A common objection to unfettered capitalism is that, left to their own devices, greedy industrialists would cut corners with product safety, resulting in tremendous harm to consumers. Dangerous products would flood the market, leading to a dystopia of preventable death and destruction.

Extreme hypotheticals are brought up the moment someone suggests a hands-off approach. Drugs would have life-threatening side effects, we are told, because Big Pharma would be trying to get away with minimal testing. Cars would become killing machines as companies scrap seatbelts and airbags to cut costs. And buildings would surely collapse all over the place, since companies would be using the cheapest materials available.

These fears are not merely hypothetical, either. History, we are told, is replete with examples where the laissez-faire approach was tried and led to predictably disastrous results. "Remember the thalidomide scandal?" one might say. "Remember all the traffic fatalities and building collapses?" "Do you not realize that almost all the safety regulations that exist today were created because free markets failed to 'regulate themselves'?!"

Examples of tragic accidents are submitted to the court of public opinion one after another, each of them intended to indict unregulated capitalism for the tragedy. How, in the face of all this evidence, could anyone seriously advance the long-debunked idea of laissez-faire?

Well, here's how.

The Parable of the Safety-First Standards

The first thing to understand about this discussion is that safer doesn't necessarily mean better. There are trade-offs involved with almost every safety enhancement. To illustrate this point, I like to tell a story that I call the parable of the safety-first standards. It goes something like this.

A local politician is concerned about road fatalities in his town. Sure, car companies have some safety standards for their vehicles, but clearly these standards aren't sufficient, because people are still dying in car crashes. "This is unacceptable," he says to himself. "Car companies shouldn't be allowed to sell death machines."