Someone said in an email discussion “In general I agree in free market economics, but there are places where it just doesn’t make sense. The City Water Company, for example. I can’t have 7 different pipes coming into my house. I can’t choose every day, based on price and quality, whose water I will by. The only sensible way to get water is to have a government monopoly (The City Water Company) provide it.

This view neatly slides several concepts together in sort of an intellectual bait-and-switch, leading one to a very different conclusion than the one I reach. I am going to break this down into three short discussions.

I - The government does, indeed have an important role in economic activity, but that role is properly regulatory not participatory. Take the grocery business. The government has a role insuring the food in the store meets health and safety standards. It has a role inspecting the scales to insure the weights and measures are accurate. It has a role defining what a “Grade A Egg” and a “Grade AA Egg”. Those standards should be known to all and the government should inspect to make sure the standards are being followed. That is a regulatory role.

The government is not supposed to be running its own Government Grocery Stores (stores where the building, the employee wages and the cost of wholesale food come from government funds and where government employees decide whether Lamb or Beef will be for sale this week).

Big difference. “But wait,” you say. The divide between regulating a company and running a company is not that clear.”

(Lady Thatcher noticed that too, you’re in good company).

If the government sets the conditions for opening and closing factories, the hours and wages of employees, the cost that can be charged for finished goods and the amount and quality of various products produced, that isn’t “Private Industry” even if private individuals own shares of the company. That is a hybrid, but a lot closer to centrally planned industry (Classical Socialism).

There has to be some commons sense in here (there usually has to be some common sense in life). The government needs to regulate, but needs to regulate “only as much as is necessary to prevent harm to the public” (and yes, that requires common sense to interpret too). The government can forbid a store from selling peaches that have toxic residue on them (that would hurt people and they have no real way to tell if the toxic residue is there or not). The government should not direct a store to sell peaches this week (rather than apples) in order to help the Peach Farmers. The government has no obligation (nor interest) in keeping the Peach Farmers (nor this grocery store) from going out of business.

It is like a lot of other freedoms. I should be free to do things in my own yard that I want (sit and read or play touch football) but I shouldn’t be free to start an enormous bonfire because that endangers other people. Government regulation in economic activity is similar. “You can sell peaches or not, but you can’t sell poisoned peaches.”