A Primer on Market Regulation

By: Guest
December 7, 2011

Today’s guest post is by long time commenter Cowboy.

JMB275 had asked me to share a few thoughts relative to discussing how much market regulation is reasonable, and where to draw the line. I don’t intend for this post to be a total consideration of that question, but perhaps to just serve as an introduction as how to think about the issue.

Open any introductory level economics textbook and one of the first topics you’ll be introduced to is the partitioning of economic analysis into the categories of normative economics, and positive economics.

  • Normative economics is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. (Emphasis mine)
  • Positive economics is the branch of economics that concerns the description and explanation of economic phenomena. It focuses on facts and cause-and-effect behavioral relationships and includes the development and testing of economics theories…Positive economics as such avoids economic value judgments. For example, a positive economic theory might describe how money supply growth affects inflation, but it does not provide any instruction on what policy ought to be followed.
    Still, positive economics is commonly deemed necessary for the ranking of economic policies or outcomes as to acceptability, which is normative economics. Positive economics is sometimes defined as the economics of “what is”, whereas normative economics discusses “what ought to be”. (Emphasis mine)

The first question to ask then is, “what should the economy do?” Now generally the response at a rudimentary level will have something to do with the equitable distribution of wealth and other resources, including the division of labor. Even when considered in isolation that response isn’t entirely satisfying because it leaves so much uncertain as regarding what is “equitable”.  Furthermore, it does not adequately address a more fundamental perception of human nature, fairness. Even more complex is that the way society views fairness, and to a lesser extent, equity, varies across culture and even within cultures.  So, how do we decide in such a way that all parties are in agreement? It would seem only natural that disagreements will arise over something as ambiguous as fairness and equality. After all, what is fair is not always equal and what is equal is not always fair.

Exploring the normative question “what should an economy do?” even further, we will have to recognize other competing ideals besides equality, where each alternative presents us with cost/benefit tradeoffs that are not always easy to quantify, and therefore subject to a wide range of opinions. For example, Milton Friedman as well as most parties to the classical liberal movement would argue that the highest ideal should be political and economic freedom. While this is not advocacy for anarchy, it is a philosophy of limited government interference that allows the distribution of wealth to be largely market regulated. Few classical liberals will debate that this system provides wealth disparities and even some poverty, however they argue that the greater good of maximizing political and economic freedom outweighs the desire for economic equality.

Most readers will have recognized by now that the American ideals we were brought up with tend to favor sentiments of liberty and freedom, and so we should all be on the same page then, right? Of course this is not true, so then why not? Economists spend a great deal of time trying to express models of rational behavior, by calculating Opportunity Costs (any web resource should be adequate, so look it up yourself), or essentially the quantifiable tradeoffs between opportunities. This works fine when used for standard business and financial problems, such as the classic make or buy decisions. In that scenario it is easy to quantify each opportunity directly in financial terms. However, many of the problems that we deal with are not easily converted into a standard unit of measure. For example, how do we balance accounts between efficient production (high volume, low cost) and environmental effects? The same is true of liberty and equality. How do we express these ideals in comparable units so as to determine how much equality we are willing to exchange/sacrifice for one more theoretical unit of liberty. This is where most of the debate comes from when considering the normative implications of market regulation. While there may be something of an American ethos regarding freedom, our respective weighting of that “good” against other needs tends to vary from person to person, and not surprisingly along the socio-economic spectrum­­­.

Having in mind a view of what it is that an economy should be doing, an equally difficult task arises in deciding what, if anything, ought to be done to direct us towards these ideals. This requires an assessment of the current state of the economy, which can often be difficult to measure. To be clear, measuring things like unemployment or changes in the price level are not overly taxing, but explaining these observations in terms of cause and effect is where significant debate occurs. For example, a popular debate that made the rounds about a few years ago was whether a New Deal era law, The Glass-Steagall Act, was to blame for the housing crisis. The law was designed to separate the banking activities of consumer lending institutions (Standard savings and loan banks) from Investment Banks (Firms that underwrite and market corporate securities). The fear was that banks that participated in both activities may be encouraged to engage in risky behavior. This law was repealed in 1999, and some argue that it was this repeal that encouraged banks to take greater risk in issuing home loans, through stimulated demand from investment banks wanting to increase the volume in their derivatives portfolios.   The counter argument is that most of the financial institutions had already taken advantage of loopholes that allowed them to function with minimal imposition from the law, and that the real driver behind risky lending was the regulatory pressure to lend to low-income and low-income minority Americans, through overhauls in the Community Reinvestment Act.

Perhaps of equal concern to determining appropriate regulations is managing the unintended consequences and the practical implementation of various regulations. Many regulations seem to start with the right idea of recognizing a problem and wanting a fix, but as the old saying goes, “the devil is in the details”. I attended a private presentation a few years ago in Salt Lake City, presented by former Governor Mike Leavitt, while he was acting as director for Health and Human Services. The topic was health reform, and health insurance regulation. A point he made that has kind of stuck with me was that when law makers pass laws, they often get a sense of tunnel vision to where they fail to take into consideration just how onerous compliance is when taken en masse. He said that most laws when seen in isolation actually make sense and often address a legitimate need. The problem is that over time these regulations have accumulated into an unmanageable burden just on account of the sheer volume of regulation.  This creates a problem where many business owners and executives feel that the law has set them up to fail. Not because they have no interest in being compliant, but because accessing resources that provide adequate awareness and compliance solutions are very costly, or hard to integrate.

My thoughts – I would argue that regulation is neither a good thing nor a bad thing, but that on a case by case basis of course it can be either. Part of my concern with current legislation is that we have recently seen a great deal of substantial compliance and reporting regulations that are consuming huge resources, diverting attention away from productive activities, and lending to overall market instability. This has many employers and firms behaving very cautiously in anticipation of higher cost, lower employment, and reduced demand for their products and services. While the sheer volume of regulation is onerous, it always has been. The greatest challenge that I see is the unpredictability in the market place. Because there is uncertainty, firms are careful to take actions that could be substantially taxed, such as hiring employees. Where possible many will consider technological substitutes for labor as the cost of labor continues to rise through required wages and administration of employees.

So as not bore anybody to tears with a long and dry post, I suppose I would like to posit a few discussion questions.

  • What role should government play in economic activities?
  • How do we balance freedom and equality – which is more important?
    • What concessions in freedom should we be willing to make for greater equality?
    • What concessions in equality should we be willing to make for greater freedom?
  • What kinds of things should be regulated, and what should be left for markets to decide

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84 Responses to A Primer on Market Regulation

  1. Henry on December 7, 2011 at 3:12 PM

    Government is helpful if a business is
    1. Denying someone products or services based on race
    Government is helpful in this arena
    2. Regulating utilities (if they didn’t, your electric/water bills might be triple)

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  2. Will on December 7, 2011 at 4:48 PM


    I question your questions. A better question is what type of government t translates into a better standard of living for everyone. With this question in mind, one needs to look at examples around the world to determine the best overall economic plan:

    – Most of the countries in Europe have massive government involvement with cradle to grave social programs. They are on the verge of bankruptcy – the whole continent.

    – North Korea and Cuba are completely managed by the Government and are 4th world countries at best. They can barley feed their own people.

    – The United States has a huge federal government with unworkable social programs and is nipping at the heels of Europe in terms of its fate. We were the envy of the world when we had very few social programs and very little government involvement.

    – China offers no social nets and has moved away from a centralized economy and is thriving.

    – Russia also collapsed under centralized control and is thriving (relative to where it was) under free market principles.

    It seems pretty clear to me that small government with very few social programs is the way to get the best overall results.

    Controversial! What do you think? Thumb up 5

  3. jmb275 on December 7, 2011 at 8:16 PM

    I thought this was a great post, Cowboy. Thank you so much. I really learned a lot.

    I think these are really the questions at the heart of it

    How do we balance freedom and equality – which is more important?
    What concessions in freedom should we be willing to make for greater equality?
    What concessions in equality should we be willing to make for greater freedom?

    These are really hard to answer. If the answer isn’t entirely obvious to me (like stealing property for example) I would err on the side of freedom. Mostly this is because of the concern over unintended consequences. No one can EVER predict the effects of unintended consequences in their entirety, and we don’t have a system that can react quickly enough to create and remove legislation to make the system run smoothly.

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  4. Jeff Spector on December 7, 2011 at 9:21 PM

    I think there is a fundamental dichotomy here. On one hand, you ask what should an economy be?

    To me, the simple answer is facilitate the exchange of goods and services among buyers and sellers.

    The second point seems to be: What should a society be?

    When a society decides what it wants to be, then it adapts the economy to provide whatever it wishes to provides. Could range from nothing to everything.

    The problem comes in when the fundamental goals of a society are subverted by the few in their favor. That is essentially how communism differs from socialism.

    That is how a market economy such as we have here has morphed into the re-distribution of wealth from the poor and middle class to the rich.

    It is how the multinational corporations co-opted their societal responsibility to provide jobs for its people to the outsourcing of jobs to other countries as a way of lowering costs, raise profits and bestow lavish executive payouts.

    Hard work and innovation have taken a back seat to influence, shady activities and the growth of wealth from non-productive means.

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  5. FireTag on December 7, 2011 at 10:40 PM


    Why should a MULTI-national corporation favor its employees in one nation over its employees in another nation? That’s a little like a parent favoring one child over another, isn’t it?

    In fact, wouldn’t multinational companies have a moral responsibility to give preference to providing jobs to poorer countries, by the same argument normally made for greater wealth equality WITHIN a country?

    Who was neighbor to the man who fell among thieves? The Samaritan who was NOT part of the orthodox Jewish society.

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  6. FireTag on December 7, 2011 at 10:47 PM


    I find it a little surprising that the discussion is phrased in terms of fairness versus freedom — as if everything is a zero-sum game — instead of in terms of fairness versus efficiency — which allows for the possibility of a positive sum game.

    When I studied economics long ago, it wasn’t about the equitable distribution of resources, it was about the efficient use of resources to maximize satisfaction of wants and needs.

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  7. ken on December 8, 2011 at 6:37 AM

    Are you seriously suggesting that Germany is failing and that we should be more like Russia and China? Did you learn this at BYU? If so, I’m going to stop sending them money.

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  8. Jeff Spector on December 8, 2011 at 6:50 AM


    “Why should a MULTI-national corporation favor its employees in one nation over its employees in another nation? That’s a little like a parent favoring one child over another, isn’t it?”

    Not exactly. We have existing employees in one country, doing a good job and losing their job for no other reason that the work can be done in other country cheaper. Not more effectively, not because the company wants to open a new market, but simply cheaper. It is displacement.

