Government intervention is always a retardant of beneficial market mechanisms.

-=1=- The price mechanism is a social institution that has emerged over countless centuries by a continuous process of trial and error. Prices are the culmination of countless individual subjective valuations which are expressed through voluntary market transactions. They facilitate a free flow of idiosyncratic and tacit information amongst individual actors in the global market economy [1]. Quite simply, they allow for the optimal allocation of various heterogeneous goods which may be devoted to a myriad of different economic activities because they express opportunity costs. Prices and the profit/loss constraint allow both producers and consumers to engage in rational economic calculation. When prices are arbitrarily manipulated, economic calculations become inept/monstrous, and without the price mechanism, economic calculation becomes impossible (opportunity costs are unknown) [2]. The producer who ignores prices in his daily entrepreneurial activities will lose access to his capitals and go out of business. Likewise, the consumer that ignores prices will find himself in a most unsatisfactory condition. -=2=- The government is not bound by the profit/loss constraint, it does not serve the consumer, it raises revenue by force (compulsory taxation), and it completely ignores the price mechanism. In fact, it manipulates and arbitrarily alters prices, through inflation, in order to raise revenue (seigniorage [3]) and extinguish its own debt. The government, therefore, does not engage in rational economic calculation and its intrusions into the market economy are ad hoc guesses made by decree. It is simply unaware of actual consumer demand conditions, supply conditions, the marginal rates of technical substitution, opportunity costs, and it faces absolutely no competition. The problem is systemic and structural: the market intrusions of a benevolent philosopher king are just as inept and self-defeating as those of the most ignorant and belligerent tyrant. Either way, politicians are not benevolent philosopher kings but rather rational utility maximizing agents like everyone else. -=3=- A quick analysis of the political structure of modern democracies is in order: Individuals, to use economic jargon, measure the marginal benefits and costs of every action before they make decisions. So, when a person wants to buy a television set, for example, he does some research, and buys the TV which he believes will satiate his desire. He does not require permission from the majority in order to buy the television set he prefers. The same is not true in the political sphere. Furthermore, the marginal cost of casting a well-informed and rational vote severely out-weighs the marginal benefit of voting. Your vote is merely one of hundreds of millions, but in order to cast a well-informed vote you must familiarize yourself with the politician's voting record, their sociological, philosophical and economic rational. Additionally, you have to read and understand complicated legislation (CAFTA trade agreements, Healthcare bill, ect) which are thousands upon thousands of pages long. The costs are torrential when compared to the benefits. This is why there is absolutely no accountability in the political realm, and why voters cast ill-informed votes (rational ignorance) [4]. But it must be mentioned that for some groups, the marginal benefits do indeed outweigh the costs. Who cares enough about "free-trade agreements" in order to read them in their entirety? Well, big businesses and special interest groups of course. The political system is built in such a way that only those who seek privilege actually care enough to educate themselves politically. Thus a system which claims to cater to the majority is actually designed in such a way that only the tiniest of minorities care enough to influence it. -=4=- The Utopia Fallacy: The ill-informed take snapshots of market phenomena (employ a completely static approach) and analyze it in order to identify so-called "market failures." I do not deny the possibility of market failures, but I take issue with the terminology and its implications. A market failure is merely the suboptimal allocation of resources that are not in-line with Pareto efficient (perfect) outcomes. But the imperfection of the market economy, and its institutions, does not, in itself, justify government intrusion. Simply pointing out market imperfections is essentially attacking a straw-man and engaging in the utopia fallacy; such a position does not refute my argument but rather entirely ignores it. Next, the attempt to deal with negative externalities creates a whole new set of negative externalities (negative unintended consequences) because the government does not control, or even understand, the subjective desires of those that it governs. Some historical examples: 1.NYC Rent control: Rent prices were deemed "too high" in NYC and the government instituted a policy of rent control. The outcomes were expected: severe shortages in housing and lowered quality [5]. 2.The "62 Drug Act:" Banned "me too" drugs from the market. "Me too" drugs were drugs which didn't infringe on intellectual property and had similar therapeutic effects to designer drugs. This act made it so new drugs had to be (a) entirely unique and (b) superior to alternatives. This severely constricted supply and solidified monopoly control in the pharmaceutical industry. Additionally, it added extreme research and discovery regulations which increased operating costs 46 fold [7]. 3.Government creation of the "Seven Sisters:" The "Seven Sisters" was a government created and backed American oil cartel (BP, Shell, Exxon, Gulf, Mobil, and others) which was countered by OPEC [7]. 4.The "Experimental Negotiation Act:" Arbitrarily elevated the wages of steel workers (5% per year) while their productivity decreased (1.7% per year). Massive strikes and productivity declines forced U.S. steel producers to cut costs rather than innovating. This ruined their profitability and competitiveness and they were eventually wiped out by their Japanese competitors, who offered higher quality and lower prices (they were able to innovate and transition into open hearth furnace technology) [7]. 5.The "Smoot–Hawley Tariff Act:" Prolonged and increased the severity of the great depression. -=5=- And finally, it is true that the government has many capable economists at its disposal, but their knowledge is different from the individual tacit knowledge that is expressed in daily market transactions and dispersed by market mechanisms. It differs in both degree and in kind. The economist is familiar with broad and impersonal market forces, but the local farmer understands his land, the local climate, farming techniques, local demand conditions, ect. The consumer understands his preferences, which are continuously changing; the producer understands his consumer base, production methods, how to motivate his workers and align their interests with his, ect, ect. The total amount of tacit and idiosyncratic information, in its aggregate, dwarfs the total amount of scientific knowledge that the government possesses. But more importantly, the tacit knowledge that individuals posses is far more relevant for maintaining a rational and efficient economic order. 1.http://web.missouri.edu... 2.http://mises.org... 3.http://en.wikipedia.org... 4.http://en.wikipedia.org... 5.http://www.econlib.org... 6.http://www.peri.umass.edu... 7.Scherer, F.M. Industry Structure, Strategy, Public Policy. New York: HarperCollins, 1996.