The Impending Free-Market Vindication

Within short order, John Cochrane, Eugene Fama, Milton Friedman and others who understand and appreciate that the free market continues to get it right more often than central planners ever could, will find themselves vindicated by the course of history. In a sense, it is already happening; note the portion of the Bloomberg story that points out the Bush Administration’s decision to abandon the purchase of mortgage-backed securities, leaving it to the Fed to do that as a way to increase the role of monetary policy in combating the current financial crisis and recession (moral hazard is an issue here, to be sure, but the Fed’s activities nonetheless do represent an extension of monetary policy–on this general point, see Robert Lucas, via Greg Mankiw). And of course, the lessons of Vietnam–referenced in the story–remain with us; a society that places blind trust in The Best And The Brightest will find itself coming to grief over one significant policy issue or other. Are we actually to believe that the same political class that brought us the depredations of Rod Blagojevich (h/t) will now bring us financial salvation by seizing the controls of the commanding governmental heights and employing Keynesian statism to bring prosperity for all? The very proposition is comical.

“Deregulation” remains a scapegoat for the current crisis–the actuals facts notwithstanding (see here, here, here, here and here for evidence against the claim that deregulation was responsible for the economic downturn. And see this for a good reason to be scared of the creeping approach of economic statism). Perhaps we should propose that those who think the Federal Register makes for thin reading ought to do weight training exercises with copies of it. Either these people will get remarkably buff or they will pull muscles left and right; in either event, the argument that we are somehow regulation-deprived should suffer the brutal blow it deserves to suffer.