The Wall Street Journal has a good story today about how car dealerships are (successfully) lobbying legislatures to ban Tesla Motors from marketing their cars directly to consumers. GOP legislators, who get the willies about regulation that actually solves real problems, are on board with supporting protectionist policies for auto dealerships.
In economics textbook, government acts to correct market failures. I am tempted to say that, in the real world, government acts to create market failures.
I wish that the car-dealer case were an unusual exception. But basic public choice theory (which ought to be in more economics textbooks) suggests that concentrated interests win and broader interests, including correcting market failures, lose.
I was tempted to title this post, “Richard Green shoots at Republicans, hits mainstream economics,” but that would have been uncharitable.
Here in NH, the legislature recently passed “Auto Dealer Bill of Rights” legislation by whopping margins. In addition to their political clout, the auto dealers also appeared to have a number of newspapers on their side. My local paper’s editorial mentioned that the dealers were “your friends and neighbors, the ones who support local youth programs and booster clubs”. But they failed to add “also major advertisers”.
Is there a better argument for the death of the newspaper? 🙂
Excellent post. Interesting how companies like Tesla, propped up by government subsidy (i.e.; intervention to correct the ‘market failure’ of a dearth in electric cars), applies market pressure on the established car dealers, who then respond to this pressure by using their clout locally (car dealers are usually high-status players in the markets they serve) to protect their hegemony. A cycle of capture, if you will…