Pop quiz, hotshot: There’s a rat in your kitchen – what are you gonna do? Shriek? Fair enough. But after that, though. Call a pest controller? Yeah, sounds like a good idea to me. Now then, which one? Which of the many pest controllers available will you call? Don’t answer that. It’s rhetorical.
I don’t think I’d be wrong if I said that everyone who reads Bogpaper favours free markets. Or, at least, favours free markets to a large extent. And I don’t think I’d be wrong if I went on to say that the majority do so because they understand that they, as customers, are better off when there’s competition among businesses, than when there’s no competition among businesses.
Let’s quickly rehearse some of the reasons: Without competition a producer has no need to keep costs down. Without competition a producer has no need to keep prices down. Without competition a producer has no need to maintain, let alone improve, the quality of his product. Without competition a producer has no need to treat his customers well. Etc, etc, etc.
In fact, so powerful and so beneficial is competition, that – as long as entry into the market is not prohibited – even in the absence of actual competitors a business will have to act as if it had them. Abnormally high profits are not only a powerful incentive for others to enter the market, but they spur the development of substitute products. High prices, low quality, poor service and the rest, make it that much easier to lose market share to potential rivals. (This is, by the way, why we should distinguish between compulsory, ie, State or State-maintained monopolies, and businesses who currently have no competitors. Only the former are immune to market forces.)
So, in the specific case of pest controllers – but, naturally, the economics apply to any other service or product – it’s easy to see why we, as customers, prefer to have a choice of supplier. We have a problem we need taking care of, and the existence of a market offers us the best chance of finding a good solution. Competition among various pest controllers keeps prices low and standards high. The fear of losing custom ensures that whichever pest controller we employ will (unless they are incredibly stupid) make every effort to leave us satisfied with their performance.
It is obvious, then, what would happen if competition among pest controllers was forbidden, ie, if the government nationalised pest control. Costs and prices would go up, quality and customer satisfaction would go down. If a producer is getting paid anyway, why should he care whether you’re happy or not? Why should he do a good job? Why should he be polite, even?
This is uncontroversial among supporters of free markets, of course. I’m confident that not a single reader of Bogpaper (regular BP reader, anyway) would disagree with any of this.
Now, what if the State didn’t talk about “pest control,” but instead “pest justice”? “Justice” – that’s a heavy word. Plato wrote about justice. Aristotle did, too. How many thousands of books have been written about justice? What a terribly complicated business it must be. Far too complicated to be left to the vagaries of the market. I mean, think about it – letting people have a choice in pest justice? That’s madness! We can’t have just anyone going about carrying out pest justice, can we? No, we need one, and one only, distributer of pest justice – otherwise there’d be chaos. The State must have the monopoly on pest justice. And it must be funded via expropriation. That will keep costs down. That will keep prices down. That will keep quality high and ever-improving. That will ensure that all the incentives are in place for maximising customer satisfaction.
No one would argue like this. No one would be fooled by the word “justice”. No one would say that a compulsorily funded monopoly would produce results preferable to the results a market would produce. And even though we can’t entirely rule out the possibility that a gang of super-intelligent rats might one day emerge and attempt to wreak havoc in our kitchens, no free marketeer would believe that the State would do a better job of protecting us than would private enterprise.
The reason for this is that we understand that free markets incentivise socially beneficial behaviours, allowing them to bloom and flourish, whereas compulsory monopolies disincentivise such behaviours, forcing them to wither and atrophy. And we understand, furthermore, that this economic reasoning of ours, being a priori, is true of any conceivable product or service. Including – to pick an example at random – the police.
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