    Multinationals are multinational because the see opportunity to participate in a new market and make money, not because they are global citizens. Once in a country, they have a responsibility to be good citizens of that country and provide a reasonable work environment for its employees.

    Under your scenario of providing jobs to poorer countries, that said, I guess all multinationals should open factories and business in Africa because that is the area of greatest need. Try to get that to happen.

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  9. Cowboy on December 8, 2011 at 8:18 AM


    I would argue that we see things similarly, but still miss each other on the details. Your specific wording was “small government with very few social programs”. I don’t think the evidence bears this out as strongly as you suggest. I do think that the evidence favors market driven economies, but even that has a bit of latitude on the economic spectrum.

    Regarding your examples, there’s kind of an old saying among researchers that “in science we can’t just track the hits, we also have to keep track of the misses”. The point being, it is very easy to come up with data, facts if you will, that support our conclusions. The question is whether we have all or enough of the facts to have an accurate picture. And that leads to right into part of the point of my post. What are the best methods to measure. For example the U.N. has had an index that they have been publishng for many years referred to as the Human Development Index (HDI), that measures a nations average life expectance, wealth, education, etc, to essentially rank nations according to their standards of living. The annual report can be found here, with relative rankings on page 23:


    You will tend to see among the top nations, those that emphasize free-market economies, yet many of which are very heavy on government size and social programs. For example, Norway/Denmark/Sweeden/Finland, each exist in the top ranked category of the HDI labeled “Very High Human Development”.

    Still, the next question as it relates to this post is “how do we measure standards of living?”. Is the HDI the best method? There has been a significant amount of debate on this topic, as many feel that life quality is largely determined by how much we consume. Presumably those who consume more have a higher standard of living. What about quality of life over longevity? Here is one more short article that addresses this issue:


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  10. Will on December 8, 2011 at 8:59 AM


    I assume your comment was pointed my way and perhaps you missed a few terms in my sentence – specifically, ‘MOST of the countries’ and “THEY (the whole continent) are on the verge of bankruptcy”. We are in agreement Germany is the mainstay of the European economy. Merkel is lamenting her status as the most powerful woman in the world and arguably the most powerful person in the world. In short, Germany is keeping the EU alive. They have kept their programs in check and have a productive and effective workforce. They, more than anyone, have a bad taste in their mouth stemming from the social programs of their neighbors — social program that have a very real possibility of taking Germany down too. Merkel has some difficult choices.

    This centralized control of other people is not new to our world. It goes back to the pre-existence when the occupy Kolob crowd (Lucifer and his crowd) picked their own fight with the 1% ers (the Gods). God wanted to give us the freedom to determine our own destiny and Lucifer wanted the control – the power – the ability to centrally manage our lives. I’ll stick with God and his plan to determine our own destiny. A plan that will no doubt result in failure of some.

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  11. Cowboy on December 8, 2011 at 9:03 AM


    Great comment. In the context of regulation I was hearkening back to arguments posed by Milton Friedman in Capitalism and Freedom. I don’t argue with your definition of economics, but would say that it is rather complete. Two modern definitions that I’m starting to hear more are “people respond to incentives” and “power – who gets what and why”. For example, if maximizing the satisfaction of wants and needs is the issue, then we must ask “whose want’s and needs”. Isn’t a question of equity entailed there?

    Efficiency vs liberty. Friedman will argue that with little government regulation, including Will’s social programs, we will broaden the middle class that on the aggregate we will have relative equality. Still he acknowledges that there can and will be a gross disparity between those on the top vs those on the bottom. He is willing to make that concession however, not on account of efficiency, but rather on account of freedom. Liberty is Freidman’s underlying normative ideal, and heavy regulation he would argue threatens that ideal, even if it can create some measure of equality.

    Continuing along that line of reason, what is efficiency? In a producer/consumer world we have to ask are we mostly referring to efficient production, or efficient consumption, and how that relates to equality. For example, efficient production is going to take a tack towards Competitive Advantage, where each producer/nation/economy/whatever, only produces those things in which it has competitive advantage (that is, their overall cost of producing a thing is lower than any other potential producer of that thing) and then they effectively trade. This is quantitatively most efficient because it allows us to get the most return on our resources. However, it is not always what the consumer wants. Why do we have Wendy’s, McDonalds, Burger King, etc? Is the hamburger demand so high that the most efficient way to feed people similar food at lunch time should cost four buildings, 4-8 managers, four completely separate supply chains, etc? Of course not! Each of these businesses are able to turn a profit at the expense of overall productive efficiency, to increase the efficiency of satifying societies wants. Efficiency to consumers is choice, being able to have exactly what I want when I want. This however is not an efficient use of resources.

    If we wanted a greater return on productive efficiency that requires central planning. Who works where, who can produce what, etc. Implicit in this arrangement is a notion of liberty, which is why Friedman argues this way.

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  12. Cowboy on December 8, 2011 at 9:19 AM


    I agree with your statement of erring on the side of freedom. As an academic discipline the lines between physical science and social/behavioral science tend to blurr I think for a lot of people, in how they concieve of economics. Just as in physics or chemistry (both subjects of which I am the foremost ignoramus) we have our models and theories which explain interactions, make predictions, etc. However, our interactions are generally based on how we predict people will respond as opposed the more stable natural world. In recent years Harvard studies on economics have been overlapping quite heavily with psychology in trying to predict consumer behavior in lieu of complete faith individual rational utility maximization.

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  13. Cowboy on December 8, 2011 at 9:23 AM

    Regarding #12:

    Sorry, I hadn’t finished my thought yet.

    The point being that given that, I am wary of policies that are dependent wholly on predicting human behavior. How will society respond to stimulus money for example? I would also argue that small regulations with very limited scope should be the goal as they are much easier to manage and monitor.

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  14. Casey on December 8, 2011 at 10:28 AM

    Will, as much as I despise the “love it or leave it” mentality I suggest you pack up and take yourself to thriving bastions of economic freedom in China or Russia – find out what the lives of ordinary people are like – you may, I hope, return a little more humble and a little more educated.

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  15. Jon on December 8, 2011 at 11:44 AM

    Regulations by their very nature imply a lack of rule of law and equality before the law. There is no need for regulations but only rule of law. Using regulations, which is a use of aggression to get what one desires, only makes a master of those we wished to control, just as we see today. Love is the answer.

    Greater prosperity and equality can be had among all people in a true free market system. Read “Healing Our World In an Age of Aggression” if you would like a comprehensive rebuttal against regulations and the use of violence as a means to an end.

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  16. Jon on December 8, 2011 at 11:47 AM

    From Aesop’s Fables:

    There was once a Wolf who got very little to eat because the Dogs of the village were so wide awake and watchful. He was really nothing but skin and bones, and it made him very downhearted to think of it.

    One night this Wolf happened to fall in with a fine fat House Dog who had wandered a little too far from home. The Wolf would gladly have eaten him then and there, but the House Dog looked strong enough to leave his marks should he try it. So the Wolf spoke very humbly to the Dog, complimenting him on his fine appearance.

    “You can be as well-fed as I am if you want to,” replied the Dog. “Leave the woods; there you live miserably. Why, you have to fight hard for every bite you get. Follow my example and you will get along beautifully.”

    “What must I do?” asked the Wolf.

    “Hardly anything,” answered the House Dog. “Chase people who carry canes, bark at beggars, and fawn on the people of the house. In return you will get tidbits of every kind, chicken bones, choice bits of meat, sugar, cake, and much more beside, not to speak of kind words and caresses.”

    The Wolf had such a beautiful vision of his coming happiness that he almost wept. But just then he noticed that the hair on the Dog’s neck was worn and the skin was chafed.

    “What is that on your neck?”

    “Nothing at all,” replied the Dog.

    “What! nothing!”

    “Oh, just a trifle!”

    “But please tell me.”

    “Perhaps you see the mark of the collar to which my chain is fastened.”

    “What! A chain!” cried the Wolf. “Don’t you go wherever you please?”

    “Not always! But what’s the difference?” replied the Dog.

    “All the difference in the world! I don’t care a rap for your feasts and I wouldn’t take all the tender young lambs in the world at that price.” And away ran the Wolf to the woods.

    There is nothing worth so much as liberty.

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  17. FireTag on December 8, 2011 at 3:12 PM


    “Not more effectively, not because the company wants to open a new market, but simply cheaper. It is displacement.”

    Yes, but why is displacement WITHIN a nation for purposes of greater equality considered morally good, but considered morally wrong if it displaced ACROSS national borders? It’s the inconsistency I’m pointing out.

    It seems to imply that we ALL justify an “us” versus “them” definition at some level. We just divide the groups differently — family, church, company, state, nation — and sometimes are more self-aware of the definitions we make than others.

    I don’t necessarily think there is something wrong with this; I tend to think God is maximizing complexity within reality over time, which invokes BOTH the creation of greater community and the differentiation of community into unique sub-communities.

    But I think it unrealistic to develop policies toward regulations that deceive ourselves about the probability that ALL people will prefer “us” over “them”.


    I think this is also an element that explains why McDonalds competes with Burger King. If my definition of “us” (e.g., my family) is better off as a district manager in Burger King than being a restaurant manager in a McDonalds (because there are many more restaurant managers to compete against for the same slot), I may not care about the total efficiency OR equality of the system.

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  18. Jeff Spector on December 8, 2011 at 6:08 PM


    “Yes, but why is displacement WITHIN a nation for purposes of greater equality considered morally good, but considered morally wrong if it displaced ACROSS national borders? It’s the inconsistency I’m pointing out.”

    I do not advocate for displacement under those circumstances I describes within or without.

    And I don’t think God enters into the equation at it. It is greed, not God that is driving these decisions.

    Regulations are generally put in place to prevent cheating or to give one party an unfair advantage in some way. Eliminate the cheating and you eliminate the need for the regulation.

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  19. Stephen M (Ethesis) on December 8, 2011 at 6:38 PM

    Well done Cowboy. I know, the economics posts were part of my schtick, but well done. Hope you have more of these to share.

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  20. Jon on December 8, 2011 at 8:35 PM

    If you are going to put minuses on my posts one should at least have the courtesy of explaining why. And who doesn’t like the wisdom found in Aesop’s Fables?

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  21. Jon on December 8, 2011 at 8:40 PM

    Regulations are generally put in place to prevent cheating or to give one party an unfair advantage in some way. Eliminate the cheating and you eliminate the need for the regulation.

