Pethokoukis, Economics, U.S. Economy

The Uber scandal: Here’s the difference between pro-market and pro-business

As I have been writing lately, moving from scientific invention to economic innovation requires an ecology of “maximum competitive intensity” where the big and established can be successfully challenged by startups’ disruptive innovation. (DC’s corrupt, crony capitalist crackdown on Uber would be the opposite of this.)

Economist Luigi Zingales gives about as good an explanation as I have heard about the difference between being pro-market and pro-business:

A pro-market strategy rejects subsidies not only because they’re a waste of taxpayers’ money but also because they prop up inefficient firms, delaying the entry of new and more efficient competitors. For every “zombie” firm that survives because of government assistance, several innovative start-ups don’t get the chance to be born. Subsidies, then, hurt taxpayers twice. …

And a pro-market approach holds companies financially accountable for their mistakes—an essential policy if free markets are to produce sound decisions. A pro-market party will fight tirelessly against letting firms become so big that they cannot be allowed to fail, since such firms may take risks that ordinary companies would never dream of. …

[The Republican Party] has to move from a pro-business strategy that defends the interests of existing companies to a pro-market strategy that fosters open competition and freedom of entry. While the two agendas sometimes coincide—as in the case of protecting property rights—they are often at odds. Established firms are threatened by competition and frequently use their political muscle to restrict new entries into their industry, strengthening their positions but putting their customers at a disadvantage.

2 thoughts on “The Uber scandal: Here’s the difference between pro-market and pro-business

  1. Good luck with that. Remember when Tom Delay actively punished trade groups that trafficked with the enemy? (Ds) Until we have real campaign finance reform we will have the finest congress money can buy.

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