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#1 2014-05-06 03:53:19

bordsilver
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Free market regulation

Before starting a topic such as this, it is useful to define the terms.

Regulation definitions
- A law, rule, or other order prescribed by authority, especially to regulate conduct.
- A rule designed to control the conduct of those to whom it applies. Regulations are official rules, and have to be followed.

Wikipedia's description is a bit more detailed:

Wikipedia wrote:

Regulation creates, limits, constrains a right, creates or limits a duty, or allocates a responsibility. Regulation can take many forms: legal restrictions promulgated by a government authority, contractual obligations that bind many parties (for example, "insurance regulations" that arise out of contracts between insurers and their insureds), self-regulation by an industry such as through a trade association, social regulation (e.g. norms), co-regulation, third-party regulation, certification, accreditation or market regulation. In its legal sense regulation can and should be distinguished from primary legislation (by Parliament of elected legislative body) on the one hand and judge-made law on the other.

Regulation mandated by a state attempts to produce outcomes which might not otherwise occur, produce or prevent outcomes in different places to what might otherwise occur, or produce or prevent outcomes in different timescales than would otherwise occur. In this way, regulations can be seen as implementation artefacts of policy statements. Common examples of regulation include controls on market entries, prices, wages, development approvals, pollution effects, employment for certain people in certain industries, standards of production for certain goods, the military forces and services.

Importantly, when viewing from a free market or natural law perspective there is still "regulation". Being pro-free market or pro-natural rights does not mean being anti-regulation. Regulation naturally exists within businesses and between parties for many sound reasons. Instead, free market regulation means to not allow coercive restrictions on people's peaceful activities that do not interfere with the rights of others.

Given the known and well documented problem of regulatory capture and the very high incentives and likelihood that it will be misused to reduce competition and allow oligarchs to arise, people should be extremely sceptical of any Government regulation that does not relate directly to the defence of citizens natural rights to life, liberty and property. As Mises said, these types of regulations not only disrupt market processes they will also tend to bring about more regulations because there are unintended side effects associated with any intervention. As the choices of the regulators are to either do away with the first regulation or to enact a new one to treat the unintended side effects of the first regulation, they will typically choose the latter.


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#2 2014-05-06 03:53:51

bordsilver
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Re: Free market regulation

What is the purpose of regulation?
In my mind, there are two main purposes to regulations created by well-meaning people:
1.    The principle one is to protect against non-apparent dangers of a product or activity (ie prevent people being harmed as a result of insufficient knowledge of the product they are consuming or the activity they are undertaking).
2.    It can be a cost effective way of enforcing the rights of people within a given jurisdiction. That is, to protect people against an activity or product that is not of the expected quality but is not dangerous (essentially to pre-emptively protect people against fraud).

Consequently, regulation is not necessarily an evil thing in and of itself and is typically motivated by well-meaning people (often after an event has occurred). It is, however, something that is often misused to violate people's rights beyond protection against non-apparent dangers (or protection against fraud) and to ban peaceful actions that do not actually harm others. Worse, it is easily misused to act as a form of protectionism for incumbents thereby stifling competition. Many regulations are simply codifications of good practice understood by a small group of experts in a given field but not understood by the general person acting in that same field. Once codified, many simply become second nature to the acting participants – essentially a form of productivity improvement as the risk of death or injury (and the associated costs) is reduced.

A good example are most building and material standards. There are many very good reasons for constructing a building in certain ways using certain materials and not others. The thickness of the slab, the placement of the sewerage overflow, the gaps between roof beams etc have become standardised because they 'work'. Apprentices learn these things as part of their training and even if the exact reasons aren't understood they (usually) follow them without thinking. As a natural result of cross-fertilisation of ideas, and the benefit of working in certain uniform ways, industry participants sometimes sit down and codify a set of procedures and rules – i.e. they create an "industry standard". Many times these are voluntary and different companies may employ different procedures or materials to obtain the same overall outcome of a safe product/service that meets its desired purpose. Many times however they get codified into law by the government who is responsible for arbitrating disputes between clients that obtain sub-standard or dangerous products.

