> From first principles, you should always expect that regulation increases prices and the burden of proof is to argue why it would not

I don’t see how that is true.

Regulation has to increase some expenses. If nothing else it's one more thing on the todo list and time has a cost too.

Note: I'm not saying anything about cost/benefit. It could definitely be true that the benefits are well worth the cost. And it could also be true that a benefit is a lowering of an expense somewhere else lowering overall prices. (which is the thing that is not obvious and need to be explained) But there is a cost that needs to be covered by something. And that cost is usually going to result in increased prices in one form or another.

Not always. Some regulations set price ceilings, which is essentially sets a lower prices than the market rate. This leads to shortages, of course, but it is the obvious counter example.

Some regulations limit prices or price increases, or create a more favorable environment for consumer price negotiation.

Some regulation may lead to negligible higher prices, so it bears asking not just is there an effect, but what is the magnitude of the effect. If minuscule, then we can ignore it.

> Some regulations limit prices or price increases, or create a more favorable environment for consumer price negotiation.

Even these regulations can increase prices, for example by driving market consolidation or reducing price transparency and increasing overhead as people devise convoluted workarounds.

Price controls also have a tendency to create shortages, causing the product to only be available via black markets that carry a risk premium (and so high prices).

> Some regulation may lead to negligible higher prices, so it bears asking not just is there an effect, but what is the magnitude of the effect. If minuscule, then we can ignore it.

A regulation setting a maximum price of a trillion dollars would have negligible negative impact because nobody would charge that much anyway, but it would also have negligible positive impact because nobody would charge that much anyway. You can obviously pass a regulation that does nothing and then it does nothing.

Customers prefer lower prices all else equal, so that's what they'll choose when all of the options are on the table. Prohibiting certain things only takes options away. If they weren't the lowest cost options to begin with then prices may not increase, but then you have to ask why anybody would have chosen that to begin with over the thing that costs less. If the thing you prohibit was the lowest cost option, prices go up.

> Even these regulations can increase prices, for example by driving market consolidation or reducing price transparency

Or (as they occasionally do) they can achieve the complete opposite. Making such an argument (from both sides) completely worthless without additional context.

The trouble here is that context is expensive. You have to not only look at what the rule purports to do but also what it actually does in practice, including the second and third order effects.

But the people who have time for that are the incumbents, so you end up with rules that on their face are supposed to help the little guy and in actual fact do quite the opposite.

Here's an example. It's a common trope that consumption taxes hurt the poor because they spend a higher proportion of their income so we need to use income tax. But if you look at the numbers, the upper middle class spends the large majority of their income too. You don't get to people who only spend a small fraction of their income until you're into the investment class -- and those people don't pay income tax either. Partially because of transfer pricing and things like that, but at root because they reinvest whatever they don't spend and business expenses are tax deductible. So the claim is BS.

Meanwhile the huge advantage of a consumption tax is that it's hard to avoid. What rich people actually do when there is an income tax is minimize their "income" and buy on credit, which in many cases lowers their taxable income even more if the interest is tax deductible. Whereas with a consumption tax, if you want that yacht you're paying the tax whether you took out a loan for it or not.

So the powerful put out this propaganda that the tax they would actually have to pay is the one that hurts the poor and the one they have many ways to avoid is the one we need to use. But ordinary people aren't all that familiar with how rich people accounting works, so they buy that theory and fight against a change that could shift more of the tax burden from the middle class to the rich. There are also a bunch of things about how the income tax on capital gains benefits not only rich investors but huge conglomerates, on and on.

So unless you have some way to counter this information asymmetry -- and as yet this appears to be an unsolved problem -- the default presumption has to be that a given regulation is inefficient or corrupt. Because most of them are.

Currently, when you carry out task Foo, you perform steps A, B, C and D. Regulation is introduced which says you cannot under any circumstances omit step C.

No increase in expenses.

Let’s label the steps.

1) acquire airplanes

2) acquire pilots

3) plan routes

4) set prices

5) acquire customers

Seems to me regulations that set prices actually save a step.

Even if no one is skipping step C, the enforcement mechanism requires auditing. If there exists an alternative to step C, is it compliant with the regulatory requirement? The regulation itself introduces legal risk which needs to be mitigated. So yes, it increases expenses.

Those expenses are on the part of the regulator, which is funded differently. As a society, we may be paying more to say "you must do step C", but as a customer or provider of Foo, there's no change.

