Responses to Some Comments About Reno and Capitalism

I thank everyone who has posted comments on my article on Friday responding to Professor Reno, and I have a few responses.

To Rick: I agree that complex regulations often benefit large firms because large firms, but not their smaller competitors, can hire sophisticated counsel that allow the large firms to work around, or at least cope with, complex regulations, thus giving them a competitive advantage over their smaller competitors. But if the small firms can’t cope with the regulations, and the large one can do so but only by paying higher transaction costs, then neither group of firms is freer than it was before.  On the contrary, both are less free. It’s just that the reduction in freedom is greater for the small firms than the large ones.

To Jim: You say that my argument is a “smokescreen” and that economic conservatives are not really interested in stopping inefficiency but simply want to cancel social welfare programs wholesale, probably because they hate the poor. This type of argument, by failing to engage intellectually with the point being made and by attributing bad faith to the other side, rarely advances the discussion. For example, how useful would it be if I said that the only reason you posted this response was that you know that my position is unanswerable and that your own is bankrupt, and so you had no option but to resort to calling me a liar? You see how silly this sort of thing is.

To Mattb: I agree that complex economic regulation is an invitation to rent-seeking and crony-capitalism, and that it tends to substitute political connections and lobbying for the discipline of the market. Roberta Romano at Yale has some excellent papers suggesting exactly what you recommend: that regulations should come with five or ten year sunset dates so that some government actor should have to make a conscious decision at some point to renew them, weighing their actual costs and benefits in the light of actual experience.

To Thomas M. Cothran: Consequentialism is a position in moral philosophy, an account of what in general makes actions right or wrong. We’re not talking about that here. We’re talking about when the government should intervene in the market, which is a different and more complex question. For example, everyone recognizes that there are some things that are immoral that the government ought not make illegal (e.g., having lustful thoughts, or not calling your mom on Mother’s Day), and that there are some things that are appropriately made illegal that are not in themselves immoral (e.g., selling securities using a writing that does not conform the prospectus requirements of the Securities Act of 1933). A person can think that government policies should be evaluated on the basis of their consequences without thereby being a consequentialist in morals.

As to your examples, governments ban the sale of kidneys but not the sale of blood, and we prohibit prostitution but not (or at least not anymore) fornication and adultery. It is not a simple question of the moral quality of the actions involved. The question turns on whether government action in these various areas would do more harm than good.