this post was submitted on 02 Aug 2023
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capitalism questions and discussion

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It's good to want workers to be paid more, better working conditions, cheaper medications, affordable housing. Those are all important and it's very hard to go without them.

However, government intervention is not a good way to deliver these. Price controls are a good example of this.

The market forces incentivizing people to provide goods, services, or employment dictate the price, and directly interfering with that price greatly effects the incentive to provide it.

This can be seen on supply and demand charts. In the case of a price ceiling, there is a much higher demand at that price (since people exceedingly find the low cost to be worth it), but a much lower supply at that price (since it's much more challenging to sell at a profit). The result is a shortage. In the case of a price floor, there is much more supply, but there's much less demand since no one can afford it, it is as though there is a shortage.

Price ceilings cause either shortages, low quality products, or both. Shortages happen because it isn't as economically viable to sell, so people don't go through the work or take the risk of selling it. Low quality products happen because companies need to lower the production cost and because if one person doesn't buy it, there will always be 10 more clamoring to buy it (no matter how low quality).

It is true that as you forcefully lower the cost, more people are able to afford it, but there are now far more people competing to buy at that price when many of them would rather spend more money and compete at a different price. More products aren't made (in fact, fewer might be made), so there aren't more people getting it, it's just harder to get now.

Price floors lower the demand and mean that many people are unable to acquire the good or service even though there is a large supply. Price floors are most common in the form of minimum wage. While there's plenty of workers willing to work minimum wage, it's hard to find a job where their input is actually worth it. Companies react by squeezing every ounce of value they can from their employees (by increasing responsibilities, lowering amenities, and forcing unpleasant working hours) all while being confident that they can replace their employees at the drop of the hat with the many people willing to work at minimum wage.

Again, there are people who might make more than they otherwise would, but they pay for it in unpleasant working conditions, and the threat of being replaced by someone who's work actually is worth minimum wage.

There are many other instances where government intervention harms the people it's trying to help. Minimum requirements for rentals mean that people who might have been able to afford a more bare bones apartments has to sleep on the street. Excessively long copyrights harm competition and allow the owners of said copyrights to act as monopolies (I don't know if no copyright protection is a good answer, but certainly government created monopolies harm people more the longer they are around). Government restrictions on what can and can't be built where cause urbanization plans that nobody wants. Even if the government provides a service for free, they tend to establish a monopoly in that area (since it's hard to compete with free) and then supply a low-quality, inefficient, unpleasant service (which still costs the taxpayers quite a bit).

It turns out, the government is really bad at helping people. Even if it genuinely wanted to help (which, historically, seems exceedingly rare) it would struggle to do so.

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