No? Entities don't get to write off the cost of being audited, there's a very real expense associated with both documenting the regulated process in a compliant manner and working through the audit process with the relevant regulatory body.

Entirely fair point.

Regulation can drive up certain cost but the whole economic cost can come down at the same time. On the other side you have technology driving down the cost.

Cars are a good example. They've been dropping in price historically as the government adds on more regulation.

You can be regulated not to do something, for instance if the regulator banned airline loyalty schemes then none of the airlines would have the cost of administering those schemes, or the cost of competing against each other on perks, so the total amount people spent on airlines would go down.

I can't believe that I continue reading this on HN. Unless something is a commodity prices are not determined by costs! That really is economics 101.

The funny thing is that this is being brought up again and again as an argument against regulation. You'd think the smart business people would know some economics, so they are either lying or not that smart.

Would it help if the concern were expressed as regulation being a constraint on supply? There’s not really an economic distinction to be made here: If regulations demand all airplanes be painted with an expensive shade of neon pink, on the margin fewer planes can be built for the same capital investment and all else being equal supply will decline.

If the regulations are arbitrary and pointless of course.

OTH if they for instance increase safety longterm you might expect demand for air travel to increase.

Air travel _is_ a commodity though.

Have you read the article? It makes some solid arguments why it isn't. I mean the existence of points programs and all the different fare codes and conditions is a pretty good indication that it isn't.

Because regulatory capture is a thing, and in absence of competition your goals are often to increase your costs which in turn means that you can charge more while still appearing to maintain a small profit margin.

It doesn't need to be higher prices, but regulation tends to bring in enough distortion that isn't transparent so we cannot know what a proper price really is.

Yes and: regulation is just a scary word for rules. As you know, there's always rules. Even informal markets have rules, known by all the players, even if they're not written any where.

Being an idealist, I prefer rules which lean towards fairness, legibility, and predictability.

In this case it is trivially true because the CAB indeed did set the minimum price that an airline could charge (mainly to avoid railroads going bankrupt—when Amtrak took over passenger rail, that fig leaf was removed)

Air travel was glamorous because if you can’t compete on cost you compete on service.

That’s only true if there were airlines that charged the minimum and would have charged even less in the absence of the regulation. The existence of the regulation is not proof of that alone.

The existence of the regulation is evidence of that in itself, because the alternative would be that someone for unexplained reasons put in the time and effort to pass a regulation that has no effect.

There is no law of nature that says all regulation has or had a purpose.

Which is why it's evidence. The presumption is that it was enacted with a purpose rather than without one because the vast majority of legislation is enacted to bring about some intended effect. To rebut this presumption you would need some explanation for why this legislation is an outlier.

I mean... you think that it was just random coincidence that essentially every single airline charged exactly the minimum fare?

Say... would you be interested in a bridge?

> From first principles, you should always expect that regulation increases prices and the burden of proof is to argue why it would not.

This reads like:

From first principles, you should always expect that adding lines of code increases the time it takes to execute and the burden of proof is to argue why it would not.

Just like code, economies can be made more complex, which can increase their efficiency.

> From first principles, you should always expect that adding lines of code increases the time it takes to execute and the burden of proof is to argue why it would not.

I would also argue this is true? Assuming more lines of code directly translates to more CPU instructions

No, it’s not true. You can add lines of code which use a more efficient algorithm.

> You can add lines of code which use a more efficient algorithm.

Yes, so the burden of proof is on the algorithm. Adding more lines of code, by default, makes the code slower. If the algorithm is more efficient, it can make the code faster. But it must be more efficient.

This logic seems to hold up to me, but maybe I’m missing something here?

Having more lines of code doesn't even reliably map to having more machine instructions let alone time complexity of solution. Given 2 programs lines of code is a measure so worthless that no reasonable evaluator would start with the assumption that the smaller solution is faster and work from there. They would instead start with the actual code. The point of the analogy which is easily lost in comparing the mechanics of the actual thing is that you must in truth examine the regulation to discern if it on overall makes things more expensive rather than starting off by making the assumption that it does.

Sure, lines of code doesn’t correlate to how much actual code is produced, but I feel like that’s just being pedantic. The assumption that I’m stating here is: the more stuff a CPU has to do, generally the longer it’s going to take to do the stuff.

