T Nation

Why Economic Regs Suck

Politicians and regulators do not about the little guy – and regulators end up supporting the interests of the regulated (capture theory – read up on it, as it’s very true from my observations).

Exhibit A:

http://www.washingtonpost.com/wp-dyn/content/article/2006/12/09/AR2006120900925.html

EXCERPT:

[i] In the summer of 2003, shoppers in Southern California began getting a break on the price of milk.

A maverick dairyman named Hein Hettinga started bottling his own milk and selling it for as much as 20 cents a gallon less than the competition, exercising his right to work outside the rigid system that has controlled U.S. milk production for almost 70 years. Soon the effects were rippling through the state, helping to hold down retail prices at supermarkets and warehouse stores.

That was when a coalition of giant milk companies and dairies, along with their congressional allies, decided to crush Hettinga's initiative. For three years, the milk lobby spent millions of dollars on lobbying and campaign contributions and made deals with lawmakers, including incoming Senate Majority Leader Harry M. Reid (D-Nev.).

Last March, Congress passed a law reshaping the Western milk market and essentially ending Hettinga's experiment -- all without a single congressional hearing.[/i]

Very interesting read BB, it sucks that he is punished for being successful.

What’s he complaining for? He’s lucky. In Mexico, they’d have simply shot him.

[quote]grew7 wrote:
What’s he complaining for? He’s lucky. In Mexico, they’d have simply shot him.[/quote]

Just because it’s worse elsewhere, doesn’t mean we shouldn’t strive to have better anyway.

You can always find people who are fatter and more out of shape than you are; yet you still train, no?

I’m afraid this debate still needs to be worked out. We cannot view the regulatory economics as a black or white issue. Because regulation did not work in favor of this person does not mean regulation is bad. The debate should be about where such regulations are in order. For example, public safety, etc.

The problem with this example is that it illustrates why many people are in favor of regulation in the first place–we fear big corporations and what they are capable of accomplishing with their power and lobbies.

One could argue the point in this example that the Milk lobby is protecting its interests–i.e., the dairy farmers. I do think in this case it came across as the bully. This is perhaps due to the underdog mentality we have in this country.

We all want to be that person/company that overcomes all odds and goes onto be successful. We forget though that the small mom-and-pop coffee shops thriving in our neighborhood become the Starbucks that we curse when we see them putting mom-and-pop out of business.

On one hand we have to allow mom-and-pop some level of success in their neighborhoods so that the mom-and-pops will continue to grow and thrive and on the other hand we have to expect with that success will come the downfall of other competing mom-and-pops–thus is the nature of free and fair enterprise.

The question we have to ask ourselves is at what point do we allow the corporation to infiltrate our lives? At a certain point the corporation is no longer just fulfilling supply and demand they are falsely creating demands and marketing those demand thru the use of pop culture and fear–creating a customer base that previously may not have been there.

The Starbuck phenomenon is a prime example of this. When did $3.50 gourmet coffee become such a big deal in our lives?

This is also why a free market can be a good thing. We choose who we want to give our business to. As long as the market is free and fair–meaning no unfair advantages going to entities because of their ability to buy favors–it will work itself out.

This Milk example is clearly not fair and a consequence of what I have described above.

Boston,

Very interesting. John Stossel recently did a piece on how many regulations were just Big Government and Big Business in a dance of creating fat privileges for themselves.

It is always a problem when regulations promote monopolies.

[quote]thunderbolt23 wrote:
Boston,

Very interesting. John Stossel recently did a piece on how many regulations were just Big Government and Big Business in a dance of creating fat privileges for themselves.

It is always a problem when regulations promote monopolies.[/quote]

Was that the one where he was arguing about off-shoring with Lou Dobbs?

[quote]LIFTICVSMAXIMVS wrote:

The problem with this example is that it illustrates why many people are in favor of regulation in the first place–we fear big corporations and what they are capable of accomplishing with their power and lobbies. [/quote]

I know you’re a smart guy Lifticus, but I think you have this exactly wrong – big corporations couldn’t accomplish anything with their power and lobbies if there weren’t the governmental power to effect the things they were lobbying and campaigning for…

[quote]pookie wrote:

Was that the one where he was arguing about off-shoring with Lou Dobbs?
[/quote]

No, this actually a separate article. I’ll see if I can remember where it was and post…

[quote]thunderbolt23 wrote:
Boston,

Very interesting. John Stossel recently did a piece on how many regulations were just Big Government and Big Business in a dance of creating fat privileges for themselves.

