7 ms·

Titans Of Industry Don't Really Like Free Markets

43 points by jakarta 16y ago

axiom 16y ago
Finance is one of the most heavily regulated industries in existence. To hold it up as an example of the pitfalls of unregulated free-markets goes way beyond dishonesty and into the realm of outright stupidity.
- yummyfajitas 16y ago
  Where did the article do this?
  - axiom 16y ago
    Are you being facetious? The whole point of the article is that Visa and MasterCard are "manipulating" the market so the government has to step in to regulate it some more because clearly the free-market isn't working. The evasion is that the only way to actually manipulate the market is through government policy.
    - kgrin 16y ago
      "Finance" is a pretty broad word; the payment card market (at least until recently) has been pretty free of regulation, certainly of regulation that would prevent the sort of abuses highlighted in the article. One interesting point is that the form of regulation that currently exists - the various laws and rules that led to the billion-dollar settlements - still don't have enough teeth (sort of like the "cost-of-doing-business" fines that gross polluters pay that are barely a day's worth of profits).
      - dantheman 16y ago
        The trick to getting people to stop polluting is to remove limited liability and enforce property rights. If you have to ensure your business, your insurer will make sure that you follow their regulations and if you don't they won't pay and you'll go bankrupt. The property owner gets to sue the polluter, and thus they get compensated instead of the fine going to the government it goes to those who are hurt.
        notauser 16y ago
        The reason we have limited liability is because we wished to promote company ownership to more people. Personally I'm right behind the idea of telling people that if they, or their pension fund, owns one share in BP they are jointly and severally liable for the entire corporate obligation of the company. It's certainly make more people take exercising their oversight duties more seriously. Attendance at shareholder meetings to elect boards would be much higher. But I think it might have a few unexpected impacts on the availability of capital that you should think about. There aren't many people who would be willing to take that risk.
        dantheman 16y ago
        I think things would change, but I don't know how much. Through insurance and bonding the risk can be mitigated, but the cost of owning the stock (the rates you need to pay) are now determined by the companies behavior so it becomes in their best interest to not cut corners. By aligning interests the problem goes away.
      - axiom 16y ago
        Honestly you would call it free of regulation? take a look at others who have tried to start payment service companies - even in the relatively free internet space it's an absolute nightmare. If you actually tried to start a new credit card company your number one barrier is not providing a better service than VISA but somehow managing to deal with the absurd amounts of red tape and regulations that go along with that. e-Gold is a nice shining example of the kind of insanity that's involved. Finance, healthcare and education are the top 3 most heavily regulated industries in the world. Now purely as an intellectual exercise, what are the most backwards, broken, evil industries that everyone always complains about?
    - loewenskind 16y ago
      >The evasion is that the only way to actually manipulate the market is through government policy. I don't agree with this. If you do really well in the market you can get big enough that no one can compete anymore and you no longer even need to try. Look at Microsoft for an example. Do you think they were manipulating government policies in the rest of the world?
    - maxharris 16y ago
      I think I agree with you, as long as what you mean is: "they are evading the fact that the only way to actually manipulate the market is through government policy."
- bhiggins 16y ago
  Tell me about it! All those regulations over credit default swaps and... oh wait, there are none.
  - anamax 16y ago
    > All those regulations over credit default swaps AIG was heavily regulated. In fact the insurance was a creation of regulators so they could justify forcing regulated banks to hold MBOs as assets. And then there's Fannie and Freddie - both creatures of regulation. And the bond rating monopoly granted by the SEC.... Regulation is systemic risk.
nhebb 16y ago
subtitled; As Kevin Drum says, they prefer monopolies like the ones Visa and MasterCard enjoy That's not a monopoly.
- ladyada 16y ago
  its not technically, but it is practically. i wouldn't say they -collude- but their discount rates (what merchants pay) have been going up. there are also new, completely arbitrary fees (yay NABU). and there is no incentive for prices to go down because the purchaser (the merchant) is separate from the consumer (the customer). V/MC rates could eventually inch up to 4 or 5% and there's pretty much nothing anybody can do about it except pass the costs to the customer.
- kgrin 16y ago
  At one point in the article he makes the correction that it's technically a "duopoly" - but certainly not a free market.
  - notauser 16y ago
    It is a free market (a free market is a market without economic intervention and regulation by government) it just isn't a perfect market (perfect competition occurs in markets in which no participant has market power).
sabat 16y ago
The ultimate goal for any capitalist worth his pinstripes is not to compete in a free market, it’s to get control over a market. Merge. Acquire. Consolidate. Squeeze. Fewer competitors means less competition. I'd argue that this is not capitalism he's describing. Capitalism, as Smith described it, involved relatively small businesses competing with each other -- not the quasi-fascism that the author describes.
