Michael Smith comments over at EconTalk on a comment by one Mark K:
Mark K wrote:
These jokers on Wall Street, who according to Russ made ‘innovative’ products like credit default swaps, showed us unregulated free market capitalism in all its glory.
The notion that we have an “unregulated free market” is false.
If we had an unregulated free market, the organizations and individuals that made stupid investment decisions — those “jokers on Wall Street” — would now be bankrupt, to be replaced by more competent organizations and managers. Instead, under the current system, they are “bailed out” — at your expense — and allowed to continue operating.
If we had an unregulated free market, the investment rating agencies that rated securities containing subprime loans as “AAA” would be disgraced, bankrupt and out of business — no one on earth would deal with them any longer — they wouldn’t be able to pay people to use their services. Instead, under our current system, not only are all those rating services still in business, the S.E.C. requires that all issuers of investments use those rating agencies.
We don’t have an unregulated free market; we have an out-of-control government intent on looting us blind.
My only quibble is the use of the word “intent.” I see government malfeasance and error as a more emergent phenomenon rather than intentionally destructive. But other than that (and that is basically nothing), lots of wisdom here. Thank you, Michael.
The problem with the world today is that there are too many Mark Ks and too few Michael Smiths floating around. “Mark K” is not an isolated phenomenon – you can find him in every major and minor newspaper column, television studio and legislature – a man who doesn’t understand economics, and doesn’t bother to either; some of them even win the Economics Nobel.
I would like to ask the Mark Ks of the world one simple question – which part of “UNREGULATED FREE MARKET” do you not understand?
And yes – thank you, Michael.
Definitions from the COED:
Unregulated = not controlled or supervised by regulations and laws.
Free Market = an economic system in which prices are determined by unrestricted competition between privately owned businesses.
* “I failed to understand such a simple matter.” Song from Gardish