The federal and state governments’ regulators and bureaucrats are always on a crusade of justice for the impecunious. They claim they have to regulate the free market to ensure companies aren’t colluding, price-fixing or lowering costs by so much that smaller businesses have to shut their doors because they can’t compete.
It’s all in the name of fairness for the consumer, for the poor.
This is a false premise because there are just two reasons for this type of regulatory overreach: cronyism and incompetence.
We all know that the government can’t dictate prices. We’ve seen what happens when they do (SEE: Venezuela’s socialism leads to food riots (video)). Only the market can properly signal and direct prices and interest rates. Unfortunately, the government is like a whiny, stubborn child who has to get his way otherwise he’ll throw a tantrum, except the government’s tantrum is a lot more harmful than a few minutes of sobbing.
Regulators interfere in businesses and will try to get you in trouble. Your prices are the way for regulators to step in. No matter how high or how small, bureaucrats will see to it that you’re actually violating some type of law.
There are three types of prices governments detest:
– Prices are too high: governments will charge you with price-gouging.
– Price are too low: governments will contest you’re trying to create a monopoly, you’re undergoing predatory pricing or selling goods below cost.
– Prices are the same as your competitor: the government will accuse you of price-fixing and colluding.
So what is a business to do? Nothing! All a company can do is cross its fingers and hope for the best that a government regulator won’t fine you.
This quote from economist Milton Friedman is superb for the topic at hand:
“Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.”
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