Free To Choose: a personal Statement

Who Protects the Consumer?
193
regulated industry protected from competition and a private in-
dustry subjected to the full rigors of competition. Both industries
serve the same market and ultimately provide the same service,
transportation. One industry is backward and inefficient and dis-
plays little innovation. The major exception was the replacement
of the steam engine by the diesel. The freight cars being pulled
by the diesels today are hardly distinguishable from those that
were pulled by the steam engines of an earlier era. Passenger
service is slower and less satisfactory today than it was fifty years
ago. The railroads are losing money and are in the process of
being taken over by the government. The automobile industry,
on the other hand, spurred by competition from home and abroad
and free to innovate, has made tremendous strides, introducing
one innovation after another, so that the cars of fifty years ago are
museum pieces. The consumers have benefited—and so have the
workers and stockholders in the automobile industry. Impressive
—and tragic, because the automobile industry is now rapidly
being converted into a governmentally regulated industry.
We
can see the developments that hobbled railroads occurring before
our very eyes to automobiles.
Government intervention in the marketplace is subject to laws
of its own, not legislated laws, but scientific laws. It obeys forces
and goes in directions that may have little relationship to the in-
tentions or desires of its initiators or supporters. We have already
examined this process in connection with welfare activity. It is
present equally when government intervenes in the marketplace,
whether to protect consumers against high prices or shoddy goods,
to promote their safety, or to preserve the environment. Every act
of intervention establishes positions of power. How that power
will be used and for what purposes depends far more on the
people who are in the best position to get control of that power
and what their purposes are than on the aims and objectives of the
initial sponsors of the intervention.
The Interstate Commerce Commission, dating from 1887, was
the first agency established largely through a political crusade led
by self-proclaimed representatives of the consumer—the Ralph
Naders of the day. It has gone through several life cycles and has
been exhaustively studied and analyzed. It provides an excellent

---

194
FREE TO CHOOSE: A Personal Statement
example to illustrate the natural history of government interven-
tion in the marketplace.
The Food and Drug Administration, initially established in
1906 in response to the outcry that followed Upton Sinclair's
novel The Jungle, which exposed unsanitary conditions in the
Chicago slaughtering and meat-packing houses, has also gone
through several life cycles. Aside from its intrinsic interest, it
serves as something of a bridge between the earlier specific-
industry type of regulation and the more recent functional or
cross-industry type of regulation because of the change that
occurred in its activities after the 1962 Kefauver amendments.
The Consumer Products Safety Commission, the National
Highway Traffic Safety Administration, the Environmental Pro-
tection Agency, all exemplify the more recent type of regulatory
agency—cutting across industry and relatively unconcerned with
the consumer's pocketbook. A full analysis of them is far beyond
our scope, but we discuss briefly how they exemplify the same
tendencies that are present in ICC and FDA, and the problems
they raise for the future.
Though intervention in energy by both state and federal gov-
ernments is of long standing, there was a quantum jump after the
OPEC embargo in 1973 and subsequent quadrupling of the price
of crude oil.
If, as we shall argue, we cannot depend on government inter-
vention to protect us as consumers, what can we depend on? What
devices does the market develop for that purpose? And how can
they be improved?
THE INTERSTATE COMMERCE COMMISSION
The Civil War was followed by an unprecedented expansion of
the railroads—symbolized by the driving of the Golden Spike at
Promontory Point, Utah, on May 10, 1869, to mark the joining
of the Union Pacific and Central Pacific railroads, completing the
first transcontinental line. Soon there was a second, third, and
even fourth transcontinental route. In 1865 railroads already
operated 35,000 miles of track; ten years later, close to 75,000;
and by 1885, over 125,000. By 1890 there were more than 1,000

---