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this post was submitted on 31 Aug 2023
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the problem is that not enough people make "good decisions", partly because of how exhausting and time-consuming it is to carefully analyze and consider all the options for every facet of life. for example, there are lots of people who don't want to switch to linux because they think its tedious to pick a distro, learn a new operating system, and find replacements/workarounds for software that doesn't work out of the box on linux. now imagine having to do that for every single aspect of life. how do you pick your toothpaste and deodorant? do you carefully examine all the options each time you go to the store, or do you have a brand you pick without thinking about it because it works fine enough?
another problem with free markets is the inherent progression towards monopolies. this can be seen most readily with the so called natural monopolies (monopolies that emerge because of an extreme barrier to entry). how much choice do you have when it comes to your electricity provider? if they do something you don't like, what can you do other than complain to a politician or move to a new region? aside from natural monopolies, we also see a progression towards monopolies because of inherent efficiencies of producing at scale.
there are other problems as well, such as corruption/lobbying, companies lying to the public, using psychology to manipulate people (link may not be the best source on the subject).
something that i personally find to be a great example of how the free market works in practice: rupert murdoch (among several others working at fox news) knew the 2020 election was not stolen, but pushed the narrative anyway because they didn't want to upset their viewer base.
And that's solved with trusted sources. I personally don't analyze what toothpaste I get, I ask my dentist or look for the support by the American Dental Association. I don't analyze every car on the market to make a decision, I ask mechanics for opinions and buy the cars they see in their shop the least (or look at defect rates and whatnot that are publicly available). For video games, I read reviews from sites that have given me good advice in the past.
It's often a lot easier to figure out who to trust than it is to figure out which products to buy. And with a free market system, there's a lot of competition both at the product variety side, as well as the product review side, so bad products tend to die and good products tend to succeed. It's not perfect and it takes time to work, and sometimes the market needs governments to step in when the process gets messed up (e.g. manufacturers exerting control over the review process through bribes, intimidation, etc).
This is almost exclusively due to cronyism. For example, ISPs form monopolies by getting regulations passed that discourages new competition, and then sue whichever groups are left so that entering the market costs more than they could hope to earn back. Or companies like Microsoft violate antitrust laws or other anti-competitive practices (i.e. requiring PC manufacturers to pay for Windows/DOS even on PCs that don't ship Windows/DOS, artificially making third party web browsers slower due to blocking APIs, etc), yet they get off with relatively little consequences (AMD v Intel is a counter-example, where the lawsuit was substantial). And so on.
In your example about electricity providers, that's because the deals are made between the power company and cities, not between individuals. I think people would likely be better off if there was actual competition there. Basically, the city would maintain all of the electricity infrastructure in the city, and individual citizens could choose between providers based on cost, eco-friendliness, service, etc, and the cities would require a certain level of power quality (cleanliness of signal, stability of generation, etc). So if you're getting ripped off, it's because of cronyism between the power company and your city/county.
Maybe electricity is a poor option for this (idk, I'm not an expert), but it seems to work pretty well for ISPs. In my area, the city owns the network and you buy service from private companies, who then pay the city a certain amount to maintain the network. If your ISP sucks, you pick another one that offers service on the network, which is a pretty smooth process.
Capitalism works best when you expect selfishness and have the government set and enforce rules. If something cannot feasibly be offered in a competitive fashion, the government should step in and provide it as a public good. Some other things I think should be government-provided:
If something could be competitive but isn't, that's a case for antitrust to step in.
Those happen regardless of structure. It happens a lot in autocracies, democracies, and everything in between. It seems to happen less in smaller communities, which is why I prefer to have each level of government be as small as possible while remaining effective.
The only overlap with the free market is that we have a mix of trustworthy and non-trustworthy sources. I count Fox News and CNN both as relatively untrustworthy and always look for second or third sources if anything seems a bit surprising. For example, Fox News claimed the election was stolen with few facts, CNN and a bunch of other sources said it wasn't, along with a bunch of facts. So I don't believe Fox News.
The fact that a number of people believed Fox News isn't particularly important, what's important is that most people didn't believe Fox News. This poll states 55-58% believed Biden was the rightful winner of the election, and that's with a heavy disinformation campaign.
