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Oct 08, 2008

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James

Of course, the flipside of this is how eerily close it is to the "no true Scotsman" fallacy: a free-market economist pronounces that the free market will never fail like this and, when presented with such a failure, responds that "it wasn't a *true* free market".

Graham Glass

Hi James,

What do you mean "when presented with such a failure"?

As I pointed out, the mortgage industry is not a free market and therefore the current crisis is not an example of a free market failure.

Indeed, there's plenty of evidence that it's directly related to the results of government interference with interest rates, mortgage guarantees and the federally-mandated expansion of Fannie Mae and Freddy Mac.

It's doubtful that the crisis would have occurred in a free market, especially with some government regulation (which as I mentioned is not incompatible with a free market).

Cheers,
Graham

Christopher St. John

Differentiating between laws meant to improve transparency (mark-to-market) and laws meant as social engineering (federally encouraged sub-prime lending) seems useful. So far the Democrats have primarily blamed the former, the Republicans the latter, but there was pretty clearly a failure of both kinds. I'm curious to see what the balance of blame turns out to be.

One interesting thing about the above division: most anti-pollution laws are written so that they're of the second type.

Graham Glass

I'm not familiar with anti-pollution laws, but it seems like they should basically fine the polluter for the amount it costs to restore the environment.

Cheers,
Graham

hughw

What James said. Libertarians have that one answer for everything. Nevermind the empirical evidence -- it's noisy -- our theory is correct!


Graham Glass

Hi Hugh,

There is plenty of evidence that free markets work. I'm pointing out that - contrary to popular belief - many markets these days are not free at all. I, and most Libertarians that I know, are more than happy to discuss the topic intelligently.

Cheers,
Graham

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