The Free Market: A False Idol After All?

By PETER S. GOODMAN
Published: December 30, 2007

FOR more than a quarter-century, the dominant idea guiding economic policy in the United States and much of the globe has been that the market is unfailingly wise. So wise that the proper role for government is to steer clear and not mess with the gusher of wealth that will flow, trickling down to the every level of society, if only the market is left to do its magic.

That notion has carried the day as industries have been unshackled from regulation, and as taxes have been rolled back, along with the oversight powers of government. Faith in markets has held sway as insurance companies have fended off calls for more government-financed health care, and as banks have engineered webs of finance that have turned houses from mere abodes into assets traded like dot-com stocks.

But lately, a striking unease with market forces has entered the conversation. The world confronts problems of staggering complexity and consequence, from a shortage of credit following the mortgage meltdown, to the threat of global warming. Regulation — nasty talk in some quarters, synonymous with pointy-headed bureaucrats choking the market — is suddenly being demanded from unexpected places.

The Bush administration and the Federal Reserve have in recent weeks put aside laissez-faire rhetoric to wade into real estate, wielding new rules and deals they say are necessary to protect Americans from predatory bankers — the same bankers who, only a year ago, were being lauded for creativity. Were the market left to its own devices, millions could lose their homes, the administration now says.

more > http://www.nytimes.com/2007/12/30/weekinreview/30goodman.html?_r=1&oref=slogin

I also posted some info recently that goes hand in hand with regulation of the banking industry and has ties to the pillaging of America. Unfortunately, it sank like a rock. C'est la poop. For anyone interested: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=2567055&mesg_id=2567055

..is very intellectually dishonest. The choice is between government agenda set by only 535 people making mistakes that won't self-correct and the rest of us making mistakes that will self-correct, or at the very least the 3 million people who control a disproportionate amount of wealth. 3 million is a step towards democratization, not a step away. The illusion of socialism is that a government of self interested bureaucrats will do a better job than a nation of self interested people. I care more about myself than someone I've never met cares about me. Most people would be able to say that, except for the most self destructive individuals.

If some idea or con job fails in the economy, it will fail as soon as it stops working, with government regulations the legislative process must be done to reform the regulations. It causes an even bigger bubble than the herd mentality does. Many of these bankers would not even be in business, were it not for government intervention in the economy. It's really not as much about the government, as it is any type of planned economy, whether instituted by a fascist organization through economic means or through government intervention. I have a feeling my words will fall on deaf ears, or rather blind eyes.

Government should not bail out the bankers, for they have done something wrong and the economy will correct it, they will lose their assets and they will be unable to participate in the economy, for their reputations will be permanently tarnished by this disaster, as it should be. If someone fucks up real bad, and they were trying to fuck over other people, they deserve what's coming to them. These investors all knew that there were risks involved in their investments, bankers knew the unwinnable risks of lending to people with subprime credit.

If this correction is not allowed to proceed, the bubble will only grow larger. Hard Times At Wallstreet High. They need to get over themselves, and realize that this is the innately beneficial self-regulation of a free market, or at least a partly free market.

a bailout. My intent is to frame the malaise that has issued forth as a symptom of greed and ill-conceived financial strategies/investment vehicles that spawned as a result of deregulation. As in the savings and loan debacle, a few became "fabulously" wealthy and the rest are left to ponder the wisdom of their past decisions. The market is a dangerous place for those swimming with foggy goggles, and the sharks are keen for the scent of blood.

Consider that the free market as an aggregate does in fact 'get it right' every time. That does not preclude intervention in the form of rational regulation prior to a good or service entering the market. Equally applied consumer protection laws and regulations (equal in application) that put minimum standards on what may enter that cherrished market will not diminish that same free market's effectiveness or efficiency.

the first time....maybe people were too busy arguing about who's candidate is the most trustworthy of all the flip flopping politicos?
Giving you an R too. Shouldn't be missed.

I am throwing this out there because my understanding of this credit crisis is minimal at best. Just searching for better clarity on how trillions of dollars of CDO's and SIV's are really not worth a crap... and what the eventual impact will be on us -- the consumer.

consumers, have been played for a long time now....I'm pretty sure it started with old raygun.

corporations.

