A Champion of Liberty

Here's an analogy: Malaysia is to cars as Stevens is to what? The answer is Pierce dining hall. Hear me out. I will demonstrate what happens when freedom of choice is reduced or eliminated and a market becomes something less than a free market. I chose two examples; one I have just recently heard about from a former Stevens student on Facebook and the other example is near and dear to all of our stomachs. Both examples boil down to one thing: protectionism.Malaysia places a tariff of anywhere from 140% to 300% of the cost, insurance, and freight expenses on cars that are imported from other countries. This is what led a friend of mine living in Malaysia to exclaim that "cars in Malaysia are so expensive!" I wanted to reassure them that there's no good reason why cars should cost so much more in that country, it was simply because of their own government. I guess that's not reassuring at all when you think about it.

Now, you can guess the reason for such a high tariff being placed on foreign imports. There is a domestic car company called Proton which was started by the government and has been known to make low quality cars. Even Malaysians would be unlikely to buy a Proton if they had the choice, so the Malaysian government solved that problem: they simply removed the choice for the average consumer by forcing the competition to be less affordable! By raising high tariffs on foreign cars and subsidizing Proton with tax money, the Malaysian government was able to force their citizens to pay for a car that they wouldn't choose to otherwise. The community at large suffers for the benefit of a mediocre car company.

Now let's look at Pierce. If you've ever done the math to figure out how much each one of your meals costs at Pierce, the answer is that it's too much. For me it was about thirteen dollars per meal assuming that I ate there every day of the week and had two meals per day. The reality was that Pierce didn't appeal to me, so I ate almost every meal out in Hoboken or prepared something from groceries. How is it that Pierce can get away with having food of such low quality at such high prices? An ordinary restaurant would go out of business that way, but Pierce is no ordinary restaurant. It has a great advantage over its competitors: all students who live on campus are required to pay for Pierce whether they'll eat there or not. This problem is on a very small scale, however, so in the grand scheme of things this isn't so bad. Even so, the position enjoyed by Pierce (or by Proton in Malaysia) is demonstrative of what interventions in the market can do to the quality and price of goods and services.

Before we criticize "free markets" for the failings that we see in the world, we should recognize just how free the market really is. Interventions which drive out competition or secure an advantage for one group will be detrimental to the consumers. Too often, people look at things as they are and believe that this is a result of the market. They forget that there was a time when attending college wouldn't put you in debt for the rest of your life. There was a time when Fannie Mae and Freddie Mac, two government agencies, did not have a bottomless pit of tax money with which to blow up the housing market. The unintended consequences of interventions are painful distortions of markets and burden is borne by the consumer.