From Professor Richard Epstein, a libertarian prof at the University of Chicago. (I’ve met Prof. Epstein a couple of times, but if he remembers me it will be only because I helped host a debate in which a Marxist prof at our law school called him the Beelzebub….)
Anyway, I love his breakdown:
Greed is a constant of human nature. Financial meltdowns are not a constant of economic political life. It takes, therefore, an understanding of the overall incentive structure to explain why selfish economic behavior produces great progress on some occasions and financial ruination on others.
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One bad regulatory turn leads to another, and lo, the bailouts come thick and fast. At the nth hour, wise heads often rightly conclude that some desperate measure has to be taken to prevent the financial disintegration brought on by, well, prior government regulation. Those bailouts, of course, come from the hides of taxpayers who borrowed prudently. The entire system subsidizes destructive behavior, which means that we will get more destructive behavior in the future. We might as well sell flood insurance at bargain prices in Galveston, Texas, and New Orleans.
The moral of this story is that bad regulation metastasizes. Short term heroics are no substitute for dispassionate deregulation, which won’t happen so long as our political leaders are fixated on greed.
Very illuminating. Via Instapundit.
