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Milton J. Madison - An American Refugee Now Living in China, Where Liberty is Ascending

Federalism, Free Markets and the Liberty To Let One's Mind Wander. I Am Very Worried About the Fate of Liberty in the USA, Where Government is Taking people's Lives ____________________________________________________________________________________________ "Extremism in defense of liberty is no vice. Tolerance in the face of tyranny is no virtue." -Barry Goldwater-

Monday, September 05, 2011

Does intervention in markets by government improve or worsen ultimate outcomes?

The lesson is that it is crucial to consider whether government regulations and laws are likely to improve rather than worsen the performance of private markets. In an article "Competition and Democracy" published more than 50 years ago, I said "monopoly and other imperfections are at least as important, and perhaps substantially more so, in the political sector as in the marketplace. . . . Does the existence of market imperfections justify government intervention? The answer would be no, if the imperfections in government behavior were greater than those in the market."

The widespread demand after the financial crisis for radical modifications to capitalism typically paid little attention to whether in fact proposed government substitutes would do better, rather than worse, than markets.
From here. I argue that despite what appears to be 'low hanging fruit' and easy central government intervention that has a positive long-term impact on outcomes, even these should not be taken. Governments very rarely have the ability to choose just the positive outcome paths, are unable to effectively determine beforehand what the outcomes will be and are ultimately both politically and from a survival instinct standpoint driven to continue their interventions. The slippery slope of government intervention leads me to think that once one action is taken, no matter how positive the potential outcomes, that this is the camel's nose under the tent that will lead to further less productive or unproductive intervention.

Despite there being a desire for governments to intervene by many groups, it is also questionable within the context of the Constitution that, in particular, the Federal government has any authority to do anything in many of the instances that it does intervene.

Lets take the recent gigantic piece of legislation forced upon the American people commonly known as Obamacare. One of the critical elements of this monstrosity is that it requires that people buy themselves health insurance. Forget that this is designed to force healthy young people to pay for others in a craven cost shifting effort, but the requirement for citizens to buy a good or service just by virtue that they exist is the 'camel's nose' under the tent for government to require citizens to buy anything with this precedent as justification.

Creeping socialism has been the norm in the United States since the 1930's. Early 'necessary' interventions have bred many many more that may not have been the smartest or most effective paths. However, they are justified since these interventions are in the portfolio of government by virtue of the first 'necessary' intervention.

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