Economic Regulation

Radley Balko (The Agitator) posted this topical version of an old joke:

Three guys are in a jail cell. They start to talking and find out that they’re all gas station owners.

The first one says, “I set my prices at a couple of cents higher than my competitors. I’m in here for price-gouging.”

The second one says “I set my prices at a couple of cents lower than my competitors. I’m in here for predatory practices.”

The third one says “I set my prices at the same price as my competitors. I’m in here for collusion!”

Radley says: “It’s funny ’cause it’s true.”

I remember first seeing this same notion when I read the marvelous short poem
Tom Smith and his Incredible Bread Machine
over twenty years ago. If you haven’t read it yet, please do. The similar portion of the poem reads:

“You’re gouging on your prices if
You charge more than the rest.
But it’s unfair competition
If you think you can charge less.

“A second point that we would make
To help avoid confusion:
Don’t try to charge the same amount:
That would be collusion!”

I’m not going to try to debunk the bad economic reasoning that leads people to hold the theories that these “crimes” are based on. It’s been done often and better than I can do. Anyone interested in these arguments can find them.

What I’m going to complain about is the moral reasoning that leads people to conclude that they have a right to coerce people into changing the way they do business.

Businesses aren’t monsters from space. They are the individual and collective efforts of human beings. They are people who contribute their time, effort, and creativity to be productive and to succeed in the marketplace; where success is principally achieved by providing more value to customers than competitors offer.

It’s true that sometimes other people act in ways that we don’t think are in our (and often their own) best interests. That’s an inevitable consequence of freedom.

Decent people don’t apply force (or the threat of force) to get others to conform to their wishes. They use arguments and reason. They try to convince them to make better choices. Or, they try to convince enough other people that there is good reason to apply enough non-coercive pressure to try to make the “wrongdoers” change their behavior. Failing in these efforts, they learn to live with their disappointment.

I think that a fundamental moral notion is that (aside from extraordinary emergency situations) people should be treated as ends in themselves, rather than as means to the ends of others. I don’t know any good reason why people engaging in commercial activity shouldn’t warrant this kind of consideration.

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