There’s been a rush to blame free markets, even laissez faire libertarianism, for the current financial crisis. As I — and Russ — have said before, there are lots of other potential culprits around. Hastily concluding that the culprit is the free market might be emotionally gratifying for many folks, but it’s an intellectually corrupt conclusion.
Research perhaps will eventually reveal that free markets and deregulation are the main culprits. Or research perhaps will eventually clear these suspects of most or all such charges. Time will tell.
In the meantime, anyone wishing to play the childish game of accusing free markets of the financial turmoil should expect something like the following from opponents playing by the same rules:
We now have proof that government is a god that failed — a poverty-inducing and economically destructive institution that humankind should finally learn must be kept on an extraordinarily tight leash, lest it wreak havoc in the lives and on the fortunes of innocent parties.
The facts are crystal clear. Since the March 24 promise by the Fed to guarantee $29 billion worth of mortgage securities held by Bear, Stearns, the Dow has fallen 34 percent (as of mid-day on October 28, 2008). Since the September 8th announcement by the U.S. Treasury Department that it will take over Fannie Mae and Freddie Mac, the Dow has shed 28 percent. Since the October 3 enactment of Uncle Sam’s massive bailout bill, the Dow is down 20 percent.
My priors tell me that all this government intervention is indeed playing a big role in Wall Street’s continuing woes. But at this point, that’s all I’ve really got: priors.
If, though, someone wishes to assert "No! The problem is caused by deregulation!" then I accuse that person of having only priors — priors no better or more trustworthy than my own. And if that person wants to get into a game of post hoc, ergo propter hoc ‘theorizing,’ then I see no reason why the particular post hoc argument stated in italics above is less compelling than the particular post hoc arguments paraded about now so confidently by the anti-market crowd.