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I have no words for how absurd this is. What happened to free market economy? How are americans totally fine with a company being denied its ability to sell it

I have no words for how absurd this is. What happened to free market economy? How are americans totally fine with a company being denied its ability to sell its product to its end users? And it's probably the exact same people later chanting that Europe is communist...

lupin_sansei 12y ago
Milton Friedman's quote is apt here: "With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves."
- Perceval 12y ago
  Adam Smith too: "Their [those who live by profit] superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction, that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always in the interest of the dealers... "The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order or men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." Adam Smith, The Wealth of Nations, Chap. XI, Part III, "Rent of Land: Conclusion".
baddox 12y ago
It has little to do with logic, ideologies, or specific political or ethical beliefs. It's just really basic economics. Concentrated interests beat dispersed interests.
kmfrk 12y ago
People tend to prefer an unregulated market, when they are challenging an incumbent industry. When they become the dominant one, they kick the ladder down.
- baddox 12y ago
  Which makes perfect sense. It fits all the incentives and options available to firms of various sizes.
  - TeMPOraL 12y ago
    Those at the top have more enemies than those at the bottom. When you're on the highest rung of the ladder, everyone below you will plot to depose you and take your place. At the bottom of the ladder it's easy to live in chaos, sometimes the chaos is even your friend, as it can propel you up the ladder. When you're close to top, you have too much enemies to deal with, so you need to create structural solutions that will let you focus on doing something else than just not getting shot down. This applies equally to companies and to revolutions. (and this makes me wonder how will the life of Frank Underwood fare in the third season of House of Cards)
lupin_sansei 12y ago
According to Heritage's Economic Freedom Index, the US economy is no longer classified as "Free (market)" but now as "mostly free": http://www.heritage.org/index/country/unitedstates http://www.heritage.org/index/country/unitedstates
- tobinfricke 12y ago
  The Heritage Foundation is hardly an objective source. http://en.wikipedia.org/wiki/The_Heritage_Foundation http://en.wikipedia.org/wiki/The_Heritage_Foundation
  - maratd 12y ago
    There's no such thing as an objective source.
    - randyrand 12y ago
      only repeatable and verifiable objective facts. yay science! note: I have no idea if the source we're talking about is repeatable or verifiable.
  - lupin_sansei 12y ago
    Time to learn about logical fallacies http://en.wikipedia.org/wiki/Ad_hominem http://en.wikipedia.org/wiki/Ad_hominem
    - AlexandrB 12y ago
      The Economic Freedom Index is an index created by the Heritage Foundation itself, not some law of nature. As such it's basically political opinion - how is the organization's political leanings/bias exempt from scrutiny in this case? Edit: from Wikipedia: > An ad hominem (Latin for "to the man" or "to the person"[1]), short for argumentum ad hominem, is a general category of fallacies in which a claim or argument is rejected on the basis of some irrelevant fact about the author of or the person presenting the claim or argument. Note that "irrelevant fact" does not really apply here since the political biases of an organization publishing a political index are very much relevant to the discussion. For example: http://www.heritage.org/index/government-spending http://www.heritage.org/index/government-spending The position that more government spending always means less freedom is a political one, as is their choice of growth curve. > The scale for scoring government spending is non-linear, which means that government spending that is close to zero is lightly penalized, while levels of government spending that exceed 30 percent of GDP lead to much worse scores in a quadratic fashion (for example, doubling spending yields four times less freedom). Only extraordinarily large levels of government spending—for example, over 58 percent of GDP—receive a score of zero. Let's take a look at labor freedom: http://www.heritage.org/index/labor-freedom http://www.heritage.org/index/labor-freedom and http://www.doingbusiness.org/methodology/employing-workers http://www.doingbusiness.org/methodology/employing-workers Now we see that that economic freedom in this case actually means freedom for employers to exploit their workers, with negative factors like "rigidity of hours" being determined by paid vacation days. Yet nowhere are factors like regulations on non-compete and no-moonlighting employment clauses factored in. So again a political opinion on what freedom of labor means - the freedom to exploit labor rather than the freedom of labor to seek work or change jobs.
frandroid 12y ago
> What happened to free market economy? It never existed...
atlantic 12y ago
It would be interesting to build economic models of markets that take into account the capacity of large agents to make changes to the rules that govern the functioning of the market itself (via their influence on the legislative process through lobbying). I suspect that if such models were studied seriously, economists would have a much less rosy view of the wonders of the free-market economy. And the same goes for the benefits of a democratic system versus other forms of government. Because lobbying is not the exception - it's absolutely standard.
- S4M 12y ago
  That's an excellent comment! I had some classes of economics (Msc level), but I have never heard of that. If you think in terms of game theory where the actors are the big companies, and have the choice between lobbying and not lobbying (let's say they have some money they can either invest in R&D, either in lobbying), you can see that the Nash equilibrium will push the actors into lobbying.
  - atlantic 12y ago
