Denver, CO

Let’s stick with the example of the Internet as a free, unregulated market:

Remember when the Internet first started out? Maybe not the very first days of Internet, but how about the days of paying for connection through your phone company and then also paying a separate fee through an Internet server/gateway such as AOL? Remember receiving CD after CD in the mail with the latest and greatest version of AOL with 700 free hours, etc? Dial-up?

Well, as it always happens in a free market economy, the technology behind the product improved, improving the product itself, and lowering costs.

Almost overnight we went from dial-up to DSL, to high speed, to wireless, etc., and with it, the cost of the Internet went to 0. You still pay your phone or cable company for the access, but there is no longer a guardian or gatekeeper in the way. This was the market providing free email to everyone, so long as you had access to a computer, and a phone line/internet connection.

Now let’s say that somewhere in the near future, the government in their infinite wisdom decides to get involved in this free-market economy, the Internet. Government involvement would, as it always is, be painted with the best intentions and here is how it might happen:

The government could for whatever reason or motivation, decide that everyone should be entitled to the best quality Internet service money can buy. Right now, of course, there exist many different options among the many different provides. So the government would have to pick a winner, and let’s say they pick DSL. There would be a massive public relations campaign to highlight how our government, from the bottom of their collectivist heart of hearts, has decided that Americans need Internet to be a great nation and the government will help pay for DSL for everyone in America. Keep the people informed! Provided entertainment! Knowledge at our fingertips! Sounds great, doesn’t it? Let’s take a look at the numbers of this “mixed economy” then shall we?

Let’s assume that a high quality Internet provider costs about $90 a month, across the board, no matter what state you live in or what company you buy from (for the purpose of keeping this exercise mathematically simple). When the government decides to go with DSL, they’ll offer either a tax credit or a subsidy, or a combination of the two. This will allow the DSL company to provide their service at a reduced cost to themselves and to their customer. So now DSL can be offered at $60 whereas their competitors scrape to lower their costs but can’t get below $80 and remain profitable. Some of the competitors go out of business.

But at the end of the day, millions more American homes have access to affordable Internet. (Would the government have to add to their program later and offer computers to everyone in America?)

Fast forward several months, maybe even years. The DSL company has grown fat and lazy, like a sloth with an endless supply of food. The original government involvement, despite the good intentions, has removed the aspect of competition from the market. And in the absence of competition, no one can keep this government-backed company honest.

Unfortunate, because a few small time guys really want to open shop with their new, eco-friendly and green Internet service that actually prevents and reverses global warming. But fighting global warming is an expensive business, and there is no way they can be competitive with the low prices of DSL. It’s faster, safer, and prettier, but still too expensive.

The solution coming from the left in Washington will call for comparable tax credits or subsidies for the new company; they may even throw around the word “regulation” a few times for good measure, and that will start another circular track of the government chasing its tail and conning the tax payer (but that’s for another discussion).

The right will want to retain current low prices, calling everything else a tax. They defend only a glimmer of what used to be free markets, when in fact, many of these “so-called conservatives” had given in to the collectivist idealist dreamworld and supported the original tax credits and subsidies for DSL because they too thought our society would be better off with accessible Internet provided to everyone.

Get the picture? Now try to apply this same story-line to other products. How about oil? Farming and agriculture? Ethanol? Notice any resemblance?

Capitalism by itself, without government involvement, would have succeeded in bring about alternative fuel and energy sources at a competitive price by this time. Instead, a government barrier to the industry of energy has been put in place in the form of subsidies and tax breaks to oil and coal industries. That is not capitalism; it is only a mixed economy. Now with energy prices on the rise and the cost of oil floating, we do see capitalism beginning to become competitive with the mixed economy. Alternative fuels and energies are becoming more and more efficient and priced closer to the cost of oil, natural gas, and coal. And guess what- if the oil industry was no longer receiving such fantastic support from the government, then oil would no longer be competitively priced.