A New Hope

24 September 2008 at 4:59 pm 3 comments

| Peter Klein |

Finally, encouraging signs of resistance to the Paulson-Bernanke Corporate Welfare Act of 2008. Naturally, the commentators at our favorite sites at our favorite sites listed in the “Links” section below and to the right have been been against the bailouts from the beginning, but now mainstream scholars and analysts are getting into the act. I don’t mean complaints from members of Congress or The Candidates that the recent and proposed bailouts don’t go far enough (e.g., homeowners should get bailed out too) or that the Paulson-Bernanke proposal doesn’t include enough new regulations. Rather, I’m talking about sensible analysis by prominent, mainstream economists and other experts explaining that a market economy in which profits are private while losses are socialized is, well, not a market economy at all but a socialist or corporate-fascist state. See, for example, statements by Luigi Zingales, John Cochrane, and Richard Epstein, among others. Maybe the Empire can be defeated after all. (Apologies to Seth MacFarlane for modding his image.)

Update: Casey Mulligan is also quite good.

Entry filed under: - Klein -, Bailout / Financial Crisis, Classical Liberalism, Public Policy / Political Economy. Tags: , .

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3 Comments Add your own

  • 1. gpeters  |  25 September 2008 at 10:02 am

    I have my own thoughts on this (which essentually mirror those posted in the related links). However, I am trying to get my head around the alternative arguments (scapegoats) that are being presented for the causes and solutions to the current woes by those in the pollitical debate. It would appear that the common theme expressed, by those who see the finanical institutions as exclusively culpable, is that the current problems are caused by “lack of regulation.” Does anyone have a succinct explanation for what “regulation” is argued to be lacking? (Regulation against compensation, regulation against risky loans, regulation against weak balance sheets, regulation against losses…..?)

  • 2. Rafe Champion  |  26 September 2008 at 7:22 am

    What about the regulation, directed at Fannie and Freddie, sponsored by McCain and others in 2005 that we are told was blocked by Democrat senators in committee?

    BTW I am pitching for markets vs reflexive regulation on a centre left blog in Australia.

    http://clubtroppo.com.au/2008/09/22/the-death-of-the-free-market/

    http://clubtroppo.com.au/2008/09/26/wither-neoliberalism/

    http://clubtroppo.com.au/2008/09/25/ludwig-von-mises/

  • 3. Peter Klein  |  29 September 2008 at 12:29 pm

    Gary, I don’t think anyone has been very specific about this. Exactly which regulators were supposedly asleep at which wheels? Sometimes people mention Gramm-Leach-Bliley or the Riegle-Neal Act, which loosened some restrictions on interstate branching and the combination of commercial and investment banking, but only in the context of a general denunciation of “deregulation” (which these weren’t). Executive compensation is of course denounced as well, but without (to my knowledge) the identification of any specific mechanism by which a lack of regulation on executive pay packages contributed to any specific problems. It’s all very vague and general, more dramatic and literary than analytical and scientific.

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