    Very often our discussions on these topics tend to dwell on the supposedly unethical behaviour of this or that corporate actor. Instead, maybe we should recognize that incentives to lobby (and sometimes, to cheat and bribe), are built into the system, and focus on changing the institutions so that such incentives are removed. And in this area, modelling could play a big role.
    - nitrogen 12y ago
      Since we're talking about a feedback loop, rather than a straight-line system with a start and an end, there is no "right" place to intervene; we have to adjust every entity in the feedback loop together. A lot of popular debates come down to people treating a feedback loop as a straight line, and picking different points on the loop as starting points. Some examples: nature vs. nurture, lobbying vs. corruption, chemistry vs. thoughts (e.g. in cases of depression).
- baddox 12y ago
adventured 12y ago
I'm also surprised that people think America is Capitalistic and or a free market. That seems to stem from image rather than substance. What happened is a century of regulations, laws, and commingling between politicians, government in general and business. The US is a heavily regulated welfare state. In this case the regulation is set up to benefit the ever expanding lust for power by the government, and to shield the government protected monopolies in each segment of the economy. Decades ago it was a mixed economy. A century ago it was a near-free market. I've seen it called everything from fascism-light, to corporatism, to inverted totalitarianism. Whatever you call it, it's anything but a free market.
CmonDev 12y ago
>> What happened to free market economy? Too strong of a political instrument not to use for manipulation.
vermontdevil 12y ago
The problem is the byzantine nature of the car market in the US. It's split up in 50 states plus DC. Thus you have all these patchwork set of laws. It favors the local dealer easily as they get quite cozy with the state legislature and dictate terms. AKA a regulatory capture environment. The Feds will not touch this issue as it's too much of a political landmine to consolidate the whole market to be regulated on a federal level. Everything else about the car except sales is consolidated (safety, design, emissions, etc) This is the nature of the Untied States - 50 states doing their own thing as long as the economy is within the borders. See health care, insurance, funeral business, hairdressers, and so on. The model has its pluses and drawbacks. Unfortunately we are seeing the drawback with Tesla. The only option I think is for Tesla to focus on their online presence and in the long term people will develop habits of buying a car through that way. Then maybe finally the stupid dealer cartel will die off.
- freehunter 12y ago
  Tesla might get away with it now, but in the long run many people aren't going to buy a car without test driving it or at least getting inside and feeling around. Some buyers will purchase purely on looks and nothing else, but others want to buy the way the car feels, how much storage is inside, or how it drives. Then again, it might depend on the return policy. My wife buys tons of clothes online and returns all the stuff she doesn't like due to the retailer's free return policy.
  - smackfu 12y ago
    It seems like Tesla should still be able to give test drives and have a showroom without actually selling the car on-site.
  - mikeash 12y ago
    They already separate test drives from purchases somewhat. I test drove one last year in Maryland and the guy who handled it was careful and explicit about never, ever discussing anything like an actual purchase of the car, because that would be illegal. He wouldn't discuss prices or ordering or anything of the like, he was just there to let me drive the car and tell me all about the actual equipment. This is obviously stupid, but if it's legal then it solves the problem of needing to try before you buy online. Well, mostly. Some people will want to try the actual unit they're going to purchase. A reputation for quality and a good warranty should be able to overcome that with time.
smackfu 12y ago
>What happened to free market economy? New players like a free market economy. Existing players like laws that preserve the status quo.
dualogy 12y ago
> What happened to free market economy? An effective advertising slogan for "the West" during the Cold War, also a nice ingredient for speeches and trade pacts..
Lagged2Death 12y ago
What happened to free market economy? How are americans totally fine with a company being denied its ability to sell its product to its end users? What happened was: The car makers used their position of power over the dealerships - power they had as a result of the free market economy, more or less - to screw them over. The dealers fought back with custom legislation. It's been this way for 70+ years now. The "free market economy," then as now, turns out to be its own worst enemy. http://www.newyorker.com/magazine/2006/09/04/dealers-choice-2 http://www.newyorker.com/magazine/2006/09/04/dealers-choice-...
- kordless 12y ago
  I believe 'levers of power' arise by entities exploiting simple liberties which are given and assumed in a free economy. Once those liberties are hedged and protected from use by others, we scramble around trying to figure out how to get the lever away from the entity who holds it. Monkeys with sticks and rocks, if you will.
  - ericcope 12y ago
    I like the metaphor... whats interesting is the people complaining about the monkeys with sticks and rocks were the ones who gave the monkeys the sticks and rocks and now are sore about it.
- ericcope 12y ago
  The dealers chose to enact legislation rather than quit a business model that was being squeezed by their supplier. Find me a business that doesn't squeeze suppliers and vendors to increase their bottom line. The worst enemy of the free market isn't itself, its the crony capitalism that takes place when government gets involved. Its rare (if ever) that the intentions become the outcomes.
  - Lagged2Death 12y ago
    I'd say this is an almost perfect example of intentions becoming outcomes, actually.

