Economics Questions

Re: What are the main Austrian criticisms of government regulation?

Weissphudder — Mon, 06 May 2013 02:45:30 GMT

When talking about regulation consider the IT industry..there is no regulation by governments in Information Techonology. I am in this since the last 40 years and never had to ask for any Governement previous license to develop my applications..and I have the honor to be in the team that built Brazilian Federal Governmmet fisrt on line real time system in 1973..there is no jail if a bank forgets to carry backup copies of their databases..there is nothing...the industry has its own standards witout any wise guys from Washungton, Brasilia, Brussels, etc

and it workks and it is very very important..sometimes makes mistakes like some crashes in Wall Street ..but delivered the wonderful Internet...

The only law that aplies to IT is the second law that governs world.."being afraid of losing my job"

I hope thsii helps you...I have the same problem discussing with people.....they just look at me and say I am crazy...I belive in Utopia..etc

cheers

Re: What are the main Austrian criticisms of government regulation?

Tex2002ans — Thu, 31 Mar 2011 04:59:08 GMT

WallStreetAce:
I'm asking who you meant by health inspector, government bureaucrat or a privately hired inspector in a world without the government monopoly on safety inspection.

Well in my example where I bring up the question of comparing two businesses (one without health inspection and one with health inspection), I was meaning in the market. Currently you have no choice, it is illegal to run a restaurant without the government approved health inspection.

Re: What are the main Austrian criticisms of government regulation?

WallStreetAce — Thu, 31 Mar 2011 01:16:53 GMT

I'm asking who you meant by health inspector, government bureaucrat or a privately hired inspector in a world without the government monopoly on safety inspection.

I'll take your advice and see where it gets me with him, thanks again.

Re: What are the main Austrian criticisms of government regulation?

Tex2002ans — Tue, 29 Mar 2011 04:37:15 GMT

WallStreetAce:
Is the health inspector a government regulator or a free market company that's being hired to inspect?

Are you asking who inspects in the present?

WallStreetAce:
Thanks for all the help. It's much appreciated.

No problem. And it seems like a lot of his arguments are only imagining one side of profits (cutting costs), while completely failing to take into account the other side of the coin (raising quality). So whenever he brings up these questions, perhaps it might be easiest to just try to think of how given example could raise quality (aka compete) in the marketplace.

Re: What are the main Austrian criticisms of government regulation?

WallStreetAce — Tue, 29 Mar 2011 01:50:01 GMT

Is the health inspector a government regulator or a free market company that's being hired to inspect?

I'll ask him those questions. But yes, those are good points. Food would probably be a lot more safe if government wasn't the only one allowed to inspect food products or any other product for that matter. Entire industries of food inspectors and reviewers would likely pop up and compete with each other to give restaurants/stores their stamp of approval, leading to more sales. That makes a lot of sense.

Thanks for all the help. It's much appreciated.

Re: What are the main Austrian criticisms of government regulation?

Tex2002ans — Thu, 24 Mar 2011 04:44:38 GMT

WallStreetAce:
restaurant owners that don't care about the cleanliness of their kitchen yet still serve food anyways, regardless of the potential impact on revenue.

Wrong. Let us imagine two similar businesses. One business is unclean and doesn't want to be inspected by a health inspection agency, one business is clean and passes a health inspection. Which one will get more business? Which one will be able to charge a premium?

There are also ways to compete in restaurants without inspection. More companies may instead decide to compete by moving the kitchen to the customer. One example being a Hibachi grill. They are cooking the food right in front of you where you can see. Another example might be a pizzaria (where they have the ovens/kitchen in plain view while you wait for pizza).

Edit: Also franchising. McDonalds/Wendys/*insert franchise here* will want consistent food throughout all of their restaurants. They will make more money by being known as a healthy and safe restaurant chain (and make sure it is enforced).

WallStreetAce:
I mean, it's not like the customer can go back in the kitchen and inspect the food as they would be able to inspect any other product they're going to buy, including groceries.