Importantly, even if regulations exist, mistakes do happen. Unsafe products or services do find their way into the market and people are harmed. Fraudulent sellers do exist and people occasionally get ripped off. To expect that the existence of a regulation and a regulator will prevent all ills is naïve in the extreme, but unfortunately that is what tends to happen as people become blasé about checking the integrity or quality of their purchases assuming that someone else is looking after it all (particularly if it is the government).


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#3 2014-05-06 03:55:01

bordsilver
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Re: Free market regulation

Walking into a trap
The Chicago School of economics has long discussed the problem of regulator capture. Under this theory, an industry or some portions of an industry act to cultivate government to obtain laws and rules that favour the industry. The government trades favours for what it wants. Politicians gain political contributions, side payments, and votes for being seen to control the industry. The industry captures the regulators. End of story (although with a variety of flavours). In 1978, Gary North went further and described the steps by which an industry (or key members of an industry) may start out deliberately lobbying for regulation but can end up being trapped and captured by it.

Gary North wrote:

The idea that businessmen are strong defenders of the free enterprise system is one which is believed only by those who have never studied the history of private enterprise in the Western, industrial nations. What businessmen are paid to worry about is profit. The problem for the survival of a market economy arises when the voters permit or encourage the expansion of government power to such an extent that private businesses can gain short-term profits through the intervention into the competitive market by state officials. Offer the typical businessman the opportunity to escape the constant pressures of market competition, and few of them are able to withstand the temptation. In fact, they are rewarded for taking the step of calling in the civil government.

The government's officials approve, but more to the point, from the point of view of the businessman's understanding of his role, shareholders and new investors also approve, since the favored enterprise is initially blessed with increased earnings per share. The business leader has his decision confirmed by the crucial standards of reference in the market, namely, rising profits and rising share prices on the stock market. No one pays the entrepreneur to be ideologically pure. Almost everyone pays him to turn a profit.

This being the case, those within the government possess an extremely potent device for expanding political power. By a comprehensive program of direct political intervention into the market, government officials can steadily reduce the opposition of businessmen to the transformation of the market into a bureaucratic, regulated, and even centrally-directed organization. Bureaucracy replaces entrepreneurship as the principal form of economic planning. Bureaucrats can use the time-honoured pair of motivational approaches: the carrot and the stick. The carrot is by far the most effective device when dealing with profit-seeking businessmen.

Those individual enterprises that are expected to benefit from some new government program have every short-run financial incentive to promote the intervention, while those whose interests are likely to be affected adversely — rival firms, foreign enterprises, and especially consumers — find it expensive to organize their opposition, since the adverse effects are either not recognized as stemming from the particular government program, or else the potential opponents are scattered over too wide an area to be organized inexpensively. The efforts of the potential short-run beneficiaries are concentrated and immediately profitable; the efforts of the potential losers are dispersed and usually ineffective.

The expansion of political power in the market process has been going on in the West for about a century, at least in the modern form of interventionism, starting with the social security legislation of Bismarck's Germany in the 1870s. Governments have evolved a strategy by which whole industries or professions are captured by the bureaucratic state. While this strategy is not the only one used, in peacetime it has proven enormously successful. (Nothing, of course, favours political centralization more than war.) I have outlined this strategy by means of the following analogy:

1.    Baiting the trap
2.    Setting the trap
3.    Springing the trap
4.    Skinning the victim
Article is continued here


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#4 2014-05-06 03:55:40

bordsilver
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Re: Free market regulation

Michael Rozeff extended Gary North's model in several directions. Quoting:

Michael Rozeff wrote:

First, if the regulation and control by the state get bad enough, we may predict that substitute industries will arise because the basic demand for services still remains and this creates profit opportunities. The market may find new ways to provide the same kinds of services. If the railroad industry is killed off, then trucking, buses, private autos, and air transport have incentives to replace rails. If medical practice declines, then home medical devices may spring up. The competition to meet needs will continue under new forms.

Second, the government will observe these substitutes arising. It has an incentive to stop them or control them. It can do this by extending regulation to these new markets. The industry under regulation will itself probably call for regulation of the new competitors so as to maintain its monopoly position. They will use fairness, equity, fair competition, and safety (to name a few) as cover stories.

The government will add stories of its own, such as the essential nature of the service, or the claim that it forms a natural monopoly, or that it's critical to national defense. It makes no difference if the rationales are false as long as they sound plausible and keep the public apathetic or even mildly supportive.