lupin_sansei 12y ago

Milton Friedman's quote is apt here: "With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves."

Perceval 12y ago
Adam Smith too: "Their [those who live by profit] superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction, that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always in the interest of the dealers... "The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order or men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." Adam Smith, The Wealth of Nations, Chap. XI, Part III, "Rent of Land: Conclusion".

baddox 12y ago

It has little to do with logic, ideologies, or specific political or ethical beliefs. It's just really basic economics. Concentrated interests beat dispersed interests.

kmfrk 12y ago

People tend to prefer an unregulated market, when they are challenging an incumbent industry. When they become the dominant one, they kick the ladder down.

baddox 12y ago
Which makes perfect sense. It fits all the incentives and options available to firms of various sizes.
- TeMPOraL 12y ago
  Those at the top have more enemies than those at the bottom. When you're on the highest rung of the ladder, everyone below you will plot to depose you and take your place. At the bottom of the ladder it's easy to live in chaos, sometimes the chaos is even your friend, as it can propel you up the ladder. When you're close to top, you have too much enemies to deal with, so you need to create structural solutions that will let you focus on doing something else than just not getting shot down. This applies equally to companies and to revolutions. (and this makes me wonder how will the life of Frank Underwood fare in the third season of House of Cards)

lupin_sansei 12y ago

According to Heritage's Economic Freedom Index, the US economy is no longer classified as "Free (market)" but now as "mostly free": http://www.heritage.org/index/country/unitedstates http://www.heritage.org/index/country/unitedstates

