The Chicken, the Egg, and Life in Montebello

Those among us who are business innovators love having their own businesses and creating ways to increase profit.  Sometimes, they look at issues in the community and find ways to increase profit as they help the community, thereby crossing over into “social entrepreneurship”, a phrase which we are likely to hear often as our society confronts Herculean challenges about the environment, retirement, job security, and Social Security. 

Many, if not most, business innovators find government intervention into their businesses annoying at best, crippling at worst.  Regulations generate paperwork, not wealth.  One imagines that many business innovators were happy when the late President Ronald Reagan championed deregulation.

But here is where the chicken and the egg come into the discussion.  Which came first, a free-market economy (laissez-faire capitalism) or government regulation?  The economy, of course.  Government regulation was a reaction to the abuses or failures of the economy:  slavery, wage exploitation, unhealthful working conditions, dangerous working conditions, child labor, environmental depredation and degradation.  (Of course, if one sees fellow humans and the Earth as no more than resources to be exploited for maximal personal gain, then one could argue that there have been no abuses or failures of the economy.)

Interestingly, abuses and failures still occur, and government responds by imposing or enforcing regulations.  A glaring example is the accounting regulations which arose from the Enron debacle.  Current cases include data-collection companies whose security has been breached, pet-food processors whose product has been tainted, vegetable growers whose produce has sickened, if not killed, people, and sub-prime lenders whose magnanimity has lead to calamity for homebuyers.  And then, looming like a large malevolent shadow on the horizon and dooming coming generations in other parts of the world, is global warming.

Since abuses and failures came before government regulation, and since abuses and failures continue, could we have a regulation-free economy, in order to enable business innovators to do what they do well?  No, unless the public be educated to expect more of businesses and do expect more of businesses.  In other words, if consumer buying habits became the “regulator”, businesses would work to meet those expectations.  That would work to an extent, but the fallacy of such an argument is to expect that the public could be so educated and would embrace such education in sufficient numbers as to compel businesses to subscribe to what some call the triple bottom line, in descending order of priority, people, planet, and profit.

So, it seems as if regulation would be the yang to the yin of innovation.  Inseparable.

If you answer the multiple-choice questions below and e-mail to lessonanswers@mymontebello.com with “Lesson answers” in the subject field, you will be credited toward a “certificate of recognition in community affairs” to be awarded in 2007 by a local nonprofit organization.

1. A conclusion which could be drawn from the above is that

(a) a free-market economy is bad for society.

(b) we humans abuse every good thing, which leads to regulations to temper that abuse.

2. Consumer expectations

(a) do have an effect on the behavior of businesses.

(b) can completely replace government regulations with regard to the triple bottom line of people, planet, and profit.

(c) can be changed through education.

April 19, 2007