I’m not arguing that a more complex algorithm can do the same stuff quicker. Of course you can do that. There’s plenty of examples of that. But in the general case, doing more things takes longer.

Of course, the CPU can execute instructions in parallel, it can pipeline instructions and gain a higher throughput, it can predict branches, etc. But those are things you have to be intentional about enabling more often than not. Making small changes in the higher level code can ruin whatever performance gains you had gained because you accidentally trashed the throughput or something.

Generally, more instructions takes longer to process. Of course, a more complex algorithm can do the stuff quicker. But it’s not the default and depending on the problem, it can be very difficult to get it to go quicker with more instructions.

This isn’t even something that should be hard to conceptualize. Getting an element out of an array using an index is O(1). Getting an element out of a hashmap is also O(1) (when there’s no collisions). Even though these both perform the same in terms of complexity (“constant” time) the array will win every time if you already know the index. Why? Because the hashmap uses more instructions to figure out where the index is.

So I really don’t understand why the assumption that: generally, more code = slower is a bad one to make. Unless you explicitly try to make the code with more instructions faster, it will usually be slower than if you did it with less instructions.

> Sure, lines of code doesn’t correlate to how much actual code is produced, but I feel like that’s just being pedantic.

It is actually the core of the entire understanding. There is no mapping whatsoever lines of code and instructions executed. A finite program that doesn't halt will result in infinite instructions. Less pedantically a sorting function that is far more efficient will result in the instructions corresponding to individual operations being called thousands of times less.

Basically everything from function calls to loops ruins any mapping between brevity and execution time.

Normally I don’t continue with arguments like this haha. But I just want to point out that I keep saying generally more code means a slower algorithm. And when I say slower algorithm, that implies I’m comparing it to something. The thing I’m comparing it to is an equivalent algorithm with less lines of code. An infinite loop will run forever with just a few instructions. But I’m not comparing an infinite loop to anything here.

And just to be clear, I do agree with everything you’re saying here, but I do think you’re still being overly pedantic.

> Less pedantically a sorting function that is far more efficient will result in the instructions corresponding to individual operations being called thousands of times less.

Exactly. The goal is to spend fewer instructions to achieve the same outcome. As soon as you start thinking about how different instructions take different amounts of cycles and you can speed up an algorithm by using more instructions that are cheaper, that kind of proves my whole point. You can speed up an algorithm by using more instructions, but you have to be intentional about it. The default will never be: more instructions = faster.

If you mean to say that on average, if you sample from a distribution of randomly-assembled instructions, then code with more lines will run longer, then that's fair. However, I don't think that most code is randomly-assembled, so sampling from that distribution doesn't make realistic sense to me.

Basically,

> You can speed up an algorithm by using more instructions, but you have to be intentional about it.

I feel like most code is written with some intention. It depends on whether or not you believe that most code is written competently, I guess.

It doesn't matter whether it's written competently. The original debate was about lines of code. There is no mapping between lines of code and instructions executed because loops and conditionals are a thing. EG even if 20 lines of code results in twice as many instructions as 10 it tells you absolutely nothing about how many times each instruction will be executed and ergo nothing about the clock time required to execute the program.

Here's an excellent example of what GP said: https://www.youtube.com/watch?v=FJJTYQYB1JQ (long video, skip to 26:00 if you are in a hurry)

The key is that code isn't running in a vacuum. It's operating on data (or controlling systems, etc). A smaller amount of code may be operating on the data in an inefficient manner, whereas a larger amount may be doing it more efficiently.

In the above talk, this contrast is very stark, because the "more code" version does some stuff and then does the exact thing the "less code" version does, yet is faster.

This kind of thing is common enough (albeit less stark than in the above example), that "less code is faster" is not a great "default" assumption to make.

Of course it's not always true but I think there's an implicit assumption of "all things equal". The same efficient algorithm written in more lines of code vs less lines of code would be less cpu instructions in the latter.

I don't think that assumption is implicit in this argument, since it's specifically about whether complexity can lead to better optimization.

Cost of flying was dropping continuously in the past 50-60 years and it has less to do with competition but with advances in the industry. While many planes 60 years ago had 4 people in the cockpit (pilot, copilot, navigator and mechanic officer), now they reduced it to 2 (navigator no longer needed with inertial navigation and later on GPS, mechanic officer no longer needed as planes are more reliable and have more sensors and automation). Also the fuel consumption, the biggest cost today, decreased with every generation of engines, time and time again.

