Freedom Supports Our Humanity

Brooks channels Hayek
05/05/09 - CafeHayek by Russell Roberts

[edited] The classical liberal prescription for the good life is not about making as much money as possible. It's about the freedom to choose. It's about voluntary rather than coercive solutions, decentralized rather than centralized solutions, bottom-up solutions that are the result of many actions and actors rather than top-down solutions by experts.

Unfortunately, economists, Republicans, and columnists often use "the market" to mean only economic freedom. Most people take it to mean the stock market, or at most the monetary parts of our lives. (This seems to promote economics at the expense of community. -AG)

People ask how the poor can possibly survive if there is more liberty? Or they argue that the market "delivers the goods" but produces inequality. Some respond that economic freedom does indeed help the poor. They're right, but that doesn't comfort the skeptic who is worried about today's poor.

Freedom doesn't mean poor people starving. Freedom means that the government doesn't try to solve the problem of poverty, but rather it leaves the door open to voluntary community rather than coerced community.

Pocketbook issues are important, but they don't inspire. Freedom is important not because it makes us rich, but because it makes our lives more meaningful. Freedom does let us prosper, and it also lets us express what is important about our humanity. Top down approaches deaden that humanity.

Government vs The Market

Government, the Downturn, and Responsibility
03/01/09 - CafeHayek by Don Boudreaux

Mr. Nouriel Roubini is an economist, interviewed by the Wall Street Journal on Februry 21. He recommended nationlizing the banks because markets have failed to price and trade assets, due to excesses, greed, and irrational exuberance. Some readers responded in letters to the editor.

[edited] Mr. Roubini makes no mention whatsoever of the government interventionism that is largely the cause of our current crisis.

• Was the Federal Reserve's policy of holding interest rates below the real rate of interest and thereby causing a credit bubble and debt-fueled consumption a market failure?
• Or was the market failure that market participants did not read F.A. Hayek's "Monetary Theory and the Trade Cycle" and divine the peril that was not being signaled through the price mechanism?
• Or does Mr. Roubini consider it a market failure that lenders were coerced by the government to make mortgage loans that never would have been made based on market-driven underwriting standards?
• Is the failure of unqualified homebuyers to decline the cheap, no-down-payment loans that lenders were coerced to offer them another market failure?
• Was it market failure that lenders knew they would never have to suffer the consequences of reckless underwriting when they could dump their rotten portfolio on the taxpayers via the government-backed Fannie Mae and Freddie Mac?

The word "market" does not mean an old man in a turban who rubs his chin and suggests a price. It means all of the people with an interest in the problem, with intelligence and experience bought with thousands of hours of study and action.

These people are wiser and better than an academic economist who has spun theories and equations, claiming to understand what government-forced result is good for us all. But, the government pushes the self-interest of its politicians and favored interests, claiming that it knows best.

We Don't Have Free Markets

Regulation of Financial Markets
02/05/09 - Cafehayek.com by Russell Roberts

If we had an “unregulated free market”:

• The banks that made stupid investment decisions would have gone bankrupt and be under new management.
• The investment rating agencies that rated subprime loans as “AAA” would be disgraced, bankrupt and out of business -- no one on earth would deal with them any longer
• No one could force bankers to make risky loans, as is currently done by the Community Reinvestment Act, lawsuits from ACORN, and the Justice Department.
• No central bank would be in charge of the entire money supply.
• - to make credit available at too-low interest rates.
• - to create a permanent inflation that made housing jump in "value".
• - to encourage risk by being a lender of last resort.
• - to condone and support an over-leveraged banking system, where reserves are only 4% of loans outstanding, inviting constant instability.
• No Fannie Mae, Freddie Mac, or FHA could direct trillions of dollars into unaffordable housing construction.
• The government could not borrow $1 trillion for handouts to political interest groups.
• The few elements of remaining capitalism would not struggle under thousands of pages of rules and regulations, and dozens of government agencies.
• The little guy would not have to contribute his funds to a government that saves the incompetent and the dishonest from the consequences of their own actions.

We don’t have an unregulated free market; we have an out-of-control government intent on looting us blind.

Nobody knows how to make a pencil

Nobody knows how to make a pencil
01/15/09 - AlexBarnett.net (11/18/06)
Do you believe that the economy can be managed, beyond setting free and fair rules and protecting property rights? Consider that there is no single person or small group in the world who actually knows how to make a lowly lead pencil.

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.

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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.