Market Opacity
I recently had a conversation with a good friend of mine who is fairly conservative. Part of what we talked about was the question of use of governmental regulation to enforce environmentally friendly policies in manufacturing. His argument is that the market should be allowed to sort this sort of thing out. If people care about such things, he argued, then they will be willing to pay a premium for them, and manufacturers will adjust their practices to accommodate this change in market preference. A perfectly coherent argument, but one which is deeply flawed. The most obvious problem is the vigorous battle fought by most manufacturing segments to prevent consumers from having access to the information necessary to make such choices. Another problem is the over-reliance on people's ability to make good long-term decisions; a requirement that seems to fly in the face of common-sense, academic research, and history. Finally, the foundation of this argument comes back to that old canard, the ability of the market to sort things out, which treats the market as some sort of omnipotent force of nature. Let's tear down these illusions.
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