The resignation of House Speaker John Boehner and the VW diesel car scandal -- two rather extraordinary events -- might not initially appear to be related, but there is a connection. The most conservative members of the Republican caucus celebrated Representative Boehner's resignation because they felt he did not fight hard enough to shrink the size of the federal government through more aggressive tactics, like government shutdowns. Although one of government's most important functions is to deter behavior such as that of VW, the radical Republicans would organize American society using only markets, not government. The difficulty with this stance is that corporations "cheating" consumers is an unavoidable aspect of capitalistic markets, making government regulation a necessity.
Adam Smith in the Wealth of Nations famously identifies an "invisible hand" by which individual self-interest has the effect of benefiting society more effectively than when an individual intends to promote it. One virtue of markets is the benefits that competition does produce. Another is that markets are associated with individual freedom: individuals are free to seek their own self-interest in exchange-based relationships.
Radical conservative ideology treats this alchemy as a truism, but it's really a caricature. Markets only work as Adam Smith described when certain conditions are present. One such condition is that consumers have full and complete information about the products and services they purchase so that they can decide whether it is in their self-interest to engage in a monetary exchange. VW's fraud violated this very basic requirement of competitive markets.
The profit motive encourages companies like VW to obtain an advantage in the marketplace over its rivals. VW's market strategy, we now know, was to oust Toyota as the world's number one selling car manufacturer by substantially expanding its sale of diesel cars in the United States. Ideally, companies would build a competitive advantage through innovation or efficiency through cost reductions, which VW rejected. Nevertheless, VW's decision to cheat rather than innovate or be more efficient was completely economically rational. If it costs less to cheat then to take other steps, companies will be tempted into doing so.
We need both markets and government. The challenge is finding the appropriate balance between the two. About this, there can be reasonable disagreement. Those politicians celebrating Boehner's ouster, however, are not interested in debate about what is an appropriate balance; they instead elevate ideology over sensible policy insights. In the meantime, the rest of us are held captive to their ignorance and intransigence.
This blog is cross-posted on the Huffington Post.
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Sidney A. Shapiro | October 6, 2015
The resignation of House Speaker John Boehner and the VW diesel car scandal — two rather extraordinary events — might not initially appear to be related, but there is a connection. The most conservative members of the Republican caucus celebrated Representative Boehner’s resignation because they felt he did not fight hard enough to shrink the […]
James Goodwin | October 5, 2015
Consistent with his ongoing efforts to distinguish himself among the Republican presidential candidates as a serious “policy wonk,” Jeb Bush, “rolled out” his “regulatory reform” plan last week. The sad truth, though, is that the plan contains little of what might be considered sober or intellectually rigorous. Rather, it is simply a mishmash of warmed […]
Thomas McGarity | October 1, 2015
The new primary ozone standard of 70 parts per billion (ppb) is definitely a step in the right direction, but it has taken EPA far too long to make this much-needed change. We should not forget, however, that EPA Administrator Lisa Jackson sent a proposed standard of 65 ppb to the White House in August […]
Joseph Tomain | October 1, 2015
Two of the most important aspects of the Clean Power Plan (CPP) are the flexibility afforded states as they design compliance strategies and the plan’s openness to all energy resources. A state can satisfy its emission-reduction targets through the use of cleaner or more efficient coal-fired generation, natural gas or nuclear power as well as […]
Katie Tracy | September 28, 2015
Lawrence Daquan “Day” Davis, 21, died tragically on his first day of work at his first job, as a “temp worker” at a Bacardi bottling facility in Jacksonville, Florida. He began his shift within 15 minutes of arriving at the facility, after completing some paperwork and watching a very brief safety video. Although working in […]
Robert Verchick | September 22, 2015
Center for Progressive Reform President Robert R.M. Verchick issued the following statement today in response to the burgeoning Volkswagen emissions scandal: With the Volkswagen emissions scandal, hard on the heels of the GM settlement, can anyone doubt the importance of strong regulation and tough enforcement? One automotive giant let a safety problem fester for a […]
Robert Verchick | September 22, 2015
Republican presidential candidate Jeb Bush released a plan meant to make it harder for federal agencies to make rules that protect public health and the environment. That might help some big corporations. But it makes everyday Americans much less safe. The idea is to jam up the federal rule making process with so many requirements that hardly […]
Erin Kesler | September 21, 2015
Today, Stewart Parnell, former peanut company executive was sentenced to 28 years in prison for his role in a salmonella outbreak that resulted in the deaths of nine people and the illness of 174. CPR Member Scholar and University of Maryland School of Law professor Rena Steinzor issued the following statement in response to the […]
Rena Steinzor | September 17, 2015
CPR Member Scholar Rena Steinzor reacted to today’s announcement of a settlement between General Motors and the Justice Department over charges stemming from the company’s failure to disclose a deadly ignition defect it millions of its cars. Steinzor said: This settlement is shamefully weak. GM and its executives knew for years that they had a […]