The Vampires Always Bite (Consumers)
It is time once again for the great debate between those who would suggest that the government avoid interfering in the workings of the marketplace, and those that would argue that government should strictly regulate the workings of the market.
I have found the answer to such lofty notions in a summer blockbuster involving allegedly self-restraining vampires, Twilight Eclipse.
In the Twilight saga, self-denying vampires refuse to drink human blood. It isn’t the notion of vampires that makes the movie entirely fictional, but rather that vampires, solely on their own volition, could self-regulate.
In real life, the vampires always bite, they just don’t use teeth. The real-life vampires seek to bite consumers and taxpayers by externalizing all the costs of business while internalizing every dime of profit. In other words, the vampires are not good corporate citizens. The bite is in the avoidance of those costs, the incurring of risks, and the desire to avoid any choke chain of regulation. Their victims are the consumers who have no ability to control such risks, yet get stuck with the tab every time.
We have plenty of examples. It was not that long ago that we were decrying the reckless and dangerous greed in the financial sector that nearly destroyed an economy and cost taxpayers billions in bailouts. Prior to that, we had similar adventures in greed in the Enron scandal and the savings & loan debacle, to name a few. In every case, we are shocked that the vampires have bitten us, and in response we slap those particular vampires with fines, in some case jail, and in others generous bailout packages. And now we have an environmental accident of gulf proportions, precipitated by other accidents by the same company. The repetition of the bite teaches us something about vampires: They simply cannot help themselves.
There is a second and deeper bite, however. Once disaster strikes, either in an environmental accident of enormous proportions or an economic meltdown of similar size, the vampires do not apologize for the bite. Instead, they seek reparations and bailouts (and often limitations of liability) from the very victims just bitten by their misdeeds. We saw this in terms of the reckless financial endeavors on Wall Street, rewarded by bailouts if only to save the economy, as well as the ministrations of BP to limit its liability from its most recent fiasco.
How does one stop the vampires from biting? The answer is also provided by the Twilight Saga: Werewolves. We find that one thing—and for our purposes the most important thing—that keeps vampires from biting is a delicate treaty. Note to vampires: Don’t bite, and the werewolves won’t hunt you down and kill you. Be a good vampire citizen, protect the public, and you’ll, er, live another day.
In real life, the werewolves are the regulators. The effectiveness of these werewolves is a function of how many teeth (pardon the pun) they have. The more money, talented staff, and other resources, the greater the likelihood the vampires will fear the regulators, particularly if there are clear lines of demarcation such that it is difficult for the werewolf to become a vampire. And, unlike what has occurred in the Mineral Management Service, the werewolves and vampires should never commingle.
The real-life vampires claim that the problem is that if they are too terrified of werewolves, they won’t focus on promoting the public good by engaging in business decisions that promote economic growth. However, economic growth based upon deception and fraud isn’t growth. And cheap oil brought in by ignoring safety isn’t cheap. And failing to innovate such that automobile manufacturers risk the jobs of their employees and repeatedly cost American taxpayers via bailout doesn’t promote consumer welfare. Regulators are necessary and important to the healthy functioning of an economy.
The missing aspect in the Twilight saga and in real life is someone who regulates the werewolves. In real life, Congress with its oversight authority has the ability to give and take away power from regulators and question the use and misuse of regulatory power. The downside is that sometimes Congress sides with the vampires to leash the werewolves. Often times, that too has disastrous consequences in that the vampires bite. Other times, the heads of the agencies leash themselves, much to the joy of the regulated and to the detriment of consumers. Regardless, it is a delicate balance that needs constant attention by all stakeholders.
All of these considerations are important when we discuss the repeated problems of vampire bites. Because, as we have discovered, vampires never bite the same place twice. Thus, it is important that the werewolves be vigilant in all sectors of the economy.