tobinfricke 12y ago
The Heritage Foundation is hardly an objective source. http://en.wikipedia.org/wiki/The_Heritage_Foundation http://en.wikipedia.org/wiki/The_Heritage_Foundation
- maratd 12y ago
  There's no such thing as an objective source.
  - randyrand 12y ago
    only repeatable and verifiable objective facts. yay science! note: I have no idea if the source we're talking about is repeatable or verifiable.
- lupin_sansei 12y ago
  Time to learn about logical fallacies http://en.wikipedia.org/wiki/Ad_hominem http://en.wikipedia.org/wiki/Ad_hominem
  - AlexandrB 12y ago
    The Economic Freedom Index is an index created by the Heritage Foundation itself, not some law of nature. As such it's basically political opinion - how is the organization's political leanings/bias exempt from scrutiny in this case? Edit: from Wikipedia: > An ad hominem (Latin for "to the man" or "to the person"[1]), short for argumentum ad hominem, is a general category of fallacies in which a claim or argument is rejected on the basis of some irrelevant fact about the author of or the person presenting the claim or argument. Note that "irrelevant fact" does not really apply here since the political biases of an organization publishing a political index are very much relevant to the discussion. For example: http://www.heritage.org/index/government-spending http://www.heritage.org/index/government-spending The position that more government spending always means less freedom is a political one, as is their choice of growth curve. > The scale for scoring government spending is non-linear, which means that government spending that is close to zero is lightly penalized, while levels of government spending that exceed 30 percent of GDP lead to much worse scores in a quadratic fashion (for example, doubling spending yields four times less freedom). Only extraordinarily large levels of government spending—for example, over 58 percent of GDP—receive a score of zero. Let's take a look at labor freedom: http://www.heritage.org/index/labor-freedom http://www.heritage.org/index/labor-freedom and http://www.doingbusiness.org/methodology/employing-workers http://www.doingbusiness.org/methodology/employing-workers Now we see that that economic freedom in this case actually means freedom for employers to exploit their workers, with negative factors like "rigidity of hours" being determined by paid vacation days. Yet nowhere are factors like regulations on non-compete and no-moonlighting employment clauses factored in. So again a political opinion on what freedom of labor means - the freedom to exploit labor rather than the freedom of labor to seek work or change jobs.

frandroid 12y ago

> What happened to free market economy? It never existed...

atlantic 12y ago

It would be interesting to build economic models of markets that take into account the capacity of large agents to make changes to the rules that govern the functioning of the market itself (via their influence on the legislative process through lobbying). I suspect that if such models were studied seriously, economists would have a much less rosy view of the wonders of the free-market economy. And the same goes for the benefits of a democratic system versus other forms of government. Because lobbying is not the exception - it's absolutely standard.

S4M 12y ago
That's an excellent comment! I had some classes of economics (Msc level), but I have never heard of that. If you think in terms of game theory where the actors are the big companies, and have the choice between lobbying and not lobbying (let's say they have some money they can either invest in R&D, either in lobbying), you can see that the Nash equilibrium will push the actors into lobbying.
- atlantic 12y ago
  Very often our discussions on these topics tend to dwell on the supposedly unethical behaviour of this or that corporate actor. Instead, maybe we should recognize that incentives to lobby (and sometimes, to cheat and bribe), are built into the system, and focus on changing the institutions so that such incentives are removed. And in this area, modelling could play a big role.
  - nitrogen 12y ago
    Since we're talking about a feedback loop, rather than a straight-line system with a start and an end, there is no "right" place to intervene; we have to adjust every entity in the feedback loop together. A lot of popular debates come down to people treating a feedback loop as a straight line, and picking different points on the loop as starting points. Some examples: nature vs. nurture, lobbying vs. corruption, chemistry vs. thoughts (e.g. in cases of depression).
baddox 12y ago

adventured 12y ago

I'm also surprised that people think America is Capitalistic and or a free market. That seems to stem from image rather than substance. What happened is a century of regulations, laws, and commingling between politicians, government in general and business. The US is a heavily regulated welfare state. In this case the regulation is set up to benefit the ever expanding lust for power by the government, and to shield the government protected monopolies in each segment of the economy. Decades ago it was a mixed economy. A century ago it was a near-free market. I've seen it called everything from fascism-light, to corporatism, to inverted totalitarianism. Whatever you call it, it's anything but a free market.

