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The Land of Unintended Consequences

Free market economists know that it is unwise to force people to use one particular good or service, and that competition should be fostered whenever possible. Unfortunately, government is often accused of being slow and grossly inefficient in most cases, and if left unchecked (which is often), public services can act like monopolies. And that's a bad thing for consumers.

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Monopolies limit choice and almost always result in higher prices and lower product quality than would otherwise exist if consumers have choice. Competitors keep each other honest, and the threat of substitutes (a product in a different category that meets the same need) entering the market and destroying an entire category the way that Netflix did, keeps competitors on their toes. So, back to the government.

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Nowhere can the negative effects of too much government be felt more acutely than in the high tax, highest poverty state of California, where I grew up. And aside from San Francisco, which is very limited in size by geography and simply oozes wealth as a result, those negative effects can be best felt in the City of Los Angeles, where I grew up. When LA imposed a new garbage collection program last summer and made recycling mandatory, advocates promised that landfill waste and greenhouse gasses would be reduced. But after only six months, the results are anything but encouraging and serve as a lesson in what can happen when there isn't any competition--that is unintended consequences.

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In short, exclusive contracts were granted to 10 operators who divvied up the city into exclusive regions. The result has been skyrocketing trash bills and over 28,000 complaints about missed collections. But a customer that doesn't like her trash collector can't fire him anymore than she can fire her local police department. That's because there is zero competition and not much incentive for a service provide to provide good service. Although the police too are a monopoly, there is something about those who put their lives on the line for the public's safety that makes them different in the way that they provide services. I think most of us would agree on that. So let's just consider these particular monopolies to be statistical outliers. The garbage industry? Not so much. I feel for the people of LA. Sort of. But here in Arvada, CO, I have at least five choices tha I know of for trash pick up and prices in the region are kept in check as a result. Service quality is not much of a problem.

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On a larger scale, many observers are concerned about the power of Amazon, Google, Facebook, Apple, and a few other companies who have become the crux of a new sort of "techno-industrial" complex. These companies are coming to dominate their respective categories, and regulators on a federal level will be eyeing these businesses to make sure that consumers have enough choices. Regulators probably should not be limiting consumer choices as the locals in LA are doing. I'll bet there are some people in LA who wish that federal regulators, who unfortunately for those residents are tasked only with policing the private sector, could intervene. It would be far more efficient to just let the market do what markets do.