St. Maximos' Hut

I was struck by a passage I read in an excellent history of oil price controls in the 1970s (and everyone thinks professors don't live glamorous lives!):

“Perhaps the most important result of the regulations [in the 1970s] was that they politicized oil price and supply decisions. Firms increasingly came to realize that their competitive position, and perhaps their survival, depended less on their efficiency or business acumen than on decisions reached by Federal regulators. Trade associations and individual companies rapidly increased their ‘presence’ in Washington through lobbying offices and law firms.”*

One of the perils of the regulatory state is just this - the diversion of resources into special interest lobbying. The firm that refrains from doing so suffers a disadvantage. The firms that do so further the destruction of the free market. If we made clear that such activity was immoral and that vigorous competition was the appropriate moral marketplace behavior, it might be possible to restrain some of this behavior. But, given self interest, we surely need strong constraints on government to keep us from doing the wrong thing.

* From William C. Lane, Jr., The Mandatory Petroleum Price and Allocation Regulations: A History and Analysis (American Petroleum Institute 1981), p. 50-51.