I think it is a mistake to talk about government “intervention” as if the government were some sort of deus ex machina. It makes more sense to think of government as collective bargaining among interest groups with respect to plus-sum opportunities. How many business owners think we should return to a time when children swept chimneys? It would certainly be more profitable than paying grown men to do it. And, most important, if it were legal, some would choose to do it, and so others would be forced by competitive pressure to do it. History proves this.

Eventually, market forces may compel better behavior through boycotting. But history says that we do not care enough about such things. If we did, there would never have been child labor or Triangle Shirtwaist Company sweatshops. Or, at least, they would not have lasted as long as they did. Legislation organizes and formalizes this public sentiment, not replacing the market but intensifying it, allowing consumers to vote, literally, not to patronize places that do bad things by making it illegal for those things to be done. This is market economics continued by other means, not “intervention” by some exogenous entity.

For the most part, government intervention in market matters is about restricting competition on the basis of low-cost bad behavior. Reducing competition is a good thing for entrenched businesses, which is why we don’t allow big businesses to exert monopoly power through unreasonable restraints on trade. On the other hand, some forms of competition are pernicious. Thus, where the antitrust laws might well forbid companies to agree with each other not to hire children, the labor laws might do the same thing, either by empowering labor and trade unions to make such a deal, or by simply outlawing the practice tout court. In either case, a negotiation takes place in the most effective forum, and practice is changed in a way that has consensus approval.

From this perspective, the issue of government intervention can be understood in meta terms as relating to where the issue at hand is best addressed. Do competitors really want (i.e., are they best served) to compete with respect to this issue, or do they want to be relieved of doing so?

Consider market-expanding measures like anti-discrimination laws. Aren’t most businesses better off when they cannot discriminate against customers on the basis of race? If discrimination is permitted, it will be practiced, because racist customers will shop with “their own,” and a non-discriminating business will lose customers. But if discrimination is not permitted, the customers have no choice, and everyone gets to shop everywhere, which means merchants get to sell to everyone. That’s a win-win that makes the previously discriminating merchants richer. We can call that government interference with free enterprise, or we can call it business cooperating through the political process.

Yes, there are pols who would shrink the pie so long as the rich lose the most. That’s the kind of government intervention we should avoid, and, of course, there is no bright line between that sort of intervention and the kind that creates a plus-sum outcome. There is a conceptual line, of course, but there is no visible line, because we often have no idea what a regulation will do or even what it has done, as counterfactuals are notoriously malleable in the hands of politicians whose operating assumption is post hoc ergo propter hoc. Still, in considering any government intervention in free markets, we should at least ask ourselves whether a proposed regulation advances an identifiable plus-sum opportunity.