- loewenskind 16y ago
  I think the kids these days are calling it "Corporatism".
  - sabat 16y ago
    "Fascism should more properly be called corporatism because it is the merger of state and corporate power." --Benito Mussolini
jbellis 16y ago
Related point: big corporations _love_ regulation, since they can afford the cost but startups they might otherwise have to compete with cannot.
- notauser 16y ago
  It should be obvious that they love some regulation, but not all of it. For example if AT&T and Verizon are so keen on it then why are they spending so much money fighting net neutrality regulation? Regulatory oversight of big players in one market to stop them crushing smaller players in dependent markets doesn't have to impose any obligations at all on those smaller players. Think about the App Store - if Apple were regulated so that they had to approve Google Voice-like apps, which Application Writers would that impose obligations on? Regulations are also sometimes set up so that they only touch big players. Monopoly regulation being the prime example. Finally some startups have actually gained advantage from regulation by ignoring it and choosing to accept the risk of their LLC possibly being sued. That's a heck of a lot cheaper than thousands of lawyer-hours and huge technical complexity. Skype and 911 is a good example.
- Robin_Message 16y ago
  Here I think you can distinguish between types of regulation. Lots of bureaucracy, with forms to fill in and specific certifications to get can be onerous to startups. For example, having to get FCC approval for wireless devices falls into this category. There isn't really a way around this, other than to make sure the bureaucracy is not excessive, which brings us to a tautology - excessive bureaucracy is excessive. However, much regulation is done proactively, for free. For example, restaurants don't pay for food hygiene inspectors, and if they have good hygiene practices the costs are minimal (and if they don't, we want them to fail.) I agree we want regulation to be of the second type, but sometimes the first type is the only practical way to do it (and you could still make it cheaper, e.g. by doing FCC-compliance tests for free.) Also, in reality there is a sliding scale for small and innovative companies, e.g. PayPal or Pandora. TL;DR Bureaucratic love-ins aside, regulation doesn't need to fall any heavier on the little guy than the big guy, and the little guy can often just ignore it (at least until they are big.)
deleted 16y ago
[deleted]
Dove 16y ago
This doesn't make sense to me. It's not the behavior of the credit card company that's a problem here. It's the behavior of the merchant. He's quoting the same price to people who pay with cash and people who pay with credit, even though he makes more money on the people who pay with cash. Why is he doing that? He should be offering them a discount or something. Heck, why is he absorbing the transaction fees and folding them into prices in the first place? Doesn't that just make his prices look bad? Shouldn't he pass the fees on transparently? That's all that would be needed for competition. Not regulation. The people doing the paying just need to see the price.
- petewarden 16y ago
  The credit-card company's agreements bar merchants from offering those sort of discounts: http://www.datawedge.com/news/newsletters/june07.htm http://www.datawedge.com/news/newsletters/june07.htm This is why government action seems reasonable in this case. You can make the argument that we shouldn't have ended up with an effective duopoly, that regulation should be lighter to allow more competition that would drive out this sort of 'rent-seeking' behavior, and I'd be sympathetic. Unfortunately I don't think that sort of wider overhaul is politically possible, and even patching up the existing regulations with yet more seems better than doing nothing.
  - Dove 16y ago
    Ah. That's the same problem we encounter with medicine and insurance customers. Is it ever a good idea to let one party dictate what another can charge a third? Seems an obvious way to leverage a market majority into a monopoly.
- houseabsolute 16y ago
  My understanding is that credit card companies often have terms that forbid the companies that use the from charging differently for customers using cards than customers using cash.
  - klous 16y ago
nerme 16y ago
I can't help but think that it is advantageous for a general population to have government regulate currencies, be they physical objects, promissory notes, or digital representations. If you follow the history of currency from a piece of gold of unknown purity, to gold coins produced by governments, to the establishment of central banks, to outlawing privately issued banknotes, to fiat currencies... ...you'll notice that all of these are created to keep up with the demands of a technologically driven advancement in the state of economic affairs. If I showed up to your store with a lump of gold for trade, we would have to go find someone we both trusted to figure out how pure it was. That takes time and money. That inhibits commerce from taking place. Having the government get involved and eventually come to manage the digital exchange of currency would be no different than these analogous historical transitions. It doesn't make sense to completely rely on private companies for a type of economic transaction that has already become the dominant way that value is exchanged. Especially when those private companies require the full backing of nation-states and their currencies to even have any sort of business model to begin with. Why else would Visa and MasterCard have not yet created their own currencies? You can't have a free market if you don't have a viable marketplace to begin with.
