More from Lester Thurow
By David Henderson
In my post on the late Lester Thurow on April 15, I promised to post more from his book The Zero-Sum Society. Here are some further excerpts.
Thurow as Ludwig von Mises
Proposition VII: Regulation Leads to Regulation
Since individual economic actions occur in an integrated economy, the adoption of regulations in any one sector of this economy is apt to have effects in other parts. If you protect the steel industry and raise the price of steel, you are raising the costs of building cars in the United States and reducing the competitiveness of the U.S. car industry. Thus a regulation designed to protect one group is apt to hurt another group and lead to new regulations protecting the second group. If you protect steel, you are much more likely to have to protect autos. We have already examined the spreading wave of regulations in the energy area. Each new regulation forced us to yet add another regulation.
I disagree with “have to” and “forced us,” but otherwise he’s spot on.
On the unfairness of price controls:
But there is also a question of equity involved. Price controls can only stop real income reductions by stopping real income increases for someone else. To hold down the price of natural gas or rents it is necessary to hold down someone’s income. Let’s suppose that we have decided to cushion the income shocks of market-priced natural gas or rents. This leads to the question of what is the fair way to raise the necessary revenue. Should we all have to pay through general taxation or is it fair to levy a tax on the owners of natural gas or apartments? They may be richer than the average consumer, but there also are many other even richer people who do not own natural gas or apartments. Why should they be excused from paying?
On the postal monopoly:
Since postal rates have been set at a level far above the cost of delivering much of the mail, regulations must be issued and enforced thereby stopping others from going into the first-class mail business. We are all familiar with the news story of the post office suing to stop some child from delivering local mail, but the purpose is to stop real competition. The result is a situation where the post office and postal workers have little or no incentive to cut mail delivery costs. As we have recently witnessed, this is true regardless of whether the post office is organized as a government department or as a profit-making corporation. Utilities, industrial mailing firms, and others would undoubtedly do to first-class rates what United Parcel and others have done to parcel post if given a chance. Undoubtedly there are routes in the United States that could not be competitively serviced with fifteen-cent letters. [DRH note: remember that Thurow was writing in 1979.] But if low-price mail deliveries are a national goal, then we ought to finance this goal nationally and not levy a tax on those who should be getting cheap mail deliveries because they live in places where mail can be delivered cheaply.