Wednesday, October 8, 2008

Misunderstanding the Free Market

I have heard a number of people claiming that the recent financial collapse shows that "capitalism doesn't work" and that it "proves we need more regulation". I couldn't disagree more. There was already loads of regulation in place. Economist Walter Williams on the subject (Hat tip to Carpe Diem):

The financial collapse of Fannie Mae and Freddie Mac is not a failure of the free market because lending institutions in a free market would not have taken on the high-risk loans. They were forced to by the heavy hand of government. The solution is not a taxpayer-financed bailout. The solution is to let them fail and allow the people who invested in them, as well as the people who purchased homes they couldn't afford, suffer the losses. Of course that takes a level of political courage that is in short supply.

Edit:
Here's more great stuff from Coyote Blog.

2 comments:

Unknown said...

Not only a political courage that is in short supply, but I would say a political courage that people are not ready for. We as a nation are too content with the two parties and their continuous supply of terrible candidates for president. Until we give a politician along the lines of Paul a legitimate shot at President, we will continue to suffer. We need to listen to the politicians who make sense and actually know what they're talking about. Maybe after four years of our country spinning around the inside of a toilet, we will be ready to listen to Paul and the others.

Ryan D. Anderson said...

Things tend to work themselves out somehow. If, as Jon says, we need to spend some time spinning around the inside of the toilet, I guess it's the price we pay for having life too comfortably for too long.