The Freedom To Choose

It is often argued that government regulations are necessary to protect consumers from unscrupulous businesses. Without such regulations businesses could take advantage of consumers by misrepresenting their products or services, withholding information, or otherwise preventing consumers from making informed buying decisions. Regulations insure that consumers get safe and effective products.

This argument implies that offering safe and effective products is of no self-interest to businesses, that a company would sell anything in order to make money. It implies that a business would invest years of research and development and enormous sums of money only to market a product that posed a risk to consumers.

Certainly, there are companies that take a short-term perspective and focus on immediate results at the expense of long-term success (for one example see Enron). But such companies are rare. A product that is dangerous or ineffective will be discovered. And if the company knowingly and intentionally misrepresents its products, it is engaging in fraud and should be prosecuted. Defining and protecting individual rights is the only proper role of government in regard to "consumer protection." Indeed, protecting individual rights is the only means by which the legitimate rights of consumers and producers can be protected.

Rights sanction an individual's moral right to act according to his own judgment within a social context. The mutual rights of others prohibit him from interfering with their actions. If an individual chooses to market a product or service, he has a moral right to do so. And consumers have a moral right to purchase or boycott his offering. Nobody--including government--has a rational justification for interfering with either producers or consumers.

Yet, this is precisely what government regulations do. The threat of physical force--fines or prison--prohibits producers from offering the products or services they deem fit. That same threat prohibits consumers from purchasing products or services that they judge best serve their needs, desires, and values.

Government regulations prohibit individuals from exercising their own rational judgment and acting accordingly. For the mentally lazy this breeds a false sense of security--if a product or service is sanctioned by government it must be safe and effective. For the independent individual this limits opportunities and choices, and often results in actions the individual would otherwise not choose. As an example, see Social Security, which is forced upon all workers regardless of their own judgment regarding the merits of the program.

Abolishing government regulations does not mean that consumers would be left to the mercy of businesses. Indeed, there are myriad examples of private organizations that provide consumer education, certify the safety and effectiveness of products, and otherwise provide information that assists consumers in making choices that best fit their own needs and desires.

nderwriters Laboratories (UL) is one example. UL is a private product safety testing and certifying organization. Founded in 1894, their web site states:U

UL has developed more than 1,000 Standards for Safety. Our Standards for Safety are essential to helping ensure public safety and confidence, reduce costs, improve quality and market products and services. Millions of products and their components are tested to UL's rigorous safety standards with the result that consumers live in a safer environment than they would have otherwise.1

Products that meet UL standards are allowed to display the UL logo as long as it remains compliant. Though UL certifications carry no legal weight, the company’s reputation is such that failure to meet UL standards can mean the death of a product:

[I]t may be extremely difficult to sell certain types of products without a UL Mark. Large distributors may be unwilling to carry a product without UL certification, and the use of noncertified equipment may invalidate insurance coverage. It is common practice in many fields to specify UL Listed equipment or UL Recognized materials.2

Unlike government regulations, which are imposed on producers and consumers regardless of their individual choices, UL certifications are entirely voluntary. A manufacturer can choose to market a product that does not meet UL standards, and consumers are free to purchase such products if they choose. While both assume certain risks on the basis of their choices, each remains free to act according to his own judgment. UL is only one example of private companies offering testing and consumer information.

MET Laboratories offers a service similar to UL, offering further choices to consumers and manufacturers. MET’s web site describes the difference between its service and that of UL: “The main difference between these two marks is with the level of involvement and partnership between the manufacturer and the test lab.”3 Whether this difference matters is a choice that each manufacturer and consumer is free to decide.

Unlike government regulations, which impose one set of standards upon an entire industry regardless of the judgment of those subjected to the regulations, the free market provides producers with choices. A manufacturer can decide to have his product tested by UL, or by MET, or forgo testing entirely. Consumers are free to purchase products that are certified or not certified (and likely less expensive). While UL and MET focus their efforts on electrical products, other organizations test other consumer products.
 

