The harsh effects of government regulation within an economy can be analyzed by using a yard sale as a model. By the end of this essay, you might be able to see the difference between a free, as in, non-regulated exchange and a regulated, as in, government regulated exchange. All poor and middle class people would suffer the consequences.
Usually, garage sales only occur once and sporadically. The mere thought of regulating and, with that, guarding these transactions is crazy. It would mean that the owner of the garage sale would have to announce to the government that he or she is going to carry on this business. This, of course, to provide the government with the facility of knowing where and when to regulate such a spontaneous enterprise. In other words, the government would coerce the businessman to federally announce that they are creating a sale’s post, so that the government could avoid the pain of the search costs in regulating a one-time garage sale. Obviously, those that would not report to the government would suffer sanctions, maybe a fine or jail.
Next, is taxing. The excuse would be that they need money to sustain a newly created bureaucracy that regulates garage sales. Both sellers and buyers would be harmed. Garage sale goods and services would now have to, if not have fixed prices, then begin a bidding at the lowest price of the good plus tax. Also, if the government was stupid enough to regulate garage sales, then the taxation done in them would have to be an all time high, because they only happen once and you need money to sustain your new bureaucrats. Unless, of course, an existing bureaucracy took care of the exchanges of garage sales, then there would be no need of high taxes in the goods of a yard sale.
Then, we would have to see who the government is going to favor in the laws, with this, already knowing the fact that the one who creates the laws (federal government) will be the ultimate beneficiary. If the buyers are the favored ones, we would have price controls and garage sale buyers who are cheapskates will push the government to make sellers lower the price to its maximum. On the other hand, if the sellers are the favored ones, they will push the government to put prices at their maximum price.
Either way, the economy will be disordered because buyers and sellers will start competing against each other to see who is the government’s favorite pet. Another case, could be a garage seller wanting to become the monopoly of garage sales and lobbying to get the government to give him what he wants and destroy the competition. A couple of years later, there would be so much conflict and chaos that finally the state would be the only one allowed to sell used goods.
The obvious conclusion is that within the first month of the new government regulation, there would already be a black market of garage sales or no one would ever use a garage sale to earn money. This random and handy business would utterly disappear. In the end, poor people would not be able to get rid of old stuff to gain money to buy new stuff, making “big companies” lose customers. This is why garage sales are purely free market exchanges, meaning that they are without government regulation.