Does that make any sense?

State vs. Market Control

I am here to address the age-old debate between state control and market control. This issue has come to light recently with the proposed smoking bans in Minneapolis and St. Paul. One point of view is that if people really disliked smoking so much, then it would be in the best interest of restaurants and bars to prohibit smoking, and they would do so. The other perspective is that smoking is harmful to customers and people who are employed at restaurants and bars, and that the government should essentially protect people from themselves.

While this issue is interesting, it is not the raison d'etre of this post. I'm more interested in generalizing guidelines about when the government should interfere and when it should let market forces have control. I think an interesting playground for this discussion is the issue of the environment. Take gasoline for instance. There is not an infinite supply of gasoline, every American knows this, and yet we consume at a torrid rate. Do market forces work fast enough to counteract this?

For instance, the following argument could be made: Once gasoline supplies start running low, the prices will increase, making the consumption of gasoline and the purchase of automobiles less desirable. People will start walking more, busing more, and companies that previously dealt in gasoline or automobiles will find it in their best interest to devise new fuel sources to get people back into cars. It could even lead to an economic boom as people are forced to upgrade to cars with that run on the new fuel and old cars are retrofitted, as well as the infrastructure that might be necessary for the new fuel source.

The counterargument could run as follows: Market forces are too slow to respond to this. Once gas gets too expensive for people to buy, this will be a huge hit on our economy. Gas stations might be forced to shut down, and certainly fewer cars will be purchased. With a little bit of government intervention, this could have been prevented. The government spends some of its money on scientific research, such as developing alternative fuel sources. Under this scheme, automobiles using new fuel sources can gradually be phased in, and as technology develops they can compete with gasoline powered automobiles.

Okay, as I type I keep on thinking of arguments for each side. I actually had a position when I started but now I'm not so sure. A counter-argument to the last paragraph could be that smart businesses, AKA businesses that should survive, will anticipate the gas-crunch and spend revenue on innovating to create new fuel sources. The drawback to this, though, is that businesses are run by people, who might be individually motivated. If I'm the CEO, my lifestyle might be improved if I take more money as profit, as opposed to spending it on research for fuel sources. On the other hand, an elected representative has a duty to do what is best for his or her constituents. But even here, one could make the argument that elected representatives actually do what is best to increase their chances for re-election.

So, in conclusion, I have not solved this problem in the last half an hour, as I had expected to do. But writing this entry has made me think a little more clearly and cynically about the problems. Posted by mill1991 at August 26, 2004 5:05 PM