How to think about regulation

If not for State regulation many people believe that…

Companies would run wild, wrecking the environment, and selling us bad food, deadly drugs,  and harmful products. 

It would be silly to claim these things never happen. After all….

  • Not all people are good
  • People who are mostly good aren’t consistently good
  • And sometimes people simply make mistakes, out of ignorance or sloth

But politicians and bureaucrats are people too, and subject to these same failings.

Do we really solve the problem of human imperfection by giving one group of imperfect people power over the rest?

To this we might add . . .

“Is there any form of human being more imperfect than the politician?”

tweedlesDon’t think only of the politicians you like. Think also of the politicians you hate. Do you really want them to have power over others?
I think a strong case can be made that the worst politicians have done far more harm than the worst business people. After all, the power scales are so vastly different….

  • Politicians and bureaucrats have a monopoly to initiate force
  • They have access to vastly greater resources than even the largest company
  • They cannot easily be fired, unlike a business

This makes it reasonable to ask…

  • Can anything other than politicians and bureaucrats regulate how business people behave, and if so….
  • How do these non-state forms of regulation compare to what The State provides?

Consider these answers . . .

Consumers regulate businesses

  • Consumers punish every company that sells a bad product or service
  • They also spread the word about bad companies to other customers
  • And many people refuse to do business with companies that harm the environment

This form of regulation is enshrined in the proverb “The customer is always right.” And, because of this…

Investors and lenders also regulate businesses

They do this to protect their investments from retaliation by angry customers. Sometimes this regulation involves direct oversight, and sometimes it involves the purchase of insurance, which then leads to….

Regulation by insurance companies

UL markNSF_International_logoUnlike politicians and bureaucrats, insurance companies have their own money at stake. This motivates them to regulate the companies they cover. One way they do this is through product-testing using firms like Underwriter’s Laboratory, or NSF International.

Legal liability also regulates businesses

This liability is determined through due process in a court. This differs from State regulationScales Balance Image iStock_000003740755XSmall in a crucial way. State regulation attempts to prejudge which products and services may be harmful, and to dictate how this danger must be mitigated, in advance.
This sounds good, but it has serious problems, as I’ll show below. By contrast, legal liability presumes that a product or service is “innocent” until there’s evidence of harm. This is the commercial equivalent of the principle we know from criminal law — “innocent until proven guilty.”

The above points debunk a widely believed myth

A completely free market would NOT be devoid of regulation. Instead, it would have multiple forms of regulation. In fact . . .
It’s inherently impossible to have a de-regulated society. Consumers, investors, lenders, and insurance companies will always take steps to control what businesses do, even if The State does nothing. So…

Does The State really have a role to play in regulating business?

Do we really need politicians and bureaucrats to prejudge whether a product or service is harmful, and dictate how that risk must be mitigated? This depends on how you answer questions that are even more basic….

  • Can you fire politicians and bureaucrats who create defective regulations?
  • Will politicians and bureaucrats have to personally pay the cost of any harm they cause, the way a business must?
  • What do you do if politicians and bureaucrats design regulations to benefit their friends?

These are powerful questions. But they’re really just another form of our first question…

Do you solve the problem of human imperfection by giving one small group of imperfect people power over the rest?

I say the answer is no. The real problem is not how to regulate businesses, but how to regulate politicians and bureaucrats.

  • They are the monopoly.
  • Their power to initiate force is inherently criminal
  • They have vastly more resources than any company
  • They are vastly more difficult to control

In fact, The State is essentially anarchistic. It is regulated by no one.

In conclusion:

  • The State is a monopoly — regulate it!
  • Politicians and bureaucrats have only one tool — initiated force. Remove this power!
  • Businesses are peaceful and voluntary. Leave their regulation to consumers, investors, competition, and insurance companies.

For a concrete example of the points made above, please read my essay about “The Jungle” rsz_1sinclair_-_jungle_bindingby Upton Sinclair.
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Copyright SymbolCopyright (c) 2010 by Perry Willis. Permission to distribute this blog post for educational purposes is granted, if done with attribution to the author and the Zero Aggression Project. Permission to use for commercial purposes is denied. You can find a full explanation of our copyright policy here.

Show Comments 13


  1. I LOVE this! It is in line with Marshall Rosenberg’s Nonviolent Communication, or Compassionate Communication principles which I have been studying – also based on EMPATHY. THANK YOU FOR THIS WEBSITE AND FORUM.

