From: Smigrodzki, Rafal (SmigrodzkiR@MSX.UPMC.EDU)
Date: Fri Jun 08 2001 - 20:03:31 MDT
I find many persons extolling the virtues of free markets and nonexistent
governments. While I do believe that a true, free market is the pinnacle of
justice, and I don't like bullies, including the ultimate ones, huge
governments, I have doubts that you can have one without the other.
According to what little I know about free markets, a free market is a very
metastable system. As soon as one (or a small number) of participants gains
some advantage (by hard work or by luck), it improves it's ability do
survive and grow - it can weather downturns better, spend more money on
research, kill or buy the competitors. It can become a monopoly and without
a bigger bully to keep it in check, hardly anything can stop it. Of course,
much depends on the particular conditions - it is difficult to monopolize
businesses with low barriers to entry, easier to control so called "natural
monopolies", but the same general pattern emerges again and again - after an
initial free market frenzy there is consolidation and emergence of a more or
less coercive system. The king will tax the monopolists, they will have a
good life, too, but the peons are ruthlessly exploited.
Certain types of government can be controlled by a large number of players,
and this to some extent enables the control of monopolies, which I believe
is the second most important function of a good government (the first is
monopolizing violence). The apparatus used by the US Gov. (Dept of Justice),
although not perfect, is better than nothing.
I had once a far fetched idea - what if the government would use a
universal, progressive transaction tax to stabilize free markets. Universal
- meaning that all legal entities, persons, corporations, would be taxed
using the same rules, without distinguishing between "business" and
"personal" expenses (this would mean that retail would have to work
differently but this is another story). Progressive - this would mean that
almost all humans and most small businesses would be taxed mildly, while
large entities with huge annual transactions would be penalized, so that
pure growth is size would be no longer so useful in dealing with
competitors. Transaction tax means that any exchange of considerations
between parties to a contract would be taxed. Such a system would take a lot
of arbitrariness out of trade policy. It would stimulate cooperation between
small, efficient and ever-changing units to achieve the tasks done now by
huge corporations. Imagine having a number of independent producers of parts
getting together to build a car (designed by independent research units),
and sell it through independent dealers.
Does such an idea appeal to economists?
Rafal Smigrodzki MD-PhD
Dept Neurology University of Pittsburgh
smigrodzkir@msx.upmc.edu
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