CmonDev 12y ago

>> What happened to free market economy? Too strong of a political instrument not to use for manipulation.

vermontdevil 12y ago

The problem is the byzantine nature of the car market in the US. It's split up in 50 states plus DC. Thus you have all these patchwork set of laws. It favors the local dealer easily as they get quite cozy with the state legislature and dictate terms. AKA a regulatory capture environment. The Feds will not touch this issue as it's too much of a political landmine to consolidate the whole market to be regulated on a federal level. Everything else about the car except sales is consolidated (safety, design, emissions, etc) This is the nature of the Untied States - 50 states doing their own thing as long as the economy is within the borders. See health care, insurance, funeral business, hairdressers, and so on. The model has its pluses and drawbacks. Unfortunately we are seeing the drawback with Tesla. The only option I think is for Tesla to focus on their online presence and in the long term people will develop habits of buying a car through that way. Then maybe finally the stupid dealer cartel will die off.

freehunter 12y ago
Tesla might get away with it now, but in the long run many people aren't going to buy a car without test driving it or at least getting inside and feeling around. Some buyers will purchase purely on looks and nothing else, but others want to buy the way the car feels, how much storage is inside, or how it drives. Then again, it might depend on the return policy. My wife buys tons of clothes online and returns all the stuff she doesn't like due to the retailer's free return policy.
- smackfu 12y ago
  It seems like Tesla should still be able to give test drives and have a showroom without actually selling the car on-site.
- mikeash 12y ago
  They already separate test drives from purchases somewhat. I test drove one last year in Maryland and the guy who handled it was careful and explicit about never, ever discussing anything like an actual purchase of the car, because that would be illegal. He wouldn't discuss prices or ordering or anything of the like, he was just there to let me drive the car and tell me all about the actual equipment. This is obviously stupid, but if it's legal then it solves the problem of needing to try before you buy online. Well, mostly. Some people will want to try the actual unit they're going to purchase. A reputation for quality and a good warranty should be able to overcome that with time.

smackfu 12y ago

>What happened to free market economy? New players like a free market economy. Existing players like laws that preserve the status quo.

dualogy 12y ago

> What happened to free market economy? An effective advertising slogan for "the West" during the Cold War, also a nice ingredient for speeches and trade pacts..

Lagged2Death 12y ago

What happened to free market economy? How are americans totally fine with a company being denied its ability to sell its product to its end users? What happened was: The car makers used their position of power over the dealerships - power they had as a result of the free market economy, more or less - to screw them over. The dealers fought back with custom legislation. It's been this way for 70+ years now. The "free market economy," then as now, turns out to be its own worst enemy. http://www.newyorker.com/magazine/2006/09/04/dealers-choice-2 http://www.newyorker.com/magazine/2006/09/04/dealers-choice-...

kordless 12y ago
I believe 'levers of power' arise by entities exploiting simple liberties which are given and assumed in a free economy. Once those liberties are hedged and protected from use by others, we scramble around trying to figure out how to get the lever away from the entity who holds it. Monkeys with sticks and rocks, if you will.
- ericcope 12y ago
  I like the metaphor... whats interesting is the people complaining about the monkeys with sticks and rocks were the ones who gave the monkeys the sticks and rocks and now are sore about it.
ericcope 12y ago
The dealers chose to enact legislation rather than quit a business model that was being squeezed by their supplier. Find me a business that doesn't squeeze suppliers and vendors to increase their bottom line. The worst enemy of the free market isn't itself, its the crony capitalism that takes place when government gets involved. Its rare (if ever) that the intentions become the outcomes.
- Lagged2Death 12y ago
  I'd say this is an almost perfect example of intentions becoming outcomes, actually.