The government will be happy to accommodate the demand for new regulation. It may pile on safety regulations or licensing requirements that raise costs in the competing industries or slow their growth. Hence, in the case of railroads, we can predict that truck, bus, and air transport will also come to be regulated.

There is a glimmer of hope in all of this. Gary North in private correspondence points out that "the regulators are usually behind the curve in technology and creativity. They are regulating last decade's model." The market leaps ahead at such times, and the public gets a reprieve.

Third, we may predict that political reform or liberalization movements will occur. There are political profit opportunities for populist reformers who promise to reform an under-performing system. By promising that the state will loosen its grip on the industry, they may gain public support and win election. Subsequently, we may even see privatization occur, as under Thatcher in England.

Fourth, while such reform movements go deep enough to be noticeable, they hardly ever go all the way back to a high degree of freedom. And after a while, enthusiasm peters out and the counter-liberal forces begin to regroup and reassert their dominance. This occurs partly because reform movements are often not radical enough. If they retain large vestiges of the earlier regulatory systems, then they will be blamed when things go badly. And things often do go badly unless a complete deregulation occurs. Statists have had a field day in California because of the botched and partial de-regulation in the electricity industry.

Fifth, the government does not find that all industries are equal prey. It has an incentive to control those industries (a) that can't escape as easily from the country and (b) for which there are fewer substitutes. At the time the US government began to control the railroads, autos and airplanes didn't exist. And the large fixed capital investments of the railroads within the continental United States made them good fixed targets. Similarly, medical services have to be delivered to individuals on the spot within the country's borders, and home medical devices like those today were not widespread in 1910 — although there have always been home remedies.

Sixth, when over-regulation occurs and the trap is sprung, we predict that the industry will try to escape overseas if it can or the customers will take their business overseas if they can. They will search for lower-cost places to do business. Many clear examples occur under financial regulation because many elements of financial dealings can be transacted overseas. Ceilings on interest rates paid on deposits led at one time to dollars fleeing overseas, whereupon a Eurodollar market grew up. Sarbanes-Oxley regulation leads to overseas listings or even incorporation. Excessive regulations of exchanges leads to lower cost trading venues in London, or else trading shifts to over-the-counter formats.

Seventh, if business escapes the country as in the case of some financial services, then we predict that the government will once again respond in order to maintain its control. One method of control is to form a political cartel with other governments. This is a movement in the direction of world government. It is usually called "harmonization." The most heavily regulating government will try to get the other governments to "improve" their regulation, that is, to copy that of the heavy regulator. This occurs in the guise of labour, safety, and environmental standards, for example.

The objective is for the government that is losing control of businesses that exit its territory to stem the flight of capital to other countries. The success of this sort of cartel depends on a number of factors such as political pressures, side payments, technical matters, ability of capital to move, and the availability of cartel-busting countries willing to house industries.

More generally, there will be some more highly controlling governments that try to make other governments harmonize their fiscal and monetary policies with theirs. Alternatively, a government can impose various sorts of controls to prevent industries and capital from leaving their country.

It's worth pointing out that state and local governments can also play the same regulation game. But they can't control those industries that can easily flee the state and do business in another state. This is why states focus on more locally oriented interests like barbers, beauticians, and construction trades, etc.


The only good tax is a repealed tax.

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#5 2014-05-06 03:56:11

bordsilver
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Re: Free market regulation

The free market approach to regulation if the government didn't do it.
1. Most people (myself and my family included) prefer consuming safe products
2. Therefore, there is a profit opportunity in not just producing safe products, but also credibly demonstrating their safety
3. Therefore there would be profit opportunity in every facet associated with being able to produce credible, reliable information on product safety
4. Therefore there is every reason to expect private market solutions to the problem of collecting data leading to the production of credible, reliable information on product safety.

What we have now is a government-granted monopoly over that decision.

A far more legitimate system would be one whereby suppliers are held liable, after the fact, for supplying inappropriate, ineffective or dangerous products contrary to their customer's interest and approval.

It is easy to imagine a legal system in which there would be a presumption of innocence for suppliers prescribing commonly-used, well-tested and certified products, and a presumption of guilt for prescribing untested products that have, in fact, caused harm to the consumer.

