Government intervention in the economy does more harm than good

Governments can intervene in the economy in several ways. I've pared down the forms in which governments affect the market to the following: 1.Regulations 2.Price Controls 3.Property Controls I will argue that these measures don't necessarily increase prosperity or standard of living while negatively affecting the market as a whole by: 1.Limiting competition 2.Limiting consumer choice 3.Increasing costs and prices 4.Increasing uncertainty of the future 5.Creating artificial surpluses/shortages 6.Diverting resources from their most efficient (consumer-demanded) employment Regulations that governments enforce are usually enacted under the pretense that they either make the market fairer, or they protect the consumer. However, even when there are no nefarious intentions of the government or the companies lobbying for the new regulations, regulation inherently limits competition by increasing the cost of entry into the market and reducing the ways in which a new business can satisfy consumer demand. One example is business licensing. Many municipalities require some kind of license to operate a business in a certain industry, i.e. food service. The licensing may require a fee, an inspection, paperwork, etc., all of which deter new businesses from forming. In addition, there may be a quota on how many businesses can operate in an industry for a certain area. These regulations increase the start-up costs of businesses, which protect existing businesses from new competition and raise the cost of the goods and services sold because of the additional overhead of complying with the regulations. The prices of goods and services trend upward while quality trends downward due to lack of competition, and because the money used to comply with regulations isn't going to improve the operation of the business. In addition, it is a fallacy to assume causation between more regulation and increase consumer safety; it is in the best interest of businesses to attract customers by providing safe and high-quality goods and services. Regulations also limit consumer choice. I will use health insurance as an example. Each state has its own set of required health care services that insurance companies must cover. Citizens in the state are required to purchase policies that comply with that state's regulations. Each service that the insurance is required to cover increases the premiums policy holders must pay. However, the consumer may not have purchased coverage for a service required by the state given the choice, and would have preferred a lower premium. The state has taken that choice away from the consumer. It has also increased the cost of health insurance for everyone in the state. Finally, regulations increase uncertainty in the future. The Dodd-Frank financial regulation bill and Obamacare are two good examples of how this affects the market. Many businesses, especially small ones, are reluctant to invest because they don't know what the costs of these regulations will be, first because they are both enormous and confounding, and second because many of the details have not yet been written by the agencies charged with enforcing the new rules. Because businesses can't predict their future costs, they refrain from taking new risks, hiring labor, buying capital, etc. Another way government negatively affects the economy is through price controls. This can be in the form of explicit price ceilings or floors on goods/services, or through subsidization. I won't argue that price floors create surpluses and price ceilings create shortages, since this is self-evident and beyond doubt. I will discuss, however, two particularly egregious price controls that governments engage in. The first is minimum wage, which is a price floor on labor. While minimum wage is enacted under the guise of requiring a livable income for workers, what it actually does is make anyone whose labor is valued at less than minimum wage unemployable. In addition, because businesses may suddenly have to pay workers more because of a new minimum wage, they must make up for this additional cost either by increasing prices, decreasing quality, or laying off marginal workers. A second price that governments control is interest rates, or the price of money. When a bank is low on assets, it raises interest rates to encourage saving over borrowing, so it can replenish its asset reserves. When reserves are high, the bank lowers interest rates to encourage borrowing. However, when the government sets interest rates lower than the free market rate, borrowing outpaces savings. While the idea is that cheap money begets business investment and growth, a lot of this borrowed money goes into the hot investment of the day, like stocks in the 1920s or housing in the 2000s. Since demand for these assets spike because of cheap money, prices skyrocket and supply moves to match demand. As supply catches up, or when investors realize that their assets are overvalued, the asset prices plummet, banks and consumers go bankrupt, and all the resources put toward building up these assets are revealed to be a waste. Artificially low interest rates are a primary cause of the business cycle. Subsidization has several negative effects as well. First, this subsidy must be extracted from the people either through taxation, reducing the people's wealth now, or by borrowing or money creation, reducing their wealth later. Second, the subsidy rewards businesses for producing things that consumers aren't demanding, at least not at the price required to cover business costs. The resources that the business could be using to produce things that consumers would demand at a market-clearing prices are instead being used to make things the government incentivizes them to produce, with market losses involuntarily covered by the consumer, who may not benefit from the subsidized good/service, or may benefit more from an alternative that wouldn't require a subsidy. A third way in which governments interfere with the economy is through property controls. This can take the form of taxation, prohibition, or seizure. Taxation, particularly of wages and income, implies that the government is the primary owner of the product of labor, and that the people are entitled only to what the government allows them to keep. Disregarding the moral implications, both the tax itself and the costs of tax compliance reduce taxpayer wealth. Much of this wealth is then wasted on unproductive endeavors, such as paying for the labor and capital required to collect and allocate the tax revenue, instead of being distributed as entitlements or satisfying consumer demands. Through prohibition, governments determine what you are and are not allowed to own. This limits consumer choice by banning products such as incandescent light bulbs, and creates future uncertainty, since the government can ban anything at any time, which may include an important resource for a business. Governments can also prohibit the use of owned property. If you buy land and the EPA determines that there is endangered species on it, you are prohibited from developing the land. The government can at any time prohibit ownership, or otherwise destroy the value, of your property. Through seizure, government can extract wealth from the people directly, such as through civil asset forfeiture, or force the people to sell their property to the government, as through eminent domain. Not only does this reduce the wealth of the people, it creates uncertainty for the future, since the government can demand a person's property at any time and leave him in a state where he cannot easily, if at all, get it back through legal action if the seizure was unjustified. Government intervention in the economy is both unpredictable and coercive. It undermines free association and property rights, and incentivizes businesses to please government agents over consumers. http://bit.ly...