Free-Market Solutions
Free-market solutions can minimize cost and rent dissipation of market interventions and regulation.
Most regulations resort to across-the-board prohibitions that unnecessarily increase the total cost of compliance. Or scarce resources are allocated politically rather than through open bidding leading to rent dissipation. The ability of the market to minimize cost or reduce rent dissipation is thereby under-utilized.
We will look at some ingenious free-market approaches to intervene or regulate that will achieve both macro-stability and micro-flexibility. These approaches are as follows:
- converting de facto rights into full rights to induce efficient behavior.
- converting commons goods into private goods.
- making users pay full cost of their economic activities.
- subsidizing producers of external benefits.
Some of these approaches are already adopted while others are blueprints for possible adoption.
