[Levi.Rodney]

If I understand the Austrian perspective correctly, the free market should not allow the success of unethical or dangerous companies because consumer sovereignty. I dont understand how that could work in each industry. For instance big pharmaceuticals don’t only represent themselves, isn’t it true that these big companies establish unique brands for each medication? Therefore if it has negative consequences, the big business brand would be relatively unaffected.

[michael.tabone]

Levi,

The question has multiple facets. For one “Big Companies” would be much more rare under an economy run in a way of a free market. I am assuming by Big Companies we are talking about corporations, which are products of state/business device. Generally, where you see a large corporation, with multifaceted smaller divisions and such you are looking at a business which has regulatory state parameters which hinder outside competition. With less competition you can increase the moral hazard a company faces because it can be in a position to try and scam people, in one head of the hydra, yet have the beast stay alive.

However, the question rises why a company would purposefully kill off that which is making it money? Cigarette companies are providing potentially harmful products to a person, but they choose to take that product. But in the same way we all go out to eat at a restaurant, and I bet you 99% of us have never asked the waiter if we can go inspect the kitchen to make sure it is prepared correctly. We take it for granted and based on the reputation of the restaurant that the food will not kill you or that you will enjoy it. Why do most of us not walk into the kitchen to see how it is prepared? Because we are conditioned with the idea there is a nanny overlooking all that for us. Take away the nanny (FDA and local health codes) and it would be selling point of any restaurant that they have “X” high standards.

A brand, say Viagra, still trees up to one umbrella corporate entity.
As a food example:
Mountain Dew, Lay’s Potato Chips, Gatorade, Tropicana Beverages, Doritos Tortilla Chips, Quaker Foods and Snacks, Cheetos, Ruffles, Aquafina, Sierra Mist all tree up to PepsiCo. Pepsi is the company and the reputation which will feel the pinch if one of their drinks started killing people.

Just recently we had Martin Shkreli who decided to purchase the rights to an AIDS drug, and boost the price from $13.50 a pill to $750. This was only allowed to try and gouge costumers because of lack of competition for one. And secondly, he has lost business opportunities because people do not wish to be associated with him. Precisely because reputation and heuristics mean something to the consumer. PepsiCo owns Dorito’s and if they started killing people in mass, PepsiCo cannot just say, “Guys Guys Guys… settle down. That is Dorito’s not Pepsi”.

Respectfully,

Mike

[jmherbener]

I suggest taking a look at a few articles on big Pharma:

https://mises.org/library/drugs-good-bad-and-ugly

https://mises.org/library/pharmaceutical-prices-patents-and-fda

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