    Regulations create the cheating. So this is a catch-22, create regulations to stop cheating but regulations are cheating so you can’t ever get rid of the regulations since they are the source of the cheating that you wish to get rid of. Using violence/aggression as your means to bend people to your will never give you the outcome you desire. Just look at the war on drugs as one heinous example of this.

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  22. FireTag on December 8, 2011 at 11:43 PM


    Similar point to Jon’s, but said a bit differently. If you get rid of the greed, regulation would be unnecessary, but unless you can get rid of the SAME greed among the regulators, regulation will be ineffective.

    So doesn’t a big part of the question of fairness boil down to how do we regulate the regulators so that they don’t just “redistribute” resources to themselves through slight of hand?

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  23. Douglas on December 9, 2011 at 2:53 AM

    I agree with Will that the question itself is poorly worded. To contrast “regulation” versus “freedom” is a no-brainer if one truly subscribes to American values. ALWAYS freedom…that is, any any laws/regulations intended to circumvent the non-agressive free choices of individuals (or their agent corporations of which they are customers and/or shareholders) are themselves an agression and are WRONG.
    Laws and/or regulations have their place to deter aggression (e.g. theft, fraud, violence). Where Government’s role is to defend persons against aggression (police for crimes, civil courts for torts), it fulfils its primary domestic purpose. However, the customer, if his freedom is paramount, always hold the “trump card”…he can take his business elsewhere. It’s that fear of loss of business that checks bad behavior on the part of individuals and businesses.
    Now, my discourse is simplistic in the extreme, but the issue itself isn’t that complicated. If we try to control outcomes of consensual behavior, starting with how folks spend their own money, against their free choices, we have tyranny. Pure and simple.

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  24. Stephen Marsh on December 9, 2011 at 5:28 AM

    Guys, look at milk without regulation. It was a leading cause of death in children in cities. Do you look at death and say “that is death in a bottle” ?! Regulation of the milk industry made the difference.

    Do you carry a kit in your car to check the gas at the pump before you put it in your car? If your car uses premium, when was the last time it had timing or other issues because the octane wasn’t as listed. Travel some and you will notice test kits for sale and used regularly in some areas.

    Much of regulation is intended and necessary to make markets trustworthy so that they can work. You can not have a free market without regulation to keep the information that flows trustworthy. Without trustworthy free flowing information, markets begin to fail.

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  25. Jeff Spector on December 9, 2011 at 6:52 AM

    “Much of regulation is intended and necessary to make markets trustworthy so that they can work.”

    That is the rub. If everyone was honest and played by the golden rule, there would be no need for regulation.

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  26. Jon on December 9, 2011 at 8:37 AM

    Jeff & Stephen,

    You are confusing regulations with simple laws applied to everyone. Rule of law and equality before the law dictates that everyone abides by the same clear laws. One of these natural laws is defrauding. No party can defraud another, if they do so then they can be brought before an arbitrator for breaking that trust.

    As for the milk issue. What sane parent would purchase milk for their young child that wasn’t made clear that it is safe for their child. Would you not look for a seal that says it is guaranteed to be safe and pay the extra money for this safety? Why would you use aggression to enforce this? Two wrongs do not make a right, the means do not justify the ends.

    Now you have people that voluntarily purchase raw milk from one another and the government comes in and destroys the property of the seller and throws them in jail. How is this just and right? This is not freedom and liberty, this is tyranny.

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  27. Cowboy on December 9, 2011 at 9:10 AM

    Stephen #19 – Thanks

    Firetag #22:

    “So doesn’t a big part of the question of fairness boil down to how do we regulate the regulators so that they don’t just “redistribute” resources to themselves through slight of hand?”

    That is an interesting point, and in fact one of the key points made by Friedman in Capitalism and Freedom. Essentially he argues that under Competitive Capitalism, the economy actually functions as an offset to political power. That corruption is minimized because the Governments ability to starve people and withhold luxuries is minimized. Simultaneously, in his view Government acts as a referee over the game so that the economy can’t run wild.

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  28. Cowboy on December 9, 2011 at 9:30 AM


    In an absolute binary situation I would agree, regulation vs freedom, generally defaults towards freedom. But that really isn’t the situation at all. We don’t have total freedom, nor should we expect it. We don’t have the right to kill for example, and then to expect that we won’t be punished.
    The question that I am trying to raise is, where are the trade-offs reasonable, and where are they too much. Think of the issue more on a continuum.

    For example, current health reforms are intended to provide medical coverage for all Americans. Some of the thinking going into this is that middle class wages have been relatively stagnant since the 1970′s, once adjusted for inflation. Worker productivity however has been growing quite dramatically even when adjusted for inflation. At the same time the cost of healthcare has been growing at a rate 2-3 times higher than inflation, while top level management pay has been growing exponentially. In essence many working class individuals can no longer afford health care costs at their current wages. Now to be clear – I am not advocating favor towards Obama health reform, I have serious disagreements with it! I am trying to explain some of the rational though. There is no doubt that the reform poses a threat against economic freedom. It restricts profit growth, and ultimately functions as a minimum wage (though the minimum wage was at least tied to relatively stable currency, whereas the health reforms are tied to a hyperinflationary healthcare market). The question is, given the trends, should we be willing to suffer some kind of trade offs in here somewhere the level the experience, or should we allow the disparities to grow under a principle of broader freedom? (by the way, I haven’t really stated my opinion here either).

    Next on to your point of aggression. What is supply and demand if not an act of aggression. What is competition if not an act of aggression?

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  29. Cowboy on December 9, 2011 at 9:32 AM

    Jeff #25:

    I agree, but until the city of Enoch is established, what do we do?

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  30. Jeff Spector on December 9, 2011 at 9:51 AM


    “I agree, but until the city of Enoch is established, what do we do?”

    Well, I think we live with some level of regulation. But, we do need to reduce regulation to common sense. some of it is just ridiculous as you would agree, I’m sure
    And some regulation is designed to give one company an advantage over others, similar to some tax loopholes.

    The current Republican mantra to eliminate regulation is laughable because those same folks are equally complicit in creating regulations as anyone.

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  31. Jeff Spector on December 9, 2011 at 9:54 AM


    “Now you have people that voluntarily purchase raw milk from one another and the government comes in and destroys the property of the seller and throws them in jail. How is this just and right? This is not freedom and liberty, this is tyranny.”

    I doubt you can come up with a real example of someone getting thrown in jail. Chances are they would just have to stop. And it would have been a result of someone getting sick.

    Look at what has been happening to our food sources lately.

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  32. Cowboy on December 9, 2011 at 10:00 AM

    “Would you not look for a seal that says it is guaranteed to be safe and pay the extra money for this safety”

    John –

    Friedman argues exactly the same way. He takes it a step further and says that the government needs to step out regulating professional licenses, such as lawyers and doctors. He argues that the community would establish its own rating system, and people could choose on the basis of choice.

    This is where Friedman and I part ways. We have a market example of how this works in the accounting world, with corporate auditing firms. The classic example is what happened with Arthur Anderson in the Enron scandal. So that everybody is on the same page, the way this works in simple explanation is this. A public company (a company that can market shares of its corporate stock on public stock exchanges) is required (regulation) to publish financial statements at specfici intervals each year. These financials are to help the public assess the value and potential of the stock. Sparing too much history, an outgrowth of the economic failures of the 20′s and 30′s was a quasi private regulatory body (FASB) that established guidelines for reporting corporate financial’s (GAAP). To certify that company’s are following these guidelines, a public company must, at their expense, hire an outside private auditor to issue an opinion as to the soundness of a their periodic financials. Now, the concern is that there is a conflict of interest here. Technically the public firm being audited is a client of the auditor. It stands to reason therefore, that in order to please the client and ensure repeat business (as well as protecting a reputation) the auditor may be tempted to represent the financials in the clients favor, even if their are problems. This is exactly what happened with Arthur Andersen, to the point they were actually caught shredding evidence after being presented with a search warrant.

    Additionally, these same allegations exist in the current housing crisis. I don’t want to clarify names and facts, so I’ll just generically refer to insurance companies and auditors. Essentially what had happened is that many of the insurance companies that were using their derivatives portfolios to pay out retirement benefits, also required the approval of independent outside auditors. Because of the nature of derivatives, both the complexity of the model, and the way in which loans become indistinguishable from the underlying assets, the auditors had absolutely no way of truly assessing the risk in the portfolios. On faith, perhaps a little bit of pressure, they went ahead and issued AAA ratings. In reality they mired in adverse selection.

    So, to your point about the milk “seal of approval”. Under a completely free market you would then require another rating agency to rate the rating agency. This is where government can be useful in my opinion. Simply because they are not paid directly by the client, but rather fined for compliance failures, there is less of a risk for collusion. Not that it doesn’t happen, but at very least it is not encouraged by the system.

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  33. Cowboy on December 9, 2011 at 10:12 AM

    Jeff #30:

    I do agree actually. I think there are a great deal of problems with our current body of regulatory nonsense. Part of my objection is not just in principle, but in the way they are imposed.

    Take COBRA for employer benefits as an example. The intent makes perfect sense. An employee should not be forced into a situation where they instantly lose their medical benefits on account of losing their job. That’s great, and in this way I think the law is perfect. However, the handling of COBRA administration places the onus on the employer to make every effort possible to notify the employee of their rights. Still, that is not enough. Now the employer must develop a measure to demonstrate that they notified an employee of their rights, in both a timely and well documented way. Failure to comply places the employer at risk for medical claims incurred by the employee, generally for the next 18 to 36 months. If an employee slips through the cracks, and a employer neglects their responsibility, there is no way to make things right, to undwind the tape and start over. Now the employer is just at risk.

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  34. jmb275 on December 9, 2011 at 10:16 AM

    Re Casey-

    Will, as much as I despise the “love it or leave it” mentality I suggest you pack up and take yourself to thriving bastions of economic freedom in China or Russia – find out what the lives of ordinary people are like – you may, I hope, return a little more humble and a little more educated.

    Having spent a couple years in Russia, they certainly are not what I would consider “free.” But that’s not a knock on capitalism since Russia is not really capitalistic. They are controlled by a corrupt gov’t/mafia that pillages the poor and regularly stifles innovation and progress.

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  35. jmb275 on December 9, 2011 at 10:22 AM

    Re Cowboy/Stephen etc.-
    I think there is another way to look at regulation, and I think it underscores what Stephen is trying to say. Does the gov’t, does regulation, do rules, etc. ever increase freedom? I think the answer to that is clearly yes. As a result, it’s not clear to me that all regulation incentivizes cheating anymore than the lack of regulation incentivizes thievery. If people can’t buy stuff, or buy safe stuff, if they can’t reliably count on being able to buy gallon of milk without it being poisonous, I would argue they’re not free.

