Over at the Wall Street Journal, John Stossel pays tribute to one of my favorite economic principles: spontaneous order. Spontaneous order is at the heart of a market system, and yet, increasingly, politicians and the media ignore this principle in favor of big government “solutions.” For example:
Barack Obama says today’s economic problems are “a stark reminder of the failures of . . . an economic philosophy that sees any regulation at all as unwise and unnecessary.”
But governments have regulated and subsidized the housing and financial industries for years. Fannie Mae and Freddie Mac were created to interfere in those markets. Had actual private companies invested in those mortgages, they would have been subject to market checks. But they were not. The results were predictable.
Now we will get a new onslaught of regulation. This intervention will fail and stifle innovation because, as Adam Smith and Friedrich Hayek taught, markets are too complex to manipulate beneficially. Life works best when decisions are bottom up. But pundits have no clue about spontaneous order. Instead, they talk about who will “run America.”
This faith in political solutions thrives in the face of repeated government failure. Big farm bills have raised the price of food and squeezed out small farms. Campaign finance reform made it harder to challenge incumbents. FEMA couldn’t deliver water to hurricane-ravaged New Orleans as well as Wal-Mart did. Medicare has a $35 trillion unfunded liability over the next 75 years.