information and product quality (ex. lemon problem)." I have no idea what he's talking about here, I don't know what he means by the "lemon problem" or asymmetric information.

He says the government needs to promote competition through anti-trust legislation, and ensure economy wide stability by providing full employment, price stability, and economic growth.

I would greatly appreciate any help refuting the previous. Also could you please provide me with common examples of specific "market failures" that people normally bring up to discredit deregulation and also provide me with examples of where deregulation made the economy better. Please include information about liscences and regulations about quality and safety, and some examples of private frims providing such. I know I'm asking alot but I don't have much time before the debate and am still a newb.

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jmw replied on Mon, Feb 16 2009 12:11 AM

These are the kind of questions you need to have with your professor. Ask him or her what they mean; clarify whenever possible. Show earnestness and openness and you will learn.

It's not really our (the communities) place to support your belief just cus' you belief it. Perhaps you find Keynesianism effective or at least desirable? Then what? Follow the evidence.

What you will find is general agreement between economists on the value of all economic schools of thoughts. The disagreement comes in the role of the goverment.

I hope I won't regret that last statement..

Some arguments....

On monopolies: a market monoply can be taken down by any David with a better idea. A state monopoly is backed by a gun. Only the state can be a barrier to entry in the marketplace.

On Keynesianism: Question the logic of public spending replacing private spending---where does public money come from? No new wealth is created, merely redistributed. How is that beneficial in a democracy with some many special interests?

On negative externalities: discuss property rights. Pollution harms private individuals and other private "property." It is not desirable in an Austrian thought framework. Hell, who would argue for pollution?

Where deregulation worked: Hong Kong. Google "Hong Kong Experiment"



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fezwhatley replied on Mon, Feb 16 2009 12:27 AM

Malaclypse the Elder:
He says really big firms can afford to make a loss in the short run which will drive out competitors and then they can raise their prices later because they're a monopoly.

Stop right there.  If he really believes that he should either stop teaching since he is not fit, or seek asylum

do we get free cheezeburger in socielism?

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