    Having said that, it’s certainly conceivable that the free market could eventually converge on non-poisonous milk. It doesn’t require regulation to do that. But is there a benefit to that regulation? Did it more quickly produce the desired result?

    I really think the right questions to ask are which bits of regulation do we need. As a result of this, I generally push back against people that wanna regulate anything that moves. But I think I also need to acknowledge that well crafted regulation can be useful.

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  36. Will on December 10, 2011 at 10:54 AM


    Neither of these countries are near Bankruptcy and I did hedge my statement when using the terminology thriving by qualifying the are better than they were under a centralized economy.

    Just because things appear better it doesn’t mean that they are — again they aren’t near bankruptcy. Our credit cards, individually and as a nation will one day come due, ironically with China and Russia holding our debt. It’s not going to be good with the Golden Rule I’m mind, he who has the Gold Rules.

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  37. Douglas on December 10, 2011 at 10:54 AM

    #28 – Next on to your point of aggression. What is supply and demand if not an act of aggression. What is competition if not an act of aggression?”

    Your assumption that the paradigm of supply and demand or the necessity of competition being de facto “aggression” seems evidence of tortured logic. Both are necessary to ensure freedom. It seems that what you have issue with is the outcome, or, as the over-matched Alderman from Chicago occupying the White House stressed of late, “fairness”. OK, and WHO decides WHAT is FAIR? Cowboy, I’ve seen all too many supposedly smarter and more talented than you or I go down this road, and the inevitable result is ALWAYS some manner of tyranny AND economic chaos. Please name one nation, just one, that somehow achieved the “workers utopia” that every self-proclaimed “progressive” blogging this site seems to champion! Just ONE!
    When a better method than free will and the constitutionally restricted application of rule of law is promulgated, I’ve champion it myself. Until then, I’ll stick with the worst economic and political system the US has, save for all the others.

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  38. Jeff Spector on December 10, 2011 at 1:01 PM


    COBRA is a great example. if you fail to fill out the paperwork exactly perfect or miss a deadline for whatever reason, you are done, no way to fix it.

    Intent is one thing, implementation is the key.

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  39. FireTag on December 10, 2011 at 2:21 PM


    “Essentially he argues that under Competitive Capitalism, the economy actually functions as an offset to political power. That corruption is minimized because the Governments ability to starve people and withhold luxuries is minimized. Simultaneously, in his view Government acts as a referee over the game so that the economy can’t run wild.”

    The intensifying competition in the Western nations between those who prefer to grasp for power in the form of economic power vs. those who prefer it in the form of political patronage is, IMO, a central aspect of what is happening to destabilize society in the present crises.

    That was really the point of what I wrote here:


    It isn’t a matter of which side wins that’s so dangerous; it’s that the collateral damage from the intensity of the dispute is getting out of proportion to what those seeking power can hope to gain, but not out of proportion to what they fear to lose, so they can find no way within their own value systems to stop. Shiz, anyone?

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  40. Jon on December 10, 2011 at 3:20 PM

    Jeff, #31,

    I try not to make anything up when I write. If I do, I’ll admit to the mistake. We live in a virtual police state and it’s getting worse all the time. Just because the go after the “undesirables” first doesn’t make it any less bad. It’s a byproduct of the warfare state that we are in. We have a people that believe in violence and we will be punished for such as natural law (God’s law) dictates. Nows the time for repentance before we are at the height of our wickedness and we become devoured as lambs by a young lion.

    Here’s your link:

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  41. Jon on December 10, 2011 at 3:32 PM

    Cowboy, #28,

    You’re making many fallacious claims in your posts. Freedom doesn’t mean you can do whatever you want. Freedom means that people live by the golden rule, natural law, second great commandment, non-aggression principle, good-neighbor policy, or whatever you want to call it. It is only when people don’t live by that principle is it OK to aggress against the first aggressors.

    As for “we need regulation to make health care affordable”. You forget all the aggression made by other regulations that have caused the cost of health care to sky rocket! The first regulations didn’t work so we need more regulations, they didn’t work so we need even more. In the end the result will be crappy cars like the Soviets had, and we won’t even realize it (like we do now, we could have so much better and inexpensive health care but we don’t because of all the aggression used).

    You mix up what the term aggression means, just like you did freedom. I highly suggest you read the “Healing Our World in an Age of Aggression” so you can understand the concept better.

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  42. Jon on December 10, 2011 at 3:38 PM


    Once again, you look at something that is highly regulated and call it free market. It is not. Read the book I keep referring to for a good refutation. You need to remember that these “credit rating agencies” have regulations working in their favor that make them not free market anymore.

    I agree with Friedman on that point. Although I don’t agree with him on everything, we was a pretty smart guy and great fighter in liberty and freedom.

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  43. Jon on December 10, 2011 at 3:40 PM

    Cowboy, #33

    Once again, a situation caused by aggression (health insurance stuck with the employer) trying to be cured by more aggression through regulations, it only causes more problems and lower quality of life.

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  44. Cowboy on December 10, 2011 at 10:13 PM

    “Cowboy, I’ve seen all too many supposedly smarter and more talented than you or I go down this road, and the inevitable result is ALWAYS some manner of tyranny AND economic chaos.”


    I’m not really sure what to read into this comment. Do happen to have a couple of nations in a petri dish somewhere that you have been observing as they start their economies from scratch, yet ultimately devolve into tyranny? I mean in seriousness, how much of this have you actually seen, that applies to the comment you are making.

    Secondly – you miss the point if you think I am advocating anything more than competitive markets. My point was to simply ask the question, where the marginal costs of free markets ultimately exceed the marginal returns. I don’t actually have an answer to that myself, but I think there is need for some regulation. If you have read my comments you will see that I am for small incremental change, not heavy regulation.

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  45. Cowboy on December 10, 2011 at 10:20 PM

    Firetag (#39):

    I think I need some time to digest what you are saying. I think I get exactly what you, are saying, but I am not exactly sure what I think about. Suffice it to say, I am pretty sure that are giving Friedman a run for his money on this point, and to some degree I think you may be right. Obama as an example, spent his election period talking “tuff” about the supposed “Fat Cats”. He then spent the first year or so trying to throw his weight around. He seems to have spent the rest of his Presidency trying to make up for some of that. I am not quite sure how to clearly identify the collateral damage to public broadly, but it seems that the fallout would spill over to the American people. Very interesting thoughts.

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  46. Cowboy on December 10, 2011 at 10:52 PM


    You accuse me of fallacy, and yet I am not sure how reconcile your logical chains. I disagree with Friedman on several points, but I am a big believer in what he calls Competitive Capitalism, as opposed to Free-Markets. In general usage I don’t have a problem with the term, but when people try to intuitively drill down to what they think it means, they make the same errors you are making. You will suggest that anything that goes wrong in the U.S. economy will be because we violated “sacred” principles of laissez-fair capitalism. You won’t use the term anarchy, but any attempt to regulate, even anti-trust, is generally treated as some form of economic apostasy.

    And that is the point. You are painting a picture that freedom, or in other posts, socialism, capitalism, etc, are static states within a nations political/economic landscape. I am arguing that they are orientations that define the overall experience within that nation, but that vary along a spectrum. I agree that the U.S. is becoming more and more regulated for example, but reject that we are living in a “police State”. Yes, you cannot sell food to the public without the appropriate licenses and processing requirements. These would be ideal things to debate. What is to much, not enough, etc. However, you are taking one example of what you see as regulatory enforcement, and allege that this is proof that your being monitored as a political dissident by the State (Police State)??

    You argued that the free market would provide its own regulatory enforcement, by invoking an industry “seal of approval”. I pointed to an example of where such a thing already exists and yet has not operated in the public good. You simply dismissed that example out of hand with a generalized argument that completely fails to connect the dots.

    ” Once again, you look at something that is highly regulated and call it free market. It is not. Read the book I keep referring to for a good refutation. You need to remember that these “credit rating agencies” have regulations working in their favor that make them not free market anymore.”

    How does this respond to the issue? Will you reject any example that I pose from any observable corralary that comes from outside an anarchist economy? Why don’t you show how these regulations create a condition that nullifies my argument. This is a weak answer.

    Last two points – First healthcare. I am not advocating Obamacare, etc. I was simply pointing to the conditions used to rationalize it. Again your defense is simply to say:

    ” You forget all the aggression made by other regulations that have caused the cost of health care to sky rocket! The first regulations didn’t work so we need more regulations, they didn’t work so we need even more. In the end the result will be crappy cars like the Soviets had, and we won’t even realize it (like we do now, we could have so much better and inexpensive health care but we don’t because of all the aggression used).”

    There is not one tangible example in here. What other regulations? I am overwhelmed by the healthcare issue, because at present nobody has precisely nailed down the root cause(s) of the escalating costs. Without feeling any accountability for your argument you however simply brush past the argument hoping to lose readers by generically referring to the “other regulations” that “caused healthcare to skyrocket in the first place”. So again, what regulations, and how do you defend your assertion?

    Lastly aggression. This is one more point that I disagree with Friedman on. He argues quite vehemently against what he sees as “violence” from the State, through redistribution. This is strictly an appeal to emotion, as he fails to recognize that “natural law” as you call it, is one of competition. Dog eat dog. Interestingly he misses this point even though he speaks so disdainfully against monopolies, public or private. All I am saying is that to the degree that wealth redistribution is violent, violence was already in the system – so these pathetic appeals to emotion are quite useless. Competition is aggressive, and that is okay. Just don’t pretend that it is Celestial.

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  47. Cowboy on December 10, 2011 at 10:56 PM


    You’ve clearly had some first hand experience with COBRA also. I think we’re pretty much in complete agreement my friend.

    By the way – I really love/hate going back and forth with you on the issues. (insert smiley gesture).

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  48. Jon on December 10, 2011 at 11:57 PM


    There’s not enough room in the comments section to give a complete answer so I’ll refer you to a couple of articles that are better written than I could ever write and give a thorough refutation of your claims.

    If you say that “this is an example how the free market doesn’t work” and then give an example of something that is definitely not free market is a red herring argument and draws the reader to make false conclusions.

    I agree that there are degrees between freedom and no freedom and free market and centrally planned economy. But there’s not many bastions, if any, of a free market in the US economy.

    Cause of medical crisis/medical costs:

    As for the police state thing just read Will Grigg and Glenn Greenwald for a while and then your eyes will open to the horrible state we are in. Yes, it can be worse, but just because we don’t directly feel the effects of it now doesn’t mean that it doesn’t exist. That’s what the German’s thought until it was too late.

