LIBERTARIANplace

Why you really don't want more regulation.

You really don't!

Or maybe you do want to move back in with Mom and Dad. 

From the perspective of a free market absolutist, as most Libertarians are, all the clamour for more regulation as a knee jerk response to the recent financial melt-down is humorous-- at least it would be if it wasn't so serious.

My response to the "Regulate!" cheerleaders is this: It's simple. Have you grown up or do you still live with your parents?

Remember when you were a teenager and you couldn't wait to get out of the house so you could make your own decisions, earn your own money, spend your own money as you saw fit, basically live and manage your own life for a change? Did that work both ways or did it work the way the U.S. economy is working? You were glad to have the independence when it came to earning, keeping, and spending your money, but when you blew the money, were you equally happy to have your liberty? Did you live with the consequences, or did you go crawling back to Mom and Dad and ask for a bailout? And if you did, did they oblige? Perhaps that is why we have this problem. 

You see, as much as we think we want the Federal Government (or state or local governments for that matter) to be ever vigilant at the bottom of every cliff to catch us when we jump off, or fall, or are pushed... we really don't-- unless we really enjoyed living with Mom and Dad and being subject to their rules, once we were old enough to live on our own..

If the government acts like Mom and Dad, beware. You could be grounded. The government that does everything for you, can take everything from you. And isn't that what the demagogues are saying now? The government needs to clean up this mess but as a result, they need to clamp down more. No more late dates. There will be a curfew. And give us the car keys. You'll  have to earn it back.

Is that what we want? And how does that work? The Congress of pork and earmarks, of defecit spending out the wazoo, and the President who makes Lyndon Johnson's expansion of government and deficits look like an exercise in restraint by comparison, suddenly acting like the disgusted parents, shaking their heads and wagging their fingers at the rest of us for blowing the budget? What makes us think they can help us? The only regulation that will truly get us out of this jam is regulation of government. Government needs to cut up their own credit cards. They need to give the kids the keys. And we think they can help us?      

Some of the key financial players in the country may have acted like children but the solution is not to treat them-- and the rest of us-- like children but to demand that they grow up. Sorry son, we've already turned your room into a quilting studio, you'll have to find your own place to stay. Sorry daughter, you blew your month's allowance in one night. Oh well, you'll have to figure something out on your own. No more advances. In other words, tough love. We could use a little more of that right now.

But won't that bring down the entire financial system? Make us all poor? Turn the whole nation into a slum (over time)?

I don't know. What I do know is it doesn't go any good to squeeze a water balloon. If you squeeze a water balloon what happens? You have complete control of the area you squeeze, but all the water just goes to another part of the balloon and changes shape. To say that the economy is a water balloon is a little simplistic, I admit, but not really. Any attempt to regulate a free market is just squeezing a water balloon. If you squeeze here, you just change the shape of your problem, you move the bad money somewhere else in the system, get rid of one bulge and create another. The best way to handle a water balloon is not to squeeze it. Let it find its own shape and density and distribution of density. Let it float, let it fly, let it crash and burst, but let it go. 

Unless we are going to scrap the free market all together and adopt a Soviet style planned economy there is no possibility that regulation will work. Regulation creates at least one loophole for every loophole it fills. It creates one bulge for every bulge it squeezes. Every time we intervene in the markets, we create a whole new set of unintended consequences that usually exacerbate the problems we were initially trying to solve.

So what's the answer? Growing up. We're all adults now. The economy, the markets, are free living beings. They correct themselves, find their own efficiencies, if we leave them alone. Every attempt to tweak, adjust, control, limit, just creates ripple effect after ripple effect. Regulation stifles creativity among those who would save us by finding a new way to generate wealth, but doesn't stop those who are looking for unscrupulous ways to find and exploit the new bulge in the water balloon. 

I'm not saying there isn't a place for scrutinizing the markets and the players. That should be done, very closely and carefully, by private initiative. There's the next big business idea for someone who can be the first to try it. The next Bill Gates could be the person who creates a company to provide private, independent ratings of financial companies that actually expose the vulnerabilities. For instance, if there were a private company that put a stamp (like the Good Housekeeping Seal of Approval) on every legitimate financial deal, then the world would have known, for example, that AIG did not have anywhere near the capital reserves required to "insure" the mortgage debt they claimed to insure. So grow up. Ask questions. Don't accept what someome tells you without getting independent verification. Don't trust the government to protect you from being the next victim. The government is just as likely to be in on the fix as to be the fixer. Do your own due dilligence. Hire someone who is capable to do it for you if you don't feel capable yourself. Buyer beware! 

You may think this isn't much of a solution, but do you really want to move back in with Mom and Dad?

   -jwh-