Funmurphys: the Blog

The Triumph of Hope over Experience

Posts Tagged free markets

Competition versus Choice

Nov 13

Posted by Kevin Murphy in Economics | No Comments

OK, if Rand Simberg can write that he wants to ditch the label “capitalism” and replace it with free markets, I’m going to ask that we stop talking about competition in the free market and talk about customer choice instead. I think that choice is the better term because the only competition that helps is where the customer choice determines the winner. Customer choice free from restriction or coercion is really what we mean when we say free in free market. We need to get the focus off the company and on to the customer where it belongs. Sometimes people get the wrong idea with competition and think that if company A does something to hurt company B – like pay stores to not carry the other guys products, or spread false rumors – that is good because it is “competition”.

We’re really not interested with actions that reduce competition between firms in the market place, but with actions that reduce customer choice – and that includes government actions, not just company actions. When the customer isn’t free to choose, then the market isn’t really free, which is both economically inefficient and yes, morally wrong.

I’m going to harken back to my Hayek – who basically said a society should be built on private property, free markets, representative government, and the rule of law. And they really aren’t 4 separate things.

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Enforced Virtue

Jun 22

Posted by Kevin Murphy in Current Events | No Comments

I used to feel strange driving a car. As opposed to a minivan or SUV, that is. Back when I used to do my parental duty and take the Fruit of the Murphy Loins to functions for children, I often had the only car on the lot. And it didn’t matter how green or blue the drivers were. Since then I’ve noticed that typically a person’s politics don’t have much impact on the kind of car they drive. People who complain about sending American jobs overseas have no trouble driving a foreign car; people who warn me about global warming and green house gases have no trouble driving some giant SUV; ardent free traders who loathe unions will only buy American cars.

I am not trying to call hypocrite here because it’s way overused and I don’t think it’s accurate in this case. The point is a lot of factors go into the decision of what kind of vehicle to drive, and as with all parts of life, we have to make comprises and balance competing priorities. That’s life. And that’s why I support free markets in general – they allow the people living with the consequences to be the ones making the decisions.

But in light of the whole CAFE standards issue, more relevant than ever, I have to note while the politics don’t seem to play a large role in what kind of car people drive, it does play a large role in support for CAFE standards. I’m against them, for the simple reason if people prefered gas milage over other features, then we’d be driving high gas milage vehicles. The CAFE standard is based on the illusion that we can all drive vehicles that get better gas milage all other things being equal. They aren’t – there are always tradeoffs. The reason I don’t support increasing CAFE standards isn’t because I don’t support increased gas milage in the abstract, it’s because I know it comes at a price, and a price people aren’t willing to pay.

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