Look at European budget airlines like Ryan Air. They achieve low prices through business model streamlining, not through technical advances.

Inferior service is usually cheaper.

Plus, on average on the whole cabin, budget airlines are that much cheaper than others. There is a floor of what an average ticket can cost, defined by operating cost of an aircraft. And not even Ryan Air can ignore those without loosing money.

Sure. And Ryanair does everything to lower down that cost: they operate only one type of aircraft and they do maintenance themselves instead of contracting it out.

Yes let’s force people who can’t quite pay enough to no longer be able to fly...

Their service is not inferior for its price.

Ryanair allowed me to fly across the Europe for $15 back when I was a poor student. It was either this, or not flying at all.

Inferior only by single criteria. If you take multiple, not by a long shot. Ryanair, if I remember correctly, has very good delayed and cancelled flight stats, better than most classic airlines.

Did the regulation piss in your cheerios? Why are you so emotional?

> Embarrassing that the author is a professor and didn’t bother making a proper argument.

People are people. Your argument is strong enough without the ad hominem.

It's not an ad hominem. OP is saying that the person's entire job in writing such an essay is to think and make intelligent arguments about this particular area, and they have failed to do so in an obvious and silly way.

It's just like saying "embarrassing that $person is a firefighter and set their home on fire playing with matches" would not be an ad hominem.

An ad hominem would be: "embarassing that $person is a Harvard grad, making such an argument.", or "of course, we can expect such reasoning from someone writing an article for $publication"

Actually, an ad hominem is when you try to discredit an argument somebody made by attacking that person.

The example you cite seems closer to attacking a person based on their arguments being (perceived or claimed to be) bad. If you say "embarrassing an XY grad would make such a stupid argument" it will only discredit the argument if I believe XY graduates are stupid (I guess the $publication example aims at this). Meanwhile, if I don't see why the argument is bad and don't have a bad opinion of XY, your statement is entirely unconvincing.

You don’t just get to say “from first principles” and then put forward your obviously-American POV as some immovable basis from which everyone else should be arguing from.

Regulation routinely reduces cost. It’s all to do with the nature of the regulation. Only one party is incentivised to say trot out this “regulation is bad” BS and its businesses that want to operate in an ancap utopia because they weren’t lucky enough to make regulatory capture work for them. It’s always disappointing when individuals get swept up in believing this tripe.

> Regulation routinely reduces cost.

Can you provide an example of this actually happening in a competitive market?

> Only one party is incentivised to say trot out this “regulation is bad” BS and its businesses that want to operate in an ancap utopia because they weren’t lucky enough to make regulatory capture work for them.

Businesses that want to challenge an incumbent who succeeded in making regulatory capture work for them would be an obvious counterexample, and for the same reason the customers who want to see the challenger succeed in making the market more competitive.

>>Can you provide an example of this actually happening in a competitive market?

Tobacco companies probably made a bunch more money as aspects of their advertising became restricted/regulated/banned - because they were basically in an arms race with one another and spending more and more to maintain market share. But that is a pretty specific case, I'm not going to make any claim that's general or applies to airlines.

https://www.nytimes.com/1989/01/02/business/the-media-busine...

Making more money doesn't imply that they lowered prices, and in general the relationship is the inverse. Also, they did not lower prices:

https://fred.stlouisfed.org/series/CUUR0000SEGA

Decriminalising and regulating marijuana reduced costs to consumers - such as the cost of going to jail in return for possessing marijuana.

But if it wasn’t “regulated”(ie: criminalized) in the first place, it wouldn’t need to be decriminalized and regulated.

> Can you provide an example of this actually happening in a competitive market?

No doubt you'll no-true-scotsman "competitive market", but buying a house in the UK got significantly smoother/cheaper when sellers were required to provide a certified survey to all interested parties, rather than each buyer having to commission their own survey. Lemon laws are widely recognised as making it cheaper to buy a reliable car. Food safety regulations made food a lot cheaper by rendering imported food trustworthy.

What you're getting at here is regulations that... increase the competitiveness of a market. Which does imply something about the preexisting competitiveness of that market, and was the reason for that caveat.

Well, I'm as pro-market as the next person, but surely fire brigades are the classic anti-example: the market was competitive with many fire brigades, prices were inelastic sure, and there was a lot of time-elasticity of demand, but the customer had the short-term ability to shop, etc. Government regulated fire brigades reduced competition and decreased cost.

