The Regulatory State’s Hidden Agenda

Regulation is routinely sold to the public as consumer protection, but its actual effect is to shield incumbent firms from competition by controlling who may enter a market and how they may operate. The airline industry illustrates this dynamic well, where a state-organized cartel produces the illusion of competing brands while regulatory minimums quietly become service maximums and passengers bear the cost.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

Government regulations are enacted as consumer protections on the premise that the state disciplines markets better than markets discipline firms. In competitive markets with strong property rights, firms must continually satisfy consumers on price and quality or lose them to rivals, and avoid harming property owners who can obtain relief from courts that enforce their rights. Governments face far weaker discipline because ineffective or corrupt politicians can remain in power until the next election, while civil service laws and powerful unions protect their bureaucratic counterparts from dismissal. This lack of accountability helps explain the state’s long record of democide, extortion, expropriation, discrimination, corruption, pollution, and ecocide.

Despite government failures being mountains next to the molehills of so-called “market failure,” mainstream economists trust the government to correct markets. Why? Could this faith reflect economists’ incentives to work for politicians, government agencies, or public universities, or to secure federal research grants at private universities? Whatever the reason, Murray Rothbard points out that policies enacted as consumer protections instead protect incumbents by determining who may enter a market and how firms may operate. The consequences include less consumer choice, suppressed entrepreneurship, artificial scarcity, and lower quality. The resulting frustration fuels populist movements on both the Left and Right as the economy increasingly resembles old-world European mercantilism rather than a genuine market system.…