I don’t disagree with Kevin Drum very often. And when I do, it’s usually over some minor quibble. But today’s post on his comprehensive plan to have the government micro-manage the business practices of credit card companies is a great demonstration of exactly the kind of politics I don’t subscribe to. I should add that it’s a particularly good demonstration because his specific arguments seem pretty convincing to me.
But I just don’t trust arguments of this sort. Regulate business to prevent negative environmental externalities, sure. Basic safety, okay. But the idea that what we need is for a bunch of people to get together and say that it would be better to ban this and that and the other capitalist act between consenting adults just strikes me as the wrong way of going about things. Purely economic regulation of this sort doesn’t have a compelling track record, runs into all kinds of Hayek-esque knowledge problems, and is basically an open invitation down the road for regulatory capture and the use of rules to prevent the emergence of competition. Count me out. For me, it’s all about higher taxes to finance more and better public services. That’s my brand of liberal economics—take the rich people’s money and use it to pay for stuff, don’t tell them what to do with the companies they run.
That said, this whole discussion around credit cards does have me thinking that there might be a niche out there for something along the lines of “charitable entrepreneurship.” Bill Gates and Warren Buffett are trying to urge billionaires around the world to give half their money to charity. That would be great. But maybe what we really need some super-rich charitably inclined businessmen to do is finance some new ventures in these quasi-utility markets like charge cards, cell phones, mortgage origination, etc. based on a “don’t screw the customer over” business model. The striking thing about the credit card universe, after all, is that there’s very little competition and no meaningful difference in business practices between Visa and MasterCard. But I don’t think it’s written in stone anywhere that there can be only two.