where can i find these things in the real world please?

Small business rarely has influence and access to the political class, and is often hurt disproportionately by regulation simply because they don’t often have the legal or accounting staff to deal with burdensome regulation. New regulations rarely benefit them, and most often significantly hurt small business.

Big Business, on the other hand, which often poses as free market oriented when convenient, often favors regulation because it drives the smaller competition out of business. Large corporations are bureaucratic by nature, so their very nature allows them to deal with government bureaucracy. Additionally Big Business, particularly Wall Street, can much more easily corrupt and /or influence politicians because they have a tremendous amount of wealth and power.

The California energy market “deregulation” and the latest games on Wall Street were pushed by the Big Business Crony Capitalists posing as free marketeers. These “market reforms” were often welcomed by politicians on the left as well particularly when huge buckets of campaign cash were in the offing.

The crisis is not over, and there will be chances to move there, if we keep pluggin. Thank you, James, for your strident debunkery!!!

Conservatives, libertarians, and business people often embrace policies labeled as “free market” or something similar without critical scrutiny, even where the policies turn out to be harmful to them.

The left frequently fails to make the distinction between the theoretical free market and the policies labeled as “free market” by their promoters and/or beneficiaries. This often turns into a trap as the government intervention buried in the fine print can be denounced after the policies fail to perform as originally advertised.

There was widespread opposition to TARP I across the political spectrum — hardly surprising since it benefits very few people — but this has been diverted and diffused by confusing the issue with constant invocations of the private sector versus government debate and aggressive blaming of the government.

Sincerely,

John

I can’t help but feel that you’re being incredibly partisan on this.

Conservative/libertarian/business may be too quick to jump all over the government, but what about those on the left who jump all over “free market ideology” for problems that blatantly stem from private interests chanelling postitive state action on their behalf? For an extreme example, Naomi Klein’s recent thesis attributes such things as the Iraq War and Haliburton’s successful rent-seeking to Milton Friedman’s neoclassical economic theory.

In the end, you’re right that the market/government dicotomy is less than helpful. Efficient markets require well designed policies to complement them. The right needs to recognize this. But the left equally needs to recognize that government policies and regulation can be just as prone to failure as unregulated markets.

There is no commandment “thou shalt put twenty percent down.” The conventional mortgage is just that: conventional. In an area such as 2004 San Diego, where nearly 80% of the population cannot afford a median house, all a conventional mortgage would have achieved is foreclosure with a larger equity contribution from the customer. The only answer that would have avoided inversion was not buying.

Unless, of course, you believe that exotics contributed to the high prices, in which case I would think you would take my point that people were borrowing exotic to pay prices they could not have otherwise…

I also think that houses that sit empty for long periods of time represent an inefficient allocation of capital, in addition to the economic and social costs to the people being foreclosed upon.

Conservative, libertarian, and business sources try very hard, usually successfully, to frame the debate on the latest crisis in terms of the putative private sector or free market versus the government. This keeps the debate away from specific policies or regulations that benefit (or harm) certain companies.
It also enables them to seize the moral high ground by claiming that they are supporting a neutral “hands off” government policy that does not favor any company, rather than policies that benefit certain companies or groups of companies.

Progressives, liberals, and leftists almost always take the bait and frame the debate in terms of the private sector/free market versus the government. For a number of reasons, they are setting themselves up to lose. Because the putative deregulation often in fact involves government intervention in the putative free market, the conservative, libertarian, and business sources can simply point with shock and dismay at the government intervention buried in the fine print of the policies that they previously supported as “free market”, thus proving once again that it is all the government’s fault.

On the other side of the aisle, conservatives, libertarians, and business people who are actually harmed by the policies will actually embrace them because the issue is framed in terms of the “private sector” versus the “government”. For example, many businesses in California embraced the electricity market “deregulation” in the belief that it would lead to lower electricity rates through greater competition. Aggressively blaming the government and environmentalists diverted the ire of the business community with ease even though they lost a lot of money.

Dean Baker at CEPR is an example of a progressive economist who is usually very careful in his language about the private sector versus government. He will for example refer to the putative deregulation as “selective deregulation”.

In the current financial crisis, most conservatives, libertarians, and businesses are not benefiting from the actual policies. They are losing money, laying off people, getting laid off, and so forth. Blaming the government and framing the issue as private sector versus the government shifts attention and blame away from specific policies and regulations that are benefiting only a small group of companies and people.

Sincerely,

John

Conservative, libertarian, and business sources began to aggressively blame the government as far back as the original “sub-prime” crisis in the summer of 2007. The attacks went into overdrive in September/October of 2008 coincident with TARP I.

This is not unusual. In other crises, like the California electricity market deregulation fiasco of 2000, as soon as things go bad, conservative, libertarian, and business sources will switch (within days) from extolling how the latest putative deregulation has gotten the government out of the way, ushering in a free market utopia of prosperity (also known as a bubble), to blaming the crisis on massive government intervention in the market!

I use the term “putative deregulation” deliberately since the putative deregulation often turns out on close examination to be a change in policy or regulations that benefits certain companies, not textbook deregulation.

Conservative, libertarian, and business sources do not wait. They attack immediately and aggressively churning out op-eds, video appearances, scholarly papers, books, and so forth in volume blaming the latest fiasco on the government.

Sincerely,

John

While it is an overstatement to say the government was the sole element responsible for the crisis, to say it was just the market/private sector is just as blind.

Fannie Mae and Freddie Mac (didn’t they hold several trillion dollars worth of mortgages?), incredibly loose monetary policy, liquidity from foreign central banks reserves (that may have otherwise been invested outside of the US if it weren’t for official policy), etc. surely had an effect as well.

The culprit is somewhere in between, but I’ve had enough of the view that ridicules anyone suggesting positive government policy may have been at least partly responsible.