No stock market commentary for this week
We do need better regulation. But what does that mean? Once we understand the nature of markets and bureaucracies, there’s only one reasonable conclusion: Better regulation means regulation by market forces. Free markets are not unregulated markets. Instead, they are severely regulated by competition and the threat of losses and bankruptcy. Anything government does to weaken those forces simultaneously weakens the otherwise unforgiving discipline imposed on business firms (and their counterparties)—to the detriment of workers and consumers. Public well-being suffers.Admittedly, this is a hard sell. Explaining how markets work when they are free of the government’s easy money, favoritism, implicit guarantees, and other perverse incentives takes time and the listener’s concentration. Denouncing markets, railing against greed (which of course never taints politicians), and calling for more government power makes for good sound bites. In the Internet and remote-controlled-cable-TV era, patience is a scarce commodity. So advocates of liberty have barriers to overcome.Of course government interference with free exchange (misleadingly called “regulation”) is portrayed as necessary for the public good. A key to understanding why it is not is grasping the inability of bureaucrats to know what they would need to know to do the job they promise to do. Markets–particularly financial markets–are too complex for government officials (or anyone else) to manage. No matter how much power they are given, they will not be able to see the future, spot “excessive risk,” or anticipate how things might go wrong. But they can be counted on unwittingly to interfere with innovation that would yield public benefits. Any move toward central direction courts disaster. Decentralization and the discipline of competition are our only hope for economic security.
This is from Sheldon Richman at the Freeman on how political regulation leads to the “money power” (cronyism)
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