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  49. Jon on December 10, 2011 at 11:59 PM
  50. Cowboy on December 11, 2011 at 12:17 AM


    With all due respect, if it would take to long for you to comment in full, then it probably would be too hard to respond to. I do plenty of reading, but I don’t particularly care for being given ad hoc reading assignment to settle arguments. There is plenty to read, too much in fact. If you were able to summarize the key points then we have something to talk about. Additionally, if your summary is interesting I may go ahead and read your recommendations on my own volition. For example, I had never read Animal Farm. I started it yesterday after Jakes post.

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  51. Jon on December 11, 2011 at 12:27 AM

    OK, Cowboy, I’ll see what I can do. The Credit Rating Agencies read is actually quite short so I won’t summarize it. The medical one is quite long. I’ll summarize it as best I can.

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  52. Jon on December 11, 2011 at 12:32 AM

    Credit Rating Agencies:

    The SEC created in 1975 a designation for credit-raters: Nationally Recognized Statistical Rating Organization (NRSRO.) The SEC rule created a cartel of 3 firms: Standard & Poor’s Credit Market Services, Moody’s Investors Service, and Fitch, Inc. — these being the only firms that qualified for use by broker-dealers for satisfying another of the SEC’s rules on net capital. This has led to more regulation of the credit rating agencies.
    A Nationally Recognized Statistical Rating Organization (NRSRO) is a credit rating agency (CRA) that issues credit ratings that the U.S. Securities and Exchange Commission (SEC) permits other financial firms to use for certain regulatory purposes. Originally, seven rating agencies were recognized as NRSROs, a number that dwindled as a result of mergers to six by the mid-1990s[1] and then to three by 2003.[2] As of November 2011, nine organizations were designated as NRSROs.[3]

    Ratings by NRSROs are used for a variety of regulatory purposes in the United States. In addition to net capital requirements (described in more detail below), the SEC permits certain bond issuers to use a shorter prospectus form when issuing bonds if the issuer is older, has issued bonds before, and has a credit rating above a certain level. SEC regulations also require that money market funds (mutual funds that mimic the safety and liquidity of a bank savings deposit, but without Federal Deposit Insurance Corporation insurance) comprise only securities with a very high rating from an NRSRO. Likewise, insurance regulators use credit ratings from NRSROs to ascertain the strength of the reserves held by insurance companies.

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  53. Cowboy on December 11, 2011 at 12:51 AM


    For the sake of argument I’m going to concede some here. I’m still uncertain what your ideal free-market looks like, ie, how “free” is it. More importantly I’m failing to see how this article refutes the principle argument, that private free-markt quality rating agencies may collude with their clients. You have also ignored the better example of Arthur Anderson. So for the sake of argument how would the “free-market” prevent this?

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  54. Jon on December 11, 2011 at 12:59 AM

    Medical Costs:

    All such rights are predicated upon full respect for the persons and property of others. This is the concept of rights appropriate to rational human beings living in a civilized society. Henceforth, I shall refer to it as the rational concept of rights.
    [T]he origins of the present medical crisis go back all the way to the government’s establishment of various forms of medical licensing as early as the nineteenth century, and the subsequent increase in licensing requirements it has imposed in the course of this century.
    [Regulations] deprives the buyers of medical care of the benefit of the additional supply of medical care that would be provided by the excluded competitors and forces them to deal only with the government-protected medical monopolists. [Which affects the poor mostly]. [The source of the regulations usually come from the medical people themselves so they can get more money for their services.]
    The first major direct step toward the establishment of socialized medicine in the United States came about in connection with World War II’s price and wage controls. [Which barred employers from raging wages, so the employers gave them health insurance, which the gov't allowed.]…After World War II, in the remainder of the 1940s and in the early 1950s, coercive labor unions made employer-financed medical insurance a standard part of their contract demands.
    It cannot be stressed too strongly that this system of medical insurance contains essential features of socialized medicine. And that, as we shall see, is why our problems in connection with medical care have gotten progressively worse since World War II, as the present system of medical insurance was extended and people became more and more acclimated to it.
    [This coercive government socialized health insurance system is the leading cause of price increases in the medical system. Imagine a group of students go together to lunch with the understanding that the check will be split evenly at the end and so some decide to not buy too expensive of an item for lunch but others, knowing that it will be payed by the group decide to get more expensive items, pretty soon more and more people in the group decide to get the more expensive items, eventually it becomes more of a system of mutual plunder as all the students feel like they are shifting the costs onto one another.] Indeed, in the context of today’s system of medical insurance, the way most individuals seem to look at matters is that any additional expense incurred on their behalf is not an additional expense, however small, to other individuals, even anonymous individuals, but merely an additional expense to a rich insurance company, which, they believe, is growing continually richer and can well afford any additional expense.

    Part 1, I’ll get to part 2 tomorrow (hopefully, I’ll also try and keep it shorter).

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  55. Jon on December 11, 2011 at 1:09 AM


    Since these companies are monopolies (or cartels as mises.org calls them). Companies have to use them in order to rate themselves in order to get government funding. Many companies are required to invest in certain types of investments that have to be rated by these agencies as decreed by regulations.

    In a free market people would be able to choose rating agencies that they find trustworthy. After an agency repeatedly falls short of being able to properly rate companies they would find more trustworthy agencies and demand the companies they are invested in use the agencies that are truly trustworthy. If said company doesn’t use a trusted agency they’ll go elsewhere with there money. People care about their savings, they won’t put it where it will be depleted. Yes, it won’t be a perfect system, but it will be far better than the system we have now that is based on aggression. There will be losers but these losers would be a smaller segment of the population. The current agencies wait until the last minute (or even after the last minute) to downgrade the stock but are still able to stay in business since they are one of the “approved” agencies. Also, the losses are covered by the public at large through higher taxes/debt.

    Is that clear?

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  56. Jon on December 11, 2011 at 1:14 AM


    I’m not much of a historian, I understand the principles better than the history, I’m afraid on won’t be much help on the history side of things.

    My ideal free market is an actual free market as it was originally intended as a word, i.e., a market that regulates itself. Similar to System D as coined by Robert Neuwirth see http://mises.org/daily/5809

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  57. Cowboy on December 11, 2011 at 10:02 AM

    Hi John:

    I’m going to do this all in one post-

    #54 – It is interesting that your article goes this way. I actually agree overall, but disagree on the points used in the context of our discussion. I wrote a paper on this very subject in college, and took a similar position to the Mises author. One of the unexplored drivers in the healthcare crisis is the way that employer sponsored healthcare effects spending and demand.

    **Sidenote: I have also managed large group health plans for companies with collective bargaining aggreements in the past. So this issue hits home with me.

    Only recently have economists been looking at the role of employer sponsored benefits, rather than focusing on “insurance” in the aggregate. Demand is defined as what consumers can and will pay for a product at a given price. Under employer benefits the employer expands the “can” part of the equation, and completely removes from the employee the “will” part. Since an employee finances their portion of the insurance at fixed intervals through payroll withholdings, cost increases on the overall plan do not translate into personal consumption habits. This is not the single cause of hyperinflation in the healthcare markets, but it appears to be part of it.

    Where I disagree with your Mises insinuation is that this was caused by regulation. Only in the sense that that wages were frozen during War time was this an issue. There is good reason to believe that the market was tending this way in the first place. As you note, Unions seemed to be the main driver behind the move.

    On to Unions. Like most free-market advocates, you also appear to be anti-union. I have never understood this because in my mind nothing is more free-market than Unions. I understand why businesses, and therefore capitalists hate this, but ideologically it makes sense if “principles” are what matter. The problem with free-market equilibrium models is that they assume some equalization between capital and labor. In practice this does not occur efficiently because of the dispersion and concentration of power. Capital is very concentrated, small in number, and well organized. When they negotiate they can do so forcefully because only a few managers need to be persuaded to action. Labor on the other hand must gain aggregate support from a companies majority workforce. When management notices this, naturally they intervene, preventing effective bargaining. Unions provide a construct from which Labor is protected against managements efforts to scatter the flock. They also create an effective way of consolidating voices for increasing the Labor bargaining position. Most importantly, they represent an organization of the workforce, by the workforce. What could be more free-market than that??

    To be clear, there are sociological problems with how effective Unions are in practice, but nothing that I can see based on free-market “principles”.


    How would people choose which rating agencies are “trustworthy”? That is my whole point, that is why you are going to a rating agency in the first place. You don’t know. If you can certify a rating agency based on public consensus then you could do the same thing for the companies they are rating. In other words, if things really worked that way there would be no need or rating agencies period.

    Still, your argument seems narrow as you have completely avoided the problem of collusion. To rebut you say that experience will lead firms to produce on quality. Yet the world is full of examples where everything from car seats, to childrens outdoor play equipment have been produced to poor standards to deadly effect. Why poor quality then? Because it is more cost effective. Do the companies provide information warning the customer that the danger hazard is greater for these goods? Of course not, they present them as safe. While it would be nice if people would behave ethically, the business world has demonstrated clearly that there are enough producers who hold little regard for quality or safety, to render the idealism shortsighted. I fail to see how a “free-market” would compell ethical behavior. Seconly, even if we accepted the notion that people will stop buying products that kill, do we want the free market to move that slowly. How about not letting people die before corrections are made? What about situations where the effects of collusion allows poor quality to prevail undetected for a long time? What is the free-market solution to that?

    Economists agree that a key problem with effective competition, particularly in risk industries (insurance,investment,etc) is assymetry of information. That is when one side of a contract is privy to information the other doesn’t have. When this occurs all sorts of moral hazards arise. Regulation’s such as transparency work to level the playing field.


    With all due respect, principles without the supporting history, simply reduces to untested theories. A market that is left to completely self-regulate tends to lead to monopoly. Essentially it leads back to an unchecked concentration of power. Even Friedman understood this, which is why he had to make concessions towards at least some minor level of regulation. Which is why he argues for Competitive Capitalism. A market of low regulation (low, not none) that was intended to keep the game going, rather than progressing to an eventual winner.

    Regarding principles – based on this comment, and other you have made on other posts, I tend to sense something of a religious belief here. I find this very dangerous because it places economic activities into realms of “sacredness” where ideals are advocated not on a basis of empiricism, but rather on a correlation to closely held religious ideals.

