Monday, 13 October 2014

"Markets Can Corrupt, But Regulation Corrupts Absolutely"

Lecture by Deirdre McCloskey

Deirdre McCloskey is a Distinguished Professor of Economics, History, English, and Communication at the University of Illinois at Chicago (UIC). Her main contributions are to the economic history of Britain, the quantification of historical inquiry, the rhetoric of economics, the rhetoric of the human sciences, economic methodology, virtue ethics, feminist economics, heterodox economics, the role of mathematics in economic analysis, and the use (and misuse) of significance testing in economics.


"Regulation" has a sweet and reasonable sound, and in a few northern countries, and New Zealand, it works. Who wouldn't want the disturbing uncertainties of a market to be "regulated"? And certainly anyone would want belching smokestacks to be regulated, though not always by bureaucrats sent out from Paris or Washington or Brussels. But "regulation" could also, and often, be described as "highhanded and ignorant interference in the mutually beneficial deals of subjects of the state, often for the benefit of the rich, and backed by state violence. "Much of regulation would fall under that definition.The policing of the recreational drug laws would be a case in point, but so would the less obvious case of regulation of medical drugs by the American Food and Drug Administration, leaving American patients, and ebola patients, without treatments, and not approving the addition of essential polyunsurated fatty acids to infant formula for premature babies.The U.S. Interstate Commerce Commission, established in 1887 to keep down rail rates charged to farmers, was swiftly captured by the railways, and commenced keeping rates up, not down.[1]The poor and other powerless have been regularly hurt by regulation, even such sweet-sounding regulations as evening closing of shops (making it hard for the working poor to find time to shop) or protections for women workers limiting the hours they can work (making it hard for women to hold supervisory jobs) or building codes claiming safety (making it hard to build inexpensive housing).

Lightly regulated markets, in other words, have on the whole been good, not bad, for the poor, the women, the powerless of the world.The fact, which is anyway evident from the history of past decades, does not mean that every market deal is ethical or that every bourgeois is virtuous, no more than one could reasonably suppose that every government regulation is ethical or that every civil servant is virtuous.We are not comparing some unattainable ideal of market-tested betterment with actual, imperfect government regulation.We are comparing the actual record of liberated markets and the betterment they have brought to the powerless with the actual record of populism, socialism, and thick regulation.


[1]Kolko 1965.