Undo Something

Crisis and Leviathan author Robert Higgs goes to town on the free market economists ("you know who you are") who have "gone over to the dark side in recent months." Some snippets:

It now appears, I am saddened to report, that these free-market experts were not so expert after all. Indeed, many of them seem to have failed to understand how markets work and how government actions can hobble or kill those workings. Many have talked as if they actually believe in vulgar Keynesianism or other crackpot ideas - about "systemic risk" where none exists or about "missing markets" for poor-quality assets that only a fool would try to sell privately when the alternative of a munificent government buyout shimmers on the horizon.

[…]

Above all, policy makers, economists, other analysts, and news media commentators need to cultivate an understanding of and appreciation for the wisdom of the aphorism, "don't just stand there, undo something." The greatest mistake made in previous occasions of this sort has been to add new government burdens to the ones that helped to bring on the troubles in the first place; hence the ratchet effect in the growth of government. If only we had the wisdom to recognize a crisis as the most compelling occasion for getting rid of accumulated government burdens and idiocies, then we could throw the ratchet effect into reverse, with highly beneficial long-run consequences, including greater economic liberty and faster economic growth.

Whole thing here. reason stands against the bailout here, here, here, here, here, and here.

Comments

[ed]

"[N]ews media commentators need to cultivate an understanding of..."

Something. Anything! The cable news journalist-celebrities come to the table with a script, a bias and a two-minute limit; they ask their guests questions without listening to their responses, allowing stupendous lies and factual errors to go unanswered, unchallenged. TV journalists have become public idiots, co-conspirators with their alleged adversaries--the criminally inept jackasses in Congress.

[joe]

The only thing a fanatic hates more than an infidel is an apostate.

[Marc]

Or it could be that everyone hates a hypocrite. Not as punchy, though, huh?

[MAX HATS]

All these Nobel prize winners and Ivy League professors don't know beans about economics. See, you got supply, and uh, you got demand. And government is bad.

[EJM]

Something. Anything!

This actually put me in the mood for some old Todd Rundgren ("Hello, It's Me"; "I Saw the Light").

[Mark Brady]

It's great to hear that Reason stands against the bailout. But why did Reason publish Steve Chapman's call for inflation?

[joe]

Wanna read something funny?

http://article.nationalreview.com/?q=MDNhMDFhNmJmYmU3NDQyZTAyOWNhMmYzNTY3NDNiODA=

Larry Kudlow is National Review's Economics Editor.

[felix]

Why have a reasoned discussion when zingers from ad hominem joes abound?

And the problem is when you point out to these joes that regulations have increased manifold (more than 10,000 pages added to the Federal Register in the last 30 years) they will then say, "well, it's the quality, not the quantity" or we just need better people at the wheel. So you can't falsify the ideas of these true believers in the political process, the creationists of political science. You can only nod and hope they stop having children.

[james_joyce]

Yeah, the monetarists at National Review are clueless. Let's see what some real economists had to say before this all went down: http://mises.org/story/1670

[joe]

And the problem is when you point out to these joes that regulations have increased manifold (more than 10,000 pages added to the Federal Register in the last 30 years) they will then say, "well, it's the quality, not the quantity" or we just need better people at the wheel.

Actually, what I'll say is that "regulation" isn't some kind of commodity where every pound, gallon, page, or dumpster load is the same as every other, the way certain true believers like to tell themselves. I'm likely to go on to point out that regulation of financial derivatives, particularly of mortgage backed securities that caused this mess, most certainly did not increase. Rather, the decision was made (against the advice of numerous agency personnel, watchdogs, and economists) to avoid regulating them. After all, as we can all plainly see over the course of the past year, financial markets can regulate themselves (what's that, Mr. Greenspan? You've changed your mind?, and if the production and sale of mortgage derivatives were regulated, why, the market might not be as dynamic and innovative as some might like. And nothing - NOTHING! - could possibly be worse for the economy than an insufficiently dynamic, innovative market in mortgage products.

[joe]

Anyway, I'm off to peruse the sections of the Federal Code on wetlands regulations, to see why they failed to stop the financial houses from leveraging themselves to buy hollowed-out mortgage bonds.

Because that's totally how it works; you just make the federal code big enough that you can pin irresponsible lenders under it. It really doesn't matter what the pages actually say, or if anyone in the agencies are reading and enforcing them.

[felix]

Oh, I see, the housing market was too unregulated. It's not enough that Fannie Mae and Freddie Mac were government creations, as long as you can find one sector of a market or anything else in the economy that isn't as regulated as you would like, you can point the wand and say, "aha, that must be it! That must be the source of the problem. It couldn't have anything to do with how much government intervention, or the threat of it, has distorted decision making up to that point. Let's just wave our wand there and it will go away.

[felix]

It's also amazing that you can pin point the one true and sole source of the crisis on this particular area, when at least some other expert economists and economic historians are hesitant to come to such strong conclusions, considering how complex the world economy is. I think there's a line in the Catcher and the Rye where Holden Caufield is listening to some blowhard cabbie going on and on, with astonishing confidence, about his theories concerning the current world problems. Holden says something to the effec that he wonders if there's some sort of inverse relationship between confidence and true knowledge or wisdom.