- vrotaru 16y ago
  > If you follow the history of currency from a piece of gold of unknown purity, to gold coins produced by governments, to the establishment of central banks, to outlawing privately issued banknotes, to fiat currencies... You trust governments way to much. Especially here "... from a piece of gold of unknown purity, to gold coins produced by governments". If nothing else, because governments in general were (and still are) famous for debasing the currency, not for keeping it honest. The story of taler coin is telling in this regard. It was just a coin issued by a specific mint, which win international recognition through competition with currencies produced by other mints. So.. not even close.
- david 16y ago
  >> If I showed up to your store with a lump of gold for trade, we would have to go find someone we both trusted to figure out how pure it was. That takes time and money. That inhibits commerce from taking place. It's the same with paper. If I show up to your store with a note and tell you it's worth x amount, a third party who we both trust has to back up that that note is indeed worth that value. You're solution, which isn't really a solution at all, is to just have the government take the place of that third party. This is replacing a free market with a coercive monopoly, and carries with it the same repercussions as any other type of anti-free-market regulation. Now we both still agree to treat my note or gold as having x value because it is endorsed by a third party, but now we choose this third party not out of trust, but because there really isn't much of a choice. So now that there aren't any competing currencies, innovations like the ones you mentioned will happen much slower, and since maintaining our trust is no longer needed, the criteria for ensuring that a certain paper note or gold piece actually has it's claimed value will be much less strict. Now the currency-regulator can do things like print too many paper bills, devaluing bills individually, while putting the value of the newly printed bills right into their pocket--and without repercussion. And I think that's only the tip of the iceberg. Regulating currency is no different than regulating telephone lines or corn. You said "You can't have a free market if you don't have a viable marketplace to begin with", but government regulated currency isn't a viable marketplace at all, and you really can't build a free market on top of an unfree one anyways.
DanielBMarkham 16y ago
As an American, I remember back when the Republicans passed the "Personal Accountability Act" or some such. The gist was that credit card debt was going to be even harder to get out of when a person goes bankrupt. The spin? People need to be responsible. When they make debts, they have a moral obligation to pay them. Therefore, the government shouldn't help them do something immoral. Never mind the fact that the entire business model of credit is based on assuming a risk the borrower doesn't pay. If government takes away that risk, well, it's like printing money. Which is exactly what the credit card companies are doing. I was with the author until this point: That’s what should happen in a healthy market. Credit and debit cards aren’t a healthy market. That’s why regulation is necessary. Whoa. Hold on a minute. Regulation is the tool of the monopolist, not his enemy. I told the story about the Republicans to make a point: the game is for special interests like PACs to write legislation that then makes their members more powerful. The best (sometimes the only) way to do this is to pretend like you're regulating or cleaning up the industry in question. So the Congressman who's all about cleaning up the finance industry? His staff is the one writing the 2,000 page bill that nobody understands yet somehow will be a boon to the finance industry in the next five years or so. When folks figure out that the bill actually made matters worse, he'll be the guy on TV telling us that what we need is actually another bill, much better than the first one, and the cycle continues. (Just got through reading a great article on just this process from an HN link: http://www.theatlantic.com/magazine/print/2009/05/the-quiet-coup/7364/ http://www.theatlantic.com/magazine/print/2009/05/the-quiet-...) The answer, I think, is that government has a critical role in defining things. How about defining what a life insurance policy is? Make seven different levels. If you sell life insurance, you have to meet one of the levels. Or in this case creating a standardized P2P clearing process for payments? Nobody needs to force people to use it, heck, if you can standardize the way payments are made between parties such that the banks are mostly out of the picture? Visa and MasterCard just go away. Not that this will happen. Too many connections and powerful people involved. But the point is that there is a spot between chaos and total regulation where government can and should do a lot of good. That point, in a lot of cases, is just in making definitions and forcing market players to use them. These choices are presented almost always as false dichotomies: one extreme or the other. That's because arguments sell newspapers and make people watch TV shows. It's also because in most cases politicians get more votes from the argument than from the solution (another reason why the regulatory bills that create new problems will come forth ad infinitum)
joeycfan 16y ago
You are so right - the first thing your free-enterpriser usually does is try and get rid of free enterprise by destroying his competition and making sure you can only buy from him.

