Wednesday, April 16, 2014

What to do about the free market?

Except for a few fundamentalist extremists, even the most ardent free marketer acknowledges that totally free markets are not perfect.  We need some constraints, some regulation, some way to keep our animal spirits from breaking free from our moral sentiments (if you don’t get those references, look them up).

But we have to do it in a systematic way.  Case by case, piecemeal exceptions, carve outs, loopholes, etc are not the solution.  They sound good.  They often resonate with the special interest being protected.  But they make our system much less efficient, make more jobs for lobbyists than anyone else, and distort the market terribly.  They result in tax codes and health care reforms that stack higher than skyscrapers. 

This is a perfect example.  I can understand what gentrification does to the original residents who can’t afford higher real estate prices and rents.  But the last thing we should do is create some San Francisco-specific rules about rent control or what building construction and lease agreements are allowed.  Not only is this same thing happening in cities all over the country (in selected neighborhoods), but similar kinds of shifts happen in other sectors as well. 

Instead, what we need to do is to decide what our core values are.  If it is not a totally free market, then what is it?  Then based on the results of that philosophical argument (and hopefully consensus), we need to create a general set of principles that apply across the board.  I am not saying a postcard sized tax form will ever be feasible.  But we also don’t need to repeat the mistakes of the past.