January 12, 2006
The market will not be denied--some random ramblings on economics
There's a good article in Tech Central Station today which traces the decline and fall of the German biotech industry. The pattern is a common one: first the government regulates, imposes controls, and tramples markets. Then the industry withers and relocates.
In all things, the Market will not be denied. It can't be.
This is a concept that has long fascinated me. All transactions between human beings take place on a value consideration basis determined by a host of intangible factors, modified by the constraints of supply and demand. People perceive the Market as harsh, or heartless, or fueled by greed, or [insert your pejorative of choice].
Some have attempted to invent alternate systems. In all cases, they have failed to realize that even if you alter the mechanism of exchange, people still ultimately seek to acquire things most valuable to them at the least cost. This holds true even in communes. "From each according to his ability, to each according to his need," sounds nice, but the fallacy of that statement is contained in the wording.
How do you determine need? Why, by assignment of value of course. When a person works like a slave (and indeed, communism makes the most sense when understood as a form of state-mandated universal slavery), he does so out of fear that failure to do so will result in a denial of needs. Thus, he exchanges his labor for what few goods can be obtained from others (embodied by the state, community, or what have you).
In other words, within the framework allowed by regulations governing commerce, exchange will always happen according to Market principles. The less arbitrary interference (i.e. government intervention), the more efficiently the Market operates, and the more value is created. Government interference in any way, shape, or form by definition destroys value.
It is no coincidence that over the period from 1950 - 1995, the countries which experienced the highest rate of GDP growth were the countries whose laws most respected & protected property rights (specifically: Singapore, Hong Kong, and Taiwan). When governments step in, you get effects like those from the article linked above.
German firms once dominated the biopharmaceutical field. Known as the “medicine chest of Europe,” German drug makers spawned U.S. divisions that are now multinationals in their own right. But today, as The Philadelphia Inquirer detailed in a recent series, there is not one German company among the top ten drug-makers.It is a simple lesson with simple, straight forward, common sense causes and effects. Unfortunately, the vast majority of politicians & bureaucrat decision makers aren't sufficiently smart to understand that lesson. Of course, you could argue that the vast majority of politicians couldn't be morons. If I grant that argument, however, then the only other possible explanation is that the vast majority of politicians are corrupt and/or dishonest.
So I've decided to give them the benefit of the doubt and just chalk it up to stupidity.
posted by Beck on 01.12.06 at 12:17 PM
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