Tuesday, July 28, 2009

Who Do You Trust? - John Stossel's Take

Once againJohn Stossel ask the good question, although it is spawned by this post by Greg Mankiw asking who do you trust.

Stossel notes that early in his career, he took for granted that the profit motive was inherently wrong and his efforts to uncover scams was predicated not on protecting people from the unscrupulous, but on the notion that people and businesses should not be making profits.

I don't like government making decisions for me and I distrust the notion that some bureaucrat or legislators knows better than I what is best for me. But the lower the level of government making a decision, the more I trust that decision as issues, in the end are local and personal, but Mankiw makes a solid point:
I tend to distrust power unchecked by competition. This makes me particularly suspicious of federal policies that take a strong role in directing private decisions. I am much more willing to have state and local governments exercise power in a variety of ways than for the federal government to undertake similar actions. I can more easily move to another state or town than to another nation.
Of course, the problem with Mankiw's proposition is that you would have to have a state or local government that understands the reason it is loosing residents and businesses is related to their policies, and such insight and understanding is often lost upon those policymakers who believe that their power is predicated upon their inherent wisdom as government. So there is a problem.

But the reason I trust the market system (properly regulated by a court system for the resolution of disputes) is that competition generally drives good service and morality. Yes, as Stossel himself has uncovered time and again, there are unscrupulous actors out there and that is why you have a court system to protect individuals from frauds, cheats and bad actors. But the companies that make the most profits do so because they 1). truly understand that providing goods and services that people want and repeated will use and recommend is a good way to make a buck and 2). they know that if they don't some competitor out there will provide that service, better and cheaper than they offer. Thus competition drives excellence.

The fact that so many people seem willing to cede control over their lives to government or to allow the government to dictate their choices seems counter-intuitive for me. I don't get how a nation that cherishes the ability to largely do what they want with their lives is willing to allow government to set up a regime and system for things like health care and spending, that compels behavior without choice.

Now before some gets off on a rant with me about government etc., there is a role for government and it is a limited role. Government is given powers by me through the Constitution to do for me that which I really can't do as well for myself, like repel foreign invaders, print money, help keep me safe from those who will do me harm (criminals and the like). But I don't cede to the government the power to determine who I will see for medical care, or which industry or private company will be bailed out with my tax money.

So I trust the market because competition makes people and institutions better.

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