I default to "regulation increases cost" as well, and think that the default position should be to justify it, but I don't think the opposite is a zero-instance situation.

The time-elasticity of demand is the reason there was no price competition. You use whichever fire brigade arrives on the scene first. So you get lots of competition for getting there fast but not for lowering the price. It's like a competition for who gets to be the monopoly today.

And then because it was a chance to monopolize something it got infested with organized crime. Which is the main reason it was short-lived and never got to evolve into a functioning market. Governments found it easier to prohibit whatever was going on there than hire enough police to arrest all the firefighters.

There are fairly obvious ways to recreate something that looks pretty much like the modern system without government regulation. A city has however many fire houses that major fire insurers prepay a rate negotiated based on how many homes they insure in that service area. Since prepaying is cheaper than paying per-incident that's what substantially all the insurers do, which mutes the incentive for firefighters to hack each other to pieces to get there first.

That still isn't a lot of competition, but at least now you're negotiating for a price before the house is on fire. Which could be enough to cost less than what the government currently does.

You are blinded by your love of the market. "The market" (the unregulated one) is a very unstable and unsatisfying beast. It is precisely because of regulations that western countries and some Asian ones are so succesfull.

Many regulations are needed to keep the "free" market from destroying all the good that it can do. One famous example is monopolists that are created in a free market and then use their power to make the market unfree. Only government regulations destroy these monopolies with anti-trust laws. Then there is pricing in so called free markets that are not in fact free. Such as pricing of infrastructure and services.

To name one perfect example of where government regulations lower the prices of services is in the healthcare industry. In most western countries (not the us tho) healthcare is relatively cheap and also accessible. This is because it is regulated. In the US it is barely regulated and very expensive. Without regulation the market will also destroy the environment. This is a "hidden cost" or an externality. I'm not patiënt enough to write a more coherent and better written response. But if you are at all interested in learning something or allowing yourself to be disproved, I would suggest you start by googling: "succesful regulation" or "examples of market failure".

> One famous example is monopolists that are created in a free market and then use their power to make the market unfree. Only government regulations destroy these monopolies with anti-trust laws.

The thing about "free market" is that it's like "reasonable person" in that it's an ideal rather than something you can actually find in the street. You want to get closer to it even if you can never actually find a flawless example.

A monopoly is basically the opposite of a free market. But where does a monopoly come from? For the most part they're a result of government regulations. The monopoly sucks and everyone hates it so you want to go into competition with them, what stops you? For the monopoly to persist there has to be some law that prohibits anyone from doing that or makes it infeasibly expensive.

The problem here is that unless you're going to go ideologically pure full anarchist, you can get to that point if the government does as little as enforcing contracts or property rights. Because then you could have contracts for selling your children into slavery or a single corporation that the government says owns all property.

So once the government gets involved with something, it has to be sure nobody is leveraging that into a private monopoly. But this is why government involvement should be minimized -- that risk increases the more they do, and there is abundant evidence that governments repeatedly fail to mitigate it effectively and prevent private monopolies from forming.

> Then there is pricing in so called free markets that are not in fact free. Such as pricing of infrastructure and services.

You're referring to natural monopolies, which is once again obviously not an example of a competitive market. The key in these cases is to narrow the natural monopoly as much as possible and prevent anything more from being tied to it than is absolutely necessary. For example, one of the classic mistakes we've made is allowing the natural monopoly on the physical last mile for data service to be leveraged into control over interconnection and over the top services like video and telephone.

> To name one perfect example of where government regulations lower the prices of services is in the healthcare industry. In most western countries (not the us tho) healthcare is relatively cheap and also accessible. This is because it is regulated. In the US it is barely regulated and very expensive.

The US healthcare industry is one of the most highly regulated industries in the world. Competition is low because FDA approval is hard to get and the AMA uses regulatory capture to limit the supply of doctors, government incentives promote employer-provided health insurance that disguises pricing from patients, "certificate of need" laws constrain competition between healthcare providers etc. etc.

The typical claim is that single payer systems have lower costs, but nearly everything has lower costs -- the US has some of the most expensive healthcare in the world -- because it has some of the most onerous healthcare regulations. Meanwhile countries like Singapore have lower costs and good outcomes with a predominantly private healthcare system, because it is less inefficiently regulated.

> Without regulation the market will also destroy the environment.