43 points by jakarta 16y ago

axiom 16y ago

Finance is one of the most heavily regulated industries in existence. To hold it up as an example of the pitfalls of unregulated free-markets goes way beyond dishonesty and into the realm of outright stupidity.

yummyfajitas 16y ago
Where did the article do this?
- axiom 16y ago
  Are you being facetious? The whole point of the article is that Visa and MasterCard are "manipulating" the market so the government has to step in to regulate it some more because clearly the free-market isn't working. The evasion is that the only way to actually manipulate the market is through government policy.
  - kgrin 16y ago
    "Finance" is a pretty broad word; the payment card market (at least until recently) has been pretty free of regulation, certainly of regulation that would prevent the sort of abuses highlighted in the article. One interesting point is that the form of regulation that currently exists - the various laws and rules that led to the billion-dollar settlements - still don't have enough teeth (sort of like the "cost-of-doing-business" fines that gross polluters pay that are barely a day's worth of profits).
    - dantheman 16y ago
      The trick to getting people to stop polluting is to remove limited liability and enforce property rights. If you have to ensure your business, your insurer will make sure that you follow their regulations and if you don't they won't pay and you'll go bankrupt. The property owner gets to sue the polluter, and thus they get compensated instead of the fine going to the government it goes to those who are hurt.
      - notauser 16y ago
        The reason we have limited liability is because we wished to promote company ownership to more people. Personally I'm right behind the idea of telling people that if they, or their pension fund, owns one share in BP they are jointly and severally liable for the entire corporate obligation of the company. It's certainly make more people take exercising their oversight duties more seriously. Attendance at shareholder meetings to elect boards would be much higher. But I think it might have a few unexpected impacts on the availability of capital that you should think about. There aren't many people who would be willing to take that risk.
        dantheman 16y ago
        I think things would change, but I don't know how much. Through insurance and bonding the risk can be mitigated, but the cost of owning the stock (the rates you need to pay) are now determined by the companies behavior so it becomes in their best interest to not cut corners. By aligning interests the problem goes away.
    - axiom 16y ago
      Honestly you would call it free of regulation? take a look at others who have tried to start payment service companies - even in the relatively free internet space it's an absolute nightmare. If you actually tried to start a new credit card company your number one barrier is not providing a better service than VISA but somehow managing to deal with the absurd amounts of red tape and regulations that go along with that. e-Gold is a nice shining example of the kind of insanity that's involved. Finance, healthcare and education are the top 3 most heavily regulated industries in the world. Now purely as an intellectual exercise, what are the most backwards, broken, evil industries that everyone always complains about?
  - loewenskind 16y ago
    >The evasion is that the only way to actually manipulate the market is through government policy. I don't agree with this. If you do really well in the market you can get big enough that no one can compete anymore and you no longer even need to try. Look at Microsoft for an example. Do you think they were manipulating government policies in the rest of the world?
  - maxharris 16y ago
    I think I agree with you, as long as what you mean is: "they are evading the fact that the only way to actually manipulate the market is through government policy."
bhiggins 16y ago
Tell me about it! All those regulations over credit default swaps and... oh wait, there are none.
- anamax 16y ago
  > All those regulations over credit default swaps AIG was heavily regulated. In fact the insurance was a creation of regulators so they could justify forcing regulated banks to hold MBOs as assets. And then there's Fannie and Freddie - both creatures of regulation. And the bond rating monopoly granted by the SEC.... Regulation is systemic risk.

nhebb 16y ago

subtitled; As Kevin Drum says, they prefer monopolies like the ones Visa and MasterCard enjoy That's not a monopoly.

ladyada 16y ago
its not technically, but it is practically. i wouldn't say they -collude- but their discount rates (what merchants pay) have been going up. there are also new, completely arbitrary fees (yay NABU). and there is no incentive for prices to go down because the purchaser (the merchant) is separate from the consumer (the customer). V/MC rates could eventually inch up to 4 or 5% and there's pretty much nothing anybody can do about it except pass the costs to the customer.
kgrin 16y ago
At one point in the article he makes the correction that it's technically a "duopoly" - but certainly not a free market.
- notauser 16y ago
  It is a free market (a free market is a market without economic intervention and regulation by government) it just isn't a perfect market (perfect competition occurs in markets in which no participant has market power).

