You Can’t Take the ‘Tics’ Out of Politics

by Don Boudreaux on April 18, 2009

in Reality Is Not Optional, Regulation

Here’s a letter that I sent last week to the New York Times:

Councilwoman Melinda Katz’s letter today reveals an ironic pitfall of government bailouts of private firms – namely, the inevitable demands by demagoguing politicians that recipient firms be hamstrung in their ability to respond to market forces.

Ms. Katz argues that credit-card companies that received bailout funds should be prevented from raising their rates.  While I have no sympathy for any firm that accepted taxpayer funds, the fact is that a firm must be able to change its prices in response to changing market conditions if it is to survive in the market.

By turning private firms into quasi-political entities, bailouts undermine their own ostensible purpose of making these firms strong and nimble competitors.

Donald J. Boudreaux


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