China's milk problem shows the failings of too much freedom in markets

Here's a situation that shows how a free market approach fails.

The situation in China where milk companies are being investigated for putting melamine (a poisonous chemical) in milk. Unfortunately, a number of children have died from kidney issues that arise from the melamine.

China is like a laissez-faire dreamscape, so it provides a good example of free markets run amok.

The free market view says that the market will take care of these companies. Problem boils down to two issues: 1) When? 2) After how much human costs?

The free market approach allows that once the public becomes aware of the problems, then it will force the companies to change their ways. The problem though, is that it will only occur after the public becomes aware, so information must be readily available.

Secondly, the free market approach makes little allowance for the human costs of these bad practices. Children have died and many more are sick.

We can all agree that this should not have happened in the first place. The only way to prevent that is to set standards and to use a regulatory scheme to protect the food supply.

The free market cannot prevent such a result.

Regulation is like salt, viz., without it, things won't work, but with too much, it ruins the situation.

Ideological de-regulators don't have the answer, but neither do the hardcore regulators. The best approach is moderate regulation.