Claremont McKenna vs Pomona

santino
Mon, 24 Mar 2008 11:27:33 +0000

True DSC, space programs had significant government intervention, mainly because of the military use of such technology. My argument was that without licensing, sub contracting or nationalizing technology develops faster in competitive environment. I don’t see any evidence for private sector moving ‘gradually’. Technology based industries are always progressing and therefore the need to innovate persists. Its a great Washington quote: “If there’s a rabbit being chased by a wolf, whose going to win? The rabbit because the Wolf is running for his dinner, the Rabbit for his life.”

[Time to Privatize NASA](http://www.cato.org/pub_display.php?pub_id=5960)

Most of the great human achievements or inventions that you cited had a nearly complete embargo decades earlier. The government simply decided to research certain fields. Even when the government does succeed in innovating something new, its almost always during war or for military purpose.

As for the railroads, you are guilty of Bastiats visible-invisible benefit again. True, railroads aided economic progress, however they also froze technology. Think of it this way: How much have trains developed since their inception? How much have cars, airplanes, ships? The problem is that you are assuming the current technological structure to be ideal. The biggest flaw of the US economy in the 18th and 19th century was federal regulation between the states. So even back then, the industries with few people, lots of money and low innovation were natural gas, pipeline projects, telecommunications projects and so on. Many countries in the 20th century tried this approach and miserably failed. And a shortage of money wasn’t the reason behind it.

DSC, Smith would roll over in his grave.

1) Occupations with licenses suffer shortage, high cost and a black market.
The classic case of this are New York Taxis. Government makes these decisions to benefit current producers. Their argument is rarely the ones you cited.

2) Smith never spoke about the properly informed consumer per say. He focussed on the rational consumer. The information is restricted by intellectual property rights, not a market failure of information. Another important aspect of the Neoclassical school of thought are time dynamics and learning curve benefits. Trade benefits both parties because every exchange of product or service increases knowledge. Tearing itself to pieces? According to your misinterpretation of Smith, industries without licenses should ‘tear themselves to pieces’. I doubt you can ever find empirical results on this one.

The most morbid example of licenses inhibiting market forces is the FDA.
[Breaking Up the FDA’s Medical Information Monopoly](http://www.cato.org/pubs/regulation/reg18n2c.html)

The notion of a godly, all knowing entity telling us what to do has its appeal, but can never succeed. Industries without licenses thrive and licensed industries collapsed. Its essentially why Nehru’s India and Mao’s China came close to a complete collapse. In India, you couldn’t even change the color of your product before government approval.

Smith wasn’t counting on that. He formed axioms of human nature to create a model for understanding commercial interaction. The term economists like to use is Self Interest. Again, the basis of Market theory is rational decision making, not intelligent and Smith explains this much better than I ever can.

BSC, most economists would shocked at your claims on licenses helping the economy. Never have, never can and never will. Essentially. what are government-backed research projects. Its taking tax payers money and spending it on a group of scientists to produce something. Invention is best driven by incentives not allocation.

You might be just fine, but you entire post is a study in Bastiats invisible effects. The costs of these programs are often very high. In this sense, I’m talking about the actual payback, where several government programs are loss-making and require too much of our money. Secondly, the opportunity cost of taking away that money from consumers, producers has a strong domino effect. You’ve really given way too much credit to government. Most economists cite our free markets, degree of competition and lower government regulation as the reason for our innovation.