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Comment by Vivtek | Hacker News Reader

While this isn't your central point, I'm pretty sure the reason Home Depot's propane tanks don't explode is not that Home Depot is concerned for their reputation and therefore takes all necessary measures required to avoid a rather infrequent problem, but that propane tanks and their handling are, in fact, regulated by government, and that those regulations codify best practices for infrequent events.

A purely free-market, reputation-based system of behavior works well for frequent events, but fails miserably for infrequent events, and that's why regulations are necessary.

In other words, and more snarkily, the assumption that Home Depot hires competent staff is probably not sufficient to protect you from explosion.

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Home Depot doesn't have to train their staff to inspect propane tanks, they only have to make sure they buy from a supplier who provides good propane tanks. But of course, since propane explosions can easily hurt bystanders, and "Fred's Discount Mailorder Propane" doesn't necessarily have as many incentives to ensure safety, so in this case I would say regulation is a good thing.

But there are cases where dangerous things aren't regulated by the government and it still works out pretty well, like roller coaster rides. In that case insurance companies actually play a big role in disseminating industry best practices.

In cases where companies produce danger for people other than their customers we shouldn't expect them to necessarily be responsible without government oversight - like with pollution. And in something like a hospital where people tend to die even when the hospital does everything right I wouldn't expect people to be able to differentiate between good and bad hospitals well enough - and the evidence I've seen is that people don't currently choose hospitals based on how good they are even with the government publishing statistics on the matter. I can easily imagine that in a totally unlicenced market the problem would be worse.

The government does regulate the safety of things like propane tanks, but major retailers, Home Depot included, usually have merchandise quality standards well above what the government mandates. That's suggestive (though not conclusive, I'll admit) that it's Home Depot, and not government safety standards, that keep you safe when you shop at Home Depot.

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