Wednesday, April 3, 2019

Cooperation versus Competition

Image result for handshake

Competition in the marketplace is trumped by only one other thing - cooperation.

Some financial fundamentalists like to cite Adam Smith and his "invisible hand" of the marketplace as what should be a guiding principle of our economy.  During the Reagan years, this took hold, as we were told that "marketplace solutions" to any problem were better than government ones.

And in an era where if you wanted to drive a semi truck with cargo or fly an airplane with passengers you first had to get permission from the government and then be assigned routes and told what to drive or fly, such thinking had merit.  The government was perhaps too much invested in running things back then.

But the "invisible hand" that finds the best price for the seller and lowest price for the buyer doesn't always work properly.   Psychology is the first hurdle - people act irrationally in the marketplace, spending more than they should and borrowing money on odious terms for silly things.   The second aspect is corruption or criminality.   People in the "free market" might engage in Ponzi schemes or other forms of rip-off instead of being rational, legal actors.

And this is where government comes in, or should - to provide a level playing field such that competition can flourish.   In every sport ever played, there are rules to the game and an umpire or referee to enforce them.  We may argue with the ref over a bad call, but no one argues that the game would be better played with no referees or no rules.    We need a framework to operate in, a frame of reference - standards to live by - in order to function in society.

And in order to create the things we want in life, our society requires the cooperation of thousands and millions of people.   Unless you are one of those particularly dense people who think Steve Jobs "invented" the iPhone and that it is made by elves in the Apple factory, you realize how this is so.   There are thousands of Engineers, not just at Apple, but in many supply companies, that spend their entire lives designing one small circuit or control feature to operate just one aspect of these devices.   The orchestration of all of these myriad people takes place without much in the way of direction, other than the incentive of money.

A chip supplier wants to land a contract with a cell-phone company.  They design a chip to the company's specifications, and it had better work as expected, or they won't get the contract.   The cell phone company, in turn, needs to make a product that people desire, hopefully won't catch fire, and will operate better than the competitor's.   It is an amazing ballet of interacting market actors, and it would not exist but for the structure and rules we have in place.

My job, for the last 30 years, has been to be one of those "cops" in the marketplace, or at least someone who works in the field of enforcement.  By prosecuting patent applications for clients, I have been able to help, in a small way, parse out who owns what in various technological fields.   Sometimes these things end up in court, most times they don't.   But even when they are not litigated, these Patents have value - often being sold or licensed to other companies for their recognized value.

If we didn't have this system in place - as weak and fallible as it is - there would be little incentive to innovate.  The innovator would have his ideas stolen by the low-cost producer, who would then drive the innovator out of business - something that happens all-too-often anyway.   The system is imperfect, yes.  It could stand improvement, too.   Abolishing it would be a nightmare.  And yet some "Libertarian" types think exactly this - that if we abolished all intellectual property rights, there would be more incentive to create.

Oh, and by the way, the Patent Office generates a profit for the U.S. Government, so please, no nonsense about "your tax dollars" going to waste.  Ditto for the Postal Service - until recently, anyway (and it would make a profit, if Congress would let it, and stop Saturday delivery).    We should be thankful these organizations are run as efficiently as they are - the most efficient in the world today (try sending a letter in other countries - you'll pay more than double what you do here, and you might as well just throw it in the trash, as it has only a 50/50 chance of arriving - and this includes those efficient Japanese!).

Don't get me wrong, competition is also necessary in the marketplace.   Imagine if the only cell phone company was Apple or if the only airliner company was Airbus.   Since they could charge whatever the market would bear, prices would skyrocket, under monopoly conditions.

Or consider if companies were allowed to dump waste wherever they wanted to - wherever was cheapest.   This was the case, not long ago in this country, where rivers were viewed as sewers to dump toxic chemicals into.   A Republican President, Richard Nixon, signed into law the bill creating the Environmental Protection Agency.    He knew back then, that left unfettered, companies will engage in a "race to the bottom" and not by choice, but in order to survive.

Today, there is much talk about abolishing regulations entirely or even abolishing entire agencies.  This mental illness of libertarianism has taken hold in this country - the idea that people should be allowed to do as they wish, even if it impacts the lives of others - and settle their disputes with handguns in some sort of wild-west shootout.

The problem with this model is that especially as our country gets more crowded, the rights of one person necessarily infringe on another's.   You can't dump toxins in the river without affecting the rights of people downstream, and expecting them to enforce their rights at the point of a gun isn't civilization, but anti-civilization.   You can't be a "sovereign citizen" by poaching on government land - land that belongs to the rest of us.  Far from being a "rugged individual" they end up being a social parasite, no better than the welfare recipients they rail against.

Sadly, this form of mental illness is sweeping the nation - an illness marked by weak thinking.  "If only" they say, "we could abolish X than everything would be hunky dory!" - where X is whatever whipping boy they are railing against at the time.   Simple answers, however, are rarely the right answers, particularly for complex problems.

I am all for better government - simpler and clearer and fairer regulations.   But merely abolishing things doesn't take much thought, particularly the thought as to the outcome.   Tearing down takes no talent.  Building things does.

Note:  This is an older post that I had left in DRAFT form for some reason.  I have several hundred of these!