Thursday, September 24, 2009

RE: The Free Market Paradox

This is comment I tried to make on the story linked in the title, but for some reason could not submit. Some day I'll make my response more coherent, but I'm out of time right now.


What Would John Wayne Do?

The best way to avoid mult-year contracts is to NOT SIGN MULTI-YEAR CONTRACTS.

Lets say you were able to make multi-year phone contracts illegal. If I were a cell provider, the first thing I would do would be to get rid of my long-term contracts, and stop subsidizing my handsets. In fact, I'd probably raise the price of my handsets to include my early termination fees if I have a cost associated with you leaving early. Now, to remain competitive, I'll set up a financing company that will knock your cash outlay down to an amount similar to my competition and make the whole process very easy. You can now leave whenever you want.

You can regulate and regulate and in the end, you're just paying for non-producing government employees. Contrary to what you say about not liking government intervention, I think you DO like the idea of government sticking their nose in. You want gov't to enforce what you think is a correction to a problem when every customer that signs one of those long-term contracts is testifying that the services included are more valuable to them than the loss of freedom - and really it's just money. You can always leave one of those contracts, you just incur a fee.

I'm not sure what you mean by private industry not regulating itself. Private industry doesn't have to power to write or enforce laws against it's participants. However, there are two things that we have in abundance that serves a similar role, Standards bodies and bankruptcy. We have the AMA, W3C, FASB, State Bar Associations, etc. If a company does not provide a good or service that is more valuable to its customers than the price they charge, they will not be able to cover expenses and will eventually go away.

Gov't artificial intervention with low interest loans, tax breaks, grants, etc. without getting a direct benefit back interferes with the markets self-controlling mechanisms. You wind up with businesses surviving that should not exist. I would argue that not only are the suggestions to manipulating the market that you have made are unfair, they won't have the consequences you intended. Instead, you'll see a decrease in your standard of living because you will be paying more for your services: Additional taxes to handle enforcement of your new regulations and higher prices because for some reason, the companies you now regulate are using that regulation as a barrier to entry for start-ups, so they are able to decrease competition and raise prices.

I'm guessing I won't be seeing you on Youtube at a Tea Party any time soon.