Friday, April 23, 2010

We Seem Incapable of Grasping Masonomics

Arnold Kling: At MIT and other bastions of mainstream economics, most economists are to the left of center but to the right of the academic community as a whole. These economists are known for saying, in effect, "Markets fail. Use government." Masonomics (George Mason economists) says, "Markets fail. Use markets."

Jonah Goldberg: Washington's solution to Wall Street's problems is to get Washington deeply, deeply involved in Wall Street. So involved that the savvier capitalists will recognize -- once again -- that the safest bets are not to be found in the vicissitudes of a fickle marketplace, but in gaming the system run from Washington. The "reform" coming down the pike will put bureaucrats in charge of investors.

We are fond of saying that the answer to free-speech problems is more free speech. But we seem incapable of grasping that sometimes -- and only sometimes -- the solution to capitalism's problems is more capitalism.

26 Comments:

At 4/23/2010 7:09 AM, Anonymous geoih said...

Markets don't fail. Markets do what markets do. It's just that many people have a vision of how they think things should be, only the market isn't doing that.

Also, markets aren't entities any more than a forest is an entity. (Do forests fail?) It's an agglomeration of numerous individuals all acting in their own best interest. If you don't like free markets, then you don't like individuals having the liberty to act.

 
At 4/23/2010 7:58 AM, Blogger juandos said...

"If you don't like free markets, then you don't like individuals having the liberty to act"...

Bravo geoih!

Your whole comment was excellent...

 
At 4/23/2010 8:31 AM, Anonymous Anonymous said...

It's just that many people have a vision of how they think things should be, only the market isn't doing that.

Therefore many people should allow their conditions to be controlled by the market that doesn't do what they want?

If you don't like free markets, then you don't like individuals having the liberty to act to the detriment of others.

 
At 4/23/2010 9:08 AM, Anonymous morganovich said...

well, look at how much good increased government involvement did for indy, freddy, and fammie.

yup, hard to argue with those results.

can't wait to get the whole system looking like that, nosirreebob.

calling this mess a market failure is like calling a bomb in an airplane a design flaw by boeing.

this financial crash was a government failure. CRA planted a trillion dollar bomb in the banks by FORCING them to lend to the uncreditworthy. someone was going to have to eat that. calling it a market failure is just madness.

show me any industry that could easily soak up a trillion dollars in government mandates losses.

 
At 4/23/2010 10:18 AM, Blogger juandos said...

"If you don't like free markets, then you don't like individuals having the liberty to act to the detriment of others"...

Hmmm, let me guess, you're not a fan of Milton Friedman, right?

 
At 4/23/2010 10:34 AM, Anonymous gettingrational said...

Did implementation of the FDIC in 1933 incentivize banks to be more risky? Prior to FDIC deposit guarantees banks did not pay fees to build a pool to save deposits in failed banks.

An offer of a free toaster rather then market reputation is often impeutus to make a deposit because of FDIC guarantees.

 
At 4/23/2010 12:01 PM, Anonymous Anonymous said...

Hmmm, let me guess, you're not a fan of Milton Friedman, right?


Let me guess, you are not a reader of Milton Friedmann.

He never suggested one individual as free to produce and sell as much poison as he chooses.

 
At 4/23/2010 12:02 PM, Anonymous Anonymous said...

Morganovitch:

Yup, hard to argue with faulty premises like that.

 
At 4/23/2010 12:27 PM, Anonymous Anonymous said...

The regulators put the super banks together. Now they don't want to admit their mistakes.

Markets have failed before and the markets recover. This is a process. After the failure it's a big fight between debtor and creditor. The people who owe money want relief, the people who are owed money want to collect. The politicians usually line up on one side or the other. With all these Democrats, they are on the side of the debtors.

But this time they also want to use the chaos to expand government power. The Dodd bill is a step towards nationalization of banks. It has the flowery rhetoric of a socialist manifesto. Also, it prevent bank failure.

Failures are messy. People might do some searching and uncover some crimes. Without failures, there is no accountability. At worse, you go to Washington and tell the politicians you know nothing. And are no investigations and no discovery of people in bed with the banks or hedge funds or whatever.

