RE: Paying for Schools (was: SOCIETY: Re: The privatization ofpub lic security)

From: Dickey, Michael F (
Date: Mon Aug 27 2001 - 11:09:27 MDT

At 11:22 AM 24/08/2001 -0400, Dickey, Michael F wrote:
>Indeed, I entirely agree, companies do need to be regulated. But the do
>need to be regulated by the government. No free market economist will tell
>you that a 'free for all' is what we are looking for. Unions and private
>watch dog groups would be much more influential and usefull in a free

"Again, I mention that this might work if we were motivated by economics
alone, but it isn't so. People develop allegiances and cartels and
anticompetitive practices like price fixing. They use marketing tactics to
push shoddy merchandise. They propagate false information using advertising
and misleading labels. Companies don't work very well to regulate each
other... that is why we have government-funded investigations into illegal
operating practices of some companies."

But those things never last. Even when price fixing, say four companies get
together and agree to charge $5 for thier product, which cost $1 to
manufacture and distribute, they now share the market equally. It will
always be in one of the companies best interest to undercutt the others. If
those four companies each shared 25% of the market then it would be in one
of the companies best interest to now charge $4 for thier product since they
may take a far greater percentage of the market. If the market is not
equally shared by all companies, then it is not in the companies that are
not recieving an equal share's best interest to continue with that
agreement. Also, other companies who might not be making a competing
product would then decide to since they could undercutt all the price fixing
competitors and take the whole market. In this way price fixing never
lasts, and it can never go past a certain point in price anway. If all the
companies who sell milk decided to charge $4 a gallon, would you still drink
it? $8? $32? There is always a limit that anyone will pay for a product,
even in a monopoly the price is kept in check.

And I agree that companies market crappy products and shoddy services, but
these are all short term fluctuations in a long term scale. Some products
may gain market dominence and be less effecient for a period of time, but
the general trend always increases the reliability of the product and the
quality of the services provided. Show me one product that is manufactured
today that is inferior to an identical product manufactured in 1950 that
cost the same amount in median average man-hours worked.

"I sorely doubt that trade unions would have much power in a free market...
but that is just my opinion."

And for what reason do you think that would be the case? There is no reason
why employees could not choose to unionize and demand certain working
conditions. It is also reasonable that self interested private regualtory
groups would ensure that working conditions meet a minimum. In other words,
instead of a government label from OSHA a private group will certify that
company follows employee treatment standards. If they do not follow those
standards, they do not get certification from that private regulatory
company (or many, competing ones) in which case an employee will say 'Are
you certified by such and such?' This will not require a great increase in
awarenss or intelligence by the consumer, as it would be in the regulatory
companies best interest to make the average potential employee aware of such
standards. Perhaps you can point out a fallacy in this logic?

"As I have stressed time and time again. I am not against competitive
capitalism. I am just wary of removing the most powerful control on
corporate excess: government. "

I do see that you are not philosophically opposed to it, nor am I a
philosophical only supporter of it. My background is actually in
philosophical skepticism, that is people who apply the methodology of
science to the rest of the world, that is, empirical edification and peer
review, etc. etc. The evidence suggests that if markets were open and
companies were allowed to compete, everyone, even the poor, would benefit.
If evidence arises to suggest otherwise, I would abandon that belief. I
dont think the goverment is the most powerfull control of corporate excess,
I think the demand provided by the consumer is. If people dont want a
product, they dont want it. I really have no desire to get a muffler
extension to make it sound like my muffler has a hole in it, and no amount
of advertising will convince me that I do.

"I have no particular love of government
either, being very conscious of how that power has been misused in the past
too. All I am saying is that we must use the practical tools we have to
limit the dangers of extreme power."

I agree, but you have yet to show that dangers will arise from allowing
those markets to be open.

>Already companies rate
>other products, like Consumer Reports, other companies like United
>Labratoris test and rate products. Companies and services like this would
>have much larger and powerfull roles.

"These sorts of things have shown up in some small way in the recent past
and that is encouraging, but so far the bulk seem to be non-profit,
generally government-supported."

Exactly, what place does a competing private regulatory company have in an
environment where the government already regulates everything, albiet very
expensively and innefiently.

