The British State Really Doesn't Get Markets, Does It?

What is this "fair value" idea?

We now have - amazin’ly - the government insisting that car insurers must provide “fair value”. Which is - obviously and clearly - an idiocy. But that’s what the law now proposes.

Six in 10 said they had got into a discussion with their insurer about the quote they had been offered, with most of them doing so over the phone. In 61% of cases this led to them being offered a lower price.

The average saving was £64 a year, although some received much more sizeable reductions. One in 20 said they had saved more than £200.

Which? says that if significantly better prices are offered to customers, but only after they make a fuss, insurers may be in breach of the FCA’s consumer duty rules, which came into force in July 2023 and require financial firms to demonstrate their products provide fair value for customers.

It’s that very last that astonishes.

The entire point of capitalism is that the capitalists - the producers - are doing their best to rip off the consumer. We also think we want to moderate their ability to do this. So, we insist upon competition. It’s the desire of the other capitalists to rip off the consumers which moderates the ability of any one capitalist to do so. For the other capitalists are so ravenous for a bit of profit rather than none that they’ll moderate their rip off in order to gain the custom.

Further, that entire idea of market prices is an insistence that there is no such thing as “fair value”. There’s what someone is willing to sell it for, what someone is willing to pay for it. Only when those two meet will an actual transaction take place.

Fair value just doesn’t exist. There’s value to either consumer or producer at a certain point in time and in a certain place. That’s it, there is no more.

But now we’ve got this fair value idea enshrined in law?

Jeebus. It was OK when Marxist theory remained in the critical studies departments - anyone without purple hair could safely ignore it. But written into the law of the country? Where did we put the remains of the Tyburn Tree?