From: solman@athena.mit.edu (Jason W Solinsky)
Subject: Re: Regulations
Organization: Massachusetts Institute of Technology
Distribution: usa
Date: Sun, 12 Apr 1992 17:35:57 GMT

In article <1992Apr12.110928.10986@husc3.harvard.edu>, koumis@husc4.harvard.edu (Anthony Koumis) writes:

|> [stuff on credit bureaus]

Let me try to put my position on credit bureas as simply as possible. The credit
bureau which supplies the most accurate information, in the form the companies
can process and use most efficiently, will make the most money. IF AND ONLY IF
reporting dirt on individuals will increase the reliability of information, will
bureaus find it profitable to do so. If the information is irrelevant, then that
will slow down the company and make alternative credit bureaus look more
attractive. Additionally, reporting irrelevant information wastes time and money.
IF AND ONLY IF giving employees "dirt quotas" gets more accurate information more
cheaply will it be in the best interests of the bureau to use this practice.
 
|> The point, that I said about unsafe cars is this. In a totally unregulated
|> car market car manufacturers would not have that much incentive to
|> make safer cars.  They could get together and decide not to offer certain
|> safety features b/c it was cheaper not to.  This would mean no one could
|> choose a safer car if it was not offered.

And my point is this, even with the small number of car manufacturers that exist
today, this is not in the economic interests of the company. The only time
regulation effects the safety of cars, is when the buyers are not willing to pay
the cost of the safety features when they buy the car. In other circumstances,
companies can make a mint by overcharging for the saftey device. Airbags would be
a great example of this.

|> Also, if there are no safety regulations in place then no one will know
|> what cars are safe or not.  I know that earlier JSW suggested private
|> little companies to run around testing cars.  INefficient econmics.
|> And there is the fear of car companies setting up such "independent"
|> companies to certify a car as safe.

Certainly. But you don't have to listen to them. The most inportant asset of any
certification company is the confidence of consumers in its certification. Any
such company owned to a significant extent by an auto manufacturer would lose
that. A crude example would be colleges. The consumers in the labor market are
looking for people who supply labor (college students). I am investing a huge
amount of time and money in getting a certification from the world's best EECS
program. Employers have a great deal of confidence in the meaning of this
certification. If tomorrow it were revealed that MIT were graduating a lot of
dolts, the value of my certification would decrease significantly, an other
people seeking similar certification would go elsewhere first. Something like
this has happened to Stanford over the past two years. A sudden loss in the
credibility of their certification, has caused two consecutive classes to turn
them down in unusually high numbers, thus further decreasing the value of their
degree.

|> [stuff about Pinto]

What you say here is correct. My point is that is people cared about the safety
of the Pinto, they would have made it economical for the company to make the car
safer. There are many situations where this happened. It did not happen with the
Pinto because consumers didn't care.

|> THere is no such thing as perfect information in a perfect market.

Once again, the price of freedom (or is it liberty?) is eternal vigilance. We
have had so much regulation for so long, that people are not willing to pay the
price. That's fine with me, but don't expect me to give up my freedom because
others can't handle theirs. (Yes, as everbody has been pointing out, I know it's
a steep price)
 
|> Consumers would not necessarily know what they are being sold.
|> 
|> And, allowing companies to sell anything wiht no safery regulations makes
|> the poor sectors of society locked into buying bad, unsafe products.

But this doesn't happen. When a company is forced to comply with a regulation, it
always raises the cost of the product. This means that while without regulation,
people would have the choice of saving money, or being safer, with regulation
they are automatically safer, and must choose between spending more money than
they can afford or not buying a car.

|> JSW feels that the govt keeps people in Harlem by feeding them

Look at areas dominated by people on welfare as a dessert, where individuals are
unable to support themselves. Years ago it used to be a lush green land, but it
slowly dried up. Under ordinary circumstances people would slowly move away, but
in this case, food was dumped there. Today it is a dessert where there is
only enough to feed a (relatively) small fraction of the populace. The situation
there is completely unnatural. It couldn't have happened without welfare because
the people would have shrivled up and died. Welfare creates an artificial
minimum that you can't go below. In real life, as long as you're alive you can
still go down. It is this downwards gradient which has caused people to slide
away from areas above a certain population density for most of human history.
Welfare creates a floor, and eliminates the sliding effect.

Jason W. Solinsky