> >To remove feedback leads rapidly to things spiralling out of control, as
>have seen so many times
> >in the past.
>Which supports my suspicion that you mis-understand what exactly a free
>market entails. It is not free reign for companies to do whatever they
>want. They will be regulated by how much a consumer is willing to pay and
>what that consumer wants in a product. These are the best forms of
>feedback, instead of a government 'committee' trying to figure out what it
>thinks the best thing for everyone else is, instead of letting the people
>decide for themselves.

Have you heard of the terms "negative feedback" and "positive feedback"? I
mean in the engineering sense. Negative feedback is a stabilising system
that corrects a change by using some of the output as a retarding input.
Positive feedback is like the howlround when a microphone squeals."

Yes, I am very familiar with those terms, my background is in physics,
science, philosophy of science, evolutionary biology (of which it is a
frequent themse, in, for example, the positive feedback effect that sexual
selection had on the ... peacocks tail for example)

"I can't see consumers being too much of a corrective force on companies
when we have the proven power of positive feedback in the form of marketing
and related strategies. "

Again, people will only pay a certain price for certain items, and no more.
This is why ketchup does not cost $100 per bottle. Nobody would pay it,
even if all the ketchup companies decided to price fix at that, people would
switch to a different condoment. If that was price fixed as well, they
would switch to nothing. In the end, no amount of artifical impositiong of
demand, which is a valid part of capitalism, will convince the average
consumer to work 40 man-hours to pay for a bottle of ketchup.

"Yes, there is some corrective power in the hands of
the consumer, but nothing like the forces that cause corporations to merge
into more and more powerful monolithic corporations. If we throw away
government, our only really effective tool in breaking up dangerously large
monopolies, then we are just on the path to feudalism -- that will not be
the way to the free market that you want."

For that to happen a corporation would have to have total and absolute
control over a market. That can not happen in a free market economy because
you can not force people to pay something for something that they do not
want. Unless, of course, you call it a tax and market it under a social
program...Can you elaborate a little more on how a free market economy could
lead to fuedilism, perhaps I am just not following the logic?

"You see the paradox here? We need a government to ensure that you get your
free market. Left to themselves corporations divide up the field among
themselves and eliminate competition."

and how exactly do they eliminate the compeition? By selling thier product
for less, in which case the competitor will then either sell thier product
for less, make it better for the same price, or go out of business. Should
they succeed in eliminating the competition and charging whatever they want
for a product, they will still be limited by A) a consumer not wanting to
pay that much for said product and B) creating an economic incentive for a
competitively sized multi national corporation to enter the market. Either
way, they are not truly free to charge whatever they want. Even for a
necessity, like Oil, if the oil producing nations charged whatever the
wanted for oil and we had no domestic reserves (for example) then at some
dollar value per barrel, it would be economically beneficial for us to
sysnthesize fuel right out of the hydrogen and carbon in the air using
nuclear reactors as power sources.

> >Capitalism works very well if you are rich. If you are not then you need
> >other means. The biggest mistake rich classes make is in supposing that
> >they don't benefit from the poor improving their lot.
>Sounds like you have some more misconceptions about free marketers...

"Actually, it seems that I understand it a bit better than you do. "

I suspect this may not be the case, as you cite 'monopolies' and 'price
fixing' as reasons why it will not work, neither of which are valid.

"You are
oversimplifying what is a complex web of motivations. People are motivated
by much more than money."

They certainly are, but when those motivations are introduced in a company
in a competing market place, they will be weeded out by companies that have
focused thier motivation on money, as thier prices will necssarily be higher
or thier products of lower quality.

" Worse, it can easily become a way of ensuring that
class barriers remain."

I disagree with this, as even the lowest economic class has more
conveniences and longer lives today then at any time in history, and this is
directly because large corporations are competing against other while trying
to maximize profits. This is why food is cheap and plentiful, and why the
global economic median has risen contiually througout history.

" The tricky task is to use the better parts of
capitalism while suppressing the worst."

Indeed, and if you present evidence to me that suggests a free market could
use a little bit of regulation and everyone will be better off while not
violiting the rights of any individual, I will change my perspective...

"In most of your reply you made the same mistake that many people make when
I express anything less than unqualified enthusiasm for capitalism. There
are more positions than totally for capitalism and totally against
capitalism. It reminds me of religion."

And you make the common mistake of using invalid objections to it. I do not
profess a false dichotomy on this issue, as I mentioned above, show me some
evidence that a market that is a *little bit* regulated is better than a non
regulated one and I will switch my opinion.


Michael D

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