Triangular intervention is a term used to describe the involvement of a third party, typically a governmental or regulatory entity, in the voluntary exchanges between two parties. This intervention takes various forms, with the most common being price controls and licensing restrictions.
Price Control is a form of triangular intervention where the government imposes a minimum or maximum price for a particular good or service. This means that individuals are prohibited from making an exchange below or above this set price. For example, a government might set a maximum price for basic food items to ensure affordability for all citizens. However, this can lead to unintended consequences such as shortages if the price is set too low, or surpluses if the price is set too high.
Licensing is a form of triangular intervention that empowers the government to decide who is allowed to provide goods or services and who is not. By requiring licenses for certain exchanges, the government restricts individuals' freedom to pursue their chosen occupations. For instance, in the fields of medicine and law, individuals are prohibited from practicing without a license, despite possessing the necessary knowledge and skills.
This intervention is often justified as a means of protecting the public from unqualified practitioners. However, it is important to recognize the underlying implications. Licensing creates an artificial barrier to entry, effectively reducing competition and limiting innovation. It grants the state the power to control who enters specific professions, potentially leading to favoritism, corruption, and the suppression of individual liberty.
Furthermore, licensing can be used as a tool for special interest groups to maintain their dominance and restrict access to their professions. By influencing the licensing process, these groups can ensure that only a limited number of individuals are granted licenses, thereby reducing competition and driving up prices. This abuse of power undermines the very purpose of licensing and highlights the dangers of centralized control over economic activity.
In a truly free market, individuals would be free to offer their services without arbitrary restrictions, and consumers would have the power to choose based on quality, reputation, and price. Licensing, as a form of triangular intervention, distorts this natural market process and infringes upon the fundamental rights of individuals to pursue their chosen occupations.