A Geek With Guns

Chronicling the depravities of the State.

Unpredictable Government Actions Encourage Short Term Profit Seeking

without comments

A lot of people, socialists especially, like to criticize market actors for prioritizing short term profit gains over anything else. I actually agree with this sentiment. However, unlike most critics, I don’t believe that the solution is more government because I believe the government is the cause.

Let’s say your company spent 10 years of research and development time to create a new product. You’re happy as can be with it and all signs point to it being a tremendous success. But just as you’re about to release the product the government creates a regulation that makes the product as it currently exists illegal. You’re now faced with a decision, do you redesign the product to make it compliant with the new regulation in the hopes the regulatory environment won’t change again or do you abandon the product?

This problem is a tremendous burden, especially in countries like the United States where the party in power can change every handful of years. One moment the party that favors your product is in power and things look good but then the next year the other party comes to power and things look grim.

I’m sure you can see how this kind of environment favors immediate profits over longterm profits. If you cannot predict what the regulatory environment will be four years from now you will have a hard time making plans that extend longer than four years. So you’ll probably seek as much profit as you can within those four years just in case your product line becomes illegal after that.

Anybody who wants companies to stop prioritizing short term profits at all costs should be demanding that the government step aside and allow the market to be free.

Written by Christopher Burg

May 18th, 2017 at 11:00 am