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  58. Jon on December 11, 2011 at 10:46 AM


    As I wrote employer sponsored health insurance started due to FDR’s regulations during the great depression. Then it was exacerbated by unions using the force of government to force companies to expand them. Then the government gives tax breaks for having these plans, not that the tax breaks don’t occur for the self-employed, there are also other regulations that force companies to pay for health insurance when they have over a certain amount of employees. How is this not clearly government aggression against employers/employees that creates incentives to have employer sponsored health insurance?

    As for unions. I have no problem with unions as long as they don’t use the force of government to get their desires and as long as the don’t break the non-aggression principle (which goes for employers too). In a free market you shouldn’t see quite so much concentration of wealth in a single sector, this is more typical of a highly regulated, licensed businesses where the barrier to entry is high, lowering competition and making the services less efficient and more costly.

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  59. Jon on December 11, 2011 at 10:57 AM

    Your rating agencies analogies could work right along with regulations. How do you know that the regulators won’t collude with the industry? (Which they do). See this short example as an illustration of this:

    When I purchase something, I choose to go with something that is higher quality, typically name brand, maybe not the most expensive item but not the cheapest either. When you have regulations you make people lazy
    and they take the responsibility off themselves and place it on others. Then they are more apt then ever before to be duped. Take Berney Madoff as an example of this.

    In a free market people would realize they are responsible for themselves. I gave you the reasoning on how the market would police itself. It would be by people having bad experiences with companies and not doing business with them anymore and they tell their friends, and their friends tell their friends. That’s why people trust Apple, because it gives a high quality product that works (granted I’m a windows person myself). Same goes for Toyota, people know it’s a good product, so they stay with the brand and pay extra for the knowledge that they will be treated well.

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  60. Jon on December 11, 2011 at 11:00 AM

    When a company defrauds the customer, you need not regulation but laws that apply to everyone equally. Like, you cannot defraud. Simple, everyone understands it. This is called Rule of Law and Equality Before the Law, no one is given special permission not to follow the laws that govern everyone (like it is under the current system where there is no rule of law but chaotic anarchy).

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  61. Jon on December 11, 2011 at 11:11 AM

    The term monopoly has been bastardized to mean something different then what it originally meant. The originally meaning of monopoly is a government force to create an industry with special privileges. In a free market you don’t see this. You may only have one company offering a service but that doesn’t make it a monopoly since anyone can compete with said company. It is only when government steps in does it become a monopoly.

    This is the natural progression of licensing and regulations. The more you use aggression to make people stop doing things you don’t like will eventually make those you aggress against become your master as they realize they must use government force also.

    As for my religious beliefs, I do use them as a stepping stone but I also use reasoning and logic. If a principle is true then you should be able to use sound logic to validate it, even with religious beliefs, if the sound logic doesn’t work then you need to reject that which is false. I try to maintain a critical mind as best I can. I admit that I’m not perfect but I prefer to be a free spirit, so if I err I prefer to err on the side of freedom and liberty, as what is written in the Aesop Fable that I posted.

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  62. Cowboy on December 11, 2011 at 3:53 PM


    I think we are just going to have to disagree. You say:

    “In a free market you shouldn’t see quite so much concentration of wealth in a single sector, this is more typical of a highly regulated, licensed businesses where the barrier to entry is high, lowering competition and making the services less efficient and more costly.”

    I understand that there are a number of people who think this way, I just see no evidence or reasonable intuition for it.

    Could government ratings agencies collude? Of course they could, but it would be more difficult in that setting, and easier to control. There are of course no guarantees.

    Your definition of monopoly is quite unique. In a free market you do see this, particularly in industries that require substantial upfront capital. The nature of business John, is to eliminate competition. Businesses do not want to compete, and so if they can establish barriers to entry, to them it is always a worthy investment. As kindly as I can say this, you are just flat out wrong on that point. We simply disagree.

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  63. Jon on December 11, 2011 at 4:37 PM

    Yes, we do disagree. You haven’t provided any evidence for your ideas. Credit rating agencies: cartel by government. Medical care: Highly regulated, and licensed (read monopoly), very high cost as it becomes more and more regulated, highly subsidized. School costs, highly regulated, high cost, poorer performance as time goes by. Postal service, government backed monopoly, highly subsidized, high cost. GM, highly subsidized, highly regulated, poor quality, high cost. Electricity, highly regulated, high cost, highly subsidized. Need I go on? I don’t see how you cannot see this. It is extremely obvious. But if you can’t see it then there is nothing I can do for you.

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  64. Cowboy on December 11, 2011 at 6:38 PM


    I see those things, I just don’t the correlation’s you are making to regulation. This is where you are missing the point that these things exist on a continuum. You haven’t demonstrated how these regulations have led to the things you are claiming. Yes, business is regulated, but it also has a great deal of freedom. The Arthur Anderson example is not indicative of regulation run amok, but rather the people tend to act – regulated or not.

    So in reality, we agree that there are harmful regulations. We even agree that the volume of current regulation is damaging. Where we disagree is in your assertion that a completely unregulated market produces ideal results.

    You have provided even less I’m afraid, Jon, appealing only to what you call principle. It’s not that I have failed to provide evidence, but that you refuse to acknowledge the implications of the evidence I have provided. The reality is we have never really had an unregulated market comparable to scale of what you are advocating for the U.S. Therefore you are arguing from a highky uninformed position.

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  65. Jon on December 11, 2011 at 7:57 PM


    I would say your position is uninformed since you are saying a highly regulated field is a free market or even close to a free market. People act differently when there is they are forced by government to do things they otherwise wouldn’t. The incentives change under these conditions.

    Also, it seems that you have equated rule of law with regulations, regulations are targeted at specific industries/companies. Rule of law is a single law that applies to everyone. Like no stealing, it applies to everyone equally (except for the laws now days don’t do this). Or no defrauding a customer, this is a rule for everyone, there is no need to create this rule for each industry separately. These laws are OK, it’s the laws that you make for specific industries that it isn’t.

    As for the free market. You’ll have to read a book on it. I won’t try and argue it here in this short space. And not from a keynesian perspective, or other anti-free market perspective. The ideal one to read would probably be “Human Action” which is very in depth.

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  66. Cowboy on December 11, 2011 at 8:04 PM

    Very good Jon.

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  67. Jon on December 15, 2011 at 9:59 PM

    Came across this today and thought it would tie well into this conversation. From President McKay 1950:

    Next to the bestowal of life itself, the right to direct that life is God’s greatest gift to man. Among the immediate obligations and duties resting upon members of the Church today, and one of the most urgent and pressing for attention and action of all liberty loving people, is the preservation of individual liberty. Freedom of choice is more to be treasured than any possession earth can give. It is inherent in the spirit of man. It is a divine gift to every normal being. Whether born in abject poverty or shackled at birth by inherited riches, everyone has this most precious of all life’s endowments—the gift of free agency; man’s inherited and inalienable right.

    Free agency is the impelling source of the soul’s progress. It is the purpose of the Lord that man become like him. In order for man to achieve this it was necessary for the Creator first to make him free. “Personal liberty,” says Bulwer Lytton, “is the paramount essential to human dignity and human happiness.”
    (2) Preserve the right to work when and where we choose. No free man should be compelled to pay tribute in order to realize this God-given privilege. Read in the Doctrine and Covenants this statement:

    . . . it is not right that any man should be in bondage one to another (D&C 101:79).

    (3) Feel free to plan and to reap without the handicap of bureaucratic interference.

    (4) Devote our time, means, and life if necessary, to hold inviolate those laws which will secure to each individual the free exercise of conscience, the right and control of property, and the protection of life.

    See: http://scriptures.byu.edu/gettalk.php?ID=440&era=yes

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  68. Cowboy on December 16, 2011 at 10:45 AM


    Let’s then tie this into the discussion by introducing a recent issue. It would appear that BYU favors regulating students via the honor code. In order to attend, a student must adhere to a dress code, a curfew, dating guidelines, chastity, tithing, church attendance, etc. These activities are heavily “regulated”, to the point that BYU even has a regulatory bureaucracy, called the Honor Code Office.

    *Incidentally I’ve always seen the semantics of “Honor” in “honor code” to be a little 1984ish. “The Ministry of Love” was the agency that tortured its citizens in order to brainwash them into conformity*

    So, clearly the Church seems to believe in the need for regulating human behavior. Now granted, we’re not talking about markets anymore, but we are still talking about liberty.

    As a way to connect this then to the discussion of the post, we can ask:

    How do we balance freedom and the need for conformity?
    -How much freedom should we be willing to exchange for greater conformity.
    -How much conformity should we be willing to sacrifice for greater freedom?

    Your thoughts Jon.

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  69. Jon on December 16, 2011 at 11:11 AM

    The big difference is that the church is a voluntary organization. Government you have no choice about. So they are apples and oranges. If government says not to do something, in the extreme example, they can kill you if you don’t comply (the iron fist in the velvet glove). Whereas, if the church tells you to do something, you can say no and the worst they can do is expel you or excommunicate you.

    When you voluntarily contract to do something you are obliged to meet the contract or receive the consequences of breaking the contract (as outlined in the contract). You have no contract with the government. Even the ancient Israelites would covenant every 7 years to obey the societal norms and a case can be made for the Nephites also, just not as clear.

    Now what are my personal opinions on the matter? I agree with Joseph when he said “I teach them correct principles, and they govern themselves.” And with the scripture that says:

    And now, as the preaching of the word had a great tendency to lead the people to do that which was just — yea, it had had more powerful effect upon the minds of the people than the sword, or anything else, which had happened unto them—therefore Alma thought it was expedient that they should try the virtue of the word of God.

    So clearly the scriptures favor freedom and liberty. But, since it is a contract, the two parties are willing. As for myself I would not attend BYU because of all the rules. Some people don’t mind so many little rules. Personally, I appreciated the time in college to grow a beard and let my hear grow out, to not have a curfew, etc.

    If a person finds they desire lot’s of rules, then by all means, you have a place to go, if you don’t then, go somewhere else.

    In government I prefer very small local laws (that aren’t multiplied ad infinitum (sp)). I shouldn’t even care, to much, what the federal government is doing, because the shouldn’t affect my life hardly at all. Unfortunately they pervade even my local government, there is no escape.

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  70. Cowboy on December 16, 2011 at 12:37 PM

    I anticipated that you might say that. In practice I agree with you. No one forces you to go to BYU, so there are better solutions the problem than revolution. However, as a matter of philosophy, I think that defense lacks thorough consideration.

    First of all – can’t we just say the same thing about government. Implicitly we agree to a social contract, and if we don’t like it, can’t we move out of the country (at least in most cases)?

