Thursday, January 1, 2009

Markets Take Time

The Crisis Prophet Speaks
01/01/09 - Econlog.Econlib by Bryan Caplan
[edited] Markets will respond to price changes, but the responses take time. People must discover the relevant changes, confirm and assess them, consider alternative arrangements of their affairs, and carry out those changes.

The competent economist knows patience is needed in evaluating the market's operation. We have no reason to conclude that "the market doesn't work anymore", simply because the market does not appear to have fully reconfigured itself soon after a shock.

Decent analysts know this; I am not breaking new ground here. So, we can only shake our heads in wonder when we see well-known, free-market economists and other formerly sound analysts taking unsound and ill-considered positions.

We must appreciate that the sky is not falling, even if the news media and the politicians act as if it is.

+ + +
Stimulus Does Not Cure a Recession
The population and millions of businesses built our economy. They will adjust to any new conditions, if the government does not raise taxes and waste resources. Government agencies created a financial crisis. Don't let government make a difficult situation worse.

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