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Article posted Jan 29 2014, 5:22 PM Category: Economy Source: LearnLiberty Print

Government Regulation: The Most Dangerous Monopoly

Everyone wants the items they buy to be safe to use or consume. Prof. Howard Baetjer of Towson University explains that when products undergo third-party certification processes to determine their safety, market forces are able to optimize the amount of testing conducted and consumers can use the information provided by certification firms to make their own decisions. It is difficult to say how much testing is enough: another test can always be run on a product, but at some point the benefit of the extra testing outweighs the costs. In a free-market system, competition among certification firms allows the market to work as it should and prevents both under- and over-testing of products. Conversely, when the government holds the monopoly on safety standards, products are likely to be over-tested, delaying their entry into the market and making them more expensive. Sometimes the costs of such delays cannot be quantified; lives can be lost while life-saving medicines are held up in safety-testing processes.

Check out Prof. Baetjer's book that inspired this video:

Animated by Tomasz Kaye:

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Comments 1 - 3 of 3 Add Comment Page 1 of 1
Nickel's 2bits

Posted: Jan 30 2014, 1:54 AM

7147 How do I know if the third party testing firm does its job? As opposed to, say, simply taking a payment under the table from the manufacturer to give a good report on the manufacturer's crappy product?

The tester's reputation? Ha ha ha ha ha ha .... Look at the current relationships between investment firms ("manufacturers") and ratings firms ("testers"). Did the ratings firms' reputations matter enough to them to keep them from helping the investment firms screw private investors? Nope: Money talked and the investors just got screwed.

So the manufacturer and the tester laugh all the way to the bank, and I'm just screwed. This is better than government how? Because the fat-cat manufacturer saved testing money at my expense?

Whose side is the author on? Well, looks to me like he's on the side of fat-cat manufacturers; while individuals like me can just plan to be screwed. I see no basis for advantage in this process.

Posted: Jan 30 2014, 2:08 AM

Because that would destroy their credibility and throw their entire business away. Government regulated rating agencies on the other hand do exactly as you describe, certified trash as AAA, screwing people over en masse, yet their businesses and government certifications are still intact.
Nickel's 2bits

Posted: Jan 30 2014, 4:17 AM

7147 Individuals might worry about their personal reputation. The deceptions involved people who profited personally and handsomely for their cooperative lies. "If the investors lost money and my company's reputation is screwed, so what? I still got mine."

So maybe I didn't make my point clear: This article (and your statement) offer ZERO PROOF that things would be better without a government.

And if that also implies ZERO PROOF that government is better, so? I still want an incentive to go through the change, and this article provides none for me; only for the fat-cats who would steal my money.

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