Thursday, October 20, 2011

Laissez Faire's Flaws

There is a serious flaw in the notion that competition causes lower prices, because supply and demand (modified by the notion of all the market will bear) wreaks havoc on pricing. Also, there are problems incurred when lower prices lead to increased consumption of scarce resources (see: water, electricity, etc…).

Then there's human nature!

Adam Smith was onto something in his other tome: The Theory of Moral Sentiments. The idea was that human nature brought individuals into conflict with self-interest driven economics; simplistically known as enlightened or unenlightened self-interest.

Free trade can be subjugated by an individual with no moral self-restraint and no respect for external restraints. Laissez faire boosters, once in government office, consistently try to drop regulatory efforts; essentially turning the playground over to the cheats and bullies.

There is a constant struggle twixt regulators and regulated that tries to inflict or mitigate pain to the consumer caught in the middle. Basic regulation is essential to functioning markets, because a few malevolent individuals can cause pain, stress and serious damage (see: 1986 – the S&L debacle; 2001 - the dot-bomb; 2007 – the Great Recession) to the economy.

"Owning" the Economic Mess

Republicans keep asking, “When will the Obama administration own the economic mess inherited from the W years?”


When my son was a toddler his natural curiosity drove him to make messes while investigating all the new and interesting things around him. My wife and I picked up the messes and, when needed, followed with appropriate punishment. We owned what and where the mess was made, but didn’t ‘own’ the messes.

The Republicans are essentially saying, “he hasn’t picked our mess yet, so he shouldn’t get more time; another term in office.” Part of the problem is that the children are constantly pestering the adults trying to clean-up, while complaining that they’re not being allowed back into the play area.

Until the Republicans are mature enough to recognize when they’re making a mess, stop making it and then clean-up after themselves, they should not be given control of the government they consider their playground.

China Mirrors the Former Soviet Union

China mirrors the former USSR

1. Politburo is a few men that tell everyone in the country what to do, then take credit for all successes and assign someone else blame for failures.

2. Research and development is most frequently borrowed from others.

3. The currency isn't traded on the open market; value is arbitrarily set by the Politburo.

4. A citizen can openly criticize the government of any where, except China.

5. History is what the Politburo says it is.

6. The economy is the exclusive property of the Politburo.

The only difference is that China has taken on a veneer of capitalism.