Many people today consider government regulation to be a necessary evil. Without government overseeing greedy corporations, the thinking goes, attention to quality, and especially safety, will degrade.
It is assumed that government is the only entity with the ability and motivation to look out for the interests of everyone.
To help illustrate how faulty the notion of government regulation being our saving grace is, let’s take a look at how the Soviet Union regulated the production of its most effective propaganda outlet, the common TV set. Keep in mind that the USSR had an interest in producing quality TVs in order to govern more effectively.
Soviet television sets tended to explode, because of faulty manufacturing. The surprising and alarming propensity of Russian receivers to blow up, and by extension the apprehension it causes in Soviet viewers, was one of the stranger features of Soviet life. By one estimate, sixty percent of all apartment fires in Moscow are caused by mass-produced Soviet television sets, which hada tendency to explode. Of the 715 apartment fires in Moscow in November 1987, 90 were blamed on exploding television sets, a statistic the Soviet press viewed as an alarming commentary on Soviet technology. Police said three television models notorious for defective wiring are being removed from the market, and millions of warning leaflets have been mailed to television owners.
Its true that markets aren’t efficient (in terms of the efficient market hypothesis ), but as inefficient as they are, governments are worse. It is a fallacy to think that a small subset of the market can do a better job than the whole market in ferreting out bad products.