Why Only Regulations Can Make Businesses Responsible
In the free market, business will almost never be able to be responsible
As much as people want to point to businesses as not being ethical or polluting the world beyond recognition — I believe that, while the people running the businesses are not being ethical or responsible or whatever, the blame is on the legislators.
Game theory dictates that people will do whatever they can to ensure the most profits for themselves. Even if a business wants to be responsible, that means that they will loose profits. Sometimes, a responsible business does not loose a lot of profits, but it depends on the market — some markets are filled with people that care about the environment, but most are not.
People do not see the effects of non-responsible businesses; and instead only see the price of the product, and the quality of the product.
If the amount of responsibility that a business had was evident on the price tag — every business would be responsible within the long run.
Regulations and regulations only have the ability to make responsibility a necessity to compete in the market — otherwise the cheapest, and most likely most irresponsible way, will be used.
The Invisible Hand
I’ll just say it right now — The invisible hand is bullshit.
NEVER use the invisible hand as an argument.
The invisible hand dictates that the economy will not need any regulations if everyone is working for the public good; which people will never do. Even Adam Smith himself realized this:
Every individual necessarily labors to render the annual revenue of the society as great as he can … He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention … By pursuing his own interests, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.
Wealth of the Nations. Adam Smith.
There will always be surpluses and deficits that will naturally occur as people do not consider the total cost and benefit. If a business raised their prices, and justified this by declaring that the price raise if for the public good, you would pick up your business and buy from their competitor — who is happy to sell to you at a lower price.