Under such legal system, most suppliers would carefully supply safe products, while allowing some to push the envelope with full disclosure to their customers.

Such a system would meet the concerns over the supply of risky or unknown products by uninformed, uneducated or irresponsible suppliers, without the huge costs and delays associated with the modern product-approval process.

Such a system would require testing.
There could easily be multiple testing organisations, including basing reliance on testing results from organisations in other countries.

Two forces would determine which testing organisations are given weight. In the case of medicines say, the important one is the force of market choice by individuals, physicians, insurance companies, hospitals, clinics, pharmacists, pharmacy chains, etc.

All have an interest in only promoting safe and effective drugs.

The less important one is the judicial system wherein irresponsible, corrupt or incompetent professionals could be prosecuted.

I will emphasise that the courts would, however, play a relatively minor role here. When you decide which car to buy, you don't rely on your ability to sue the car manufacturer for selling you a faulty car. You just stay away from low-quality brands, and prefer those with reputation for quality.

Those very same "industry stakeholders" whose professional expertise is behind current-day regulations could just as easily express their opinion as to which tests (or testing organisations) are actually any good.

Remember - most knowledge in society doesn't require a legal, official, government-mandated "seal of approval".

It is true that this system requires "faith". I would say that expecting monopoly government-imposed regulatory bodies to continue and improve requires much more faith, as such bodies have only very weak incentives to do so (and powerful incentives to stagnate, over-reach and over-regulate).

By contrast, institutions operating in a competitive market have no choice but to improve or die.


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#6 2014-05-06 03:56:50

bordsilver
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Re: Free market regulation

The success of Private institutions – Kosher
In the free market regulatory system, producers and retailers of safe products will go out of their way to make it very easy for consumers to identify their products as reliably safe. Such products will carry a clear label. They will be sold in stores that display a clear label on their windows or web-sites, committing themselves to only selling safe products. No need for much research, let alone specialised knowledge.

If you want to see a market which works this way, think about the market in Kosher foods. Eating non-Kosher food won't kill you, but if you are an observant Jew, you would consider that to be a worse fate. Observant Jews go to a lot of trouble ensure they only eat Kosher foods.

Now while some foods are obviously non-Kosher, no food (except perhaps fresh fruits and vegetables, but not always even those) is obviously Kosher. The rules are very complex, and supervision is required throughout the production process.

So how is an uneducated and harried housewife of an observant household to know which foods she can safely buy?

The answer is simple. Kosher foods are labelled as such. And in certain areas, Kosher stores will only sell Kosher foods. So a housewife checks all her food purchases in a general supermarket for a Kosher label, or restricts her shopping to Kosher stores.

As a side "benefit", people shopping in Kosher stores do not even need to care or look - they will always get Kosher foods because of the significant fraction of the customer base who insist on a Kosher label.

Btw, there isn't a single Kosher label. Different religious authorities offer their own stamps of approval, and their followers sometimes insist on only purchasing items authorised by their own sub-community.


Free market regulations pertaining to food safety could easily work along broadly similar lines. Some people would look for clear labels credibly asserting safety. Food manufacturers and retailers would offer such labels, jealously guarding their credibility. Mainstream supermarkets will only carry safe products. Consequently, shoppers who buy their food their (i.e. most people) will enjoy safe food products whether or not they personally check for the label.

The bottom line is that the story of Kosher food certification is an illustration of how "hidden" information (about the safety of a production process involving multiple steps) can be conveyed in a robust fashion to lay people. And the mechanisms, operating in the much larger general market, will be that much more efficient and sophisticated.


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#7 2014-05-06 04:44:09

Holdfast
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Re: Free market regulation

Counterfeit and slavery.

Crikey they even make counterfeit eggs; so much for a free market.

Last edited by Holdfast (2014-05-06 04:45:57)

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#8 2014-05-06 05:20:44

bordsilver
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Re: Free market regulation

Holdfast wrote:

Counterfeit and slavery.

Crikey they even make counterfeit eggs; so much for a free market.

So much for our all-powerful Government regulators you mean. Without looking at more than 30 seconds of the video it is also confusing intellectual property issues and enforcement.

