Blog

What alcohol and free markets have in common

As I am watching TV nowadays it seems the discussion about free markets is deeply polarized. Some people think that the market should heal all the economies wounds and some other say that the government must create regulations for everything. It seems that there is no middle ground.

Trying to find a way to explain this middle ground I thought about booze. Let’s think about deregulated markets as alcohol for a minute.

If you are on a party and you don’t drink at all you are probably not going to be brave enough to move forward on that hot chick. The same applies with market freedom. If you have none, there is no room for innovation or risk taking, hence no big rewards.

On the other end, if you take too much of your preferred drink you will end up doing stupid things. Fighting someone that you shouldn’t, singing on top of a table, etc. For companies works about the same way. If they are completely deregulated they will take far more risks that what they should resulting on a poor situation for them. Not only that, most companies act like frat boys where they start competing against each other on who takes the riskier move ending up on an environment way too risky.

Between those scenarios is the middle ground, where you can drink a bit to help your guts but not enough to knock your conscience. You might even end up with a nice date. Market’s wise this would mean some regulations, the problem is to find which ones.

You could say “what if I want to knock myself out with booze?” or “why do you care if I got all my money from my small shop to the casino and bet it?”. The answer would be that in most cases it doesn’t really matter. If you start singing naked in the middle of the party while trying to hook up with your wife’s sister is your problem. Almost no one would care either if you bet all your shoe shop’s money on the casino and then loose. That is socially irrelevant, knock yourself out.

But if you are drunk and then you want to start driving, on the highway, on the wrong side of the road, we all have a problem. If banks start lending money to people that will never be able to repay, we all have a problem. If health care companies deny you service because you got sick, we all have a problem.

Here is where regulation should be present and very strict. In fact if you drive under the influence of alcohol you could end up in jail. That is not meant for people to stop drinking or to stop driving, the law makes people think before they do both, and most of the time they don’t. Market laws could be stated so CEOs know that if the take risks they shouldn’t with other peoples lives on the line, there will be consecuences, legal consecuences; and maybe they will think twice before taking that road.

Hopefully some day there will be enough regulation in place so companies that could hurt the status quo of the society are regulated to not take irresponsible demissions and don’t become a burden on taxpayers pockets.