Some interesting thoughts from Jonah Goldberg.
The key point is that uncertainty about government policy makes private-sector decision making very difficult, and tends to inhibit rational and dynamic investment.
(via Betsy)
5 thoughts on “Experimentation, Uncertainty, and the Economy”
Comments are closed.
I don’t think people like Obama want private-sector decisionmaking to be easy. I think they want as many people as possible to depend on government money and government decisions. This means, in part, keeping the rules complex, opaque and subject to frequent change. The individual, typically someone who either is or aspires to be an independent business owner, who thinks to himself, “screw the government, I just want to control my own life” is not their friend. Thus the hostility to Joe the Plumber. Thus also some of the hostility to Palin, who among other things is a small-business person and therefore likely to see the individual’s relationship to government differently than Obama sees it.
Jonah Goldberg’s views are not isolated. The governments policies, buying every bad loan they could find through Fannie Mae, prompted by Democratic desires to “help”, caused the current crisis.
You need a big mistake and much power to cause a crisis. As usual, government provided both for 30 years.
See other links agreeing with JG’s view atGovernment Action Delays Recovery
Goldberg’s suggestion isn’t very realistic.
Every functioning economy needs a central bank and it must operate under the rule of law.　
From there, the real discussion is not about the quantity of government involvement, but the quality of it.
We have seen beyond a shadow of doubt that deregulated financial markets swing too widely. That would be ok if we were willing to live without a central bank, which, inevitably, is forced to clean up the mess in order to get on with its job of maintaining price stability. But if we want to realize the benefits of maintaining a central bank, we have to have adequate rules in place to prevent very large stakeholders from gaming the system in a way that prevents the central bank from achieving its modest goal of maintaining price stability.
It wasn’t lending to poor people that caused the collapse. It was three other things:
First and foremost, the removal in 2004 of the limit on investment bank leverage. When that was lifted, at the Bush administratons behest, the Bears and Lehmans etc. piled on the borrowing that lead to their demise.
The collapse has drawn a lot more deeply than it might have because of the effects of the unregulated market for credit default swaps, a decision that was made under the commodities futures modernization act in 2000. These instruments enabled further leverage and created a false market for risk that is now and created a false market for risk that is now imploding.
Thirdly, interest rates were kept artificially low for too long, allowing real estate prices to rise too quickly relative to income growth.
The question is never simply more regulation or less regulation, but good regulation, that prevents anti^competitive behavior without distorting overall market function, versus regulation that does distort market function by favoring special pleaders.
So does is spinning economic activity as a disease. Until people realize that Induced Demand is the whole point of infrastructure, spending on it will just be inflationary pork.
> It wasn’t lending to poor people that caused the collapse.
Absolute crap. There are several NYT articles to demonstrate that the charge was led by the FMs and the attitude that housing always went up in value, thus lending tied to the housing market was “guaranteed”.
And the errors of the banks of which you speak was them jumping on the “me too!” bandwagon, since their competitors (FMs, etc.) were making money (or appeared to be, at that moment, thanks to criminal lies by Gorelick and Raines) hand over fist.
Carl, over at NoOilForPacifists does a fairly good summary, with extensive linking, of the arguments. I disagree with his conclusion, but you can certainly get a good, broad overview of the arguments starting with that link. (He’s also done three preceding surveys of the problems in the last couple months, which you can find for yourself if interested).