If you do not like it, then do not eat food without labels, do not eat at restaurants that aren't approved by agencies you trust, do not buy products that are not approved by agencies you trust, only eat at restaurants that cook the food where you can see. No one is FORCING YOU to eat at the restaurant or buy that specific product, and all the monopoly does is making it illegal for anyone else to do so.

Edit: Would he buy lemonade from a girl across the street? Would he buy cookies made at a school to raise money for something? Does he eat food at a neighbor/friend's party?

WallStreetAce:
How do you think the free market would handle that? It's points like this that I can never seem to refute.

Yeah, it is very hard to think of examples off the top of your head unless you have given the idea a some previous thought. But that is what talking with others is for.

Edit: Also, what is his take on Software and user reviews? Does he refuse to download anything at all since there is not a government monopoly approving the software?

Re: What are the main Austrian criticisms of government regulation?

nhwulf — Thu, 24 Mar 2011 04:15:15 GMT

Freechoice is the DNA of a freemarket. With each regulation more choices are removed. As with human DNA, the more alike the choices, the more inbred the result. Regulate enough and you have got the market equivilent of having the daughter of your daughter's daughter. To say that only the govnmt can decide what one can buy is the same as admitting one is not intelligent enough to know ones own needs and desires.

Re: What are the main Austrian criticisms of government regulation?

WallStreetAce — Tue, 22 Mar 2011 03:06:37 GMT

Alright, I'll ask him that.

The other day he brought up another example: restaurant owners that don't care about the cleanliness of their kitchen yet still serve food anyways, regardless of the potential impact on revenue. He asked me who would protect the customer from that type of danger without government health inspectors in a completely free market. I honestly didn't have an answer. He might have a point. Aren't restaurants kind of a special case? I mean, it's not like the customer can go back in the kitchen and inspect the food as they would be able to inspect any other product they're going to buy, including groceries. How do you think the free market would handle that? It's points like this that I can never seem to refute.

With that said, I agree with Hoppe. That makes a ton of sense. I never even thought of it that way. I'm turning more into an Anarcho Capitalist every day.

Re: What are the main Austrian criticisms of government regulation?

Tex2002ans — Fri, 18 Mar 2011 00:22:39 GMT

WallStreetAce:
He’ll usually give me an answer saying “you’re right, a lot of regulatory agencies are out of control and don’t need to issue as many regulations as they do,

Which ones does he believe need to be peeled back? Perhaps you could work from the examples which he thinks are already bad.

WallStreetAce:
Isn’t Sweden a massive welfare state, or are they starting to become more free? But I’ll definitely look at those articles.

I wouldn't be able to name specifics off the top of my head, I haven't read too much on the topic. But what I do know is that a lot of people have written about it (which is why I linked you to that amazing topic by krazy kaju).

WallStreetAce:
Can you elaborate more on your “greater good” comment? Are you saying that our court system gives preferential treatment to firms over consumers?

Covered very well in For A New Liberty, starting at page 317. Basic is government declares raising GDP, producing steel/gas/shirts/roads/railroads (insert good here) is more important than your puny property damage.

While your friend will probably bring up "well that is why the government should start putting a carbon tax" or some other nonsense... while the whole root of the problem in the first place is government not enforcing the Property Rights of the ones who are damaged. Perfect example of government intervention begetting more intervention.

WallStreetAce:
And what do you mean by monopoly courts?

The government is, using Hoppe's definition, "a territorial monopoly of final arbitration." The only one who has the final say on what the law is in a given area.. no one else is allowed to compete in law. You can still provide private arbitration, and contracts, but the government can override those all no matter what you agree to.

Re: What are the main Austrian criticisms of government regulation?

WallStreetAce — Thu, 17 Mar 2011 23:33:31 GMT

I honestly think he would listen with an open mind if I could prove to him that Hong Kong thrived without being regulated (data showing no regulation etc.). He has said to me that he doesn’t hate capitalist and corporations per se, but that the government needs to be in there to protect people from potentially dangerous firms/products. He thinks that in a completely free market there would be no such protection, and as I’ve said I told him otherwise.