Good Housekeeping has been testing and approving products since 1902. The magazine first began testing products “to study the problems facing the homemaker and to develop up-to-date, firsthand information on solving them.”4 In 1910 the magazine built the Good Housekeeping Institute in Springfield, Massachusetts to test products, which included a model kitchen, a domestic science laboratory, and test stations for testing products under household conditions. As with the UL mark, the Good Housekeeping Seal of Approval has become an important aspect of marketing and brand recognition for many products.

Interestingly, both UL and the Good Housekeeping Seal of Approval were started during the Progressive Era—a time when businesses were unjustly under attack for the safety of their products. Recognizing the need for independent evaluation of products, these two private companies moved to satisfy the legitimate concerns of consumers. And they are not alone in helping consumers make informed decisions.

Consumers Union (CU) tests products and publishes the Consumer Reports magazine. Its mission

is to work for a fair, just, and safe marketplace for all consumers and to empower consumers to protect themselves. The organization was founded in 1936 when advertising first flooded the mass media. Consumers lacked a reliable source of information they could depend on to help them distinguish hype from fact and good products from bad ones. Since then CU has filled that vacuum with a broad range of consumer information.5

In addition to its laboratory testing, CU also conducts reader surveys, which results in product reliability reports from the actual users of those products.

Other organizations also provide information to consumers. For example, ConsumerLab.com provides “independent test results and information to help consumers and health care professionals evaluate health, wellness, and nutrition products.”6 Angie’s List allows consumers in more than 120 cities to share their experiences with service providers in more than 450 different categories. The Better Business Bureau “ensures that high standards for trust are set and maintained… so consumers and businesses alike have an unbiased source to guide them on matters of trust.”7 Many trade associations and product manufacturers offer certification programs that insure that professionals meet certain standards, properly install products, and operate ethical businesses.

Each of these is an example of the private sector providing alternatives for consumers to obtain the information that they require to make an informed decision. Unlike government regulations, which are inflexible and coercive, these organizations can respond quickly to changing market conditions and are entirely voluntary. As such, they respect the moral right of producers and consumers to act according to their own judgment. Protecting that right is the only proper function of government, and the only form of "consumer protection" required.

Footnotes
1 "Standards for Safety," http://www.ul.com/global/eng/pages/corporate/standards
2 http://en.wikipedia.org/wiki/Underwriters_Laboratories#About_UL
3 http://www.metlabs.com/pages/AsGood.html
4 "The History of the Good Housekeeping Seal," http://www.goodhousekeeping.com/product-testing/history/good-housekeeping-seal-history
5 "Our Mission," http://www.consumerreports.org/cro/aboutus/mission/overview/index.htm?CMP=OTC-FOOTER4
6 http://www.consumerlab.com/aboutcl.asp
7 "Vision, Mission, Values," http://www.bbb.org/us/BBB-Mission/

Television, Phones, and Freedom

On Sunday the Chronicle ran an article that illustrates, at least in part, a practical benefit of freedom. The development of Internet television is creating concern among broadcasters and cable companies, who fear that they will lose viewers. Prior to this innovation, cable television created similar concerns for broadcast television.

In a free market, an individual can offer any product or service that he chooses. The voluntary choices of consumers will determine whether he succeeds or fails.

In a regulated market, an individual must meet the arbitrary mandates of government officials. His success depends partially on his ability to satisfy consumers and partially on his ability to satisfy government bureaucrats. And often the latter is more important than the former.

When I was a child we had 3 choices when it came to television. Because the airwaves are "public property", the government regulated (and still does) their use to promote the "common good." The result was a lack of choice for consumers and the stifling of innovation.

Cable provided (and still does) a way to escape the regulatory burden of the FCC. Because they are not using "public property" cable companies do not need to comply with many FCC regulations. This freedom allows cable companies to offer a wide variety of programming, and the success or failure of these companies depends upon the voluntary choices of viewers.

