Saturday, January 10, 2004

Free Markets, Damned If They Do...

Further thoughts on my post below about the proliferation of choice. To be fair to the article’s author, he did not actually advocate public policies designed to reign in choice (though I suppose he might in his book). But I wouldn’t be surprised to find out that others have advocated such policies or will in the future. If so, then we have a nice example of the “damned if they do, damned if they don’t” trap that statists set for free markets. If markets don’t produce a wide array of choices, they are condemned for imposing the values of some consumers (those with the greatest influence on producers’ choices about product characteristics) on the population at large. We hear this kind of argument from the high-brow critics of pop culture (“Britney’s driving out Mozart!”), despite the wide variety of non-pop cultural products also available. On the other hand, if markets do produce a wide array of choices (as is, in general, the case), then we get the criticisms discussed in the previous post: that people are paralyzed by choice, that they spend too much time making decisions, that they are less content, etc. One way or another, the market takes the blame.

Similarly, no matter what happens to food prices, markets come under attack. If the price of food is high, markets get blamed for starvation and hunger. If the price is low, markets get blamed for making people fat.

As I discuss elsewhere, alcohol regulations are justified via a similar Catch-22. Franchise termination laws (which restrict the ability of alcohol suppliers to find new distributors) are sometimes justified by the alleged need to restrain the monopolistic power of large suppliers. The claim is that termination laws are required to protect competition, thereby (presumably) holding down prices. But if turns out that the laws actually drive prices up by shielding the large distributors from new entrants and the encroachment of small distributors, as I think is more likely the case, then the regulators fall back on a different argument: that higher prices are good because they cause people to consume less of the devil drink – like a back-door sin tax. Either way, regulations are justified.

Readers are invited to email me more examples (or put them in the comments box).

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