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Competition is not about depressing wages and living standards. Competition is about producing a good or service at the most effective cost for the best price the market will bear.  The opposite of competition is monopoly. This would be when there is one milkman and he can charge whatever he wants because there is no competition.  Introduce competing milkmen, and the other milkmen will charge lower prices.  

Competition and free market economies benefit the CONSUMER.  Business produces goods and services for people in exchange for money and profit.  Prices are determined by supply and demand.  Price is determined from information from a varity of sources.  No one person controls the price of anything.  That is what is democratic about the pricing system.  Free marketers dont want government intervention into the pricing system because it distorts market prices and causes unintended consequences such as shortages, etc.  So, for example, government starts giving out student loans to help students.  Now, students have more money to go to college if they are willing to hock themselves in debt. The result in the US, massive inflation in education costs.  Or, Clinton imposed a luxury tax on boats in the 1990s. The result-boats went up in price-massive layoffs in the boating industry, lost profits, lost taxes.  Or, government starts subsidizing corn for ethanol. The resulting distortion, massive inflation for corn products, corn sweetener, animal feed resulting in higher beef prices.  Poorer people now have to pay more for food. All for ethanol which is not a good fuel alternative.

Here is a great link to Milton Friedman explaining the economics of how a pencil is produced-it is two minutes long but worth 4 college credits.

http://youtube.com/watch?v=d6vjrzUplWU

Terry

by Terry (Terry@pollackzuckerman.com) on Mon Dec 17th, 2007 at 11:57:38 AM EST
[ Parent ]
What a lovely religion you have. Unfortunately, nothing you say is true in the real world as opposed to the world of voodoo.


Competition and free market economies benefit the CONSUMER.

Sometimes, when appropriately regulated. Sometimes they don't - see the energy, rail and other infrastructural markets like health or education. I'm sure you're familiar with the sections of Hayek and Smith where they point out  there is a role for public provision there. I'm not sure if Friedman is sane enough to admit it: I still haven't got around to reading his stuff.

No one person controls the price of anything.  

No, that would take groups of companies colluding. Which I'm sure never happens in the wonderland that is the US. In the real world, I'll refer you to The Wealth of Nations for what happens when producers meet.

So, for example, government starts giving out student loans to help students.  Now, students have more money to go to college if they are willing to hock themselves in debt. The result in the US, massive inflation in education costs.

And lots of people having the opportunity of a college education that didn't have it before ... what was the effect of that on the economy.

Suitably regulated markets are among the tools we have to achieve our aims as a society. The stock and financial markets rely on brutal regulation to function at all: look what happens when the regulations are enforced badly or not adapted to the changing market.

by Colman (colman at eurotrib.com) on Mon Dec 17th, 2007 at 12:10:23 PM EST
[ Parent ]
Of course, you're assuming that free marketers dont believe in ANY regulation.  That would be an incorrect assumption.  Friedman and Hayek say that there are certain areas where there are "market failures" where the government must intervene.  Enviroment regulations are a good example of "market failures".  Collusion and price fixing is another proper intervention as Smith noted.  That's why we have an anti monopoly law.  Smith also noted thought that price collusion often brings it's own revenge without gov. regulation.

I dont agree that energy, railroad and healthcare are good areas for government intervention.  These are business areas and bureaucrats are incapable of regulating industries properly. If they were, they would be in the private sector. Our medical industry is heavily regulated, especially with prices. This causes massive distortions in prices.  So, a doctor I know gets paid $75 for a spinal tap.  My father in law goes into the hospital for observation only for ten days and the insurance company pays $65,000.00 (no tests, no operations).  

As to education, I dont have a problem with a public role. It's just that private schools are better. The curriculum is more reading and writing oriented toward a British style system.

As to the higher education costs, do a lot more people have access to higher education now thanks to student loans? No, because the price of one year at college went up to $45K a year.  Student loans do not come close to that level.

As to stock markets, I think they are casinos. I do not think buying stock is "investing", it is gambling.

Being a free marketer doesnt mean your against regulation or laws. It depends on the regulation and what is trying to be accomplished. Unfortunately, much government regulation ignores human nature resulting in unintended consequences.


Terry

by Terry (Terry@pollackzuckerman.com) on Mon Dec 17th, 2007 at 02:16:27 PM EST
[ Parent ]

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