Remember as well that situations are always evolving and there will always be a new player looking to commit fraud in a new area (I said that myself in the earlier posts). Hence, there will always be a reactive element. As I said, internal guidelines and procedures within companies are always evolving in light of new incidents. This is no different with things that become Government regulations. What you need to do is to look past the scare and then turning to the government nanny to take all of your fears away because (a) there will always be new scares, and (b) it comes with a host of negative consequences that people tend to ignore.

Most people should be old enough to remember the Herron Paracetemol contamination issue that poisoned a Brisbane doctor and his son. Herron themselves recalled all stock nationwide. They then proceeded to retool their production process to provide tamper evident packaging. This all happened at great expense to themselves in order to protect their brand. It did not require any government legislation to occur. It was a reactive adjustment to a brand new one-off occurrence that was enacted to prevent similar incidents.


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#9 2014-05-06 07:00:27

mmm....shiney!
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Re: Free market regulation

bordsilver wrote:

Importantly, even if regulations exist, mistakes do happen. Unsafe products or services do find their way into the market and people are harmed. Fraudulent sellers do exist and people occasionally get ripped off.

I watched a documentary the other night on SBS about fracking in the USA, it was argued that any harm that occurred with the fracking process was not a result of the process itself, but rather human error ie not encasing the bore in enough concrete etc (I can't remember the others).


http://www.sbs.com.au/ondemand/video/22 … nergy-Rush

Last edited by mmm....shiney! (2014-05-06 07:01:14)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#10 2014-05-06 09:07:52

hawkeye
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Re: Free market regulation

bordsilver wrote:

The less important one is the judicial system wherein irresponsible, corrupt or incompetent professionals could be prosecuted.

The more I think about it the more I think this is the biggest problem we have in society at the moment.  A monopoly over law.  Simply because it permeates, well, pretty much, everything else.    Thinking we are going to ever get good laws from a bunch of politicians, who got there by winning popularity contests, and have no real fundamental stake in the laws they make, seems to me to be a huge problem and quite possibly to be the real core of the problem. 

The most important area in which we need market regulation is the law.

I think the problem that people have is in imagining a poly-law system with lots of different providers.  But if you think about it, this is the world we live in today with lots of different "law providers" that have to negotiate with each other internationally.  We just need to open it up to competition within countries and allow people the choice of who they choose to go with.

Last edited by hawkeye (2014-05-06 09:10:54)

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#11 2014-05-06 18:39:18

mmm....shiney!
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Re: Free market regulation

bordsilver wrote:

Michael Rozeff extended Gary North's model in several directions. Quoting:

Michael Rozeff wrote:

Seventh, if business escapes the country as in the case of some financial services, then we predict that the government will once again respond in order to maintain its control. One method of control is to form a political cartel with other governments. This is a movement in the direction of world government. It is usually called "harmonization." The most heavily regulating government will try to get the other governments to "improve" their regulation, that is, to copy that of the heavy regulator. This occurs in the guise of labour, safety, and environmental standards, for example.

Australia is in the process of exporting its workplace health and safety laws to New Zealand.

Jurisdictional Progress on the Model WHS Laws

There is a continuing delay in the implementation of the model work health and safety (WHS) laws in Victoria and Western Australia. New Zealand has announced that it will adopt the model WHS laws.

snip

The Victorian Government has confirmed that while they support the principle of national harmonisation, Victoria will not adopt the national model workplace health and safety laws in their current form.

http://www.safetyaustraliagroup.com.au/ … ion-update


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#12 2014-05-06 20:34:38

bordsilver
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Re: Free market regulation

Grades of safety
One of the things that I dislike about the Australian Government's approach to regulation is that it is usually very black/white, yes/no, safe/unsafe, banned/allowed. In reality consumers are constantly deciding what level of safety they require from their products. Quite often (but not always) this level of safety is subjective and different for everyone. For example, I own older less safe cars because I prefer to have a lower cost vehicle at the cost of some safety. Other people buy new Volvo's because they prefer more expensive and safer cars.

Another example. I buy cheap electrical devices from China for various purposes. These devices do NOT conform to Australian safety standards, and some of them are in-fact more dangerous than they would be if they complied. Conversely, some of them are just as safe as complying products, but they do not comply with the specified rules. To comply they would be much more expensive for the exact same product.