Just think how much worse it would be if the government were in control of the media. We could potentially have those numbers flipped, with the majority believing that the election was stolen.
i appreciate the well thought-out reply. i disagree with some of the things you've said but respect your reasoning and level-headedness. i'm going to (generally) quote the first line of each paragraph so you can more clearly see what i'm replying to, but my responses are intended to address the whole paragraph.
you may be a bit of an anomaly then. this page gives an overview of consumer behavior and how companies are able to influence peoples decision making. it also links to this page listing ways in which consumer behavior tends to be irrational, often being influenced by their moods, what their friends buy, and also by marketing techniques.
putting that aside, let's suppose that everyone did behave rationally and only bought things recommended by experts. wouldn't this be much more work for everyone than simply letting the experts pass regulations on which products can be sold? wouldn't it be nicer if you didn't have to consult an expert each time you bought something? if instead, you could have some faith that anything on the shelf was a good option?
i'm not so sure it is easy to find out who to trust. this article you linked is a good example of that: 40% of people had a hard time finding out who to trust in regards to the 2020 presidential election, something that arguably is way more important than something like which brand of toothpaste you buy. it might be tempting to write those people off as unreasonable, but keep in mind that would mean saying 40% of the population is unreasonable.
next, i'm not sure i agree that bad products tend to die. i understand "good" and "bad" can be subjective, which makes this topic a bit more complicated, but you yourself have said fox news is relatively untrustworthy. i think it would then be reasonable to say they are "bad" news organizations. despite this, they were the most watched news network last july and i dont think they'll die anytime soon. there are many other examples of this: companies like EA, comcast, nestle, etc, who many people have disliked for years, continue to do well economically and show no signs of dying.
this is actually part of my point: cronyism is part of the free market. if companies are incentivized to compete with each other britannica defines the free market as "an unregulated system of economic exchange, in which taxes, quality controls, quotas, tariffs, and other forms of centralized economic interventions by government either do not exist or are minimal". in an unregulated system with minimal interventions where companies are supposed to make money above all else, why wouldn't they influence legislation, sue other companies out of existing, and all the other things you mentioned?
in a free market, cronyism is just playing by the rules. this is probably the biggest reason why i don't think free markets work. you can say that's not right or it's not supposed to happen, but it is what happens. it's why we need regulation. another famous example of this was the book "the jungle", which led to the creation of the FDA.
i'm not sure about electrical grids (texas comes to mind but that arrangement seems much different the situation you've outlined), but from what i've read, britain's current arrangement is (at least a bit) similar to what you've outlined. we can see how that's going. but i want to make clear that i understand you expressed apprehension about applying a private model to the electrical grid, so this is more of a minor point.
this is something i agree with. i would add a few more things to your list (such as housing, all parts of healthcare, public transportation, among others), but i can acknowledge that certain things could work fine if they worked in the private sector with government regulation (eg video games and movies). i also agree with you that we need much more action when it comes to enforcing antitrust laws.
i completely agree. it's something that can happen in government as well as the private sector, and does seem to happen less in smaller communities. this is a very hard problem to solve, and i'm not sure it can be completely solved. i think having a good education system reduces the risk of corrupt people coming into power, but that only helps to reduce the problem. that being said, things are very bad in the current system. this kind of corruption and manipulation is allowed in the private sector: most of the time it's either legal or it's illegal but the consequence is a very small fine.
the overlap with the free market is that news organizations are incentivized to pander to their viewers, which is what the thing about fox news showed. they played the election fraud narrative because they didn't want to upset their base. this is because from an economic perspective, the viewers aren't the "buyers". the advertisers are the "buyers" and the viewers are the product. in the context of this example, this means that it's "bad" to say the election wasn't stolen because it could result in fewer viewers, resulting in fox news having a "worse product" in the eyes of advertisers.
don't get me wrong, i completely agree that things can get very bad when the government is in control of the media. controlling the media is one of authoritarians' favorite pastimes. my goal in bringing up that point was to show how free market principles can be inherently at odds with journalistic integrity. in a capitalist society, journalistic integrity will take a back-seat to economic pressures.
On a small scale looking at any given individual, sure. I make irrational decisions all the time. But on net, groups tend to act more rationally.
Look at politics, 68% of Americans support marijuana legalization and >60% disagree with Roe v Wade being overturned, yet both are hotly debated. So what happened? Our political process encourages divisiveness, so one party pretty much just rejects whatever the other party supports, and gerrymandering ensures that more extreme candidates make it to Washington.
In other words, we've selected a biased sample that doesn't align with averages.
