Thursday, January 18, 2007

Free-market solutions

A while ago I was listening to a story on NPR regarding the safety testing of infant car seats. Kim Klemen, an editor from Consumer Reports was interviewed and called for federal regulations on the seats to ensure safety.

I remember thinking that Klemen was basically advocating for "bigger government".

The free-market solution to a situation, in which tests on infant car seats shows that one or more are dangerous, would be that consumers would just not by the dangerous ones. Obvious. However, when the company that produces a "faulty" infant car seat slashes the price by 25 or 50 percent, it's a much more viable option for families who may already be on a tight budget.

There is nothing to deter parents from picking a car seat that appears sturdy and indistinguishable from other car seats on the market. The determining factor is the price. They would have to seek out the research on product in say, Consumer Reports, and purchase the ideal seat. How many people do that?

I believe that most "free-market solutions" depend on highly informed consumers making educated choices. However, most consumers don't refer to product reviews. Their purchasing decision in a consumer society are based mostly on price. The free-market solution would assume that the manufacturers of unsafe infant car seats would eventually go out of business because no one would buy their products with the knowledge they were unsafe. Obviously, that isn't true.

The flip side is people like Klemen arguing for more (or better) regulation. These have their own downsides (additional government responsibility, bureuacracy, etc). Assuming the car seats are made in the U.S., providing Americans with jobs and sustaining a market, higher compliance costs can affect the ability to pay labor, off-shoring, etc.

In the end, the highly localized and extreme choices are possibly dozens of injured infants or possible economic downturn.

We must pick and the price is steep. The brings me to a Ben Franklin quote via The Moderate Voice:

“Friends,” says he, “and neighbors, the taxes are indeed very heavy, and if those laid on by the government were the only ones we had to pay, we might more easily discharge them; but we have many others, and much more grievous to some of us. We are taxed twice as much by our idleness, three times as much by our pride, and four times as much by our folly; and from these taxes the commissioners cannot ease or deliver us by allowing an abatement.”

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