This summarizes the argument made in "Walking into a Trap", an essay by Gary North, that originally appeared in 1978 in The Freeman, on the threat to American medicine posed by the State.
The Chicago School of economics favored and still favors the theory of "regulatory capture." Under this theory, an industry or some portions of an industry cultivate government to obtain laws and rules that favor the industry.
The government trades favors for what it wants. Politicians gain political contributions, side payments, and votes for being seen to control the industry. The industry captures the regulators. End of story.[Gary North] called the first step of obtaining favors "baiting the trap." But matters do not stop there, he pointed out. The trap is set when the industry becomes comfortable with its subsidy, tax break, tariff, exclusive position, license, or whatever. It then begins to extract monopoly rents and to lower product quality.
This then leads to further steps such as public outcry and a government demand for the industry to police itself. Then come crisis, further regulatory intervention, and eventually a government stranglehold over the entire industry via a panoply of boards and price controls. This is when the trap is sprung. The market is replaced by government power and bureaucrats. Government, its aim being control, traps and captures the industry.
In the shorter term, the interest groups use the state against the public. In the longer term, the state and its bureaucrats rule the roost. In the end, the government bureaucracies expand. Paperwork and soft jobs rule the industry, innovation and competition are eclipsed, and the public suffers from poor product quality and high prices.
Thursday, September 28, 2006
How governments accumulate power
I came across this description recently.
Posted by Blinding Insight at 11:27 PM