Saturday, June 27, 2009

On Corporatism

Our Fearsome Comrade has a really important insight on the relation of business and government:
Corporations are going to get your money. The question is, will they do it by offering you a useful service or a valuable good in return, or will they do it by getting their friends in Washington to force you to give it to them for nothing?
When business and government collude, ordinary people lose. A laissez-faire policy is not based on some generalized affection for big business, rather the recognition that businesses that aren't threatened by the government have no reason to meddle in the government and no lust to control the government. If the government didn't have the power to bankrupt competing companies, funnel billions in tax revenue to favored industries, or force people to buy products they don't want, businessmen would have no interest in corrupting it.


Shane said...

That's why I argue for simple, easy-to-understand regulation. The overhead of all the special cases makes everyone worse off. Except maybe the industries that sprout up to address the complexity of the regulations - e.g. tax preparation, SOX consultants, all sorts of staff attorneys.

But hey, I think that cap and trade is the best answer - a market based mechanism for addressing externalities. Much better than other clumsy regulations that ignore market forces.

Bi-Coloured-Python-Rock-Snake said...

Well, if we're really determined to use fiscal policy to control carbon emissions, the best mechanism would be a simple carbon tax, as the Economist and a good number of conservatives have argued. Its revenues could offset some tax cuts in other areas, and climate concerns aside even, it's an attractively fair sort of tax. It would also create real incentives for energy sector innovation.

It's transparent and fair, so of course it's dead in the water. Nobody will ever enact it. It doesn't provide the opportunities for rent-seeking and political meddling, so politicians and business won't like it, and it's a new tax, so voters won't like it, even though it'd probably cost us far less than all the hidden costs of cap and trade will.

Fearsome Pirate said...

Assuming CO2 emissions are a problem, there is no market-based solution. The market favors the best good at the lowest price. Cap and trade won't work. A carbon tax won't work. You know why? There are billions of people in India, China, and Latin America that don't want to be poor and are quite willing to use cheap, coal-fired electricity to produce goods at a price the rest of the world wants to buy.

When one country enacts laws to make production more expensive, production simply moves elsewhere. This is ignoring the intrinsic thermodynamic problem with trying to replace coal with anything other than nuclear. Even if we could find enough wind and solar power (plus solve the intermittency problem) to provide the energy we currently use, the price alone would drive more businesses overseas.

Bi-Coloured-Python-Rock-Snake said...

Oh, Comrade, you just don't have the vision! Those overly ambitious billions will be so inspired by our bold leadership and self-sacrifice that they will renounce carbon-fueled development and embrace their green squalor!


Don't worry, though, after the West fails to bully China and India into greenism, you can bet that it won't be long before we'll start hearing arguments for carbon tariffs on imports from non-greening countries. The chilling effect this will have on global trade will be a side benefit for all of those who've never been big on globalization in the first place.

Fearsome Pirate said...

What I find truly shocking is when "green" leftists write editorials such as Tom Friedman's screed against the Tata Nano, basically demanding that billions of people accept a much lower standard of living than leftists enjoy.

The difference between me and a leftist is that I can't look someone in the eye and say he has no right to try to attain what I have.