sabat 16y ago

The ultimate goal for any capitalist worth his pinstripes is not to compete in a free market, it’s to get control over a market. Merge. Acquire. Consolidate. Squeeze. Fewer competitors means less competition. I'd argue that this is not capitalism he's describing. Capitalism, as Smith described it, involved relatively small businesses competing with each other -- not the quasi-fascism that the author describes.

loewenskind 16y ago
I think the kids these days are calling it "Corporatism".
- sabat 16y ago
  "Fascism should more properly be called corporatism because it is the merger of state and corporate power." --Benito Mussolini

jbellis 16y ago

Related point: big corporations _love_ regulation, since they can afford the cost but startups they might otherwise have to compete with cannot.

notauser 16y ago
It should be obvious that they love some regulation, but not all of it. For example if AT&T and Verizon are so keen on it then why are they spending so much money fighting net neutrality regulation? Regulatory oversight of big players in one market to stop them crushing smaller players in dependent markets doesn't have to impose any obligations at all on those smaller players. Think about the App Store - if Apple were regulated so that they had to approve Google Voice-like apps, which Application Writers would that impose obligations on? Regulations are also sometimes set up so that they only touch big players. Monopoly regulation being the prime example. Finally some startups have actually gained advantage from regulation by ignoring it and choosing to accept the risk of their LLC possibly being sued. That's a heck of a lot cheaper than thousands of lawyer-hours and huge technical complexity. Skype and 911 is a good example.
Robin_Message 16y ago
Here I think you can distinguish between types of regulation. Lots of bureaucracy, with forms to fill in and specific certifications to get can be onerous to startups. For example, having to get FCC approval for wireless devices falls into this category. There isn't really a way around this, other than to make sure the bureaucracy is not excessive, which brings us to a tautology - excessive bureaucracy is excessive. However, much regulation is done proactively, for free. For example, restaurants don't pay for food hygiene inspectors, and if they have good hygiene practices the costs are minimal (and if they don't, we want them to fail.) I agree we want regulation to be of the second type, but sometimes the first type is the only practical way to do it (and you could still make it cheaper, e.g. by doing FCC-compliance tests for free.) Also, in reality there is a sliding scale for small and innovative companies, e.g. PayPal or Pandora. TL;DR Bureaucratic love-ins aside, regulation doesn't need to fall any heavier on the little guy than the big guy, and the little guy can often just ignore it (at least until they are big.)

deleted 16y ago

[deleted]

Dove 16y ago

This doesn't make sense to me. It's not the behavior of the credit card company that's a problem here. It's the behavior of the merchant. He's quoting the same price to people who pay with cash and people who pay with credit, even though he makes more money on the people who pay with cash. Why is he doing that? He should be offering them a discount or something. Heck, why is he absorbing the transaction fees and folding them into prices in the first place? Doesn't that just make his prices look bad? Shouldn't he pass the fees on transparently? That's all that would be needed for competition. Not regulation. The people doing the paying just need to see the price.

petewarden 16y ago
The credit-card company's agreements bar merchants from offering those sort of discounts: http://www.datawedge.com/news/newsletters/june07.htm http://www.datawedge.com/news/newsletters/june07.htm This is why government action seems reasonable in this case. You can make the argument that we shouldn't have ended up with an effective duopoly, that regulation should be lighter to allow more competition that would drive out this sort of 'rent-seeking' behavior, and I'd be sympathetic. Unfortunately I don't think that sort of wider overhaul is politically possible, and even patching up the existing regulations with yet more seems better than doing nothing.
- Dove 16y ago
  Ah. That's the same problem we encounter with medicine and insurance customers. Is it ever a good idea to let one party dictate what another can charge a third? Seems an obvious way to leverage a market majority into a monopoly.
houseabsolute 16y ago
My understanding is that credit card companies often have terms that forbid the companies that use the from charging differently for customers using cards than customers using cash.
- klous 16y ago

nerme 16y ago

I can't help but think that it is advantageous for a general population to have government regulate currencies, be they physical objects, promissory notes, or digital representations. If you follow the history of currency from a piece of gold of unknown purity, to gold coins produced by governments, to the establishment of central banks, to outlawing privately issued banknotes, to fiat currencies... ...you'll notice that all of these are created to keep up with the demands of a technologically driven advancement in the state of economic affairs. If I showed up to your store with a lump of gold for trade, we would have to go find someone we both trusted to figure out how pure it was. That takes time and money. That inhibits commerce from taking place. Having the government get involved and eventually come to manage the digital exchange of currency would be no different than these analogous historical transitions. It doesn't make sense to completely rely on private companies for a type of economic transaction that has already become the dominant way that value is exchanged. Especially when those private companies require the full backing of nation-states and their currencies to even have any sort of business model to begin with. Why else would Visa and MasterCard have not yet created their own currencies? You can't have a free market if you don't have a viable marketplace to begin with.

