My man DD responds to my essay on EconLib, excerpted here on The End. Original in italics, DD in roman, MM in bold.
But we still face the same basic problem: can I
decide, and risk just my money, for great reward if I'm
right? Or will we decide, and risk our whole future budget,
on things we aren't very good at deciding?
Many of these examples, though, presume that the individual (a) is risking "only" money and (b) actually can make a fair assessment of the risks.
Nonsense, DD. No reason to believe that people are good at assessing risk. The point is that if they lose, or win, they get all the loss/profit themselves. So
they have better incentive to be right. But no way would I claim that inventors are good at assessing risks. The whole point is that they are nutjobs.
The examples come thick and fast: should we have a uniform
ethanol standard in all gasoline, or should we let gas
stations (or individuals) concoct their own fuel mix
Ignoring individual petrochemists, for the moment, and focusing on sale through stations: what responsibility does a station have for being straightforward about what a mix is and where it works and doesn't work? What responsibility does a car manufacturer have for providing the owner with information on the limits and requirements of the engine? Will there be any sort of signage requirements, or will drivers away from their home stations have to pull into a station and read the fine print to figure out whether the formula is compatible with their car?
Pollution is a classic example of an externality; given that some ethanol requirements are to reduce petroleum emissions, should a market with less regulated fuel mixes have a more complex tax structure to capture these costs?
Private institutions would post recipes on the internet within just a few hours. It is easy to get information about things like this. Why do YOU think that the Department of Motor Vehicles has your best interests at heart? That is what always amazes me: people who don't trust markets, where there are incentives to take care of customers, assume the DMV and the Post office would do a better job. Why?
And if you are worried about pollution, yes, tax the hell out of the relatively more-polluting component. That is hardly "complex", compared to the current insane system of taxes and subsidies on fuel. We could actually simplify the tax system: tax petro-gas at another dollar a gallon. You liberals just don't want to have to pay more for gas, so you come up with psychotic schemes like CAFE.
Why not allow terminally ill, or even mildly ill, people to use whatever drugs they want, regardless of whether Median Joe (working through his stone-faced employee, the FDA) thinks that drug has five chances in a million of giving you a stroke?
Of course, we can't write off Joe at the FDA too quickly. Even if you argue that the individual consumer has a right to choose to take (or not to take) the five-in-a-million risk rather than delegating the choice to Joe, that argument presumes that the probability is known to the decision-maker. History, and observation of the market, indicate that the average pharma company is motivated to offer the sick a one-sided sales pitch rather than a sober assessment of safety and efficacy.
Oh, please. Stone-faced Joe's main job is to delay new drugs to protect the profits of existing drugs. If you think that the FDA cares about patients, you have just lost it. There are plenty of rank and file FDA-ers who want to serve the public, yes. But the FDA leadership more or less works directly for the drug companies.
Sure, shorten the patent period on drugs, and sharply cut the time required for development. The drug companies have nearly stopped developing new drugs for all kinds of diseases, because the FDA makes it so easy to make huge profits on little fiddles, small changes. ALL regulation is either designed, or soon comes to operate, to benefit the profits of the industry it regulates.
If you are saying that FDA performs some of the same functions as the (private!) Underwriter's Lab or Consumer Reports, okay. But why not let the FDA just do the research on the probabilities, rather than assume that everyone has the same risk preferences?
Markets, and market processes, are themselves a pretty important innovation,
But the innovation is actually a "regulated market" rather than a simple market of transactions... So the question is one of the optimal level of regulation. While one can argue that the FDA approval process restricts the entry of new drugs to the market, one could similarly argue that the patent system prevents new drugs from becoming widely and cheaply available.
In fact, the entire concept of "intellectual property" is one of government intervention in the market process... And yet IP regulation is generally seen as an essential component of a market which encourages innovation.
If you think enforcing property rights is the same as "regulation," then you think that having speed limits is the same as having a cop drive your car.
It seems to me that regulation of commerce here can be seen as an alternative to...
(1) Very strict regulation of commercial speech and advertising to enable informed consumer decision-making
(2) A chaotic world in which liability lawsuits are the primary response to bad behavior in the market
You don't think #1 involves the courts? The chaos is in the AL courts, under the FTC Consumer Protection Division. The only question is whether we have independent courts and open processes (#2), or closed iron triangles. Companies prefer #1 because (this will sound familiar) regulation is run to benefit the regulated, not the public. Stigler had this right, no matter how much you might wish it were otherwise.
Imagine that airlines could compete based on the level of security they provide. Let passengers choose their own security, along with a mix of price and inconvenience that some entrepreneur thinks would increase profits.
The obvious market response--that would undoubtedly be profitable and make many passengers feel far more secure--would be the "no brown people" airline. And yet I can't help but think that particular innovation violates the social contract. (I would also argue that a recipient of significant governmental support like an airline has a much greater obligation in such matters than does a private citizen.)
So when I say "compete based on security," you hear "in addition, repeal existing laws about discrimination on public accomodations." An odd ear you have.
It takes government to enforce real discrimination. The TSA guy standing there in all his thuggish glory is the one who does cavity searches on "brown people."
You think that because you can imagine a society without discrimination that a real-world government could do that. It can't, and it doesn't want to. Markets are color-blind, because greed is color-blind.
(Note from The End: Dirty Davey and I are old friends. And he really doesn't give a damn what I think. So this public battle is pretty much typical of our private, friendly conversations. I just thought I would share, because he raises some important points. And my responses are flippant because I don't have anything better than that to say)