Laissez faire capitalism - statism and regulation

Posted by sanjay_ankur 8 years, 10 months ago to Economics
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I'm a firm believer in laissez faire capitalism - that the market should be free of statism. Recently, I discussed this with one of my friends who put forward his opinion - that sometimes, the state is needed to regulate the market because corporations/producers behave immorally. While I understood what he said, it didn't quite hit home since I hadn't a fresh example.

I just watched the John Oliver show where he shows how the bigger corporations lie to chicken farmers and trick them into farming chickens that are poorly bred. If we stick to "no statism" and the free market, how is this to be handled?

I guess what I'm really asking is - laissez faire capitalism, to me, appears to have a very important foundation - that both the consumer and producer are moral entities that do not attempt to cheat each other - when one of the parties does cheat, how does laissez faire capitalism handle it?

As I've learnt from Atlas Shrugged - contradictions cannot exist, if you run into one, check your premises. The premise to laissez faire capitalism seems to be that all parties behave morally/fairly - what happens when this premise is false?
SOURCE URL: https://youtu.be/X9wHzt6gBgI


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  • Posted by tkstone 8 years, 10 months ago
    The corporate power we are witnessing is a result of the very regulations the speakers are pushing for. Regulations skew the advantage to large producers every time and the regulations lull the consumer to sleep and induces a stupor of trust in the government. Any business that treats its employees and customers with anything less than respect would fail if not protected by government regulation. The chicken industry is highly regulated by the USDA and the EPA and numerous State agencies. They essentially bar entry by smaller farmers who can't afford to meet these regulations on a smaller scale. Fixed costs kill them. This process is repeated in industry after industry. Get the government out of the way and the market will react to a bad actor. No question. The premise that needs to be questioned is that government regulation is the answer. The farmers in the video have the answers, but the regulations that give the corporate entities the advantage are impeding them.
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  • Posted by mspalding 8 years, 10 months ago
    Note that the chicken problem is happening today with a huge government and lots of statism. So if you are concerned about those evil corporations, clearly statism isn't solving your problem. Let's try Laissez Faire Capitalism and see what happens.
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  • Posted by Mamaemma 8 years, 10 months ago
    On a more basic level, who in the world would assume that the government would do what is moral and right? Please...........
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    • Posted by kevinw 8 years, 10 months ago
      Very good point. There is the notion that, because we have a democratically elected government, they will all be "angels" with only everyone's best interest in mind, while a businessman who has to answer to his customers and exchange value for value is intrinsically a bad person who cannot be trusted. The inversion of cause and effect allowed by the real application of regularly misunderstood "altruism"
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      • Posted by Mamaemma 8 years, 10 months ago
        That is a notion I have never believed, or even come close to believing, but you are eloquently stating my point. Why people think gov't is good and businessmen are bad is nuts!
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  • Posted by kevinw 8 years, 10 months ago
    In true capitalism, reputation is everything. Regulation gives people a false sense of security that distorts the importance of reputation. Without the regulation customers would pay attention to a companies reputation so it would benefit that company to protect their reputation. Companies might even pop up that would monitor such things and make that information available.
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  • Posted by BeenThere 8 years, 10 months ago
    "The premise to laissez faire capitalism seems to be that all parties behave morally/fairly - what happens when this premise is false? "

    That is not the premise to laissez-faire (originally laissez nous faire meaning leave us alone). The premise is each individual must evaluate and judge for ones self whether a product or service is worth the trade of one's work ($$$). The idea that individuals cannot or will not do this opens the door for looters/moochers to advocate government action (more than sufficient evidence of how well that has worked). As for immoral, disreputable, deceiving businesses, they will not flourish if a majority of individuals are "on guard" using their independent judgment as to quality and honesty of a business.

    The main point is government regulations is just another method to take control from the individual (which is all that exists) and put it in the hands of looters........the premise being (so they can loot) "no one should have to think for themselves"...............only fools and irrational philosophies brainwashed people fall for this.

    See the first post by kevinw.........................and companies would be formed ("pop up") to monitor and disseminate information..........good $$$ there!

    P.S. Competence and morality cannot be legislated.................but they can be suppressed, repressed and mutilated with disastrous consequences......................for which a plethora of evidence exists today.

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  • Posted by $ Thoritsu 8 years, 10 months ago
    I don't understand how it is in the best interest of a big corporation to have chicken farmers raise "poorly bred" chickens.

    As for these rules regarding the treatment of chickens, it seems unlikely that the genesis of them is other than public opinion...turning into PETA protest, Dept of Agr rules and/or legislation. The companies would only be acting to preserve profits.

    I've said before, that government rules belong only, when the simple, monotonic optimization from capitalism will not provide a global minima (or maxima, depending on how you want to pose the problem).
    Animal rights might be such a case, but simple public education (e.g. 60 minutes) could provide the same result. The problem in these cases is the same as union workers shopping at Walmart, where everything comes from China. In private people make more selfish decisions than they'd objectively admit to, or vote for.