Today, Internet television is expanding the choices available to consumers. Companies such as Google and Apple have identified an opportunity and are acting according to their judgment.

Government regulations are often defended because alternatives to the status quo cannot be imagined. For example, few can imagine how electricity or water might be provided on a competitive basis. Such industries, it is argued, are "natural monopolies" and should be regulated to protect consumers from gouging.

For decades this argument was made to "justify" regulation of phone companies. Cellular technology--which could not be imagined just a few years ago--has made that argument moot. Even with regulations restricting their actions, entrepreneurs developed alternatives that others could not envision. The same is occurring with television.

It wasn't that long ago that cable television and cell phones were considered luxuries. Today, their availability and affordability make them almost necessities. This development did not occur because of government regulations, but in spite of them. When men are free to act according to their own judgment, they will find innovative methods for providing the products and services that others desire and value.

It is impossible to predict what innovations men would develop if they were free do so. We cannot imagine how water, electricity, roads, and a myriad other services would be provided if men were free to innovate and act according to their judgment. But our lack of vision does not justify stifling the creativity and ingenuity of Thomas Edison, Henry Ford, or Bill Gates. Instead, we should stay out of their way. Not only will we enjoy the practical benefits, it is the moral thing to do.

Public Education and the Poor

It is commonly argued that without public education the poor would have few, if any educational opportunities. Without public education, those born into poverty would have little opportunity to escape, and the poor would remain poor generation after generation. To break this cycle, the argument goes, government must intervene and provide the educational opportunities that would otherwise be absent.

Undoubtedly, poverty can pose an obstacle to attaining a quality education, just as poverty can pose an obstacle in the attainment of many other values. But obstacles are simply that, and they can be overcome without government intervention.

Today, education is a virtual monopoly of the government. While home schooling and private schools have grown in popularity in recent decades, public schools remain the dominant source of education for most Americans. Indeed, approximately 85 percent of America’s schoolchildren attend public schools, primarily because these schools are “free” to attend.[1] Of course, these schools are not free—their costs are borne by taxpayers, which includes parents and non-parents alike. Because they are forced to financially support public schools, most parents cannot afford the expenses associated with private schools or home schooling, despite the fact that, according to a survey conducted by the National Association of Independent Schools, only 39 percent of those polled would send their children to public schools if cost and proximity were not factors.[2]

In other words, while the vast majority of parents send their children to public schools, those schools are not their preference. Taxation to support public schools effectively eliminates a meaningful choice for many parents, and prevents them from acting as they would choose if they had complete control over their money.

Prior to the Civil War, public schools were virtually non-existent. As educator Robert Peterson writes, most young children were taught at home: “Home education was so common in America that most children knew how to read before they entered school.”[3] It wasn’t necessary for public officials to dictate the curriculum, compel school attendance, or force citizens to pay for public schools. Parents recognized their responsibility for educating their children and acted accordingly. Combined with vocational training received at home, for many colonial Americans a formal education was simply unnecessary. For those who did desire additional education, churches and private schoolmasters offered an abundance of choices. Peterson writes:

Historical records, which are by no means complete, reveal that over one hundred and twenty-five private schoolmasters advertised their services in Philadelphia newspapers between 1740 and 1776. Instruction was offered in Latin, Greek, mathematics, surveying, navigation, accounting, bookkeeping, science, English, and contemporary foreign languages. Incompetent and inefficient teachers were soon eliminated, since they were not subsidized by the State or protected by a guild or union. Teachers who satisfied their customers by providing good services prospered. One schoolmaster, Andrew Porter, a mathematics teacher, had over one hundred students enrolled in 1776. The fees the students paid enabled him to provide for a family of seven.[4]

These schools allowed colonial Americans to attain the education they desired without government intervention. The desire to profit motivated educators to provide the types of classes that individuals wanted, not those demanded by public officials. Both educators and students were free to pursue their own self-interest.