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      1. Thank you, Perry. Here are some quotes by Marshall B. Rosenberg that you might enjoy. Have you read any of his books?
        “All violence is the result of people tricking themselves into believing that their pain derives from other people and that consequently those people deserve to be punished.”
        ― Marshall B. Rosenberg, Nonviolent Communication: A Language of Life
        “Peace requires something far more difficult than revenge or merely turning the other cheek; it requires empathizing with the fears and unmet needs that provide the impetus for people to attack each other. Being aware of these feelings and needs, people lose their desire to attack back because they can see the human ignorance leading to these attacks; instead, their goal becomes providing the empathic connection and education that will enable them to transcend their violence and engage in cooperative relationships.”
        ― Marshall B. Rosenberg, Speak Peace in a World of Conflict: What You Say Next Will Change Your World
        “Now, with regard to the people who have done things we call “terrorism,” I’m confident they have been expressing their pain in many different ways for thirty years or more. Instead of our empathically receiving it when they expressed it in much gentler ways — they were trying to tell us how hurt they felt that some of their most sacred needs were not being respected by the way we were trying to meet our economic and military needs — they got progressively more agitated. Finally, they got so agitated that it took horrible form.”
        ― Marshall B. Rosenberg, Speak Peace in a World of Conflict: What You Say Next Will Change Your World
        “At the core of all anger is a need that is not being fulfilled.”
        ― Marshall B. Rosenberg, Nonviolent Communication: A Language of Life

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  2. Hi Perry. If there are no particular safety laws, and someone is harmed by a product, what is used in the courts to judge if/how a product was responsible for the harm? If a product hurts someone, what set of guidelines does a jury or judge use to determine if the product was safe or not? I agree with your entire website, so I’m not challenging the above. I’ve never had something like this happen to me so I’m trying to think through what I would do if a product that has never hurt anyone hurt me and I needed to sue. The threshold of product safety can’t be set arbitrarily by the govt, but then who sets it?

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      Great question Michael. Thanks for asking it. The plaintiff will present evidence that the product caused him or her harm. A jury will decide if the product really did cause harm, and what the compensation will be. Sometimes advertising claims will be used as part of the evidence. “They said the product would do this, but it did something else instead.” Of course…

      The harm done will have to be significant before a plaintiff or group of plaintiffs will see value in taking a case to court. Often a producer will make good on a defective product without court action, or the harm done by a bad product will be so small as to merit only two kinds of action — no longer doing business with that supplier, and/or telling everyone about your bad experience. After decades of experience as a consumer reporter John Stossel concluded that bad companies tend to go out of business quickly. This is one of the market’s methods of regulation — the “death penalty” for bad products.

      Hope these answers help?

  3. Jim, Perry,
    Great article!
    It makes the very point that Alfred G. Cuzan made in his brilliant paper “Do We Ever Really Get Out of Anarchy?” [https://mises.org/library/do-we-ever-really-get-out-anarchy]
    Of course we don’t. The choice is between political anarchy, where ONE party gets to enjoy anarchic privileges, or market anarchy, where MULTIPLE entities operate in rational competition.

  4. If we are sovereign beings, beings who think, then we are never totally ruled, even though it may appear so. For example, do we ever know what a person is thinking, even as we are able to predict actions over and over based on the past? Is the last thought/action a 100% predictor? Or has there been an inner unconscious mental operation going on that results in a surprising sudden change? This might be called a “tipping point”, slow enlightenment that takes time to manifest but does so suddenly.
    I have noticed this in poker. An uninformed action with painful results may seem unavoidable by the actor. However, eventually, the bad habit (action) may suddenly change. The actor finally learns from experience.

    As the US Empire/Police State gets more & more draconian, will there be a sudden backlash? Or will there be a slow, steady withdrawal of consent by the victims until society breaks up into many groups and collapses into more independent groups, more dependent groups, and mixed groups, like the USSR?

  5. What a simplistic joke… you ignore the reality that the big money in business BUYS the wrong-doing of govt.. so your assertion that bad people in govt are the biggest evil is WRONG… the bad people in govt with those evil powers were PUT THERE BY THE BAD PEOPLE IN BIG MONEY BUSINESS specifically for doing those evil things….. so your formula defending ‘business’ is absurdly simplistic……

    1. MJ,
      I think you’re misreading several key principles.
      To anarchists, and certainly to Austrians, the success or failure of government does not depend on whether good or bad agents run it. As von Mises said, even angels, if they were endowed only with human reason, could not form a perfect government [https://mises.org/library/two-masterpieces-mises].
      As for “big money” putting bad agents in government, neither anarchists nor Austrians are promoters of “big money.” Both have ever been antagonists of corporatism, cronyism, and the essentially fascist union of big money and big government. “Voluntaryists” support business that achieves its “bigness” without the interventions of government.

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