    Seems to me all that is needed is widespread opinion that mistreatment is bad, and social behavior will control consumer choice, which will control the behavior of corporations.

    The problem with chicken farmers is the value they add is very small, and thus their market position is weak. This is also not a problem.
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  • Posted by Herb7734 8 years, 10 months ago
    Laissez faire capitalism is self regulating. However, nothing happens overnight. With government controls it a appears as if things happen rapidly. An announcement is made that new enforceable regulations are put in place. People are impressed that the problem is cured. What they don't see is that the implementation takes months or years or sometimes never. Whereas a producer with a bad product under laissez- faire, once the word gets out, will need to correct the problem or go out of business. Very likely faster than in a mixed economy country like ours. It is true, a totalitarian dictatorship could correct the problem immediately by sending in the troops and destroying the business, but that's a hell of a price to pay for efficiency.
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  • Posted by RonC 8 years, 10 months ago
    The consumer would become his own best advocate in a free market. Using Adam Smith's example, if it's the end of business and the fish smell, there is nothing forcing the customer to buy. Likewise, if the vendor notices he has spoiled fish to dispose of, the vendor will take care to refrigerate or otherwise protect his investment. These simple governing factors fall victim to market distortion in a highly regulated environment. The catch of the day is anything but in the USA. It must be inspected and approved before distribution.

    A few years ago I vacationed in Cancun. I watched them wrestle a swordfish out of the sea, clean it, fillet it, and prepare it. I realized in America we no longer have freedom. We have the choice of 3 or 4 items of any category the government allows us to choose from, and they tell us that is freedom.
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  • Posted by $ MichaelAarethun 8 years, 10 months ago
    First you have to have an acceptable and moral belief system. That's where Heinlein's use of Moral Philosophy steps in.In ti's best form it supports or destroys any other belief system if the practitioner applies it honestly.

    the need for some government is what happens after standards are established and ensuring the standards are included in the education system.

    Rights AND responsibilities of citizenship are always the first step.
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  • Posted by Zenphamy 8 years, 10 months ago
    There is an obligation on the buyer of 'Buyer Beware', in Laissez Faire (Let It Be) capitalism. Additionally, fraud is always cause for court. But the strongest deterrent is reputation.

    Many that have a preference for the ideas of freedom fail to understand the concept of 'self defense' and the responsibility that falls on the individual to exercise that right. And along with that responsibility is the requirement to recognize what is an attack on the person. If someone is defrauding another, he is endangering the other's life.
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  • Posted by $ jlc 8 years, 10 months ago
    I watched part of the video (tho I am at work) and what I got from it was that people did not read their contracts closely, talk to other people in their prospective industry before they decide to get into it, and that the reason to fear 'poorly bred' chickens is because you will loose out on the incentive payments if you get inferior chicks.

    I agree that the big chicken companies are not behaving in a scrupulous manner, but think it through: Would you pay for a tough chicken in the market? (Apparently sunshine and running around makes chickens tough - and I can verify that anecdotally.) Would you pay more for the same chicken? How do you feel about chicken with a side of salmonella?

    The solution to the chicken farm question has to include all of these elements. kevinw and Mammaemma are right in asking why we believe that a politician will be an 'angel', but we also have to deal with the fact that businessmen are not 'angels' either.

    Probably the best solution is the "UL" (Underwriters Laboratory) plan: let anyone farm chickens in any way they want with no Federal oversight, but have one or more independent accreditation companies grade the product before it gets to market. Markets can refuse to accept chicken that does not have a 'passing grade' (eg has salmonella). This keeps the gov out of it (or minimizes the federal role - I am open to the idea of the gov monitoring the accreditation companies - qui custudio etc)

    Jan
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  • Posted by $ TomB666 8 years, 10 months ago
    As I recall, laissez faire, in addition to meaning let the people do as they choose, also admonished the buyer to beware. I always take that to mean I have to be responsible for my decisions and actions. If I let you cheat me, it is because I failed to beware. I really can not blame you for being a liar and cheat because it was up to me to check you out before doing business with you. I think that is the premise that is missing in this context.

    With all the government interference we have right now, the cheats still get on with it. The latest news about the 5 big banks being fined $5 Billion for the frauds they perpetrated is an example. (http://money.cnn.com/2015/05/20/investin...) Does anyone really think they only stole $5B?

    There will always be liars and cheats. NO government is ever going to stop that. In fact the government institutionalizes some of it. The Pure Food and Drug Act is one of my favorite examples of keeping the truth hidden. The FDA has set standards for how much rat excrement can be in your sausage, not that it must be pure meat. Where exactly does the “Pure” part come in? So I know I can not rely on the government to protect me from harm, beyond what it does to punish those convicted of doing harm to others.

    After all, A is A. People are what they are and that includes the many defective ones that vote (check the link to the Hillary voters and Zombies to see what I am referring to.) Start by realizing that, by definition,1/2 of people are below average. There are many people to whom the concept of "moral" is unintelligible. Government can't fix that!

