Thursday, March 17, 2011

Good v Bad Business Practices

Libertarians and conservatives have a nasty happy of assuming that all business is good and all government is bad.

The founders of this nation discovered that a limited government focused on protecting property and overall security of the people is a good government. A classical liberal recognizes that there is an area in which government is good.

When government moves beyond its limited confines, the government tends to become a source of oppression.

I contend that this same dialog needs to take place in regards to business. I contend that some business models are good and others are bad.

For example, if I created a business model in which I stole or extorted from others, I would prosper, but my business model would diminish society.

It seems to me that, if we wanted to preserve our freedom, we need to engage in a discussion about good versus bad business models.

Libertarians tend to shy away from discussions about good and bad business models fearing that such discussions would lead to demand for more government regulations.

I contend that the exact opposite is true.

It is our unwillingness to engage in a fundamental debate about the differences between good and bad business models that lead to the call for regulation.

Good business models that enhance freedom and produce wealth do not require regulation. If one has a society filled with freedom centric businesses, there is not a call for regulation.

It is the proliferation of companies using negative business models that lead to the call for regulation.

Rephrasing the comment: if there is a business model that begs government regulation; in all likelihood, the business model itself is anti-market.

Health insurance is a great example of this principle. Attempts to pay for individual consumption with a pooled resource depends upon regulation and micro management of the health care industry.

The fact that the business model demands regulation is a blaring signal that the industry is anti-market.

A fundamental debate about business practices would lead to a discussion about alternative business models.

The Medical Savings and Loan is a business model in which financial institutions provide tools to help individuals self-fund their care. The Medical Savings and Loan does not require the regulation or micromanagement needed by the insurance industry.

If we engaged in the fundamental of good v. bad business practices, we would remove the demand for regulation.

The libertarian assumption that all businesses are equal creates a market where there is a loud demand for every greater regulation.

Engaging in the fundamental question about good v. bad business models does not lead to regulation. If we engaged in the discussion of building affirmative business models, we would effectively remove the calls for regulation.

(END NOTE: My experience is that the left actively encourages the development of bad business models, as such business models lead to the call for regulation. This process has been going on since Marx penned "Das Kapital" which laid the foundation for modern capitalism.)

Tweet Button:


condo insurance quotes said...

I think a business should also have business insurance to protect its investments and also those unforeseen losses that might come in the future.

y-intercept said...

Thanks for the comment.

Personally, I think it better for a company to maintain a strong cash reserve than purchasing an insruance product.

The 2007 economy was stacked to the brim with derivative products that were supposed to hedge investments and provide eternal stability. As the economy dipped, the insurance schemes failed to pay off and deepened the recession.

I've finally concluded that it is better for companies to develop real assets than to buy into schemes that promise security at the cost of freedom (insruance).