October 12, 2005
Let the Free Market Be Free
By John
Stossel
The Internet
has revolutionized the marketplace by, among other things, eliminating
middlemen.
Internet
car-buying services let you shop for prices and options without
leaving home. "For sale by owner" websites show you
houses for sale.
Uh oh. Can't
have that, can we?
In a truly
free market, businesses can't kill competition, because they can't
use force. Unfortunately, in our "mixed economy," they
can get their friends in politics to use force to stifle competition.
Adam Smith
saw it all the way back in 1776. In "The Wealth of Nations,"
he wrote, "People of the same trade seldom meet together,
even for merriment and diversion, but the conversation ends in
a conspiracy against the public, or in some contrivance to raise
prices." He advised that any legislation such a group proposed
"ought always to be listened to with great precaution."
Detroit and its dealers wield enough influence in state capitals
to make direct sales of cars on the Internet illegal everywhere
but Alaska. Every year the automotive industry spends millions
of dollars fighting government regulation, but when it can use
government for its own ends, it does.
When I confronted
David Hyatt, spokesman for the National Automobile Dealers' Association,
about that, he said, "If the manufacturer sells directly
over the Internet, it leaves the dealer in an unfair competitive
situation."
"So
what?" I asked. "The Internet put lots of middlemen
out of business. Consumers like it. I don't want to buy from the
dealership!"
Hyatt answered,
"There is a very healthy system in place."
Healthy
for his car dealers, anyway. Less healthy for consumers.
Similarly,
now that more home sellers sell their homes themselves, real estate
agents are using their political clout to try to protect their
6 percent commissions.
In 2001
and 2002, California's Department of Real Estate, run by (surprise)
a real estate broker, sent warning letters to some "for sale
by owner" websites, demanding that they comply with licensing
laws for brokers. In 2004, a federal court held this demand unconstitutional.
Limited-service
"discount" brokers also threaten brokers' 6 percent
commissions. They offer services at lower rates, like a flat fee
of $250 to host a two-hour open house or $499 to review the contract
paperwork.
So traditional
brokers have won "minimum service" laws in many states
that force discount brokers to offer more services -- and thereby
force consumers to pay higher fees.
When I confronted
David Lereah, chief economist for the National Association of
Realtors, about that, he said,
"Not
everyone is providing the adequate amount of services to protect
the consumer."
Excuse me,
but if I want a Realtor to protect my interests, I'll hire one.
I didn't hire them to protect me from concluding I don't need
their services. If I think I'm better off selling my home with
less help than they want to sell me, that should be my choice.
Part of
being a free person is deciding for yourself what's in your interests.
That doesn't mean you can't get expert help, but it does mean
you get to decide when, how much, and from whom. If the Realtors
think "for sale by owner" and discount brokerages are
bad options, they should -- as they do -- make their case through
advertising.
Ironically,
the same industry asking government to keep home sales expensive
has itself been a victim of government meddling. Real-estate agents
share information through what are called "multiple listing
services." It's one of their best services, and it costs
money and effort to maintain. But the federal government is trying
to force the brokers to let their competitors take advantage of
their invention.
Why not
let real-estate services compete on the open market? Traditional
brokers provide a lot of knowledge and effort, and their multiple
listing services reflect big investments; if you want the benefit
of their energy and expertise, it's only fair that you should
pay for it. But if you think you're better off with a cheaper
alternative, that should be your choice, too. The government should
stick to enforcing the contracts you willingly decide to make.
©2005
JFS Productions, Inc. Distributed by Creators Syndicate
