Here’s a letter to the Wall Street Journal.
Your November 6th page features an interesting inconsistency. Jim Secreto writes that “private capital alone hasn’t secured our supply chains because markets have underpriced the risk for too long” (“Trump, the New Congress and the Solyndra Probe”). To remedy this alleged market failure, he – although acknowledging the dangers of political interference in markets – would have politicians override market assessments of risk and direct capital toward industries that they deem to be strategically important
In contrast, Jeff Yass explains that “it is arrogant to believe you know more than the market, and you’d be a fool to listen to a pundit who says he does” (“There’s No Such Thing as a Stock-Market Bubble”)
I’m with Mr. Yass. The fact that markets don’t eliminate particular risks is no evidence that they underprice those risks. And economic theory and history give us ample reason to doubt that politicians and bureaucrats can match – let alone surpass – the success of markets at assessing risks and allocating capital. The case for markets isn’t that they are always right. They aren’t. Instead, the case for markets is that they are more likely to be right than are politicians and bureaucrats.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