 
At 4/23/2010 12:29 PM, Blogger FoxyMtnBiker said...

@anonymous: it's pretty clear, both from Friedman and earlier free marketers (Smith, etc), that a mass marketer of poison will only be able to produce and sell poison if the market dictates. IE: tobacco industry. It's in everyone's self interest to not consume the poison, however they will act usually based on short term consequences (not consider death, only looking cool). That said, the only alternative is elimination of the freedom for people to choose on their own. Very little good has come from limiting people's choice. Jefferson's belief is still relevant: that personal freedom is granted by a higher authority, not a government.

 
At 4/23/2010 2:01 PM, Blogger Walt G. said...

Morganovitch,

There is nothing wrong with lending to those who are high risk. You just have to assess that risk and charge accordingly.

I believe the meltdown was due to too many bad loans mixed with good loans and sold as grade A investments to people who did not know what they were buying. Throw in an insurance company too big to fail who had to pay off those bad loans and we had a mess.

 
At 4/23/2010 2:16 PM, Anonymous Anonymous said...

Morganovitch.

You are missing the point. we can argue that the best social interest is but the sum of all the best individual interests.

There are two problems with that. some individuals, for reasons that have nothing to do with personal responibility, will not be in a position to reach their best individual interests without help.

The second problem is how you define the best individual interests. Some will define it narrowly seeing indivdual liberty or corporate profits as paramount and averything else as decicedly and necessarily socialist.

But I know tht even inside my own business the best way to do each individual task does not add up to the best way to run the business as a whole. When measuring results, it matters how youdefine the system.

There is plenty of market and plenty of uses for DDT or even fertilizer, but we restrict their use because the people who market and use these products excessively are damaging other people.

What the socialists don't understand is that they are not entitled to zero damage any more than the other side is entitled to unlimited protection.

I don't like undue government interference or wasteful government help any more than the next person, but I know that someone who argues only for lowest government cost, or lowest production cost isn't necessarily arguing for lowest total cost.


Very little good has come from limiting people's choice. But that does not mean that zero good has come from it. The problem is evaluating the value of the good that is achieved vs the value of the alternative.

We do not do a very good job of that, and the reason is that the market is incomplete. Friedman has only considered the value of priced goods. He will be correct once we establish ownership and trading rights for all the valuable goods and services we now take for free.

 
At 4/23/2010 2:56 PM, Anonymous Anonymous said...

One of the biggest arguments for too big to fail is the danger to business deposits like payroll accounts. Why not offer deposit insurance for payroll accounts?

 
At 4/23/2010 5:54 PM, Blogger juandos said...

"Let me guess, you are not a reader of Milton Friedmann"...

ROFLMAO! Oh dear, another angered Obama supporter...

"He never suggested one individual as free to produce and sell as much poison as he chooses"...

Educate yourself...

 
At 4/23/2010 6:41 PM, Blogger Ron H. said...

Anon @ 08:31

>"It's just that many people have a vision of how they think things should be, only the market isn't doing that.

Therefore many people should allow their conditions to be controlled by the market that doesn't do what they want?"


An example of this might be that you think everyone should use a composting toilet to help save the planet. Very few are sold, because almost no one Likes them, therefore the market isn't doing what you think it should do.

Your solution might be use the force of government to mandate their use by offering a 100% government rebate on their purchase, (Thereby billing all taxpayers), and tax regular flush toilets so severely, that no one could afford them. Then the market would be doing what you want it to do.


>"If you don't like free markets, then you don't like individuals having the liberty to act to the detriment of others."

Tell me if this is correct. You are a successful widget manufacture, and I decide to start making widgets because I can see that it's a very lucrative business, and the market is big enough for more than 1 widget company. I am so successful that I manage to drive you out of business. Is that what you mean by "the liberty to act to the detriment of others"?

4/23/2010 8:31 AM

 
At 4/23/2010 7:31 PM, Anonymous Anonymous said...

Is that what you mean by "the liberty to act to the detriment of others"?

