Sunday, January 10, 2010

Fairy tales

The "Chicago School" of economics has always stuck in my craw. It basically believes in the fairy tale that markets always will do the right thing - if left unfettered by the nasty government - and Adam Smith's invisible hand will protect us all. This despite the fact that recent history is strewn with panics, a big-time Depression, and numerous recessions. Bubbles, from tulips in Holland to mortgages in the U.S., appear with clock-like regularity. Yet Republicans and their simplistic laissez-faire, no-regulation ideas prefer ideology over the obvious. (Just like it's OK to have a whole bunch of federal agencies working to protect agriculture, say, but God forbid the same type of system might protect the health of you and me and our kids.)

Anyway, spleen vented for the moment, I'm glad to report that, according to a recent New Yorker article, one of the honchos of the Chicago School, Richard A. Posner, has joined a Keynesian (say Kane-sian) revival that suggests that well, duh, the government should not only handle checks on inflation, but also check the greed and stupidity of bankers and other financial whizzes by means of a few sensible regulations.

The last couple of years obviously have shown that the notion that huge banks and other corporations are perfectly rational is delusional. Institutions screw up just as much as the rest of us. Trouble is, the screw-ups of large banks and other big financial organizations matter rather more. We need more Posners, and fewer Limbaughs, ad nauseam, in our fragile economy. And fewer believers in laissez-faire fairy tales.

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