Government Markets

Using Capitalism to Clean the Sky is the article title, but oddly enough the "capitalism" they describe is created by the government. Hmmmm.

Specifically the article talks about environmentalists buying up licenses to release sulfur dioxide into the air. Licenses to pollute. Licenses created by the government. True believers in markets like to hype up their efficiency which is about as polluted a word as you can get... Ironically it seems it would perhaps be more efficient if government just released less licenses, wouldn't it?

Yes and no. The problem with direct government regulation of industry is generally not an issue of inefficiency, but of rigidity, power and conflict. When a government directly regulates an industry, it imposes its power and forces the industry into the rigidity of regulation. This places government and industry into direct conflict with each other, the creation of an economic war.

When the government creates a market of regulation, the government and industry are no longer in conflict, but are now working in cooperation, they are partners in a market. In exchange for the power to directly regulate the industry, the government gets the power to regulate the market. The relationship between government and industry is no longer rigid, but instead fluid.

As for whether governments understand how to use this power to regulate the markets they have created, that is a story for another day.