Why we'd not like governments correcting markets


Yes, I too am up with the idea that markets are not perfect. Yes, I too am up with the idea that markets can be made better by judicious intervention.

But the problem is that said intervention is going to be made by politicians: people who depend upon votes, lucre to gain votes, to gain their position.

As an example:

The unrelenting heat has also extended one of the worst droughts in Russia's history. The government will ban grain exports from Aug. 15, as the outlook for this year's harvest shrinks and domestic grain prices continue to soar, local news agencies reported. Mr. Putin told a government meeting that he supported the ban, and that 35 billion rubles will be allocated to supporting victims of the drought.

Righteous and just you might say. Fires mean less wheat, so let us not export that wheat, we might say.

Well, yes, perhaps, but there is something else that we might say about this. Russia, amazingly to anyone who remembers the need of the Soviet Union to import the components of bread, that staff of the proletarian life (and absolutely not to the amazement of anyone who understands how markets increase production), is now one of the major exporters of wheat to the international markets. As, umm, it was before communism and as it is now after such (such a lesson in agricultural economics, eh?).

That something that we might say about this is that in a supposedly "free" market, it is still possible for producers, even consumers, to capture the bureaucracy that over sees that market. As Adam Smith pointed out, with the businessmen, conspiracy against, and so on.

The whisper in the grain markets is that various Russian exporters were promising a large amount that they could export.  The drought has meant that they cannot. This, so far, is fine, they lose money on what they promised to supply but cannot. However, if the Russian Government insists upon no exports, then they can declare force majeure and the export contracts are voided.

No, obviously, I do not know that the export ban has been caused by those exporters not wishing to lose their money. But that is the way I would bet.

And if so, it's a grand reminder of one of the most basic points about the world: yes, really, absolutely everyone would like to use the power of government to screw us over. That's why we shouldn't allow government, of any type or stripe, the power to screw us over.