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March 08, 2003

Lance on Regulation

I just cranked out a mega-post over at PeoplesForum.com, and it's policy-related, and pretty good I think, so I'm posting it here.

My entry into the discussion starts here, a few posts before my mega-message. You can read there for context. The folks in that thread had been discussing energy regulation, mostly in California. It sprang from a discussion about recalling Gray Davis, and his energy "deregulation" scheme.

In my mega-post, I make my general case against regulation, and monopoly "utilities". It starts with an italicized excerpt from "osage"'s reply to my first inquiry. I've edited it a bit so it's a little more essay-like. Here you go:

osage,

Thanks for your answer.

There simply isn't enough space in/above/under the public streets to allow for multiple distribution systems for the same service.

That may have been the case back in the day, but I would argue it's no longer the case, as you sort of acknowledged. Electricity can be gotten through solar or wind equipment, or via a generator. Advances in technology have made it so that small power stations could serve small areas, thus eliminating the need for much of the distribution infrastructure we use today. Gas is readily available in independent containers which can be filled up by trucks, effectively eliminating the need for in-ground gas lines. There is a growing array of options for phone service which don't involve traditional phone line distribution-- or any lines at all. Water is also transportable independent of infrastructure, perhaps the least practically of all so far, but it is feasible.

In each of these cases, the monopoly/utility framework has impeded (and continues to impede) the advancement of the new, competing methodologies-- at the same time instilling a dependency in the utility users, which further impedes the ability of new (or old) innovative technologies to take hold.

I submit the same thing would have taken place had our predecessors decided to treat food and clothing in the same way they've treated utilities. Where would rayon and other synthetics have fit in if the cotton industry had been granted monopoly control over the distribution channels and technologies? Presumably, less "essential" fabrics like silk and mohair and such would have been relegated to being second-class providers, using the distribution channels owned by the real "utilities"-- similiar to the dilemma faced by modern-day telephone providers and others who seek to compete now that they are allowed. They "compete" in a tightly restricted atmosphere over which they have almost no control (other than buying/controlling politicians, which is a double-edged sword, and in which they are still second in resources to the original resident provider).

In all the analyses I've seen, so-called "deregulation" of utilities would be more accurately described as re-regulation-- just a political-corporate shell game, a deal made to save face and keep the public calm, so that the politicians will get re-elected and the most politically powerful corporations will keep making the green. Any real benefit to consumers or the market is generally in spite of re-regulation, not due to it.

Meanwhile, there sure is a huge variety and supply of food readily available, eh? Even moreso with clothing. Coincidentally (or not), the clothing industry is far less regulated than the food industry. The last essential, shelter (aka housing) is almost as highly regulated as the utility industries, and the result is similar -- less choice, less variety, less innovation, higher costs, more dependence on the infrastructure.

on the other hand, look at two of the (as of yet) least-regulated industries, computers and the Internet. Innovation, choice, variety, independence, and low prices.

Look at Ebay for a hypothetical. As Ebay (and Internet auctioning in general) becomes a more essential part of the economy, the pressure will mount to regulate that industry. The probable consequences are easy to predict. Less sellers would be judged "qualified" (there would probably be mandatory licensing or certfication), so there would be less competition-- i.e., less choice, less variety, less quality, higher prices. Less places would qualify as approved "auction houses", and so there would be less competition on the macro level as well, with the resultant inevitable effect on that market. Those places that did qualify, and those sellers that were licensed, would have to spend significant resources understanding and complying with regulations, and would function with less choice and flexibility in their internal operations. The regulations would also impact the industries those folks do business with in a similar fashion-- restricting choice, flexibility and innovation, and driving up costs.

I understand the desire to control massive companies and industries, I just think that regulation as we know it is a very poor way to do so, with harmful effects that are incalculably vast. The wedding of industry and government can be found at the root of many of our country's (and our society's) problems, from overconsumption to environmental degradation to union busting to health care, and so on and so on. In almost all of those cases, the marriage took place as an effort to regulate and control so-called essential industries or resources, or just to generally protect the economy, to ensure the safe and sure provision of goods and services. In reality, regulation tends to end up serving corporations and the economy to the detriment of consumers.

Meanwhile, much more powerful mechanisms for control and consumer/employee empowerment are available in the free market, but they are hobbled by regulation, while at the same time the majority of the energy and resources devoted to control and empowerment are directed toward tinkering with the regulatory model. Consumers and workers get less and less powerful and more apathetic and lazy about being informed and proactive actors in the economy.

If all the people energy devoted to urging the government to do this or that to companies was devoted to boycotts, big industry would get cleaned up quick-like. And if all the energy devoted to protecting the environment was devoted to pollution lawsuits (which can't currently happen because pollution is "regulated", i.e. allowed, by legislation and the EPA), it would accelerate environmental improvement exponentially.

I share most of the broad, positive goals of the Green Party, but I think that further reliance on government management to control the provision of goods and services is unlikely to result in anything but the gradual strangling of the economy, and a continued lessening of consumer and employee power. Direct interaction between customer or employee and business is more effective, and much more healthy for society and the economy.

I can almost guarantee that if government had never gotten involved in the fuel, energy, and transportation industries, we would be infinitely better off right now. It would be a whole different world -- a much better one -- and most of what we consider negative about those industries would be a non-issue by now. I shudder (in a positive way) to think of what the free market could have come up with as solutions for us if it had been allowed.

Instead -- oil. Oil oil oil oil and highways. Since the late 1800's -- the first dawn of modern regulation.

Posted by Lance Brown at March 8, 2003 02:24 AM | TrackBack
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