2011-06-19

I Have to Stop Doing This

Once again, what started as a brief comment on an interesting thought from Arnold Kling turned into a blog posting in its own right. Therefore, I am re-posting it here.
In my book, the real problem is that people on "Main Street" are constantly inundated by people saying that the entire recession was caused by people on "Wall Street." 
The idea that these kinds of things can be avoided by correcting the behavior of people in a single sector of the economy is childish bordering on pathetic. 
I mean, it would be great if we could make recessions illegal and if Santa Claus were real and God helped me out a little when I go golfing. But this is wishful thinking.  
Regulations are really good at making things "stable." The problem with "stable" is that it is incompatible with making things "improve dramatically." Markets are really good at making things "improve dramatically." 
The sooner people realize that there will always be a trade-off between profit and volatility, the better for all of us. The market approach doesn't suggest that things will magically be better for everyone; it simply suggests that profit is inherently risky, but that if we let the chips fall where they may, then we end up with much better conditions in the long run.
UPDATE: Hilariously, cross-posting your comments on your own private blogs is against the rules at EconLog. I very nearly had my posting privileges revoked. I have to stop doing this, indeed...

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