WELCOME, ECONLOG READERS. There are a couple more goodies there, should you have arrived at this station from a different direction. There's a new post on measuring inequality that's worth a look. Cal Pundit has what he describes as his final post on inequality (for the present, I bet, he's got more tax incidence stuff up). It's some of the interventions I wish to speak to, however.

"Example: capitalist economies work their magic via competition, but classical economists have recognized for over a century that laissez faire capitalism frequently leads to monopolies, which in turn destroys laissez faire capitalism. The answer is antitrust legislation, which is designed not so much to rein in free markets as to allow them to flourish. Securities regulation, which is generally designed to promote transparency and a freer flow of information, is another example.
." But what happens to those monopolies, and do they last forever absent government storm shelters (consider Baldwin Locomotive, Sears, A&P, K-Mart, Ford, and United Airlines)? Consider further the interpretation of the antitrust laws by the courts: does it protect competition in the way Mr. Drum sees it, or does it protect less effective competitors (see, e.g. George Stigler's "The Origin of the Sherman Act" in Journal of Legal Studies some years ago.)

"Interventions designed to correct things that capitalism does poorly. Example: brutally exploitive child labor is a normal and predictable consequence of industrial capitalism. However, when it eventually became socially unacceptable it took government intervention to end it. A modern day example is minimum wage laws. A free market will inevitably price the least skilled labor at (more or less) subsistence levels, but today we have a social consensus that if you want to employ someone, there's a certain minimum amount you should be required to pay." Isn't child labor a normal and predictable consequence of poverty? Those pre-industrial kids weren't playing Pokemon. It's probably more accurate to say that child labor laws plus the establishment of common schools served either to indoctrinate immigrant children into American ways or to give all kids some sort of shot at a fair go, depending on whose interpretation you wish to believe. And as long as there is illegal migration, there will be ways around the minimum wage laws (Junius had an interesting post on illegal migration and induced innovation that is worth a look.)

UPDATE: Atlantic Blog has more on antitrust, including the trap identified in Incredible Bread Machine.