Restoring market forces isn’t as simple as repealing old laws

by | Mar 30, 2017 | Capitol Review | 4 comments

As a believer that market forces are better at serving consumers than are government regulators, I found de-regulation one of the most challenging issues while I served in the Colorado Senate.

When government intervenes, it always tilts the playing field.  Sometimes it does this for ostensibly good reasons – most notably to provide all Coloradans with electricity and telephone service as was done predominately in the first half of the 20th century.

But decades later, de-regulating those areas in order to promote competition turned out to be more complicated than just repealing old statutes.  Technology ultimately made local telephone monopolies obsolete, but before that happened, fights over bills to allow local competition were cutthroat.

Would the heirs of the Mountain Bell (US West, Qwest and CenturyLink) be required to give its competitors unfettered access to its facilities?  Clearly, competitors couldn’t compete if they had to first install their own telephone wires across every community.

The existing system was constructed with subsidies and Mountain Bell given a monopoly in order to make service widely available.  That gave Mountain Bell an advantage, largely financed by government or through taxes on phone service.  Mountain Bell’s would-be competitors wanted access to that subsidized system.  However, Mountain Bell remained responsible for maintaining that system, so it wanted  to charge its competitors for access.  That left the question of what constituted a fair charge.  Mountain Bell wanted to charge relatively more; its competitors wanted to pay relatively less.  Legislators had no way to know what was fair or who – if anybody – was telling the truth.

Re-introducing competition in the health care market faces different but similar hurdles.  The number of health insurers has dwindled, and those that remain have some inherent advantages (more money, large numbers of existing customers) on new upstarts.  But they’re also burdened by the bureaucracy and inflexibility that makes large corporations want to preserve the status quo rather than adapt to something new.

The more complicated challenge is what to do with the people who have benefitted from ObamaCare.  This is both an economic question (how to create an replacement that functions well and doesn’t increase costs) and a political question (how to make the transition simple so it doesn’t turn frustrated consumers into voters for your political opponent).

ObamaCare’s goal was to get more people insured, mostly through government programs, to help reduce the amount of unpaid health care given to people who didn’t have insurance and were unable to pay.

A truly free-market system would require not require anyone to purchase insurance, not require insurers to cover pre-existing conditions, and not require doctors or hospitals to serve people who can’t pay for care.  If you don’t understand why two of those three are political losers in today’s America, then you are politically tone deaf.

The takeaway is this:  Markets thrive with no government interference.  Once government becomes involved (regardless of the reason), restoring genuine competition is a tedious process.


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