    Having a laissez faire government would mean I'd have to look out for myself when it comes to dealing with others. How is that different then the current situation? I'm being delusional if I expect anyone else to responsible for choices I make.
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  • Posted by $ Snezzy 8 years, 10 months ago
    The chicken situation is indeed interesting, from a business perspective and from a regulatory one. The USDA, presumably there to "help the farmer" has during the past decade or two pushed forth regulations that enforce the message, "Get big, or get out." If you try to run a small farm and stick your nose above the radar, you will be regulated, taxed, or shut down.

    So what's wrong with big-farm chicken farming? It's slavery. The chicken companies finance the buildings for you, but just about when you think they're paid off, new government regulations come along, and they are obsolete. You're still "owned" by Tyson. You don't get any choice of how to run things, either. THEY tell you when the next load is coming in. You dare not plan any time off.

    We looked into it, and determined that chickens, at least large-scale operations, are a matter of religion. Unless you sincerely believe that the chickens are the most important animal on the planet, and the Lord God Himself personally appointed you to look after His chickens, you have NO BUSINESS with trying to raise 50,000 chickens at once. The correct number of chickens is actually two or three dozen, and that's only if you LIKE chickens. We had some for a while. Now it's ponies, sheep and goats. Don't get me going about the USDA on those matters, either.
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  • Posted by Sunjock13 8 years, 10 months ago
    The Problem is not True or False... There will always be Corporate heroes and villains and I can probably counter every villain with 100 corporate heroes. AND are you promoting that there are not just as many Statist Villains as there are Corporate villains? I suggest that the halls under the rotunda (state and federal) are MUCH more sinister and manipulated than those in the overwhelming number of corporations. Coming at it from the other direction, if your premise that the Statist can do a more efficient job than the Gates Foundation in societal good, I vengefully (not respectfully) disagree. How can you take isolated exposures and totally negate the $$Billions of corporate dollars efficiently and transparently distributed each year based on an isolated corrupt occurrence or in most cases the strawman of an occurrence. Based on that, should all quasi governmental 501C3s be dissolved because of HIGHLY questionable practices of the Clinton Foundation? If you look closely, when Government is considered "the Solution", you are more than likely going to discover that they have created the problem.These are not either/or problems and will not be solved by either/or solutions!
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  • Posted by $ blarman 8 years, 10 months ago
    What you need to do is ask your friend what constitutes "immoral", as that will be the crux of the decision. He will either be a 99%-er who believes that profits are somehow "unfair" and that he's just envious of the success of others, or he'll really just never have actually _thought_ about it at all! Once he does that, ask for an example, because 99 times out of 100, you can point to a government regulation that creates incentives and disincentives for the company to behave in a certain way. If they complain that businesses don't pay enough taxes, simply point out that the US currently has the highest corporate tax rate in the developed world. If they complain prices are too high, point out the effects of minimum wage laws that trickle UP into everything else and make everything else more expensive. I haven't found a single example of "immoral" corporate behavior that wasn't driven primarily by government rules, regulations, or taxes if I looked hard enough.
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  • Posted by gaiagal 8 years, 10 months ago
    Government appears to provide support for immoral, and amoral, behavior. The HMO Act of 1973 and The PPACA are excellent examples. One can't "regulate" health care costs without rationing. Managed care is rationed care. Unless a person is familiar with medical procedures, it is very difficult to know when health care is being withheld.
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  • Posted by wiggys 8 years, 10 months ago
    when the premise is false what you get is an economy that we now have. laissez fair capitalism does not exist in the world let alone the usa.
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  • Posted by blackswan 8 years, 10 months ago
    Do you want to do business with someone who requires the government to monitor his actions, or he'll rip you off? And do you want to rely on a third party to ensure that you're not cheated? If the first party is a cheat, what ensures that the second party isn't also a cheat? Why would you automatically assume that the government agent is honest? If we're dealing with people, they can be honest or dishonest, regardless of whether they're in business or the government. Why make things even more complicated by dragging in another person/entity to deal with a bad situation. It would be better to not deal with someone you can't trust.
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  • Posted by $ jdg 8 years, 10 months ago
    This is an area where you will find disagreement among even "purist" libertarians. But I believe the common law behind property rights -- including enforcement of contracts and robust laws against theft fraud -- is not only acceptable but a moral imperative. Those things don't break "laissez-faire", they're prerequisites of it.

    And I favor some economic regulation if its lack can be shown to have serious bad consequences. For example, regulations that require insurance underwriters to have enough cash to pay claims even in any reasonably possible disaster scenario are quite necessary.

    Where possible, though, I prefer the law to simply place the blame for bad results where it belongs and let the business people choose for themselves what precautions to take. Thus for example, rather than insure bank deposits I would simply ban corporations from the field of banking. All banks would be required to be owned by partnerships or sole proprietors, who stand to lose their personal life savings if they lose yours. (This is how it was in Scotland in Adam Smith's time, and he wrote about it.)

    But reputation is certainly not enough. The world has simply become so large that it's simply not possible to prevent someone who cheats or steals from finding new clients. Those libertarians who insist there should be no remedy for fraud except reputation should be kicked to the curb with the anarchists.
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