Minor Thoughts from me to you

Road Blocks to Improvement

Quick -- how do you increase the wealth of a nation and improving living standards for everyone? I'll tell you how. First, create a stable system of laws that apply to everyone and make sure that everyone knows what they are. This creates a level playing field where neither income nor social status prevent justice from being served.

Second, allow individuals to produce goods and compete for buyers in a free and open market. Producers will compete for buyers through price, quality, and quantity. Producers will diligently strive to gain in edge in one -- or all -- of these categories, in an effort to draw more buyers and earn more profit. As each producer gains a temporary edge, other producers will rush to imitate the innovation. What starts as an innovation by one producer will quickly become the norm for an entire industry.

This cycle will repeat over and over and over again in each sector of the market. Electronics (iPod vs Zune), automobiles (American vs Japanese), furniture (getting nicer all the time), homes (getting bigger all the time), lighting (incandescent bulbs vs compact fluorescents), and more. What once was inconceivable quickly becomes the new base line standard.

At least, that's the way things normally work. Every so often, a spanner gets thrown into the works. The story of Creekstone Farms Premium Beef provides a nice illustration.

The U.S. Agriculture Department tests beef for mad cow disease. However, the USDA has a limited budget and Americans eat a lot of cows every year. As a result, less than 1% of all slaughtered beef is actually tested for mad cow disease. Creekstone Farms sells a premium grade of beef. They'd like to offer buyers another incentive to choose their beef over their competitors. They decided to gain a competitive edge by testing all of their beef for mad cow disease and certifying every cut mad-cow-free.

This would have given Creekstone Farms a decided advantage in the market for premium beef. Their competitors were worried about losing buyers to Creekstone. Rather than compete with their own innovations, they lobbied the USDA to crack down on Creekstone's innovation. The USDA ruled that no beef producer could perform more testing than the U.S. government performed.

Creekstone is fighting the ruling in court, for their right to innovate and compete in a free market.

For the moment, the forward progress of wealth and living standards has been stopped by the U.S. government. Companies that would rather lobby than innovate control the regulatory system. Do you still believe that government regulation makes the world a better place? I don't.

(Hat tip to Coyote Blog.)