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Imagine that the US Congress someday decides that as a matter of national security it is imperative for each American adult to be in possession of a smartphone. (Perhaps they believe that we might all need to receive an important text message from Homeland Security in the event of a major terrorist attack.) Suppose also that at the time of this decision there are 100 million American adults still without smartphones, and that the average smartphone costs $200.
According to the Supreme Court of the United States, here is a procedure Congress is permitted to follow:
Step 1: The government levies a one-time $200 tax on everyone who does not possess a smartphone.
Step 2: The government purchases 100 million smartphones from companies of its choosing.
Step 3: The government delivers the 100 million smartphones to the people without smartphones.
But here is something Congress is not permitted to do:
Step 1: The government mandates that everyone without a smartphone buys a smartphone from the company of their own choosing.
Step 2: Nothing else. All done.
Now isn’t this restriction ridiculous? For one thing, the extra steps in the first procedure add pointless bureaucratic costs to accomplish the very same end result accomplished by the second procedure. Also, in the second procedure, American adults without a smartphone get to choose their own smartphone company. But if the first procedure is followed, the government buys the phones for them from the companies the government chooses. What sensible country would permit the former procedure but prohibit the latter?
[Read the rest at New Economic Perspectives]