Myths/markets regulate themselves

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[[category:myths|Business doesn't need government regulation; a truly free market will regulate itself.]]
Myth: Business doesn't need government regulation; a truly free market will regulate itself.

Myth

Example

  • "Saying that regulation works is bullshit. That's the point. You can't regulate better than the market can. Monopolies happened when the government got big. Thank you TR, FDR, and Wilson."[1]

Reality

Markets don't "regulate themselves" in the sense of limiting abuse. When economists talk about how a market "regulates itself," what they mean is that markets reach an equilibrium between supply and demand. This says nothing about whether or not this equilibrium will be a good thing for society.[2]

A marketplace without external regulation deteriorates into a feudal state as the wealthiest collude and use their power to extract more and more wealth from the less-wealthy, resulting in an ever-increasing spiral of wealth concentration accompanied by increasing piracy and squabbling over the remaining wealth as the market's ability to create new wealth deteriorates.

Summary: You can't have a good game without empowered referees.

Sources / Credits