And I very much agree with the above poster who said failed businesses should not be bailed out - especially not at this magnitude. I worked very briefly for the Resolution Trust Corporation in the early 90's, just before they shut down and finished "cleaning up" the S&L debacle. Very little money was recovered from those who embezzled, there were no trials (as far as I am aware) and the American people got no value for their money.

Perhaps the failure of a CitiGroup or Bank of America is what CorpAmerica needs to start acting responsibly. It's no skin off my ass if they go down and it would set an example that won't soon be forgotten. The concepts of justice and fair play aren't getting nearly enough press these days.

And the government ends up protecting the criminals

and the criminal rich escape with impunity.

:grr:

MARKET FAILURE is a term used by economists to describe the condition where the allocation of goods and services by a market is not efficient. Market failure can be viewed as a scenario in which individuals' pursuit of self-interest leads to bad results for society as a whole.<1> The first known use of the term by economists was in 1958,<2> but the concept has been traced back to the Victorian philosopher Henry Sidgwick.<3> The belief that markets can fail is a common mainstream justification for government intervention in free markets.<4> Economists, especially microeconomists, use many different models and theorems to analyze the causes of market failure, and possible means to correct such a failure when it occurs.<5> Such analysis plays an important role in many types of public policy decisions and studies. However, not all economists believe that market failures occur, or that they are compelling arguments for government intervention, due to government failure.<6>
http://en.wikipedia.org/wiki/Market_failure

As far as far arugments, we can begin with, poor people are poor because they are lazy, not smart, educated, have low IQs, etc...

IMO, the most shameful and dishonest lie is the public debate about health care. An honest inspection reveals that it is simply a sanitized form of genocide wrapped in a capitalistic ‘discussion’. The government is spending $15B a month for an ‘undeclared war’, while thousands are dying a month for treatable illnesses.

You do not have to explain this lack of human interest to the poor or poorly educated who may not understand macro/micro economics, they are very capable of piercing the clouds created to raise false arguments.

In Sept., the SEC nor the Feds could explain to the public the impact of the subprime meltdown. Later, we learn that the SEC do not have software to read the markets data to analyze the market's impact.

Instead of actions to make the public whole from the organized looting in the mortgage industry, we are going to give them a brochure to 'educate' them about home loans.

In regards to the second post about citigroup, I would imagine that the mob of litigants described in the article below will be glad to know who got the money.

It's just code for "Investor's Rights."

K&R

Mammon. As an agnostic I'd have no problem with the Democratic candidate wielding the term liberally, esp if we're running against a Southern Baptist minister. The 21st century version of "It's the economy, stupid!" should prolly be "The free market is Mammon, stupid!"

Just as copyrights and patents are a kind of bribe to get artists and inventors to make their works available, so profit was originally a bribe to get people to invest their money in high-risk enterprises, like building canals or railroads. The profit motive can still be useful in that way for encouraging startups and entrepreneurial situations -- but anywhere else, not so much.

It doesn't do much for old, established brands, like laundry detergent or toothpaste. At best, it encourages the addition of a few more bells and whistles. At worst, it means manufacturers jacking up prices to wring more profit out of the same old product.

It seriously distorts the development of new products -- so that, for example, the diseases of rich old white men get far more attention than the diseases of poor minorities.

It leads to behavior that would be considered immoral by any normal standard -- exploiting workers and the environment, dropping sick people from health coverage, breaking laws as long as the cost of settling is less than the profit to be made.

And even when it comes to encouraging invention and entrepreneurialism, you can find story after story about the founders of new companies bringing in money-men to help with expansion and marketing and then being forced out by those same money-men because they aren't sufficiently profit-minded. Or going public and seeing their firms sold out to big corporations by profit-seeking stockholders.

In a theoretical, systems-theory sort of way, the *idea* of a self-regulating free market is far more attractive than the idea of government mandates. But on a practical level, using profit as the sole mechanism for that self-regulation has been a disaster.

Perhaps if it were possible to reconstruct the free market using feedback mechanisms closer to those in nature -- where groups thrive only if everyone is healthy and well-fed, the offspring grow up in nurturing conditions, and the environment is not subjected to unsustainable demands -- we might have something worth endorsing. But at the moment, we're not even close to that sort of ideal situation.

:kick: