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Economics is a strange "science"

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January 08, 2009 – Comments (6)

 

I have been thinking about how strange the field of economics is this morning.  It is absolutely amazing how in economics two highly intelligent individuals can have completely different opinions on a subject like free markets.  Here's an example, this year's Nobel prize winner Paul Krugman (who is about the most liberal person I have ever read) is all for a massive government stimulus package.  He believes that the United States is essentially doomed without massive government stimulus.

At the other end of the spectrum we have the famous economist Thomas Sowell.  I have read a number of his books and I have a ton of respect for him.  I was listening to an interview with him on Bloomberg radio while driving home from work yesterday.  He has almost the completely opposite view of government stimulus that Krugman has.  In short, his argument against govermnet stimulus is that every dollar the government spends in attempting to stimulate the economy is a dollar that will have to eventually take from the private sector in higher taxes.  Not only is the government just spending money itself that would have eventually been spent in the private sector anyhow, but the huge government bureaucracy spends funds much less efficiently than public or private companies  would have.

I always have believed that when it comes to the government, less is more.  Over the years, I have found that the larger a company (which is what the government essentially is if one thinks about it( gets, the less efficiently it operates.  My free market views have shifted somewhat over the past year.  Right now part of the problem with the markets is a crisis of confidence.  People have been spooked by all of the scandals that have happened recently in Madoff and Satyam and even in the recent past in Enron, etc...  I am one of the least trusting people that  I know and even I have been taken back by the unbelievable greed that is out there and how regulators have failed to catch these criminals before it was too late.

The government needs to restore confidence in the markets.  This means that it should fire just about everyone at the SEC and put in competent people who will effectively enforce the rules that we already have on the books.

I also strongly believe that the government should make an example in cases like Madoff and Satyam and absolutely throw the book at them.  Draconian measures are necessary at this point.  Satyam's auditors, PriceWaterhouseCoopers, should be absolutely hammered.  They should have to pay the largest fine ever recorded for being so incompetent.  Madoff should have every penny that he has ever earned, including all of the stuff that he's hurriedly shipping off to relatives when he is mind-boggling still allowed to roam free without his assets frozen, taken away from him and be locked up in a prison...not a fluffy white collar one either...for life. 

Add to this the clawback of bonuses of executives who run companies into the ground and the elimination of their golden parachutes.  The government needs to severely punish criminals (or at the very least incompetent people who never earned their money) like these so that this sort of incident is never repeated.

Effective regulation that will restore confidence in the markets, combined with a reduction
in wasteful government spending and low tax rates are the long-term solution to what ails this country right now.

Well, that's what was on my mind this morning.  I've got to run to work.  See you around.

Deej 

6 Comments – Post Your Own

#1) On January 08, 2009 at 8:45 AM, DaretothREdux (45.50) wrote:

So you are the other Libertarian on this site? I thought there was only "me and four others" in words of the great Tucker Carlson. Good thoughts. Unfortunately, we live in an entitlement culture that believes they are "owed" everything, and they are under the delusion that it can last forever.

And don't even get me started on the Fed...

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#2) On January 08, 2009 at 8:51 AM, JakilaTheHun (99.93) wrote:

Economics is indeed a strange field.  I think I agree with you, too, on the regulation bit.  In fact, I seem to be a bit of an economic odd-ball in that I think on the front-end, you need strong regulations to establish order and acceptable rules for the game and on the back-end, the government needs to be hands-off and let the market do its work --- punish the reckless, reward the prudent. 

Maybe that's what I find so annoying about this crisis.  We should've had the proper regulations put in place from the get-go that would've prevented this, but we were laissez-faire about it. Now, that the market is punishing reckless behavior, we suddenly become interventionist.  It seems like the worst of both worlds to me.   

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#3) On January 08, 2009 at 9:06 AM, TMFKnightly (< 20) wrote:

If you're into Sowell, I highly recommend The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy.

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#4) On January 08, 2009 at 9:33 AM, Gemini846 (54.83) wrote:

There are a lot of libertarians here Dare. We range the gamet from hardcore reactionaries to the mild Ron Paul republicans.

Most of us agree in the abolition of the Fed, restoration of monitary policy to the powers of congress.

Some of us believe in abolishing social security (phased out in my case).

I think many of us believe that the purpose of the federal government is to provide for interstate and international commerce by maintaining for a national defense and providing strong infustructure.

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#5) On January 08, 2009 at 10:15 AM, DaretothREdux (45.50) wrote:

Gemini846,

I know Gemini. I was being a little sarcastic. If you read any of my blogs you will see that I do that from time to time.

For Liberty,

Dare

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#6) On January 08, 2009 at 10:28 AM, kdakota630 (29.85) wrote:

I love Thomas Sowell.

Regarding your comment on throwing the book at these scam artists, I believe EverydayInvestor had a blog yesterday about a pump'n'dumper getting sentenced to 51 months in jail.

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