This is clearly not an example of regulation lowering consumer prices. The claim was never that regulation can never be necessary. You don't want the widget factory dumping industrial waste in the river, but prohibiting that isn't generally a means to lower widget prices.

It can even do both things at the same time. You can have a regulation that succeeds in reducing pollution while also being dramatically less efficient than some other means of achieving the same goal. This is why government regulation is so precarious: If you get it wrong nobody else can fix it because anybody who tries to do it another way is incarcerated.

I’m not sure if it’s relevant to the issue here, but if you want an example of a regulation that reduces cost: “you cannot sell medicine X for more than $Y”. You could argue that in a pure market such a rule would never help (a competitor would naturally offer it cheaper, if possible). But if you look closely there few “pure” markets.

Which is better given an uncompetitive market, an regulation that says "you cannot sell medicine X for more than $Y," or a regulatory change that restores competition to the market?

The latter is better to such a degree that the former is just a toy example with no practical use outside of academic discussions and corrupt politicians who want to avoid solving the underlying problem on purpose.

Living in utopian abundance would be even better but sometimes not every option is feasible, especially in the short term. The objectively inferior option might still be better than doing nothing.

Inefficient hacks are often worse than nothing because they remove the momentum behind fixing the underlying problem. You reduce the margin from 2500% to 1000% and think you're helping, but what you're really doing is condemning yourself to paying a 1000% margin forever because it's now below the threshold that people get outraged enough to do something about it.

> “you cannot sell medicine X for more than $Y”

This leads to shortages.

I am speaking from experience here. I'm an anesthesiologist, and with three exceptions I can think of, our drugs are all off-patent, so their prices are basically a function of production costs. But the federal government of the US, which buys a lot of drugs under the VA and Medicare, has a rule that you can't increase the price by more than X% per quarter (or year, not sure). Now, we all agree that this sounds like a good regulation. Right? Nobody can just raise the price of insulin by 40000%?

Except that generic drugs really don't make much money, and when one company leaves the market for a given drug (there are usually only 2-3 manufacturers per drug), the remaining corp(s) can only make up the shortfall by moving to 24-hour operations (in the short term). Staffing that means hiring more people and paying overtime. So the cost of production... doubles, at least.

The part that is missing: it's a drug that sells for twenty cents for a sterile ampule. Doubling it to forty cents is not going to break the bank. It's cheap, it will continue to be cheap, and yes - in the long run, someone will set up a line to make it for ten cents and sell it at twenty. But in the short run? You run out of drugs. I've seen it in almost every category of anesthesia drugs (induction, opioids, paralytics, paralytic reversal, etc.) in the last ~20 years. You'd think that "not being aware during surgery" would be one of those things that people would care about, but it isn't.

> This leads to shortages

Or lower margins. After you spent millions/billions on R&D, testing and approval, why would you purposefully decrease your product just because your margin now is not 2500% but 1000%?

Of course this might affect your willingness to invest into developing new drugs in the future

It leads to shortages in a competitive market and lower margins in an uncompetitive market.

But if you have an uncompetitive market on purpose as a result of patents meant to increase margins to fund R&D, a law capping prices is a screw up because it was meant to be the way it was.

Whereas if you have an uncompetitive market unintentionally as a result of some other regulatory failure, a law capping prices is a screw up because you're not actually lowering margins from 2500% to 1000%, you're just raising them from the ~5% they ought to be to 1000% instead of 2500%, which is still bad.

> Can you provide an example of this actually happening in a competitive market?

How about EU regulations on the price of mobile phone roaming between member nations (the "roam like home" rule)?

Either there isn't a lot of competition between carriers there and they were just sticking the roaming fees in their pockets before, or there is a lot of competition and the carriers had to make up for the increased usage and loss of roaming fees by raising the prices of phone plans.

This isn't the same thing as whether you like the result of the rule. Maybe paying a little bit more in total in exchange for having a more predictable monthly bill is something people like. It would still be paying a little bit more, if the market there is competitive.

Assuming markets default to be competitive is wrong I think . Natural cartels and monopolies do exist after all, or markets have high entry costs etc.

Economic theory usually assumes pute and perfect competition, which doesn’t exist in many markets

It's not assuming the market is competitive. Wireless markets are often not competitive, because entry is limited by scarce spectrum availability etc. which incumbents lock up to limit competition. The point is that if you had a competitive market, margins would be thin and the only place for lower prices to come from without a reduction in operating costs is higher prices somewhere else.

