I half-agree with the above, which is that loser-pays is a good system and it's necessary to stop enabling companies.
The problem with your theory is that market forces incentivize firms to take action that reduce everyone's profits/benefits so long as the action is individually profitable for the company. Which is why there are "lemon laws" on selling used cars or food regulations.
The used car industry as a whole benefits when consumers are willing to pay more. Customers are willing to pay more for a used car if they think it will be high-quality. However, an ethically questionable used car salesman will try to undercut each other by offering low-quality cars that immediately break, giving all used car salesmen a bad name. Consumers now no longer want to buy used cars at all and now the only people making money are those selling a bad product.
The point of legal regulation here is to enforce a quality minimum on used cars. This drives the price of used cars upwards. Salespeople get paid more, the customers get better quality, and the world is better off having reused cars that would've been scrapped. Everyone is better off.
This could also be true for social media. Forcing social media to invest in better systems to ban users means that social media advertising can be worth more money. Right now, advertising marketplaces are controlled by the companies themselves. Nobody trusts companies to show ads to real users instead of bots. This drives the value of social media advertising down.
While individually, it doesn't make sense to pay for customer service infrastructure to verify people's ownership of accounts, if there is a mandatory standard, all social media companies would benefit because it increases the value of their products.
This is one of the roles of government regulation that can create a net economic gain.
Sidenote: car sales in general are not ethical. When you go to the dealer & talk to a salesperson, and subsequently talk to the $ guy, you will be required to sign a piece of paper stating that you cannot derive ANY claims on what the salesperson told you, except those written down on that form. And that form is empty.
Also, I wish there was a nationwide requirement for warranty. Not that I have a problem with selling as-is per se, but it incentivizes used car dealers to take in every vehicle they can on trade, erase the codes, and try to sell it. Again, they can lie to your face about how well this car was maintained, how it was taken care off, etc, and you cannot derive ANY value off those quotes.
I find it insane that in 2024 I cannot get a print-out of a car on how well it was maintained, and how many times it was floored on a cold engine.
That said, this economic paper is pretty legendary at this point: <<The Market for Lemons>>
Summary: <<Akerlof's paper uses the market for used cars as an example of the problem of quality uncertainty. It concludes that owners of high-quality used cars will not place their cars on the used car market. A car buyer should only be able to buy low-quality used cars, and will pay accordingly as the market for good used cars does not exist.>>
The Market for Lemons is legendary only as an example of economists ignoring reality to pursue their pet theories. Reality is closer to that explained in Mediations on Moloch.
The theory that the removal of lemon laws would result in a more informed consumer base has no basis in reality--economists need to spend less time theorizing about how economies work and start looking at actual economies to figure out how they work. We had decades of consumers not becoming informed enough to differentiate between a peach and a lemon before lemon laws existed. That's decades of proof that The Market for Lemons is wrong. That should have been caught in peer review, and that should have prevented the paper from being published. The fact that this absurd paper won a Nobel Prize should call into question the validity of the prevailing ideas of the entire field of economics, at least at that time.
The market for cars of uncertain quality will always have a floor on the price because people don't have a choice except to take a risk on buying a car of uncertain quality in an economy where the car industry has successfully dismantled public transportation infrastructure. Given this inelastic demand, dealers can leverage consumer ignorance to sell lemons as if they were peaches, and the consumer suffers. Hoping consumers will educate themselves is a solution that doesn't scale; it is unrealistic to expect consumers to become experts on cars, computers, phones, medical devices, and every other complex product just so they can avoid being sold inferior, broken products. It is clear that the only solution that works is for experts on products, i.e. the sellers, be held accountable when they knowingly sell low quality products as if they were high quality.
> The theory that the removal of lemon laws would result in a more informed consumer base has no basis in reality.
That's not what the paper says. It proposes government intervention and predates many lemon laws.
> Hoping consumers will educate themselves is a solution that doesn't scale; it is unrealistic to expect consumers to become experts on cars, computers, phones, medical devices, and every other complex product just so they can avoid being sold inferior, broken products.
This is the core claim of the original paper. When buyers have information asymmetry relative to sellers, they suffer.
> It is clear that the only solution that works is for experts on products, i.e. the sellers, be held accountable when they knowingly sell low quality products as if they were high quality.
This is literally what a lemon law is and what you're saying is on page 1 of the Market for Lemons paper.
> There are many markets in which buyers use some market
statistic to judge the quality of prospective purchases. In this case
there is incentive for sellers to market poor quality merchandise,
since the returns for good quality accrue mainly to the entire group
whose statistic is affected rather than to the individual seller. As
a result there tends to be a reduction in the average quality of goods
and also in the size of the market. It should also be perceived that
in these markets social and private returns differ, and therefore, in
some cases, governmental intervention may increase the welfare of
all parties
> "I find it insane that in 2024 I cannot get a print-out of a car on how well it was maintained, and how many times it was floored on a cold engine."
In the UK every car has a registration document with the previous owner's name and address on it. You can assume a lot regarding whether you want to still buy the car based purely on this information. It's surprising how many people overlook this simple step and rely upon warranties and such which are,often, not worth the paper they are printed on.
Aren’t there obd2 readers that will dump this information?
And if the representations form is empty why don’t you just write down all the things the dealer told you and then offer to buy the car? At least you’d know which sellers are knowingly lying to you.
> While individually, it doesn't make sense to pay for customer service infrastructure to verify people's ownership of accounts, if there is a mandatory standard, all social media companies would benefit because it increases the value of their products.
I am not sure this is a good idea in the US where even voter ids are controversial.
The problem with your theory is that market forces incentivize firms to take action that reduce everyone's profits/benefits so long as the action is individually profitable for the company. Which is why there are "lemon laws" on selling used cars or food regulations.
The used car industry as a whole benefits when consumers are willing to pay more. Customers are willing to pay more for a used car if they think it will be high-quality. However, an ethically questionable used car salesman will try to undercut each other by offering low-quality cars that immediately break, giving all used car salesmen a bad name. Consumers now no longer want to buy used cars at all and now the only people making money are those selling a bad product.
The point of legal regulation here is to enforce a quality minimum on used cars. This drives the price of used cars upwards. Salespeople get paid more, the customers get better quality, and the world is better off having reused cars that would've been scrapped. Everyone is better off.
This could also be true for social media. Forcing social media to invest in better systems to ban users means that social media advertising can be worth more money. Right now, advertising marketplaces are controlled by the companies themselves. Nobody trusts companies to show ads to real users instead of bots. This drives the value of social media advertising down.
While individually, it doesn't make sense to pay for customer service infrastructure to verify people's ownership of accounts, if there is a mandatory standard, all social media companies would benefit because it increases the value of their products.
This is one of the roles of government regulation that can create a net economic gain.