Despite the success of the market in providing educational services, in the mid-nineteenth century many Americans began to demand public schools. Much of the justification for establishing public schools was to meet the needs of the poor and to help immigrants assimilate. The market was considered a failure because some individuals were not receiving the education that others deemed desirable. The fact is however, that the market was providing educational opportunities to these groups. According to Peterson: “In 1767, there were at least sixteen evening schools, catering mostly to the needs of Philadelphia’s hard-working German population…. There were also schools for women, blacks, and the poor. Anthony Benezet, a leader in colonial educational thought, pioneered in the education for women and Negroes.”[5]

In colonial America for example, education was a favorite form of philanthropy for Quakers, and “the poor, both Quaker and non-Quaker, were allowed to attend without paying fees.”[6] Such educational philanthropy is not limited to colonial times: Oprah Winfrey has donated nearly $2 million to the Ron Clark Academy in Atlanta[7] and Providence St. Mel in Chicago.[8] Both schools serve poor, inner-city children. Such examples demonstrate that those who are concerned about education for the poor have the opportunity to provide voluntary financial support to schools for the poor.

However, the poor do not need to rely on alms and philanthropy. If individuals are free of government coercion, entrepreneurs find innovative ways to provide the values desired by consumers, education included.  A study by James Tooley, a professor of education policy at the University of Newcastle in England provides a compelling example.

Tooley conducted a two-year study of education among the poor in five cities in Nigeria, Kenya, China, Ghana, and India. His study focused on differences between public and private schools in the poorest areas of his selected cities—areas that lacked indoor plumbing, running water, electricity, and paved roads. What he found was remarkable.

For example, in Hyderabad, India, 76 percent of all schoolchildren attended private schools. Despite the fact that public education was available, many of the city’s poorest parents chose to send their children to private schools, even when then had to pay tuition. Tooley reported similar findings in the other cities: “the poor have found remarkably innovative ways of helping themselves, educationally, and in some of the most destitute places on Earth have managed to nurture a large and growing industry of private schools for themselves.”[9] The students in private schools in Hyderabad had an income of less than $30 per working household member, compared to an average of $46 per month for the city. Tooley’s findings dispel the myth that the poor need government assistance in order to educate their children.

The competitive nature of private education directs schools to provide the curriculum and quality desired by consumers. If the schools fail to do so, parents are free to move their children to a better school. As previously noted, taxation virtually eliminates this option for most Americans.

As we have seen, both historically and currently, the private sector can and does provide ample educational opportunities, even for the poorest of the poor. More importantly, private institutions cannot rely on coercion to obtain funding or customers, but must meet the freely chosen desires of parents and students. In recognizing the right of individuals to act according to their own judgment in the pursuit of their own values, a free market in education is moral. The examples in this article demonstrate that it is also practical.


Footnotes
[1] http://en.wikipedia.org/wiki/Education_in_the_United_States#Elementary_and_secondary_education
[2]“Public Knows Features That Make a Quality School”, Council for American Private Education, January 2000, http://www.capenet.org/Outlook/Out1-00.html#Story1
[3] Robert A. Peterson, “Education in Colonial America”, The Freeman, September 1983, Vol. 33, Issue 9, http://www.thefreemanonline.org/columns/education-in-colonial-america/
[4]Ibid
[5] Ibid
[6]Ibid
[7] http://blogs.ajc.com/the-buzz/2009/12/17/oprah-gives-1-5-million-to-ron-clark-academy/?cxntlid=thbz_hm
[8] http://www.npr.org/templates/story/story.php?storyId=113683847&ft=1&f=1013
[9] James Tooley, “Private Schools for the Poor”, Catholic Education Resource Center, http://www.catholiceducation.org/articles/education/ed0319.htm

A Good Article on the Preservation Ordinance

A good article on the impact of the new preservation ordinance, complete with informative pictures, can be found at Cynthia Mullins' Real Estate Market Blog. (HT: Barry Klein) The pictures show many alterations to homes that will not be allowed under the new ordinance. The ordinance is wrong in theory, and the pictures show how absurd it will be in practice.