… is from page 152 of Randy Holcombe’s important 2018 book, Political Capitalism: How Economic and Political Power is Made and Maintained:
The idea that regulatory agencies represent the interests of the general public amounts to wishful thinking on the part of those who have an unrealistic assessment of the incentives involved in the regulatory process.
DBx: Bizarrely, the world is not much populated with people skeptical of strangers possessing the power to coerce. And the world also has, equally bizarrely, an abundance of people who are skeptical of, even hostile to, market-disciplined commerce – commerce governed by the rules of private property, contract, and tort and saddled with no obstructions or other privileges imposed by legislation. Such commerce – although of course never perfect by any standard – works amazingly well in large part because every person operating in it has the right to say “no” to any offers, along with the right to make different offers to whomever they wish.
With the right to say “no,” no one is compelled into a worse position. Yes, people sometimes make mistakes the results of which put those who err in worse positions. (“I thought that saying ‘yes’ to the person selling time-shares would serve me well, but it didn’t.”) And yes, sometimes someone’s saying “yes” to an offer reflects that person’s unusually bad circumstances. (“I wish that I had a better job offer than the one that I accepted as a motel maid, but my skills at the moment are very low.”) But the incentives in markets are clear: if you want to gain by trade, you must make to someone else an offer that he or she finds attractive. This latter fact applies to Jeff Bezos no less than it applies to an immigrant with only the barest of skills.
Matters change greatly when the state superintends, with the power to override, voluntary market choices. No private citizen can say “no” to commands issued by the state. (Well, strictly speaking, each private citizen can say “no” to such commands, but only if he or she is willing to be caged and ultimately executed for his or her haughty refusal to obey those who command.) Unable to say “no” to the command to help subside firm X, to the diktat to pay a penalty for patronizing firm Y, and to the order not to compete with firm Z, there is no reason to expect that the resulting pattern of outcomes will be one of mutual benefits.
And unless those who support government power to superintended and override peaceful, voluntary commerce among consenting adults have a substantive and coherent explanation for how government officials will gain the knowledge necessary to enable them to issue their commands in ways that improve upon market processes, and a substantive and coherent explanation for why government officials will exercise this discretionary power not in ways that differentially benefit them and their cronies but benefit instead the general public, supporters of such government power should be taken no more seriously than we take a person wearing feathers who promises that his dancing and sacrifice of virgins will appease the gods and bring prosperity to all.
Although the language in which they offer their schemes of tariffs, industrial policy, and other interventions masks this reality, all who offer such schemes today – protectionist schemes, industrial-policy schemes, you name it – are the intellectual equivalent of feather-wearing prancing priests who propose to save the village by sacrificing virgins. Such people – despite the illusion they cast to the contrary – have no idea what they’re talking about.