It is always a problem when regulations promote monopolies.[/quote]

The milk industry is an oligopoly (not a monopoly).

Regulations can cut both ways.

[quote]BostonBarrister wrote:
LIFTICVSMAXIMVS wrote:

The problem with this example is that it illustrates why many people are in favor of regulation in the first place–we fear big corporations and what they are capable of accomplishing with their power and lobbies.

I know you’re a smart guy Lifticus, but I think you have this exactly wrong – big corporations couldn’t accomplish anything with their power and lobbies if there weren’t the governmental power to effect the things they were lobbying and campaigning for…
[/quote]

Do you really mean that? If there is no government there is no need for lobbies.

Working in regulatory affairs myself, I have to say that the argument that markets in themselves prevent mono/oligipolies (or -psonies, for that matter) through the application of the legal rights, falls on the morningstar rebuttal, i.e. the guy who holds the morningstar wins.

If you look at gambling theory, you will find that the participant with the largest resources will win over time. It is a simple function of iterations.

On practical basis, if were in a position to recount the various arguments I have been subjected to, to either promote regulation in favour of the applicant or to introduce regulation for the same purpose, you would probably be amused, but hardly edified.

The regulator’s job is to promote competition and to create a level playing field. It is true that some times the is a mutual dependency that causes problems, an example being the the TV stations role in elections to the House of Representatives, or here in Europe, governments propensity to favour companies from their home country. Much of my work is aimed at simplification and removal of regulation, but competition regulation must remain.

Karva is right. Lobbying would disappear if there were no regulation. I am not certain, it would be wise to remove that hurdle, though.

TQB

[quote]BostonBarrister wrote:
LIFTICVSMAXIMVS wrote:

The problem with this example is that it illustrates why many people are in favor of regulation in the first place–we fear big corporations and what they are capable of accomplishing with their power and lobbies.

I know you’re a smart guy Lifticus, but I think you have this exactly wrong – big corporations couldn’t accomplish anything with their power and lobbies if there weren’t the governmental power to effect the things they were lobbying and campaigning for…

[/quote]
I think a blanket statement that regulation is bad is false. Ther are many example where regulation has helped–child labor, anti-trust, etc. It’s a question of who regulations are designed to help that needs to be addressed. I personally don’t trust big businesses to regulate them-selves.

[quote]LIFTICVSMAXIMVS wrote:
BostonBarrister wrote:
LIFTICVSMAXIMVS wrote:

The problem with this example is that it illustrates why many people are in favor of regulation in the first place–we fear big corporations and what they are capable of accomplishing with their power and lobbies.

I know you’re a smart guy Lifticus, but I think you have this exactly wrong – big corporations couldn’t accomplish anything with their power and lobbies if there weren’t the governmental power to effect the things they were lobbying and campaigning for…

I think a the blanket statemnt that regulation is bad is false. Ther are many example where regulation has helped–child labor, anti-trust, etc. It’s a question of who regulations are designed to help that needs to be addressed. I personally don’t trust big businesses to regulate them-selves.[/quote]

I agree with you.Big business consistently been found wanting in the arena of self regulation.

A monopoly is an exclusive governement grant of trading privilages, not a product of a free market place. Find me one monopoly in recent history that has maintained itself without the help of government.

[quote]LIFTICVSMAXIMVS wrote:
I’m afraid this debate still needs to be worked out. We cannot view the regulatory economics as a black or white issue. Because regulation did not work in favor of this person does not mean regulation is bad. The debate should be about where such regulations are in order. For example, public safety, etc.

The problem with this example is that it illustrates why many people are in favor of regulation in the first place–we fear big corporations and what they are capable of accomplishing with their power and lobbies.

One could argue the point in this example that the Milk lobby is protecting its interests–i.e., the dairy farmers. I do think in this case it came across as the bully. This is perhaps due to the underdog mentality we have in this country.