The point is that safety standards across much of what we consume are somewhat arbitrary and not useful to consumers with different safety preferences. Safety standards make some products "too safe" and therefore too expensive, while other safety standards make some products not safe enough. It should be up to the consumer to choose their level of safety.

Although it's been over a decade since I've been there but I remember the Singapore government allowed a wider range of safety levels w.r.t. to food hygiene.

I remember the food courts in Singapore had a grading system. A and B basically meant the operator had food handling, hygiene, cleanliness etc standards of Australia. C and below was basically traditional Malaysian level quality. Within the same food court you might see two A's, three B' a couple of C's etc and a couple ungraded. Almost without exception, there were noticeable price differentials between the prices of the "same" dish between the different stalls. Some food courts (particularly those in the flashiest shopping centres) were known for only having A and B grade vendors while others had a dominance of the lower grades (but usually still had at least one of the highest grades). It was a brilliant and very easy system. Except for the ungraded ones, they all had a giant letter prominently displayed somewhere so the first thing we did when we entered a food court was walk around seeing the grades (and prices) and then deciding on what to eat. We willingly paid more for A and B and only occasionally opted for certain lower risk dishes from the C's and D's. Anyone who was ungraded we simply avoided like the plague. Similarly, as I said, the upper end food courts required vendors to be of certain quality standards. I'm not positive, but I presume that the quality of any food court services that were out of a vendors control were also part of the grading, which would put pressure and incentives both ways.

Besides the Government being the one responsible for the grading it was all a very free market approach to conveying complex information about food safety to visiting foreigners with no other way of judging or who had difficulty finding out from locals. I forget where we found out about the letter system (possibly the hotel or the airplane), but we knew about it before we first ate out and I seem to remember a chart hanging somewhere within each food court describing the system, so it was effectively advertised as well.

I presume the system is still in place (or a variant thereof).


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#13 2014-05-07 00:09:57

hawkeye
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Re: Free market regulation

^ Basically what you are saying above is that you have standards but you are removing the element of force (and punishment) and leaving the decision to consumers.  It's kind of how standards work in general (ISO) and proves that the concept of government is not required and not needed.    Industries themselves establish standards by consensus and then individual companies can choose to follow the standards or not.  It's generally economically advantageous for a company to follow established standards in their industry.

Using force via government is really just about reducing competition and hiking prices to make the consumer pay more.  The government is basically just a giant rent-seeking mechanism that uses fear as a tool to benefit itself and it's cronies.

Last edited by hawkeye (2014-05-07 00:17:35)

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#14 2014-05-07 00:16:48

bordsilver
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Re: Free market regulation

Yes.


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#15 2014-05-07 00:44:09

hawkeye
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Re: Free market regulation

To add to what I said about companies following standards, it is generally advantageous for them to do so.  Sometime it isn't because there has been some technological change for example, and now a company can come in and create new products and/or services that don't match the standards but it turns out that customers prefer it.  The rest of the industry then has to follow suit or risk going out of business.

When government enforces standards and regulations it short-circuits this mechanism.   It is not easy for companies to come in and innovate.    Subsidies and the like often help the existing companies to become bigger than they otherwise would.   The bueracracies that are created within these companies become conservative and stagnant.  When the customers stop buying the products the companies go to the government for even more money in order to "save jobs".   

The whole process of innovation which leads to better products and services for consumers and thereby a better life for us all is short-circuited.   

Government slows the pace of technological change for the benefit of a minority of it's constituents.

Or to put it another way, the Australia of today with huge government and huge taxes is all about throwing good money after bad.  And people wonder why things cost so much.

Last edited by hawkeye (2014-05-07 00:52:43)

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#16 2014-07-01 05:28:17

bordsilver
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Re: Free market regulation

This is a great example of "regulatory capture".

Jacob Goldstein wrote:

Jestina Clayton grew up in a village in Sierra Leone where every girl learns traditional African hair-braiding. Then, when she was 22, she moved to Centerville, Utah, a place where no one learns traditional African hair-braiding. So Clayton was pleasantly surprised to find a niche in the market among a small group of Utah parents who had adopted African children but didn't know how to style their hair.

