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Free Choice or Regulation – Which Protects The Public More?

By Theresa Camoriano

We are all human and prone to errors.  While we are capable of doing a lot of good, we also have the ability to harm others, both intentionally and unintentionally.  This is true of all of us, whether we are rich or poor, old or young, in the private sector or in government.  This raises the political question of which economic system does the best job of increasing beneficial actions while minimizing the opportunity for doing great harm – a free market, capitalist system or a system of government regulation and control? 

A free market capitalist system is one in which government force or coercion is used only to protect private property rights, with people otherwise being free to buy, sell, and trade that property as they choose.  On the other hand, the government regulation and control system relies on a variety of types of government control -- from taxes and spending, to regulations, to outright government ownership of property. 

We have heard Hillary and Obama denounce the evils of capitalism and say that government regulation and control are needed in order to limit the ability of businesses to harm their employees and customers.  They denounce oil companies, pharmaceutical companies, insurance companies, the healthcare industry, and other businesses as being greedy and evil and in need of government regulation to protect their customers.  At the same time, capitalists say defense of private property, which protects individual freedom, is the best way to protect people from harm.  Who is right?

The real difference between private enterprises and governments is the ability to use force.  Private enterprises do not have the ability to use force against people, while governments do.  While we often hear private enterprises described as having “market power”, and we hear about “economic forces”, we should not allow that language to confuse us into thinking that businesses have the ability to use force against people.  Businesses only have the ability make us offers, which we are free to accept or reject.  On the other hand, government action almost always involves force or the threat of force.  So, for example, when a private enterprise sends us an invitation, we are free to accept or reject it, but when the government sends us an invitation, we usually understand that we must comply, “or else”.  

While an evil or incompetent CEO may offer inferior products at high prices, nobody is forced to buy them.  While an evil or incompetent CEO may offer jobs at low wages or with poor working conditions, nobody is forced to accept those jobs.  And any business that regularly fails to satisfy its customers or to attract good employees eventually goes under.  On the other hand, if a CEO wants to make a lot of money, he will strive to do the best job of serving customers by hiring good employees and offering the products or services the customers want at a price they are willing to pay.  In this manner, the capitalist system provides the kinds of incentives and rewards that encourage good, productive work and minimize harm.

Unfortunately, since governments have the ability to use force, they are not subject to the same kinds of constraints and incentives as businesses.   Often, governments do great harm and then use the resulting disaster as an excuse to demand even more money to try to solve the problems that they caused in the first place! 

For example, governments have established schools, and they force people to support these schools whether they like them or not.  Since these government schools do not have to compete in the free market, they often do a poor job of educating many children.  Then, the politicians say the reason the government schools are not doing a good job educating children is that they do not have enough money, so they force people to provide even more financial support.  This causes great harm, because it is a tremendous waste of resources, which could be put to far better use elsewhere, and it results in many children being poorly educated and not ready to be productive citizens when they grow up.

As another example, governments have a monopoly over the building and maintenance of roads, highways, and bridges.  They force people to support them through gasoline taxes, property taxes, and other taxes.  Politicians often use this money to build roads for their friends or to build new projects that will bring recognition to the politicians, but they often fail to use the money to provide much-needed maintenance or to provide hidden safety features, because this does not help the politician politically.  As a result, many people die in traffic accidents that could have been prevented if the resources had been put to better use.

Government also regulates which drugs we can take.  Bureaucrats have every incentive not to stick their necks out, so they tend to be excessively cautious.  The result is that the approval process is extremely expensive, which prevents many drugs from being developed.  Also, many people die while waiting for drugs to be approved.  In addition, the government bureaucrats have every incentive to be persuaded by drug company lobbyists to try to limit competition by outlawing herbal remedies.  So, for example, the government is taking steps to regulate herbal products, using its force on behalf of some private businesses, again doing great harm. 

When we hear proposals for partnerships between government and business, all the red flags should go up, because this is a golden opportunity for government to use its force on behalf of private businesses, giving them far greater power to do harm than they should have. 

When we hear proposals for government to control our medical treatment, what we eat, what kind of cars we can buy, or how we raise our children, we should recognize these regulations as having the potential to do great harm.  If we really thought these things were for our own good, we would do them or we would demand that businesses do them in order to earn our business, without the need for government force.

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