Central planners — whether in governments or huge corporations — cannot judge and balance supply and demand as well as the market can, through the independent actions of numerous individuals. A classic critique of planned economies is that it leads to shortages and excesses — that is, waste and inefficiency — and thus leaves everyone poorer than if producers were responding to price signals and thus producing what people want and need.
But there’s another relevant critique of planned economies, particularly as we have a president who continues to campaign on the platform of battling the special interests: When a few bureaucrats or politicians try to set supply and demand, they will often act so as to benefit the well-connected incumbent businesses.
Witness the DC government’s proposals on taxis. Mike DeBonis of the Post writes of a provision in the latest taxi legislation:
So, customers will want many, many cabs. Current cabbies will want no more cabbies than currently exist. Who do you think will win?
Who has more resources to spend on this matter, and who has more concentrated interests at stake? The incumbent cabbies do, far more than the passengers or the theoretical future cabbies. So the sellers (cabbies) will always argue that “the market is saturated.” Of course, as Julian Sanchez writes on Twitter, “When a market is ACTUALLY “saturated,” you generally don’t need a bureaucrat to deter new entrants.”
But this bill empowers bureaucrats to erect just such barriers to entry.
I’ve got nothing against cabbies getting rich. I do have a problem, however, with cabbies using government might to deprive future competitors (who are probably immigrants) from one way of making a living, and creating shortages for customers at the same time.