Clayton moved to the United States as an 18-year-old and headed out to Centerville to be near her in-laws. After graduating from college, she considered getting an office job but decided instead to start her own hair-braiding operation and began advertising on a local Web site. "It's not like it was bringing me millions," she says, "but it was covering groceries." At least until a stranger who saw the ad e-mailed her a demand to delete it. "It is illegal in the state of Utah to do any form of extensions without a valid cosmetology license," the e-mail read. "Please delete your ad, or you will be reported."

A cosmetology license required nearly two years of school and $16,000 in tuition. But Clayton hoped for an exemption. After all, many Utah cosmetology schools taught little or nothing about African-style hair-braiding, and other states allowed people to practice it after passing a hygiene test and paying a small fee. Clayton made her case (via PowerPoint) to the exhaustively named governing body of Utah hair-braiding, the Barber, Cosmetology/Barber, Esthetics, Electrology and Nail Technology Licensing Board. The board, made up largely of licensed barbers and cosmetologists, shot her down.

This isn't just a random Utah law. There are more than 1,000 licensed professions in the United States, partly a result of more than a century of legal work. As the country industrialized, state governments wanted to protect their citizens and create standards not just for lawyers and doctors but also for basic services. It didn't take long for professional groups to find that they also stood to benefit from the regulations. Over the years, more and more started to lobby for licensing rules, often grand-fathering in existing professionals while putting up high barriers to new competitors. In fact, businesses contorting regulation to their own benefit is so common that economists have a special name for it: regulatory capture. "Everyone assumes that private interests fight like crazy not to be regulated," says Charles Wheelan, who teaches public policy at the University of Chicago. "But often, for businesses, regulation is your friend."
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A bolder idea, of course, would be for states to get rid of the licensing rules that are doing more harm than good. ... But pushing this sort of policy, beyond being a logistical nightmare, can be "political suicide," says Morris Kleiner, ... . "When you talk about reductions in licensing, you have every occupation from the plumbers to the C.P.A.'s to the electricians lining up to argue why regulation should not be reduced," he says. Arguing for the other side you have, basically, Jestina Clayton.

This is the pattern that creates regulatory capture — the people with the biggest stake in any regulation are usually the ones who are being regulated. When there's a public hearing on, say, implementing new rules for trading derivatives, most of the people who show up are the people who trade derivatives. And these people, who generally know the most about trading derivatives, can use their expertise to try to create rules that benefit themselves. In the high-school--civics model, the insiders would be countered by smart, well-informed opponents who could argue for the public interest. But real life has nothing to do with high-school civics.

Full article


The only good tax is a repealed tax.

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#17 2014-07-03 11:12:19

Lovey80
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From: Sunshine Coast, QLD
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Re: Free market regulation

The worst part of regulatory capture is once it is entrenched you can't get rid of it. Pick any licenced profession. Once the majority of the people in that trade have jumped through the regulatory hoops to get certified they will always fight like cats and dogs so that some upstart can't start competing with them without having to jump through the same hurdles.

As stated it is often the people that start the "industry standards" that lobby government to turn their standards into law.

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#18 2014-08-10 00:21:27

mmm....shiney!
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From: 昆士蘭
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Re: Free market regulation

Massive fee hike for individuals working with vulnerable adults, children and the aged

30 June 2014

NDS can today confirm that NGO's supporting vulnerable adults, children and the elderly can expect to see a massive increase in the cost of DCSI screening as of 1 July 2014.

Under the new scheme individuals seeking to acquire a 'disability services screening' for working with vulnerable adults and children and a screening for working with the aged (over 65's) will pay $182.05 up from $62.70. This constitutes a $119.35 increase per employee.

NDS has clarified the new processes and fees with the Minister for Communities and Social Inclusion's Advisor and the Department for Communities and Social Inclusion Screening Unit, these include:

    As of 1 July 2014, screening checks for children, vulnerable adults and probity, will be amalgamated under one check, referred to as 'disability services employment screening'. This check will cost $99.55.

    The new Disability Employment Services screening clearances are valid for 3 years.
    Organisations receiving Commonwealth funding for providing services to the aged (over 65's) will be required to undergo a separate check for working with the aged. This can be obtained from the DCSI screening unit and will cost $82.50.