It's easy for regulations to lower costs in an uncompetitive market because the lack of competitive pressure allows the incumbents to do all kinds of inefficient nonsense that would drive them out of business if it was actually practical for new competitors who don't do that to enter the market and undercut them on price. But what you want to do in those cases to the fullest extent possible is to restore competition to the market, not try to regulate the incumbents while keeping them as a monopoly/oligopoly. A set of regulations that gets you 8% of the benefit of actual competition can be a significant improvement from the status quo while still being by far the less effective solution.

Roaming used to be very expensive and so people almost never used it. Instead they would buy cheap local prepaid SIM cards when they traveled across intra-EU borders.

The carriers would charge high prices to each other for roaming, and pass those on to their customers. The market had worked itself into a stupid corner where nobody wanted to come down on wholesale roaming costs because they would lose out to cross-border carriers.

The EU capped the wholesale rates and mandated that there be no retail cost, so now carriers are charging less to each other and consumers are roaming on their own numbers without worry, and without the hassle, expense, and waste of buying SIM cards all the time.

It's been moderately beneficial for carriers, and a huge benefit for the public. The imposition of regulation has enabled the companies to be more profitable and consumers to get more value.

> Roaming used to be very expensive and so people almost never used it. Instead they would buy cheap local prepaid SIM cards when they traveled across intra-EU borders.

So it was already available at a low price via a different route.

> The carriers would charge high prices to each other for roaming, and pass those on to their customers. The market had worked itself into a stupid corner where nobody wanted to come down on wholesale roaming costs because they would lose out to cross-border carriers.

You're describing an uncompetitive market. The local carriers have such high market share that charging otherwise-profitable wholesale rates would deprive them of a monopoly rent so they're not willing to do it.

Compare this with a market where there are carriers with low market share who don't care about cannibalizing someone else's retail sales to get more wholesale customers.

> It's been moderately beneficial for carriers, and a huge benefit for the public. The imposition of regulation has enabled the companies to be more profitable and consumers to get more value.

The drawback of this approach isn't that it can't produce an improvement relative to a preexisting uncompetitive market, it's that it leaves the uncompetitive market in place. Which is almost certainly itself a result of existing regulations.

Suppose the way mobile networks operated is that anyone can build an independent cell tower and then auction off capacity in real time. Which makes it easy to operate a cell tower; you just build one and sell into the market. So you end up with dozens of local cell tower operators or more and any carrier, local or otherwise, with a customer in the area can bid for capacity from any of them. Which also means that anyone can start a carrier, because "carrier" just means you resell wholesale capacity from all these independent cell towers and your business is to bill the customer and provide customer service.

Doing it that way is going to solve your roaming problem and seven hundred other problems and lower prices. But existing regulations don't facilitate this, do they?

So unless you have 3-5+ of towers in every area what prevents the company which owns them from charging whatever it wants? As pong as that whatever is less than the cost of building a tower yourself?

It makes about as much sense as having multiple competing rail networks or power lines, the more tower there are the higher overall cost per user.

> So unless you have 3-5+ of towers in every area what prevents the company which owns them from charging whatever it wants? As pong as that whatever is less than the cost of building a tower yourself?

That's the amount you'd expect them to charge -- the cost of building a tower. That is what they have to recover.

If they try to charge much more than that then it's profitable for someone else to build one.

> It makes about as much sense as having multiple competing rail networks or power lines, the more tower there are the higher overall cost per user.

If you have more towers you can reduce the transmission power of each one and it increases the available bandwidth by reducing signal overlap. If the towers themselves used realtime spectrum auctions then the tower nearest the user could come in with the lowest price because it could use lower transmission power and less spectrum.

You can also very reasonably have competing rail networks or power transmission lines because they don't have to use 100% all the same routes to ultimately still connect all of the same cities. Then some may be more efficient for certain routes but the alternative still puts an upper limit on what they can charge, and provides for redundancy in case one of the lines or networks is unavailable.

> there isn't a lot of competition between carriers there and they were just sticking the roaming fees in their pockets before,

Yes. Now they can’t do that so prices are lower.

The regulations didn’t really make the markets more competitive though. They just capped prices.

> The regulations didn’t really make the markets more competitive though. They just capped prices.

Which is why the regulations are still causing prices to be higher than they ought to be.

