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Separating what markets should do vs. what the government should do

Lane Filler

Understanding when it is best to leave the market alone and when it is best to let the government involve itself.

It sometimes seems the thought world has come to a standstill because all the big debates have devolved into two sides screaming slogans and wearing T-shirts festooned with pithy messages, which is only great if you’re in the T-shirt, slogan or pith businesses.

Take governments and markets. Some folks believe if the free market were left to its own devices, all the deserving people would be rich and all the undeserving people would be striving honestly to get rich (or at least dying quietly in the corner).

They believe everything else would be better too, that the market would punish polluters by putting them out of business, ensure everyone got a fair share of common resources and make the lion lie down with the lamb.

On the other side is the government gang, certain that if we worked under a collective plan of societal betterment, we could all have great health care, education, no crime, short workweeks and bike paths. They also believe we would have innovation and advancement and peace and ... well, not wealth, which they view as yucky, but at least a Prius and a really fierce Cannondale bike.

The market does some things well and some horridly. The government does some things, if not well, far better than the market.

The market is great at setting prices. The price the market sets is always right. Why do payday lenders charge so much? Because that’s what it costs to loan money to people with bad credit. Were it wrong, someone would charge less and take all the business.

The government is terrible at pricing. The government sets prices high for milk so farmers can make money, then taxes the farmers to supply poor people with money to buy the milk that is priced at three times its value to support the farmer.

The market is great at reacting. The market introduced New Coke, the biggest launch in history, and canceled the old Coke formula forever. Forever lasted through 77 days of consumer complaints before the old formula was back. If New Coke were a government program, it could not be killed. The IRS, the Department of Education and the Department of Energy are government versions of New Coke. Purposeless and roundly despised, each would have been shut down in about 90 minutes based on market principles.

But the market has no conscience, no future and no memory. It wants low prices, and if the cheapest way is to pour radioactive sludge in the river, so be it. The market is terrible at protecting people. The market wants cheap baby formula, and if that means making it with poison, the market says be my guest.

The government is better, although not nearly good enough, at protecting people.

And the market is horrible at doing unprofitable things that must be done. Imagine the Postal Service being privatized.

Every company would bid on the routes in the cities where all the addresses are close together, but no one would bid on the ones out in the country, because they could never be profitable.

Society only works if everybody can send mail at a reasonable price, thus the government has to handle it.

So rather than yelling about whether the government trumps the market, or vice versa, it seems like our time might be better spent on which one works in which situation.

It won’t do much for the T-shirt, slogan and pith businesses, but maybe they’ve had their day.



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