Thank you for your thoughts and questions. Much of what you wrote provides us with an excellent opportunity to look at premises, and how important they are to understanding a situation. So, if I may, I’m going to ask you to scroll down and I’ll do most of this as a back-and-forth dialogue between us:

Larry wrote: Hi Bob, You’ve got some great thoughts here and I’d like to hear your thought on taking your point a step further with “market failures”. A basic principle of basic economics 101 is that a free market does not always result in the outcome that is best for everyone, including those directly involved.

Bob responds: You are absolutely correct in that a free market doesn’t guarantee a succesful outcome for the particpant(s). After all, while some businesses succeed, other businesses fail. I would have to ask you, though, what that proves with regard to your question; that government should run businesses because then they *would* be successful? I don’t think anyone (even defenders of big government) believes that. Larry, free-enteprise does not equate to Utopia. There are no guarantees of success in a free market; there is only a guarantee of choice; that a person who *freely chooses* to do so, can invest in themelves, can create, can produce, etc. as according to their own personal value system. Whether enough consumers *choose* to buy from them in order to make the enterprise a success is strtictly between the two parties. Who ever promised a guarantee of success in a business venture?; the only thing guaranteed by our Constitution is the opportunity should someone decide to go after it. And, by the way, if you’re thinking that the free market doesn’t always have a beneficial result for the consumer, I would agree with that, as well. Remember, though; it goes back to choice; any transaction in a truly free market is because both the buyer and the seller believe that they are making the very best choices in their own interest. I freely decided to buy fish for dinner the other night instead of chicken. Afterwards, I thought, “I wish I had chosen the chicken.” Would I have been better off with a government bureaucrat making that choice for me (which, would be by force)? Next time, I might make a differnet choice based on my own self-interest. Remember, free-market does not equal Utopia, but it’s certainly much better than being the child of a nanny state.

Larry wrote: In principle government intervention is used when there is a market failure of some sort (imperfect or asymetric information, monopoly, etc).

Bob responds: Let’s go back to “premises.” What exactly do you mean by “market failure?” The market itself does not fail; people fail, ideas fail. I don’t really know how “imperfect or asymetric information” fits into the equation. It’s up to the entrepreneur to do his or her homework and make sure the get the correct information. In terms of monopolies, however; this is where I take the biggest issue. I will respectfully challenge anyone to go back into history and tell me where there has been any significant monopoly that was not either an outright government monopoly (i.e., the Postal Servide) or a monopoly supported, endorsed and/or protected by the government. Without government protection (meaning force) there can be no significant monopolies; at least not for long because someone will always come along to offer an alternative.

Larry wrote: If the market were a better solution than the government why isn’t the market doing this on it’s own already?

Bob responds: Larry, with all respect, this is actually the greatest “false premise” of all. Your very question indicates (actually, states a premise) that there has been a free market that was at one time allowed to exist without government interference and that it failed, so government must help. Not the case at all. Rather than take the space to explain it here, I’ll ask you go go back to the first article in this series where I explain that we have never had a totally free market (though at one time we came as close as any country ever has) but that, over the past 80 years or so we have drifted further and further into a socialistic, government-controlled abyss. Your very question – while I appreciate your asking – is itself based on a totally false premise. Remeber, Larry, first there must *be* free-enterprise before it can fail.

Larry writes: Historically, why didn’t this ever happen successfully?

Bob writes: Again, refer to above response.

Larry writes: The government may not do a good job or creat additional problems, but the alternative (nothing) better?

Bob responds: Actually, yes; government doing *absolutely nothing* (except for their Constutionally legitimate enumerated powers; mainly stopping people from force and fraud) is better. Much better. In fact, much, much better. And, every country in which government has gotten its far-reaching tentacles out of the hands of its businesses has seen amazing growth and prosperity.

Larry writes: What’s getting the the way of private sector doing what you propose?

Bob responds: Government being where it doesn’t belong, which is everywhere but where it is Constitutionally authorized to be.

Thank you, Larry, for participating in our dscussion. I hope you didn’t take my responses to you an personal or offensive in any way; that was certainly not the intent and, if they came across that way, please accept my apologies.

Best regards,

Bob

Your second paragraph summed it up perfectly. Thank you…great points!

Bob

Thank you for your response. I think you have excellent points. There is always the possibility of dishonesty (profit, not-for-profit or government), but at least in a free market scenario, the donor has the option to stop providing if fishy circumstances are uncovered.

Come to think of it, isn’t that what a free press is supposed to be about – uncovering any fishy circumstances so that the participant (or taxpayer) can take action to stop the dishonest situation? Of course taking action is easier when the situation is free market as opposed to government forced, eh?

You’ve got some great thoughts here and I’d like to hear your thought on taking your point a step further with “market failures”. A basic principle of basic economics 101 is that a free market does not always result in the outcome that is best for everyone, including those directly involved. You give the example of the free rider problem where someone benefits from the system without putting into it.

In principle government intervention is used when there is a market failure of some sort (imperfect or asymetric information, monopoly, etc).

If the market were a better solution than the government why isn’t the market doing this on it’s own already? Historically, why didn’t this ever happen successfully?

The government may not do a good job or creat additional problems, but the alternative (nothing) better? What’s getting the the way of private sector doing what you propose?

Larry

Here are my thoughts about it:

1. Sure, anything could happen. And not only might there be a natural tendency for that to happen; we also need to keep in mind that free market doesn’t mean necessarily honest and truthworthy (usually, yes; just not always). What it does mean, however, is more accountability, since a free market approach (whether profit or non-profit) is answerable and accountable to the individual doners, as opposed to the government variety in which they simply take by force. The more free-market something is, the less the chances they can get away with being both unscrupulous and lazy and unthinking.

2. Since, in a sense, a for-profit charity would not necessarily be run much differently than a not-for-profit (when considered, both have a vested interest in keeping going whatever they are involved in) I don’t think that would end up happening anymore than the occasional times it does with a non-profit. Mainly, for the following reason . . .

3. There are so many people out there who actually do need these kinds of services that I think we have a long ways to go before “having to manufacture needy people to accept charity is an issue (sad and disturbing as that is).

However, Thomas, you could very well be correct. One thing about free market solutions is that you never know exactly how they’re going to work out. On the other hand, one thing we do know is . . . they always work better than government solutions.

Anyone else care to chime in on Thomas’ excellent point?

Bob