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Our three year old son has happily taken an interest in all things choo-choo. Now, I know nothing about either real or model trains – and so his exploration is also a learning experience for me. At several of the train fairs we have attended recently, there have been displays by merchants touting that their products were evaluated by the NMRA.

Now, folks that are into model railroading can tell you very enthusiastically how important it is for manufacturers to make products to very precise standards (with little room for error) and of course how important product quality is. The NMRA was set up in large part to set up a system of standards for all manufacturers to adhere to (think of the potential compatibility problems otherwise) and also as a testing agency to make sure products do, in fact, conform. Manufacturers eagerly submit their work, or so I am told, to this agency as a way to signal to both sellers and consumers that their products are safe, high quality and conform.

When they do this, and the NMRA approves, they get this:

That’s not only pretty cool, but also unsurprising to those of us who understand a little economics. Competition ensures that producers will do whatever they can to convince customers that their products are worth buying. And for situations where goods are hard to evaluate ex ante, and where even after owning for some time problems might not become apparent, there is a strong incentive for some institution to step in and solve the information and regulatory problem. In short, it should not only not be unusual, but downright accepted that this should be the natural outcome of market forces. Indeed, over the course of history, this has been the norm. And much of what you know of as advertising and other commitment mechanisms are nothing more than signals to customers of quality and an intention not to run off and dupe them.

Of course, folks in the congregation of progressivism dismiss that this would ever happen. They think that nothing can curtail the rapacious instincts of entrepreneurs, who they think would rather hurt and maim their customers for a shot at a one time gain, rather than helping and making them happier for a chance of a regular stream of patronage. Or they would point to this example as saying, “You see, model railroads are totally unimportant. So what if private market forces can discipline people here, that doesn’t mean we want to try that on something so important, or that it would ever emerge in something more important.”

To which I say:

  1. When you regulate nearly every aspect of human existence, there is not exactly any room for private forces to emerge and do these sorts of things. We do have a little chicken and egg problem. However you should think hard about how well private regulation has worked in the past and get past the old canards about the topic.
  2. The “progressives” point to this and say, “yep, this is only toy trains.” And I say, “YES … the market even finds reasons to regulate in something as unimportant as toy trains, don’t you think the incentives to do this and to do it well are even strong in more important markets?”

I don’t even know why I try to point these sorts of things out. It seems only to be used as a piece of “look at the hopelessly utopian ideas of a classical liberal over at the Unbroken Window” shrapnel that will be used in some later form of an ad hominem attack on me. I wonder what would suffice as acceptable presentation of an idea that perhaps we don’t need the government to regulate as much of our lives as we get today? I have shown on this site through a variety of posts (1) Private regulation is possible and has been successful; (2) Government regulation has had a best mixed success and in some cases spectacular failures; (3) Public choice issues make the comparison a little different than “imperfect market outcome” with “perfect government outcome.” In other words, political actors and interest groups are self-interested, so ‘results may differ from what is shown in the commercial;” and (4) I have laid out before the standard cost-benefit analysis that ought to be applied when thinking of when and what to regulate. Not only does this seem to not get much weight, there are times that governments do not even acknowledge that we should even be doing it.

5 Responses to “You See, They Only Can Do This When it Doesn’t Matter!”

  1. Captain Profit says:

    Having mentioned chickens and eggs and self regulation, remember the salmonella scare of a few months back? Since that time, the rate of vaccination against salmonella among US egg producers has risen from around 60% to near 80%, without a government mandate. http://www.avma.org/onlnews/javma/dec10/101215x.asp

    England had an egg borne salmonella problem some years ago, and a private certification authority arose there, the British Lion stamp being somewhat analogous to the NMRA approval. http://www.lioneggs.co.uk/page/lionmark

  2. Harry says:

    The Progressives are experts at running negative railroads.

  3. Harry says:

    Maybe you could build a Liberal Layout. Use a combination of Lionel, American Flyer and HO tracks and equipment. Put up a windmill outside for power. Figure out a way to get someone else to subsidize your project. Call it the RLB&WRR (Rochester Liberal Buffalo and Western).
    Dream up a complicated system for who gets to run the trains, etc.

    Then, set up a train wreck, and introduce your son to Federal Emergency Management.

  4. chuck martel says:

    I like to point out to regulatory enthusiasts that the second biggest expense for most individuals and families is essentially unregulated by the federal government and accredited by non-governmental organizations. That would be college education.

  5. wintercow20 says:

    Hi Chuck,

    But that scares me! I think the czars would then say, yes, that is OK because the elite of America run higher education. And of course, two other points worth bringing up. You can see the market forces popping up here in terms of evaluating schools to the extent they are allowed to. We can gnash our teeth a lot about USNWR, but that is a spontaneous mechanism meant to do what opponents say can never happen. Second of course is that even net tuition prices have skyrocketed at rates well above the rate of inflation, so something else is going on (one problem is the very accreditation system you mentioned … it works worse than the AMA cartel does).

    -Wintercow

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