>Regulation routinely reduces cost

What? No they don't. Not without considerable adverse effects at least. You're not referring to price ceilings, are you?

If the market is uncompetitive the adverse effects for consumers should be minimal.

There are so many cases in which a regulated market shows lower costs, that not seeing it is just not wanting to see because it touches your core belief system instead of using reasoning. Regulation is needed to ensure property rights, contracts law, ward of monopolies, ward of externalisation of costs by companies unto the general population or the environment, to stop lies from being told as much as possible, to destroy rent-seeking behaviors. These are all legitimate reasons for government regulations and make the market better. There is of course a time and place for regulations. There IS such a thing as too much regulations.

The a priori that regulation reduces cost is a good one, but neither of you are compelling because the question has to include a time horizon with respect to resource consumption and other factors otherwise regulation reduces cost would be true only so much as a meaningless technicality.

Similar to what you said I find it’s disappointing when individuals get caught up in believing that regulation or “more government” must be good while they ignore the externalities that the government brings to bear - I’m still trying to figure out why the government is regulating my EV like it’s a super duty F-250, and why the government made it illegal in my state to bring my own bottle of wine to a restaurant.

I’m also trying to figure out why the government is leasing my land in Alaska (I’m an American, therefore it’s mine as well - yes I’m aware of recent Biden admin actions +) for oil and gas companies but won’t approve new nuclear reactors.

It’s also crazy to me that the government doesn’t regulate by making mandatory seatbelts a requirement for school busses, and why it fails to regulate (ban) additive sugars and vaping and all sorts of other harmful products.

I’m not trying to both-sides it here, but the central theme is everyone has an opinion on this stuff and the truth is regulation is good and bad, and it can cost or save money. We shouldn’t get into X is good, Y is bad. It lacks nuance.

The Americocentric nonsense is always prevalent in discussions like this, to the point that often the conclusion ends up being that America is so “special” and “unique” in its issues that any of the solutions other nations have come up with would supposedly never work.

In terms of regulation reducing costs, you only need to look at Europe.

Regulations in education, housing, medication, cellular networks, utilities, etc. have all driven cost down to one degree or another depending on which specific regulation a country has implemented.

“Ah”, says the American, “but now show me regulation in a competitive market” as they rub their lower back in an effort to quell their aches from carrier that goalpost.

And then you point out that those examples are of a competitive market.

Only for them to pull a “gotcha”, because surely it couldn’t be that competitive if it had a cost reducing effect.

The further you entertain, the more they move the goalposts and introduce circular reasoning, because in their mind anything that challenges their worldview must simply not be true.

That prices were falling prior to deregulation and did not fall even faster after deregulation proves that deregulation wasn’t a factor.

If you’re coasting to earth in a parachute and someone gives you a cup of coffee to drink which does nothing to change your rate of descent, would you then attribute your descent to the cup of coffee?

You even say it yourself: There’s lots of reasons… but deregulation wasn’t necessarily it especially not in the axiomatic way you say when you say that by “first principles”, regulations increase prices.

E.g., regulations and legislation around marijuana access have decreased prices, the ultimate “price” being a stint in jail for possession.

You are wrong that prices falling prior to deregulation proves that deregulation wasn't a factor in declining prices. A graph of numbers showing decreasing costs measures purely quantitative factors. The trend continuing completely excludes qualitative factors, of which you must understand to properly understand what is going on. For example, the article says that what was expected to happen was that costs would fall because there would be an influx of hundreds of competitors. That in itself is a misunderstanding of qualitative factors. Imagine there being 100 different airlines. More than half of them would be incompetent. The correct qualitative understanding of the situation is that deregulation allows the most competent airlines to consolidate/buy underperforming ones. Did service really get worse? Or is the difference really just that these airlines are now able to transport way more people at a cheaper cost because they are no longer catering to smokers who like to leer at PANAM blondes in short skirts?

Also, regulation around marijuana has not decreased prices. This is obvious because in places where marijuana is now decriminalized people still prefer to buy from illegal sellers... because it is cheaper.

> That prices were falling prior to deregulation and did not fall even faster after deregulation proves that deregulation wasn’t a factor.

Do you have a source for this? I've seen graphs for prices since ~1980, but my search-fu fails to find anything before that.

> That prices were falling prior to deregulation and did not fall even faster after deregulation proves that deregulation wasn’t a factor

No, this on its own doesn’t prove anything.

[delayed]