I’ve asked him a number of times where he draws the line. He’ll usually give me an answer saying “you’re right, a lot of regulatory agencies are out of control and don’t need to issue as many regulations as they do, but we still need regulations so you can’t just do away with them. It should be up to the voters or the government itself to set limits on regulation. ” Sure, like that will happen. Then I ask him what the endgame is and say that government never stops growing. He usually doesn’t have an adequate answer.

Isn’t Sweden a massive welfare state, or are they starting to become more free? But I’ll definitely look at those articles.

Can you elaborate more on your “greater good” comment? Are you saying that our court system gives preferential treatment to firms over consumers? And what do you mean by monopoly courts?

Re: What are the main Austrian criticisms of government regulation?

Tex2002ans — Thu, 17 Mar 2011 17:53:15 GMT

WallStreetAce:
And, wasn't Hong Kong also an unregulated economy before the introduction of its minimum wage in 2006? I ask for examples because I'd like to show my friend that an unregulated market economy can be prosperous and safe at the same time, and that government isn't needed to step in and act as referree.

Yes, but who knows where he would take the conversation then. He will point out the "horrible" housing, the SPECULATION, and everything being run by rich asian guys (do they have evil curly mustaches as well?)... and perhaps all of the "illegal" things being produced from there!! (radios that go out of US bounds, cell phone jammers are two examples)... I do not think that would be an effective way to argue with this type of person (epsecially with this next paragraph you bring up).

Another great example is the collapse of the USSR. There was a very high push towards less regulation in all those states. I wonder if he is going to say the people in those states are worse off because of it. Or then if he begins to say "the USSR was too much", then you ask why, how, where do you draw the arbitrary line as the stopping point.

And I would NEVER use it on this type of person, but Sweden is a great example of deregulation as well:

http://mises.org/daily/4146

http://mises.org/Community/forums/t/5616.aspx?PageIndex=1

WallStreetAce:
The example he gives me of an economy where mass industrialization and market forces runs rampant is China in all of its cities, where the citizens are forced to breathe in polluted air and there are no barriers limiting how much a firm can pollute.

By the gods... that is the exact opposite of voluntary capitalism. That is state run, state approved, and highly controlled economy.

The problem with pollution is not enforcement of Property Rights. I would recommend reading Rothbard in For A New Liberty on that topic... but the basic argument is, the government does not allow people who are damaged by the pollution to sue, because it is for "the greater good." The government decides that industry and producing things are more important than people's pollution problem. This is a problem of monopoly courts and nonenforcement of Property Rights, not of "capitalism run rampant".

Re: What are the main Austrian criticisms of government regulation?

WallStreetAce — Thu, 17 Mar 2011 08:51:45 GMT

Everyone's replies continue to make a lot of sense. Thanks a lot for the replies thus far!

Clayton: Why is saying the market is self correcting and self regulating magical thinking? Faith in the overal "market" is wrong of me? I thought this was true for a vast majority of businesses. If they release a shoddy product, the market regulates them out of existence. Am I wrong on this? If so, please correct me.

With that said, does anyone know of any prosperous developed countries any time after the Industrial Revolution who didn't engage in vast regulation of their economies? If I remember my history correctly, wasn't the United States a relatively unregulated economy that experienced huge amounts of economic growth after the Civil War in the 19th century (according to Rothbard)? And, wasn't Hong Kong also an unregulated economy before the introduction of its minimum wage in 2006? I ask for examples because I'd like to show my friend that an unregulated market economy can be prosperous and safe at the same time, and that government isn't needed to step in and act as referree.

Oh yeah, I forgot. The example he gives me of an economy where mass industrialization and market forces runs rampant is China in all of its cities, where the citizens are forced to breathe in polluted air and there are no barriers limiting how much a firm can pollute. I said that China isn't a truly free market because of its authoritarian government and also because of its lack of property rights and a well functioning court system to enforce them, which would cut down on pollution. Is that correct in terms of Austrian thinking? Any thoughts on that issue as well?

Re: What are the main Austrian criticisms of government regulation?

Clayton — Wed, 16 Mar 2011 07:30:51 GMT

With that said, I was recently debating a friend of mine who was vehemently in favor of nearly all government regulations. He said that without them businesses would create shoddy products to cut costs, causing death and injury to their customers in the process.

