This is the Cato Daily Podcast for Thursday August 16th 2007. I'm Caleb Brown.

Are realtors and new cars a rip-off? Is the free market rife with scam artists. Economist John

Lott argues in his book freedom nomics that the market works to serve

consumers not scam artists. Lott spoke at a Cato book forum July 14th.

In your book you dispute claims in particular markets

that asymmetries of information are very widespread from the market to nearly new autos to

realtors. Could you talk about that?

Right. Well, I think a lot of people view there as being difficulties with the market and forming customers and that because of that

You don't have trades that would normally you'd want to occur taking place. And I'm happy to admit that people aren't

perfectly informed about everything, but that creates profit opportunities

for people to try to solve that because customers know that they may make mistakes that people may take advantage of them and so just as firms compete against each other and on the basis of price or on the basis of quality, they

also compete against each other on trying to assuage these fears that customers may have,

that they may be taken advantage of.

And the car example that you bring up is one perfect case.

There's a fear about so-called lemon with regard to cars that the claim is is that there's a huge

drop in the price of a car when you buy it.

You take it off the new car lot and the claim is it can fall by 20, 25% in value simply by taking it off.

I'm sure many people have heard that type of story, particularly if they've gone out and bought a new car.

And in fact, it's not true.

It's pretty easy to go and test that.

You can just go to Kelly Blue Book.

They have very detailed information on not only the manufacturer

...