No.

Fair competition is one thing, but there is no incentive for business to prevent or not engage in unfair competition, so some kind of external control is required

You are free to compete with me in the trucking business, but youare not free to compete with me and not carry insurance against damage to others.

 
At 4/23/2010 7:34 PM, Anonymous Anonymous said...

We could, of course, not require insurance of truckers. Anyone else who wanted to be anywhere near a truck could buy insurance to protect themselves.

I suspect that would be a lot more expensive, as a system, and to individuals, but at least the truckers would be able top operate with complete liberty.

 
At 4/23/2010 7:46 PM, Anonymous Anonymous said...

Very few are sold, because almost no one Likes them, therefore the market isn't doing what you think it should do.


It's just that many people have a vision of how they think things should be, only the market isn't doing that.


The argument is many vs few. One responsibility of government is to prevent the minority from being victimized by the majority: the "market" if you will.

The opposite situationis very seldom a problem, as you point out. Not many people want composting toilets so we don't have them.

Sometimes it is a problem when a few people have outsize influence over the market, preventing it from discovering a fair (and lowest) price.

 
At 4/23/2010 7:49 PM, Anonymous Anonymous said...

Educate yourself...

Thanks. Several of those books are already in my library.

In my book, educating one's self conists of more than reading someone else's books.

The "market" is a great and powerful thing, but it isn;t the only thing.

 
At 4/23/2010 7:53 PM, Anonymous Anonymous said...

I am neither angry, nor an Obama supporter.

I am equal opportunity when it comes to my disdain for idiots with an agenda of drivel.

 
At 4/23/2010 7:56 PM, Anonymous Anonymous said...

Not being young enough or smart enough to reduce complex thoughts to acronyms, perhaps you would be kind enough to translate roflmao into English. Spanish, German, or Italian, would do as well.

 
At 4/23/2010 8:01 PM, Anonymous Anonymous said...

The regulators put the super banks together. Now they don't want to admit their mistakes.

It strikes me that allowing the superbanks and the investment banks to assemble themselves through lack of regulation is not the same as putting them together themselves.

I didn't hear too many people complaining about super banks while they were making handsome contributions to their retirement plans.

 
At 4/23/2010 8:08 PM, Anonymous Anonymous said...

Markets have failed before and the markets recover.


Really?

More likely markets fail and then they get regulated.

Because they pissed a lot of people off.

George Washington complained bitterly because suppliers were cheating him on the quality of buttons for uniforms.

Government responded by making stricter requirements. 250 years later we have the FAR and $700 toilet seats: $10 for the toilet seat and $690 to prove that you were not cheating on the specs.

There are two sides to this nonsense.

 
At 4/23/2010 8:15 PM, Anonymous Anonymous said...

Your solution might be use the force of government to mandate their use by offering a 100% government rebate on their purchase, (Thereby billing all taxpayers), and tax regular flush toilets so severely, that no one could afford them. Then the market would be doing what you want it to do.


something like this already happened with the forced use of low flush toilets, which resulted in a black market of toilets from Canada. Someone forgot to tell regulators that the slope in sewer lines assumed a certain volume of water behind the object in question.

But, faced with the problem at hand toilet manufacturors succeeded in overcoming the regs. The new low volume toilets flush much better than the old ones.

Still we didn't come up with the same solution as the French. toilets there have two buttons: number one and number two.

Beats the heck out of the sign in the family summer camp: "If it's brown, flush, if it is yellow, don't."

 
At 4/24/2010 12:44 AM, Blogger Ron H. said...

Anon @ 7:56 pm

>"...perhaps you would be kind enough to translate roflmao into English."

This Slang Dictonary may help. ROFLMAO stands for Rolling On Floor Laughing My Ass Off.

 
At 4/25/2010 9:50 AM, Blogger juandos said...

anon @ 4/23/2010 7:49 PM says: "Several of those books are already in my library"...

Call me skeptical but I don't believe you...

"The "market" is a great and powerful thing, but it isn;t the only thing"...

According to whom? What would be the alternative?

 

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