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Bad Security Driving Out the Good
Bruce Schneier has up at Wired a typically thoughtful piece on how, in the security market as in others, the lemons are winning out over the good products. Schneier harks back to "The Market For Lemons," the 1970s work of economist George Akerlof, to explain why the market's invisible hand pushes most of the best products into the abyss: "With so many mediocre security products on the market, and the difficulty of coming up with a strong quality signal, vendors don't have strong incentives to invest in developing good products. And the vendors that do tend to die a quiet and lonely death."
The Earth is degenerating today. Bribery and corruption abound.
Children no longer obey their parents, every man wants to write a book,
and it is evident that the end of the world is fast approaching."
--Assyrian tablet, c. 2800 BCE (allegedly)
SO YOU'RE GOING TO DIE: The Comic for Dealing with Death
Nobody argues the free market is infallible. If they do, don't listen.
What people argue is that the free market is "good enough," and is a system that is so complex and quick to react, that any attempt to regulate it for its own good should be looked at long and hard -- simply because it's so difficult to do better without detrimental ramifications, even with the best of intentions.
Natural monopolies are a problem and environmental costs are a problem, and are good targets for regulation.
"Imperfect information" -- I don't understand where this idea got started, but it's completely wrong when applied to free markets. It has to do with zero-sum games like the bond market where there are definitely winners and losers -- here, the guy with the best information wins.
In a free market, when a transaction takes place, the idea is that both parties are better off than they were before. I make a piece of furniture to sell you, you buy it because you can't make as good a piece of furniture for as low a price. I make a profit, and you profit by using your time more efficiently. We both win, despite the fact that I'm a furniture expert and you don't know every detail about the construction of the chair I sold you.
In fact, it's precisely this reason, that you don't need to have perfect information to participate to your advantage, that the free market works.
No, it's not perfect, but it's the best we've got in a free society.
If moderation could change anything, it would be illegal.