Tibor R. Machan
Whenever I encounter the sentiment expressed in the following, I get
pretty pessimistic about how today’s commentators tend to think: "Goodman
[the author of a free market bashing book, Past Due (Henry Holt, 2009)], a
fair-minded reporter and a clear writer, demonstrates how both Bernake and
Summers, along with most other major economists and Well Street plutocrats
of the past two decades, became entranced by the Greenspan-Chicago School
notion that financial institutions can be trusted to police one another in
the absence of rigorous government oversight…." (NYTimes Book Review,
10/11/09, p. 17) Just consider that while the reviewer, the†Business Week
managing editor Paul M. Barrett, shares Goodman’s severe dislike of free
markets and those who consider it, or whatever bits and piece of it exist,
a promising instrument for dealing with the country’s economy, he has
complete faith in "rigorous government oversight."
How is this possible for any person who has even the slightest claim to
being rational? The market, after all, is a place where economic decisions
are made by agents who normally pay a heavy price for making mistakes.
†Maybe not immediately but in time–the Enron fiasco is a case in point,
as is the recent meltdown within what amounts to, in fact, a highly
mixed–rather than a free market–American economy. No one in his right
mind believes that market agents are all omniscient and/or supremely
decent. There are rogues in all areas of life.
However it takes a very foolish individual to notice mistakes in the
market–market failures, so called–while being oblivious to errors made
by bureaucrats–political failures, that is. The so called rigorous
government oversight is treated by such foolish folks as somehow
guaranteed, as if people who move to Washington and other centers of
regulatory power cannot err and all their oversight will be pure and wise.
Not only is such an outlook naive and ignorant of one of the best ideas to
emerge from economics, namely, public choice theory. †I is simply
self-contradictory. †People in free markets are so prone to corruption
while people in government are not! †How is this possible when both groups
are people and in centers of power the incentives to guard against error
are virtually nil?
Of course, the claim that Bernake, Summers, and Wall Street were all
"entranced by the Greenspan-Chicago School notion" is balderdash to begin
with. †Geenspan’s early admiration for Ayn Rand’s political economic
philosophy has had very little if any impact on his work at the Fed. †Te
very idea of the Fed is anathema to Rand’s viewpoint and in the end also
of the views of the late Milton Friedman who wrote Capitalism and Freedom
(1961). †Ad the self-interest Greenspan referred to in October 2008 as the
culprit has nothing at all to do with Rand’s classical notion that what
people ought to do in their lives is promote their rational self-interest,
to pursue their human happiness in their lives.
So the premise of the idea Goodman advances and Barrett supports is flawed
to the core. But even more importantly, where is the common sense of these
people as they express such total faith in rigorous government oversight
when, in fact, the government has had the power of such oversight since
the Fed was founded back in 1913? †A the Harvard economists Niall Ferguson
pointed out in, of all places, The New York Times Magazine, back in May
2009, "The biggest blunder of all had nothing to do with deregulation…."†
Someone needs to explain to Goodman and Barrett that when people have
political power at their disposal, they cannot be counted upon to apply it
fairly, sensibly, consistently, and competently to the task of managing
other people, including those in the economy. What they can be counted
upon to do is to push for an agenda of their own. This is for two reasons.
First, they have no clue what their job description as "public servants"
means since the public is, of course, a huge variety of human beings with
extremely diverse interests; and most of these folks have goals of their
own they are free to pursue with impunity while in office. That is what
having sovereign immunity means, not having to answer personally to
objections from the citizenry! †S that rigorous government oversight is
but magical wishful thinking, nothing else.