This is magical thinking and it's important to point that out. Force them to explain how and why we should believe that the government cares about the public's interests whenever its interests are not aligned with the public's and why we should believe the government's interests are any more aligned with the public's interests than any other organization. Sure, the government wants to keep us hale and hearty so we can work hard and produce lots of tax revenues. But that's not because the government cares about us, it's because it cares about tax revenues and we are merely the means to that end.

Invariably, they will turn to democracy and elections but a quick brush-up on public choice theory should put you in good condition to dispel the Magical Majority Vote line. As if nobody ever tried taking a vote before the late 18th century... good god.

He went on to say that without government regulations there would be no industry standards,

I think there is such a thing as over standardization, something not often talked about. Software standards are a great example. Digital protocols and software standards are actually used by the big players to control competition. The big players get together, form a "standards committee" and then try to use their collective weight to ensure the market cannot escape their lobotomized, design-by-committee standards. Instead, customers should be free to choose whatever standard they like, including things like user-interfaces and so on. The hand-wringing leftist always assumes that chaos will ensue if nobody steps in to "stop the madness" and force everyone to use the same interface (think of driving interfaces, for example). But this is silly. Producers succeed by pleasing consumers and the interface features that consumers consistently demand will therefore be widely available. But without the attenuating effects of over-standardization and regulation, the consumer will have more options. Consumer sovereignty.

and that nothing would be uniform across certain sectors and lines of business, again causing injury and chaos. After he said these things, I used Rothbard's argument that regulations impose a cost on a producer that has yet to do anything wrong, and as a result are illegitimate. I also told him that in a completely free society without government controls, the market would regulate itself

Be careful not to engage in magical thinking yourself... to help avoid this, make sure you do not refer to the market in anthropomorphic ways. This is precisely the mistake that leftists/socialists make when reasoning about "society." They use words like "we" "us" "our" "society's" as if referring to an individual. This muddies the discussion and attributes telic action to uncoordinated individuals.

and those companies with shoddy products killing people would be weeded out because consumers would shift to the ones who don't create such products.

Product information is itself a product and demanded by consumers. Just not necessarily the product information that government mandates and sometimes information that government fails to mandate and sometimes even prohibits. As always, the central planner is like a blind bull raging in a China shop wreaking havoc over the free chocies that consumers would have preferred to make had coercion not been used to prevent them from doing so.

He told me that such a world view is a fantasy, and that firms can't be trusted to make good products if all they're relying on is cutting costs to make a profit, and that you can't wait for people to die in order to do something. He ended by saying: "If you can save people's lives with a simple safety standard why wouldn't you be in favor of that? What, you don't want to save people's lives? What's wrong with you?". I then just lost it and threw up my arms in disgust.

The answer is strict liability and this identifies part of the problem with even minarchism... socialized law. Until we have a free market in law itself, the legal structure will always be distorted by power interests. Police departments, prosecutors, judges, elected leaders, child protective services, banks, the national military, etc. are explicitly exempt from strict liability for many of their actions. The problematic behavior of these individuals and organizations is the immediate and inevitable consequence of this fact. Yet the idea of a market of law is incomprehensible to most people and, therefore, pointing out that the problem lies in insufficient privatization of all goods and services, including law, strikes them as utter insanity.

Clayton -

Re: What are the main Austrian criticisms of government regulation?

Tex2002ans — Wed, 16 Mar 2011 05:21:16 GMT

While opening up a can of pineapple juice, I noticed the Kosher label on the side, and then remembered that they are also an example of private food inspection agency.

Re: What are the main Austrian criticisms of government regulation?

Scrooge McDuck — Tue, 15 Mar 2011 05:18:55 GMT

If you want to go on the offensive, ask him what incentive the government has to ensure safe food/products/environment, etc. How does having a legal monopoly on providing a good or service improve its quality?

For me, it was the realization that the government is just a firm with a legal monopoly on goods and services that can extract payment by force. Would you expect McDonald's to make good hamburgers if there were no alternatives, and they could force you to pay for them? You wouldn't, and it's the same for the government.