    Secondly – using BYU as an example, how much freedom do you have once you have begun your program? I mean, it’s not like changing programs is easily done. Furthermore, consider it in the case of the guy who started the Missionary pin-up calendar. He had completed his course work, and was yet denied a degree for producing his calendar. Admittedly it was in bad taste, but still he should have been free to do it if we are advocating a free society. Wouldn’t the withholding of an earned degree be an act of agression against the use of free choice?

    Thirdly – and probably most importantly, intent. The Church cannot exact broad force only because the Government prevents it from doing so. However, we do have examples of the Church’s philosophy on governance exemplified in the microcosm of BYU (I). Hypothetically is it reasonable to assume that if the Church became the Government, its management style would be similar to that of BYU, or would we argue that in such a case the Church would instead drop the honor code and promote greater freedom? It stands to reason that if they are going to exact religious based regulation in a free-market, then certainly they are going to be even more heavy towards regulation if there is no check against their power for doing so.

    A second example to this is the Church’s involvement in Prop 8. Agree with it or not, it was an effort by the Church to use the Government to regulate the practice of marriage. In a “free-society” there would be no purpose to a State position on the matter. Rather we would let individuals decide what marriage meant to them, and each person could act accordingly. For the Church to enlist Government enforcement is act towards regulation and away from liberty. Hence, the tradeoffs that I have been mentioning. Clearly, they believe that liberty must be restricted in this matter.

    Taking all of the above into consideration raises two points in mind. First, it brings us back to the topic of discussion, on how we determine normatively what the greater good(s) are/is, and how delineate the tradeoffs along a continuum. In other words, when does society have too much freedom. Friedman, arguing from a position of economics would say that only to the point that broad freedom creates conditions where “natural law”, as you call it, creates a non-liberty-friendly arrangment independent of government intervention. Hence his approval of anti-trust regulations.

    The second point it raises is whether an appeal to Mormon Church authorities as liberty advocates is justified. It is one thing to preach liberty and free-agency, and quite another to contribute to an enviroment that is upheld by these ideals.

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  71. Jon on December 16, 2011 at 4:41 PM

    1. As for the so-called “social contract” see comment #24.

    2. Freedom (or !=, if you prefer) chaotic anarchy. You are confusing what freedom means. You are free to make a contract with anyone you please. Once you break that contract natural law (God’s law as it is called in the BoM) dictates that you are bound to the punishments outlined in the contract unless the other party decides to give some leniency. I agree that I do not like the decisions the bureaucrats made and I would have hoped that it would have been overturned by the higher ups. This is just another reason why it would not be wise for some to attend BYU.

    What does the scripture say on the matter?

    We have learned by sad experience that it is the nature and disposition of almost all men, as soon as they get a little authority, as they suppose, they will immediately begin to exercise unrighteous dominion.

    Your example is a case in point.

    3. You propose that the church would be able to do the same as the government if there was no government (we should use the word the state, not government, since government is OK, it is only when it devolves to statism that it becomes bad, as outlined in the seminal piece “War is a Racket” by Smedley Butler)? Where is your proof?

    I think a more civilized society would exist. It wouldn’t be perfect but when one isn’t given a monopoly of force, as the state is, society, on the whole, should be more peaceful. As demonstrated by medieval Iceland and the not-so-wild west.

    I agree, that the church’s position on Prop 8 was wrong. It was based on fear and what did Christ tell us of fear? It reminded me of the circumstances leading up to the Iraqi war, also based on fear. Early christians, would have been repulsed by the idea that the stat is involved with marriage to begin with.

    I do not believe Mormon church authorities to be perfect, but they do have many instances where they truly understand liberty and freedom and say it in such a way that makes sense. Really, if a good argument is said correctly then it doesn’t matter the source. But when people respect the source’s opinion, many times that gets people to believe something they otherwise wouldn’t consider.

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  72. Jon on December 16, 2011 at 4:42 PM


    It’s nice to have a blogversation that is more of a discussion where both sides respect the opinions of the others. In the past that hasn’t happened and it can be quite frustrating.

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  73. Cowboy on December 17, 2011 at 3:54 PM


    You are not free to create any kind of contract you would like. But that is not the point. The point is, that clearly the Church believes in some level of regulation. That regulate lifestyle and culture at BYU, and they tried to regulate marriage. Those are my two evidences. It stands to reason that they would be more strict in my hypothetical, rather than less. The reasoning is simple, nothing is stopping them from being less aggressive now, but there are forces that prevent them from being more aggressive. They have taken actions that show they favor control, so it would make sense that they would argue for more regulation not less.

    I agree that a comment that stands on it’s own does not depend on the authority of those state it. However, McKay’s comment is not self-evident. I happen to agree with the overall sentiment behind it, but perhaps not all of the particulars. However, I am just showing that for the sake of this example the Church seems to favor at least some level of regulation, making your inference about McKay’s position somewhat debatable.

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  74. Cowboy on December 17, 2011 at 3:55 PM

    also P.S.

    I also enjoy the conversation in spite of our differences.

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  75. Jon on December 18, 2011 at 12:09 AM

    Yes, and that is why it is important that people understand what freedom and liberty are (two separate things). If people have a mind of a free people then they won’t let themselves become enslaved but will reject that which is improper. Unfortunately, many in the church, have closed their minds and let the church become more controlling and then call it good. JS called this a darkening of the mind and a people that are but enslaved (when they do what they are told without questioning).

    The church has followed the path of most typical businesses, i.e., become more bureaucratic and rules oriented. In a free market you have competition which makes these bureaucratic organizations disappear since they are not agile enough for the changing times.

    What does God do to stop His church from this natural phenomena? He calls outsiders to call the church members to repentance. He creates splinter groups of people that will take His word and try to live it. I’m sure he does other things too.

    The church now days compared to the church during McKay compared to the church during BY compared to the church during JS are all different. None are perfect. Why? Because they are run by men and men are imperfect. Should we expect perfection? No. Should we expect perfection in a free market? No.

    Let’s look at what regulations do. We take an idea by the few in power and use that idea to create more “fairness” on a group of people using violence and aggression. Do we expect that group to stand by without doing anything? Apparently many people do. But these groups that are being persecuted in the name of “fairness” (fairness would imply that everyone is treated the same, regulations do not do this but instead extract a very specific group) fight back. So the people that we would make are slaves become our masters and the people that we would like to lift up (the poor, middle class, etc.) become the slaves. This is the natural order of things. That is why it is better to not use aggression to begin with. For violence begets violence. Christ showed us the way. It is better to use love and persuasion, even if we are persecuted until the fourth time (D&C 98).

    Will a free society be perfect? No. Will it be better than the alternative? Yes. For when man has liberty he must pay for his own sins (Mosiah 29). If he pays for his own sins then he has a strong incentive to do that which is right.

    People can contract whatever they wish as long as they have comprehension of that which they contract to do and are not forced into the contract. A free people, in any society, requires a people that are just and fair. So, in a free society, people wouldn’t make these bad contracts, like selling themselves into slavery.

    In order to achieve freedom and liberty people must first educate themselves then educate others around them what these freedoms and liberties are. When they do understand these things then they can start living the principles right away and take responsibility for themselves instead of blaming their actions on their leaders.

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  76. Cowboy on December 18, 2011 at 12:47 AM


    We agree more than this discussion would seem to indicate. Again, to rehash the point, we disagree only on a matter of degree. I think your free-market salvation perspective is a little more ideological than empirical. I agree that ultimately regulations that are intended to make things more “fair” do more harm than good, so long as by “fair” we mean “equal”. I don’t have faith that the free-market balances as well as you suggest, which is the problem I have with a completely unregulated market. We can point to examples of Monopoly, to mention a largely undisputed consequence. This has to be controlled or it will ultimately take control. Still, all of this notwithstanding, we can show that competition in markets creates conditions where society seems to thrive at it’s best. This is why I support Competitive Capitalism. The goal is to create conditions that foster competition. It is the competition that works best for society, and competition requires a significant amount of freedom. However, the challenge in competition is to eventually cede the competition to some kind of a winner. Ever play Monopoly? Sort of a crude example, but eventually somebody walks away with all of the cash. That is the final state which completely unregulated markets tend towards. Regulations should be used to avoid that.

    I can almost agree with your last paragraph, except that it doesn’t seem to work that way in practice. If society were on the average, more interested in education about these ideals, the less need we would have for regulation. However, this does not seem to be the tendency for society. So, while there may be some theoretical truth to that (I’m guessing), it doesn’t offer practical solutions for policy making in the here and now.

    I’m not at all sure what your position on the Church is. You seem to be acknowledging that the current Church is in some state of apostasy? I’m I getting that right?

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  77. Jon on December 18, 2011 at 8:41 PM

    Yes, I see that you aren’t for what we have now, but when you look at policy and laws that are created you have to look at the long term consequences and the long term always leads to monopolies, higher cost, and lower quality. History has proven this over and over. Yes, a complete free market (based on natural law) can and will have market failures but the alternative is worse. Just read Murray Rothbard’s “Conceived in Liberty Volume 1″, it is chalk full of government backed monopolies and a people fighting for freedom from the government. Even Standard Oil back in the 1800s, although it was pseudo-cartel it was never able to raise its prices because other people would lower theirs or get in the business once the price got high enough. That’s my main point.

    Really we haven’t had a true free market but the closer we get to one the better. Even though we have never had it before we shouldn’t worry about actually having the freedom one day. When people were trying to end slavery society didn’t know what to do, they thought it impossible. But now that it is ended we can’t imagine going back. I think this is the last slavery of mankind, the state and all its regulations and other ills.

    It’s the pride cycle. It also doesn’t help that people choose to have their children raised up by the state. One requisite that would help the march to freedom is for people to remove their children from government indoctrination camps, (AKA public schools), strong language but if you ever stop to think about it it isn’t far from the truth.

    The Israelites chose to go down the path of a king because of the wickedness of the people, hoping for better, but instead they got worse. I would rather err on the side of freedom than tyranny.

    My opinion about the modern day church is nuanced and ever changing as I learn more. I do think there are some troubling things that occur in the church and some troubling ideas that are taught. I also recognize that people are human and that they will always make mistakes no matter what positions they hold. Is the church apostate? Maybe partially. Some would argue entirely. I don’t think it is black and white. I do think that the church still produces much good fruit.

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  78. Cowboy on December 19, 2011 at 10:51 AM

    I see-

    I am very familiar with Dr. Rothbard. You seem to lean heavily towards the Austrian school, by referernce to Mises and Rothbard. I don’t wholly reject the austrian school, however the theories behind the austrian school rely on praxeology, but to my mind provide little helpful solution for understanding human behavior. As a tool for critiquing the mathmatization of neo-classical economics, I find the praxeological approach very instructive. Still, in my observation it compensates by offering almost an “economic theology” of “faith in the market” that doesn’t seem to pan out as well as the “believers” seem to suggest. They seem to recognize that human action is variable and inconstant, yet that it miraculously balances? Doesn’t this imply constancy?