We all want to be that person/company that overcomes all odds and goes onto be successful. We forget though that the small mom-and-pop coffee shops thriving in our neighborhood become the Starbucks that we curse when we see them putting mom-and-pop out of business.

On one hand we have to allow mom-and-pop some level of success in their neighborhoods so that the mom-and-pops will continue to grow and thrive and on the other hand we have to expect with that success will come the downfall of other competing mom-and-pops–thus is the nature of free and fair enterprise.

The question we have to ask ourselves is at what point do we allow the corporation to infiltrate our lives? At a certain point the corporation is no longer just fulfilling supply and demand they are falsely creating demands and marketing those demand thru the use of pop culture and fear–creating a customer base that previously may not have been there.

The Starbuck phenomenon is a prime example of this. When did $3.50 gourmet coffee become such a big deal in our lives?

This is also why a free market can be a good thing. We choose who we want to give our business to. As long as the market is free and fair–meaning no unfair advantages going to entities because of their ability to buy favors–it will work itself out.

This Milk example is clearly not fair and a consequence of what I have described above.[/quote]

I agree. LIFTICVSMAXIMVS, you’ve become a shining beacon of sense in this crowd of extremists. Thank you.

Big business supports gov’t regulation all the time. It keeps the little guy out of the picture, pure and simple. It is widely acknowledged that Enron lobbied the Bush admin. to support Kyoto. The question is, why?

Here is an interesting article from Cato on the subject:

"Today’s history books credit muckraking novelist Upton Sinclair with the reforms in meatpacking. Sinclair, however, deflected the praise. “The Federal inspection of meat was, historically, established at the packers’ request,” he wrote in a 1906 magazine article. “It is maintained and paid for by the people of the United States for the benefit of the packers.”

Gabriel Kolko, historian of the era, concurs. “The reality of the matter, of course, is that the big packers were warm friends of regulation, especially when it primarily affected their innumerable small competitors.” Sure enough, Thomas E. Wilson, speaking for the same big packers Sinclair had targeted, testified to a congressional committee that summer, “We are now and have always been in favor of the extension of the inspection, also of the adoption of the sanitary regulations that will insure the very best possible conditions.” Small packers, it turned out, would feel the regulatory burden more than large packers would."

[quote]LBRTRN wrote:
Big business supports gov’t regulation all the time. It keeps the little guy out of the picture, pure and simple. It is widely acknowledged that Enron lobbied the Bush admin. to support Kyoto. The question is, why?

[/quote]
Yes, I agree. The question still remains, how do we manage the rights and safety of the public without giving unfair advantages to big busness? Should one practice be favored over the other? Is economic fairness more important than clean air, for example?

There are many examples where fairness in business does not commute with fairness in humanity.

The debate continues.

[quote]LIFTICVSMAXIMVS wrote:
LBRTRN wrote:
Big business supports gov’t regulation all the time. It keeps the little guy out of the picture, pure and simple. It is widely acknowledged that Enron lobbied the Bush admin. to support Kyoto. The question is, why?

Yes, I agree. The question still remains, how do we manage the rights and safety of the public without giving unfair advantages to big busness? Should one practice be favored over the other? Is economic fairness more important than clean air, for example?[/quote]

I’m glad you agree, but the fact of the matter is, for the last 100 years or so, the debate has been framed as a struggle between Big Business and the regular joe. And that simply isn’t the truth–Big Business has gained more from gov’t regulation than any other sector. I’m not arguing that the gov’t shouldn’t be involved in any way in the regulation of business practices, especially with regards to environmental issues; however, the negative consequences need to be addressed, and considering very few even realize that gov’t regulation has been nothing but a windfall for Big Business, and a boondoggle for small businesses and individuals, I don’t see how that is going to happen.

Fairness to humanity in what regard? I would argue that for every instance of unfairness gov’t regulation has rectified, one could point to another it has facilitated. Until that is acknowledged by the mainstream, I don’t see how the situation is going to change.

It sure does…

[quote]sactown1 wrote:
A monopoly is an exclusive governement grant of trading privilages, not a product of a free market place. Find me one monopoly in recent history that has maintained itself without the help of government.

[/quote]

Ma Bell?