    Workers who cross both aged care and disability will need to undertake two assessments as a safeguarding measure for vulnerable clients.
    Volunteers will now pay a total of $55.00, which includes all required forms of DCSI screening (Disability Employment Services and the Aged Care Screening as detailed above).

http://www.nds.org.au/news/article/3023

Mmmm, pass legislation requiring screening of workers in certain industries, then introduce a fee that has to be paid, then keep upping the fee. Gotta love governments. hmm

Last edited by mmm....shiney! (2014-08-10 00:22:02)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#19 2014-08-10 01:29:05

bordsilver
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From: The rocks
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Re: Free market regulation

Sounds like the childcare industry. Oops, I mean the "Early Childhood Education and Care" industry tongue


The only good tax is a repealed tax.

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#20 2014-08-10 01:31:14

Big A.D.
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From: Sydney
Registered: 2009-10-29
Posts: 6,437
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Re: Free market regulation

mmm....shiney! wrote:

Mmmm, pass legislation requiring screening of workers in certain industries, then introduce a fee that has to be paid, then keep upping the fee. Gotta love governments. hmm

Indeed. It would be so much quicker and cheaper to forget all the paperwork and just get on with things.


I am the Leafy Sea Dragon.

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#21 2014-08-10 01:45:31

bordsilver
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From: The rocks
Registered: 2012-05-23
Posts: 9,596
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Re: Free market regulation

Big A.D. wrote:
mmm....shiney! wrote:

Mmmm, pass legislation requiring screening of workers in certain industries, then introduce a fee that has to be paid, then keep upping the fee. Gotta love governments. hmm

Indeed. It would be so much quicker and cheaper to forget all the paperwork and just get on with things.

lol Yes. Government child safety services around the country have a stellar record of performing in the interests of the most vulnerable members of society. It's not a lack of bureaucracy or of resources available to, say, hypothetically, check that the temporary guardian that is being paid to be a child's ward isn't a convicted sex offender who sexually abuses them on their first night. Most departments around the country have a toxic culture that is more concerned about covering their own arses or fighting internally than actually providing a service to the children placed into their care. Better governance is definitely required but given the waste and mismanagement it requires a clean-out right through to the top. It does not require yet more resources to be thrown into the black pit of DHS. Licencing and screening are only partially effective methods at best and are more about protectionism (and arse covering) for the privileged insiders.


The only good tax is a repealed tax.

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#22 2014-08-10 04:02:31

JulieW
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From: Australia
Registered: 2010-10-14
Posts: 11,101

Re: Free market regulation

And as far as I know, you have to have a clearance from each state you want to work in. A nurse I know has needed to get these from 3 states so far.

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#23 2014-08-10 04:53:29

mmm....shiney!
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From: 昆士蘭
Registered: 2010-11-15
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Re: Free market regulation

Big A.D. wrote:
mmm....shiney! wrote:

Mmmm, pass legislation requiring screening of workers in certain industries, then introduce a fee that has to be paid, then keep upping the fee. Gotta love governments. hmm

Indeed. It would be so much quicker and cheaper to forget all the paperwork and just get on with things.

Or not charge for the screening process.  roll


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#24 2014-08-10 05:18:57

Big A.D.
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From: Sydney
Registered: 2009-10-29
Posts: 6,437
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Re: Free market regulation

mmm....shiney! wrote:
Big A.D. wrote:
mmm....shiney! wrote:

Mmmm, pass legislation requiring screening of workers in certain industries, then introduce a fee that has to be paid, then keep upping the fee. Gotta love governments. hmm

Indeed. It would be so much quicker and cheaper to forget all the paperwork and just get on with things.

Or not charge for the screening process.  roll

Surely a user-pays system is the fairest way of recovering the costs of screening?

Are you saying someone other than the individual receiving the accreditation should pay for it? Sounds very socialist to me.


I am the Leafy Sea Dragon.

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#25 2014-08-10 05:25:05

Tacrezod
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Registered: 2010-01-29
Posts: 474

Re: Free market regulation

mmm....shiney! wrote:

Mmmm, pass legislation requiring screening of workers in certain industries, then introduce a fee that has to be paid, then keep upping the fee. Gotta love governments. hmm

Tell me about it. It costs $230 P/A for the privilege of having a licence to fix air conditioning on vehicles. Re-registration consists of going online, self certifying yourself by ticking boxes and punching in your credit card details. Value for money or what?

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