Under Laissez-faire Capitalism, one would expect products to be safer and to work better, for the simple reason that a company who produced unsafe products would lose out to the competitor who sold safer products.
The concept involved here is reputation — a doctor with a reputation for killing his patients in surgery will not be in business for long.
One would have private certification boards which would rate product safety — such as Consumer Reports does today. The difference is that the consumer would be free to disregard this information — if they thought it was inaccurate, or did not apply to their situation. Furthermore, such boards would not be subject to political pull and lobbying that goes on in today’s government system. Lastly, no certification board would be able to use the power of the police to force their opinions down anyone’s throat — the board would have to earn the citizen’s respect by providing consistently good decisions over a number of years.
Consumers could then use this information to make their own judgment regarding product safety — as opposed to some bureaucrat charging consumers thousands of dollars to decide for them.
This is not the case in the U.S. where the FDA bans drugs used in other countries that could save millions of lives.
Statists view adult citizens as “idiots” unable to make rational decisions, who must have bureaucrats make important decisions for them.
The real idiocy of the situation is that these bureaucrat regulators are hired by politicians voted into power by the same “idiots.”
This begs the question: if private citizens are incapable of making decisions affecting their own lives, on what rational basis are they supposed to elect an official to make the decision for them? Doesn’t such a decision presuppose that the ability to judge the decision-making rationality of the elected official?
Also does that same “idiot” magically become a genius able to decide for everyone else when he becomes elected?
Furthermore, if a private citizen has no right to choose what goods are safe, where does the government official get the right to chose for them, as are not all powers delegated to government those that belong to the people?
The government’s job is to protect rights as a referee (which means the enforcement of voluntarily made contracts), not to regulate people’s affairs as a dictator.
Thus, if a company sells a product as being of a given level for safety, and it is not; then the purchaser has a right to demand legal compensation. Otherwise governments position is laissez-faire: to market participants alone.
In the present “organic” food movement (no “unnatural” chemicals) the organic growers have to lobby the government to define what the term “organic” means (I have read of complaints that the government is redefining it into something different from which those who market such foods intended).
However, in most supermarkets if one wants “organic” we do not label all “non-organic” foods as “non-organic”; we simply label the organic foods as “organic.”
This same principle governs the labeling of other kinds of foods.
Under capitalism, the state cannot force anyone to label anything. Companies are free to label their foods as “non-genetically altered,” and to define the rules that allow other food companies to use this term (and then to trademark the brand name to ensure its proper use).
This private certification system will satisfy those who only wish to buy “non-genetically altered” foods, without placing a burden on those who wish to sell genetically altered foods. It will be up to the private label company to enforce the use of their “non-genetically altered” label/brand, i.e., the “Good Housekeeping” seal.
Those who are concerned about the “genetically-altered” issue can purchase these private label brands — those who do not think it is a valid issue can purchase everything else (which will more than likely be cheaper). Anyone who sells genetically altered foods will not be able to use the “non-genetically altered” approval logo.
What we do not need, is the situation we have now: where the government decides how to label products — as opposed to having consumers and producers choose labeling standards in the marketplace.
Under capitalism, can’t a group of a few wealthy individuals acting as a fund “manipulate” a stock, causing unaware investors to buy the stocks at inflated prices, where then wealthy individuals would dump the stocks, causing prices to collapse? Would this count as fraud even though it is technically legal under the laissez-faire capitalism? If the government had to step in to regulate things, wouldn’t it violate the system?
People do indeed occasionally try this strategy, particularly in regard to small, illiquid stocks, often trading outside of the U.S. The situation described didn’t constitute fraud, however. If a few people
People do indeed occasionally try this strategy, particularly in regard to small, illiquid stocks, often trading outside of the U.S. The situation described didn’t constitute fraud, however. If a few people aggressively bought stock to drive up the price, there can have no certainty that others will follow them and buy enough to drive the price high enough for the original buyers to sell profitably. Such a strategy sounds risky, and would likely be a losing strategy by itself.
There is no such thing as an “inflated price” by the way. Prices are only determined by those willing to buy and sell. If a person believes the price that others pay is higher than what he believes it should be, he can sell or sell short that “inflated” stock. A person who buys a stock merely because it has gone up is foolish and has little basis to complain about the actions of others.
If enough people have enough money, they can increase a stock price by buying heavily, faster than sellers are willing to accommodate. However, remember, unless fools rush in afterward with even more zeal than the original group, the original group will be the ones who lose money, as the stock would tend to settle back down afterward, all other things being equal.
The situation which happens more often, and is more serious, is for people to buy up a stock, and then make false statements about the prospects of the company or stock, soliciting others to buy it. While this is immoral, it would probably not be illegal if these people were just private individuals exaggerating the quality of a stock. That is why one should take free investment advice with a grain of salt, and carefully judge its source and quality. If on the other hand, such false statements were intentionally made by (for example) a stockbroker to clients, then this would simply be fraud and would be punishable as such.
Neither of these situations poses a threat to capitalism. All business is subject to risks, and all business requires one to use good judgment. — Andrew West