Regulation Can Increase Freedom

A bit of straw that’s been blowing about ever since Obama took office is the idea that government regulation must inevitably lead to a decrease of personal freedoms.  While one can almost understand the logic behind this, it’s so patently, self-evidently untrue that it’s hard to imagine anyone actually bandying about the argument in good faith.  The truth is that government regulation may decrease options, but often actually increases them.  I’ll make up some fanciful examples so that I don’t tread on anyone’s toes, and then I’ll go ahead and tread on their toes anyway.

In the most basic cases, regulation decreases freedom.  For instance, if the government says that all cars must be blue, you lose a bunch of car color options.  Of course, most often, the option they’re taking away isn’t one you’d want anyway, and you’d probably be glad that it was removed, especially if you weren’t aware of the downsides of the options.  For instance, if you had ten drinks to choose from, you’d have reason to be happy if the government swooped in and took away the one that was poison, particularly if you weren’t aware that one of them was poison.

Regulation of this sort always decreases freedom and options, but most people wouldn’t say that’s always bad, since the options we’re losing are things like the freedom to own a stroller that amputates your child’s fingers.  It can be misapplied or overextended, but just about everyone would agree that the government should be able to ban things that are insanely dangerous, especially if they’re being misleadingly marketed, such as the 19th-century “soothing syrups” for babies, which contained morphine or other opiates.  From there, it’s just a question of where exactly to draw the line.

The former type of regulation, however necessary, is a restriction of options, but there is another type of regulation that actually increases the options available to the average American.  That’s the regulation of businesses and corporations.  It’s a simple economic fact that, while providing consumers with options may be good business, eliminating options so that consumers are forced to use your product or service is even better business.  No example is better than the old practice of paying workers in scrip only redeemable at the company store.  The store can then charge whatever prices it wants because the employee’s money is literally worthless anywhere else.  (If only it were an old practice.  Wal-Mart was doing it in Mexico two years ago.)

In these cases, when the government steps in, people get more options.  Consider trust-busting.  It’s highly lucrative for companies to divvy up locations or product lines so that one person in one area only has one choice of gas station, cell phone service provider, or whatever it may be, because that one provider can charge any price for any quality and the customer must accept it or do without.  When the government forces the companies to break up and compete, the customer gains more options–and better options too, because each business must lower prices and improve quality so that customers will choose it over the competitor.

It’s misleading that the above state, where customers benefit through businesses’ competition, is referred to as the “free market,” implying that it’s the natural state that the market will return to.  In reality, once established, noncompetitive situations are incredibly unlikely to break up on their own.  The trusts of the 19th century had a solid plan for keeping their monopolies:  They saved up part of their exorbitant profits in a war chest.  When a new competitor attempted to enter their business, they would instigate a price war, using the funds from the war chest to drop prices precipitously until the competitor was forced to sell out to them or go bankrupt.  Competition eliminated, the prices would get jacked back up and the war chest would be refilled.  In order to break into the market, a competitor would have to literally have as much money as Rockefeller or Carnegie so as to win the price war.  Government interference is necessary to return the market to its “free” state.  Hence, regulation of corporations increases personal freedoms.

Of course regulation of corporations decreases the freedom of the corporation, but give me a break.  Corporations should not be treated as people.  The people in the corporation benefit from their increased freedom as consumers, just the same as everyone else.

Articles like this are a bit moot, since the sort of people who yell about government taking away their freedoms are not generally article-readers.  Nevertheless, “regulation decreases options” is becoming a more and more commonly accepted idea, and anything that is commonly believed and false deserves a proper refutation.

Here’s a nice rant with some more concrete examples (and slightly colorful language).

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Picture from Wikipedia.

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1 Comment

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One response to “Regulation Can Increase Freedom

  1. Mom S

    Wow! Those Olga Coal Company scrip coins bring back memories of “October Sky” and the awful treatment of coal miners in our country. Getting rid of company stores was a step in the right direction.

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