Dear Friend,
I remember a quote form Confucius, When asked what he would do if put in charge of a province Confucius said he would “rectify terms”. When asked why, he responded, when terms are rectified the measure will be accurate and the people can trust one another. It seems to me that this is one of the best analogies for the legitimate role of government in regulating markets.
Stability in rule and regulations is like loam to markets. Government that is constantly regulating it’s markets, trying to improve one aspect or another, are like the farmer who, when checking his fields saw that his corn wasn’t growing as fast as he wanted, so he pulled it all up.
Upon returning home his son seeing the fatigue in his father’s continence, asked what he had done that was so tiring. His father replied “ I was helping the corn to grow.” The son ran out to the field to see all the corn pulled up.
Like a good farmer, government that wants a strong economy, stays in the background. He provides the means and the keeps the weeds from the crops The crops job is to grow. Clear and consistent rules concerning conduct, not business practice, is like keeping weeds from the crops. By that I mean that every dishonest business practice is based in dishonesty. It is impossible to foresee all the potential deplorable business practices. So you cut the bad practice at the root. The root is always in dishonesty. Hold businessmen to a high level of honesty and virtue. The higher the level of the business man the higher the level of honesty to hold him or her.
Lack of crime is like sunlight. When asked what a duke could do to prevent crime in his province Mencius said that the duke should stop being corrupt. Live by the laws and customs that he imposed upon the people. The amount of reasons to participate in crime are innumerable but men want to be good, it is when their personal good come against our morals does our morals give way. If we see our superiors being corrupt we loose our will to be virtuous. The best and most effective means, to promote crime, is to have corrupt public officials. There can be no better incentive for crime than that.
Markets that are subject to plunder is like salting the fields. When an industrialist is making investments in a country he or she must be confident that the government won’t plunder his or her largess. A fair shake is all an industrialist should get and all he or she deserves. If a gambler looses his shirt with the roll of a die, he is content. If he discovers the die were loaded, he is angry, and will not participate again. Plundering assets is like loading the die at a craps table. Those stolen from won’t come back and those that are not see the corruption and wisely don’t participate.
If a government keeps these principles in mind when they are considering regulating markets, like growing a plant, markets thus cared for will grow to be giant and healthy. Markets otherwise cared for may grow but can never reach the potential that it otherwise would.
