A good topic came up on Chris Linfoot's website when he made a comment that regulation, e.g. industry regulation, may have kept Microsoft from invalidating thousands of Windows licenses via the WGA authentication tool. I took issue with that idea, being a person who believes in free market economics, and wrote a lengthy reply that didn't get much reaction. I thought I'd post it here for further comment because I do think this is an important topic.
But, if I may, I did want to take issue with the notion that regulation is the answer. It goes without saying that regulation brings important safe guards to the public, and in many cases it is imperative that regulation be in place and in force. Good examples are measures. Auditors here in the US, county by county, certify and seal petrol pumps so that we as consumers know we are getting a gallon when we buy a gallon. This is a pretty indisputable and obvious piece of regulation.
Then there is social and economic regulation. Before I dive into this, yes, I'd love to see MS change - but let's look at what makes for the most effective means. If I have government regulation on free-market exercises, there is a cost associated with it either in enforcement and monitoring (a regulatory model) or in litigation (a jurisprudence model - ala the antitrust suits brought against MS by the government). It's easy to declare that the regulated body should pay that cost, but it is always passed on to the consumer.
Now, not knowing MS's exact internal financial details, I'm relatively sure we are paying the price today for, in part, the anti-trust legislation. We would likewise be paying the cost today for regulation that may have preempted the need for litigation in the first place. Where ever there is a business, and a business has expenses, a business has but one way to cover said expenses - through incoming revenues. So, I think it's fair to say regardless of model, we pay in the end - even if we say the Government should pay the cost - then it comes down on the tax payer and I'd rather the business pass on the cost rather than the government appropriate funding to cover it being that they are much less efficient that entrepreneurs.
So, my two p would be that regulation in any form is not the answer. The answer is free market consequences - namely loss of market share. This is starting to happen for MS with Vista. People are finally fed up with it, so the adoption rate has failed to deliver and MS is feeling it. While I love to gripe and complain about how MS has screwed us over time, they have screwed themselves royally with Vista. This is great because with a decline in market share comes a decline in perceived value and with that comes a further slide in demand. Eventually, MS only choice to recoup will be to cut prices or start delivering like the multi-trillion dollar firm they are. In that case, we win. Capitalism at its best.
Right now in my lovely state of Ohio, the socialist governor is making noise about returning our public utilities to regulated rates. Currently they are unregulated and by the end of 2008 or 9 the blanket coal delivery contracts will expire, driving up the cost to produce power. The argument is that the government should restore utility regulation practices because no competition has arisen to challenge the existing deregulated monopolies.
What he fails to mention or address is that even though rates are unregulated, there are many other plethora of regulations on an energy producing utility. Despite labels, it's not a free market economic model. The cost to entry is so high and the returns so meager and protracted that there is not a rush of investment capital to attempt to raise up any competition. So, would further regulation make sense in this case? On the one hand, utility rates are bound to rise and rise suddenly in the near future. On the other, if the rates are artificially suppressed, someone will have to cover the actual cost to produce the energy. Either the fuel suppliers will have to lower their prices to compete for the now capped contracts, potentially forcing utilities to consider cheaper off-shore sources, or the government will have to subsidize somewhere along the supply chain.
In either case, the people who consume the power will still pay the price.
Personally, I'm inclined to let prices go up and watch the innovation ensue. Just look at the innovation all the global warming hype has produced. Just imagine the fevered pitch of inventiveness and resourcefulness that will result if the cost of power rises steeply. Either option is a market force - the question is which one results in the most positive return? Would you rather have one large company trying to figure out how to solve the problem or millions of individual consumers?
My money is always going to be on the consumer - they have more at stake. Whether they choose to invest in a solar array or to switch to Linux, they are making a choice that promotes free market growth rather than being insulated from the pressure to innovate on their own from a nanny state.