vrotaru 16y ago
> If you follow the history of currency from a piece of gold of unknown purity, to gold coins produced by governments, to the establishment of central banks, to outlawing privately issued banknotes, to fiat currencies... You trust governments way to much. Especially here "... from a piece of gold of unknown purity, to gold coins produced by governments". If nothing else, because governments in general were (and still are) famous for debasing the currency, not for keeping it honest. The story of taler coin is telling in this regard. It was just a coin issued by a specific mint, which win international recognition through competition with currencies produced by other mints. So.. not even close.
david 16y ago
>> If I showed up to your store with a lump of gold for trade, we would have to go find someone we both trusted to figure out how pure it was. That takes time and money. That inhibits commerce from taking place. It's the same with paper. If I show up to your store with a note and tell you it's worth x amount, a third party who we both trust has to back up that that note is indeed worth that value. You're solution, which isn't really a solution at all, is to just have the government take the place of that third party. This is replacing a free market with a coercive monopoly, and carries with it the same repercussions as any other type of anti-free-market regulation. Now we both still agree to treat my note or gold as having x value because it is endorsed by a third party, but now we choose this third party not out of trust, but because there really isn't much of a choice. So now that there aren't any competing currencies, innovations like the ones you mentioned will happen much slower, and since maintaining our trust is no longer needed, the criteria for ensuring that a certain paper note or gold piece actually has it's claimed value will be much less strict. Now the currency-regulator can do things like print too many paper bills, devaluing bills individually, while putting the value of the newly printed bills right into their pocket--and without repercussion. And I think that's only the tip of the iceberg. Regulating currency is no different than regulating telephone lines or corn. You said "You can't have a free market if you don't have a viable marketplace to begin with", but government regulated currency isn't a viable marketplace at all, and you really can't build a free market on top of an unfree one anyways.

DanielBMarkham 16y ago

As an American, I remember back when the Republicans passed the "Personal Accountability Act" or some such. The gist was that credit card debt was going to be even harder to get out of when a person goes bankrupt. The spin? People need to be responsible. When they make debts, they have a moral obligation to pay them. Therefore, the government shouldn't help them do something immoral. Never mind the fact that the entire business model of credit is based on assuming a risk the borrower doesn't pay. If government takes away that risk, well, it's like printing money. Which is exactly what the credit card companies are doing. I was with the author until this point: That’s what should happen in a healthy market. Credit and debit cards aren’t a healthy market. That’s why regulation is necessary. Whoa. Hold on a minute. Regulation is the tool of the monopolist, not his enemy. I told the story about the Republicans to make a point: the game is for special interests like PACs to write legislation that then makes their members more powerful. The best (sometimes the only) way to do this is to pretend like you're regulating or cleaning up the industry in question. So the Congressman who's all about cleaning up the finance industry? His staff is the one writing the 2,000 page bill that nobody understands yet somehow will be a boon to the finance industry in the next five years or so. When folks figure out that the bill actually made matters worse, he'll be the guy on TV telling us that what we need is actually another bill, much better than the first one, and the cycle continues. (Just got through reading a great article on just this process from an HN link: http://www.theatlantic.com/magazine/print/2009/05/the-quiet-coup/7364/ http://www.theatlantic.com/magazine/print/2009/05/the-quiet-...) The answer, I think, is that government has a critical role in defining things. How about defining what a life insurance policy is? Make seven different levels. If you sell life insurance, you have to meet one of the levels. Or in this case creating a standardized P2P clearing process for payments? Nobody needs to force people to use it, heck, if you can standardize the way payments are made between parties such that the banks are mostly out of the picture? Visa and MasterCard just go away. Not that this will happen. Too many connections and powerful people involved. But the point is that there is a spot between chaos and total regulation where government can and should do a lot of good. That point, in a lot of cases, is just in making definitions and forcing market players to use them. These choices are presented almost always as false dichotomies: one extreme or the other. That's because arguments sell newspapers and make people watch TV shows. It's also because in most cases politicians get more votes from the argument than from the solution (another reason why the regulatory bills that create new problems will come forth ad infinitum)

joeycfan 16y ago

You are so right - the first thing your free-enterpriser usually does is try and get rid of free enterprise by destroying his competition and making sure you can only buy from him.