Liberty Maven

Many people, especially those on the left, such as Barack Obama and his disciples, are insisting that it was deregulation (or lack of regulation) that contributed heavily to the current economic woes. The main problem with that theory is that there has been no relevant deregulation in the last 25 years. The failing banking industry has been heavily regulated, in fact.  John Stossel says that deregulation wasn’t the problem, and reregulation isn’t the solution:

“It’s deregulation’s fault!”

That’s the conventional explanation for the economic mess.

Barack Obama said, “This is a final verdict on the failed economic policies of the last eight years … that essentially said that we should strip away regulations, consumer protections, let the market run wild, and prosperity would rain down on all of us.”

Is deregulation is the culprit? It can’t be. There was no relevant deregulation in the last 25 years. Meanwhile, highly regulated institutions eagerly bought risky government-guaranteed mortgages, stimulating excessive housing construction and an unsustainable price bubble.

Deregulation wasn’t the problem, and reregulation isn’t the solution.

It’s intuitive to assume that regulation prevents problems, but it’s rarely true. First, how would regulators know what to do? Leaving aside the bias they might have and the brutal fact that regulation is physical force, how can a small group of people understand the workings of a market sufficiently to regulate sensibly? Markets, especially financial markets, are far more complicated than any mind can grasp. They consist of many millions of participants making countless decisions on the basis of unarticulated know-how and intuition. To attempt to regulate such activity requires knowledge no one can possess.

Head on over to TownHall.com to read the rest.