    Anyway Jon, I am not necessarilly trying to call the discussion, but I think we have both spent our empirical chips at this point and are now arguing ideology. Not that it isn’t useful, but for the sake of the post I think it is important to recognize the normative vs positive angle of our arguments. Perhaps rather than pretending that we can observe what “is”, we ought to acknowledge that we are really saying what “ought to be”.

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  79. Jon on December 19, 2011 at 12:49 PM

    Yes, I like the Austrian school the most since they are consistent and are logical. I think other schools of economics are instructive but not nearly as much as the Austrian (some seem to just come up with solutions to what is politically expedient, AKA, whatever is popular at the moment).

    You have yet to give me an example of a free market failure. The only examples you have given are highly regulated industries.

    I don’t think the Austrian school says it would be a perfect world with a free market, neither do I. All I am saying is that it is much, much better than the alternative, from logic and empirical evidence (which I recognize that everyone likes to bastardize to their own world views).

    If you want to call it quits that’s fine. Nice discussion.

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  80. Cowboy on December 19, 2011 at 2:11 PM

    “You have yet to give me an example of a free market failure. The only examples you have given are highly regulated industries.”

    This is what I am talking about. I have pointed to examples, such as Arthur Andersen, and you disqualify it as an example because technically the industry is regulated. You don’t point to how regulations affected the specific activities, or even how the specific activities are regulated, just that regulations are somewhere present. If that is the approach, then unfortunately you can and will dismiss any example I provide because every business has some regulation in it.

    In reality there have never been completely free markets, particularly in places where there is any kind of effective government, where effective government = anything more than anarchy. So, neither of us can point empirically to any examples of success or failure if these are the parameters. To this end we are left with theory, logic, ideology, and/or intuition. Praxeology, as I have stated, seems to dismiss the formal mathmatical logic (and I’ll even admit rightfully so regarding individual behavior), and trades it with intuition. So what is the basis for true “logic”? While I get the intuition, I don’t get how anyone can conclude that it is invariant. Now, I do think that an argument for variation effects can be made here, but that is the strongest argument, and says nothing to invalidate small calculated changes/regulations.

    So, it’s not necessarilly that I want to call it quits, it’s just that I am not sure how to further the discussion without introducing a new dimension to the conversation. At least for my sake, I am now restating past arguments.

    So, in light of the argument that there is no valid examples that we can study of completely free-markets,ie, zero government intervention, how do we decide whether such a thing is truly “better”? What do we mean by “better”?

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  81. Jon on December 19, 2011 at 5:36 PM

    You have pointed to examples of free market failures like Arthur Andersen? This is a highly regulated field, it’s not technically regulated, it is HIGHLY regulated, this is what happens when you get highly regulated industries – political favors, misdeeds and all sorts of shenanigans. I don’t know how you can even think that it’s a good example. If anything it shows how regulation doesn’t work and how the market works better since soon after everything came out the companies paid dearly for their misdeeds. Regulations create the atmosphere for corruption. A free market creates an atmosphere for honesty, since you’ll pay with money if you are not honest. Regulations, you don’t get touched but rarely.

    Like I said before. I need not provide an example. Did people in the past need to show an example that slaves are needed in order to end slavery? No. Logic and reasoning was enough to show that slavery was bad. Likewise, today, logic and reasoning should be enough to show that that we do not need to be enslaved by the supposed saviors called government regulators that are as every bit corruptible as everyone else, and the regulators are prosecuted even less for their misdeeds than the regulated. How can you expect bureaucrats to behave well if their is no consequence for their actions?

    I can point empirically to free market being better, although it is not necessary. Look up which countries have a freer market compared to those that don’t. Which ones do better in the long run? The freer markets with rule of law.

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  82. Cowboy on December 19, 2011 at 9:14 PM


    I am now satisfied saying that this conversation has run it’s course. You are refusing to address my points, so I don’t see that conversation is ensuing at this point. You are shying away from the Arthur Andersen case either because you are unfamiliar with it, or you don’t want to admit that it poses a threat against your worldview. You have consistently dismissed it under completely generic grounds. I’m not sure what “political favors” are relevant to the example, so I’m at a complete loss as how to respond. You argue as though your position were so obvious in regards to Arthur Andersen, and yet you have yet to articulate a single meaningful sentence as to how. You just pound your fist insisting that markets work and regulations don’t. Is this conversation in your mind? As for your argument about regulations not costing money, well I wonder what you do for a living? I work with businesses that are struggling to keep up with the costs of regulation. If anything, and this would be a point for your argument, regulations can create conditions that show favoritism to certain businesses by making the costs of doing business to high for those trying to enter the market. It favors only those that can bear the cost, but it doesn’t eliminate the costs….it raises them!

    Corruption occurs wherever corrupt people meet, and neither regulation or free-market have this market cornered.

    Now, as your slavery argument, this is where things are getting absurd. I mean, really Jon, do you think that you are a slave? I’m willing to bet that most people who have been slaves would disagree.

    As for logic and reasoning, well your reasoning is entirely borrowed from the Austrian school. I have pointed out the problems I have with that school of thought, and you haven’t responded…so what more can we say. As for logic, well again, you mention you are from the Austrian School which is pretty much at odds with the formal mathmatical logic of economics, so what “logic” are you referring to. I would guess that based on your comments you are referring to your intuition, and are calling that logic. Logic and reason will do when evidence isn’t available, but intuition is generally grasping at straw.

    You speak so disdainfully against regulators, but uphold rule of law as though it is not part and parcel with government. I don’t get this. Corruption is just as possible with law enforcement as it is with market enforcement, so what is the difference. By that rationale it sounds as though you are advocating anarchy.

    “As for your final paragraph- you state:
    I can point empirically to free market being better, although it is not necessary. Look up which countries have a freer market compared to those that don’t. Which ones do better in the long run? The freer markets with rule of law.”

    I did look them up, and in fact I posted links to them in comment #09. They aren’t free-markets by any stretch. The hip word these days is “mixed economies”. In any case, seeing as how you argue that any of my examples aren’t qualified (even though I was citing examples from the “free-est” country with the longest history as a free country, America) because of US market regulation, I can likewise dismiss any example outside of the US on similar grounds.

    Like I said, we actually agree more than this discussion suggests. However, I get the sense now that we are just arguing to find out who wins. I’ve said all I think I am willing to say on this issue. Good luck Jon.

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  83. Jon on December 19, 2011 at 11:33 PM

    Yes, it does seem the conversation is devolving. I guess it was never going anywhere.

    Arthur Andersen. Yes, I’m not familiar with the particulars. Neither do I need to be. It is completely obvious that it is a highly regulated field (along with the energy field). I don’t see how you don’t see this. You haven’t offered anything up in any particulars yourself on the case so there is nothing for me to refute but in generalities. You are being very general yourself, so I don’t know why you are pointing fingers. I think I have shown my point for what it matters.

    I don’t know what you are talking about me saying that regulations don’t cost money. They cost dearly to everyone even for the favored companies that keep out competition because of the regulations, this is called monopolies by the state.

    Once again government is different from the state. I know I use the terms interchangeably, I shouldn’t. Rule of law goes hand in hand with governance, not with the state. The state bastardizes rule of law, one of the ways it does this is through regulations which is contrary to rule of law. There is nothing wrong with law that says you can’t defraud applied to everyone equally. There is something wrong when you say that a company can’t conduct business because you believe it is too dangerous, if the customers are willing to take the risk it is the freedom and liberty of the customers to contract. When you take this away there is no more rule of law, but enslavement by the state.

    I do not favor chaotic anarchy, I do favor voluntaryism though. You didn’t read my comment #24 did you?

    As for the links in #9, you said it was against the rules to make links without summarizing them. My link to #24 was my own words. Let’s see a summary.

    Just FYI, America isn’t exactly a free nation anymore. People don’t care to protect the undesirables. People don’t want to protect people smoking pot in their homes. Cops can are militarized and can kill without due process with juries letting them off. Sure not all are let off, but enough are that saying we are free is a misstatement. We maybe not be Germany 1940 but we are headed that way. Congress enacts laws that even Hitler never codified into law. A man can be accused of misdeeds have his wealth stolen from him so he can’t defend himself and be thrown in the slammer. A woman can be thrown in prison for making misstatements to the police. The cops can lie and cheat and beat people without consequence. How is this rule of law and equality before the law? This is a ruling class and a people in servitude. Just because it’s done with an iron fist in a velvet glove doesn’t make it any better. A man doesn’t need to be in chains to be a slave. Christ said a it is not right for man to rule over man. I am not free to not support the military. Neither am I free not to support companies that do poor business. I have to pay for them. Through the tax system, I work for them. Sure I get to keep some of my money, just as the serf got to keep some of his crops, he wasn’t free though to create his own destiny, and to a certain extent neither am I. All I ask for is true liberty and freedom. I don’t see why that is so much to ask for. But when people support chaos through regulations and a ruling class, all they do is enslave their brethren. I hope that is enough examples for you.

    Logic need not be mathematics. Have you never taken a logic class? Look up the trivium sometime that teaches a man to think for oneself.

    I do think we agree on quite a bit. I don’t mind the state that much as long as it is small and local. I support the constitution to a certain extent with it’s original meanings. Of the bill of rights there is only one part that still exists (no military can be in your home), but that is it. If the bill of rights is the minimum and only one part still exists to “protect us” what does that say? People are asleep. Neither do they understand what rule of law is. It is natural for a man to want to be free to live his own life without interference from government, as long as he does not aggress against his neighbor. Why is it OK for the state to do that? Government is an extension of an individual and it cannot take powers that an individual cannot do himself. Herein lies what government can and cannot do.

    It would be nice to talk in person. It seems the internet is not a great place for it. Books are better. But it seems there are personalities that cannot agree on these things. I think most people want good for all, but some don’t understand that when they are trying to do good to some they are hurting others in the process and everyone is worse off because of it. As Ernest Hancock says. There are two types of people, those who wished to be left alone and those who won’t leave them alone.

    I’ll do my best not to reply to anymore posts, if you wish to have the last word. I don’t know how to be any clearer. I’m not the best with words.

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  84. Cowboy on December 20, 2011 at 7:29 AM

    I think we’ll let things stand with that…until next time…(Ominous music)…

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