We can also look at income. Democrats love to point out income inequality, but real median income has been going up. Yes, poverty exists and some people probably have too much money, but most people are getting wealthier over time.
Individuals aren't important when talking about trends. Enough people choose their toothpaste based on ADA markings that the ADA marking is worth getting. Individuals may not care, but enough do that bad products tend to fail.
Regulators consistently don't act in consumers' best interests.
Look at ISPs, which have been able to cement a monopoly because they could get enough regulations in place to prevent competition (and tie up those who try with lawsuits). Or look at consumer electronics, we ended up in a duopoly of CPU manufacturers largely because of patents (again, another form of regulation).
Look at COVID restrictions, where we gave up liberty and hamstrung our economy with little to show for it. See Florida vs California COVID results) (latimes is biased in favor of California):
The discussion here is interesting, but my point isn't to say one response was better or worse, but that sometimes the experts get things wrong. They expected a very different outcome than what happened. My state, for example, was somewhere in that middle. Here's roughly what we did:
I think this is a reasonable approach. We listened to the experts, but let the public ultimately decide what they wanted to do. A lot of people made stupid decisions, but most wore masks, and most workplaces and stores implemented more strict controls than required.
I think experts should absolutely weigh in, but in most cases, we should let the public ultimately decide. Individuals are irrational, but the masses tend toward rationality, though there's an argument to be made for specific cases like Tyranny of the majority (protecting minorities is one major function of government imo).
Individual needs matter, and if you try to ensure everything is safe, you ultimately end up in a "least common denominator" situation. Most people eat too much sugar, but restricting it restricts the freedom of those who don't have issues with it. Most people aren't obese, but many are, so we'd likely restrict access to things obese people have issues with. Likewise with drugs, media, gambling, prostitution, etc.
Sure, but only if your main concern is journalistic integrity. They are a "good" entertainment organization in that people enjoy watching them. The problems arise when people assume they are neutral, which is irrational.
This poll indicates most people believe their chosen news sources are biased:
So I think the market is doing it's job of helping people see biases in news reporting. Whether people actually want unbiased news is another story. And I don't think we necessarily need unbiased news, provided people understand the bias of their preferred news source and have options with different biases.
I'm going to have to disagree here.
A truly free market only exists when there is no government intervention whatsoever, so any government involvement necessarily makes the market less free. However, when we say "free market," we usually mean the government enforces separation between organizations to prevent cabals and other forms of backroom deals to promote competition and reduce the barrier to entry for newcomers to the market.
So with that definition of a free market (one with a set of rules to encourage competition), cronyism is by definition not part of the free market. In other words, any form of anti-competitive behavior is an abuse of the rules and thus an indication of governmental failure in crafting and/or enforcing the rules.
But you're right, if we're talking about the free market in the anarchist sense.
From my understanding, that's a monopoly granted by the government (as in, they control the complete water system), which isn't at all what I'm talking about.
I'm talking about the city being the provider (i.e. they own the pipes), and private companies being suppliers. If a private company can meet the standards of the city and provide the same good more efficiently, they can sell it to the city.
For example, let's discuss electricity. If someone decides to invest in solar power, they can sell that to the city, who will then distribute it to the rest of the grid. If someone else makes a hydroelectric dam, they could sell power generated that way to the city. And so on.
If there's only one company that can realistically provide a service, the city should build their own supply so there's competition. Private monopolies should never exist because that is antithetical to the concept I outlined above about a free market.
A lot of the problem with housing is government getting in the way. The mere fact that NIMBYs prevent higher density housing is enough for me to distrust government here. People with influence will stand in the way of progress, if they're able to.
The reason suburbs are everywhere is because of zoning rules that only allow single family homes. If we instead allowed mixed zoning in more places, we'd see more lower cost housing, increased supply, and more use of mass transit due to higher population density.
A lot of the problem here is lack of transparency in the system. I asked for a quote for a routine operation for my kid so I could compare options, and we had to call multiple people, most of which couldn't even give me a range, much less a quote.
There's a ton of cronyism going on between pharmaceutical companies, care providers, insurance companies, and probably regulators that keeps prices high. Here's what I think we should do:
In general, I want health insurance to work more like auto insurance, but it should also be completely reasonable to not have any health insurance at all.
However, the system we have now is worse than universal healthcare due to the rampant cronyism. I'm worried that universal healthcare will have similar cronyism, but it'll at least be spread across taxpayers.