A Response to My Readers

The following is a response to a posting by “Jazz” in the blog entry immediately before this one. It is an important enough topic for it to be it’s own post.

For those that would care to continue, this short posting is a simple response to a criticism of my beliefs as a Libertarian.

The original comment by “I Hate You, Jazz,” as posted in my blog titled “A Libertarian’s Perspective on the Mortgage Giant Bailout” is shown here:

Ah yes, the pathetic attempt of a libertarian to try to explain how this wasn’t the fault of an unregulated system. If there had been real oversight, these companies would not have been allowed to take the insane amount of risk they did buying up subprime and predatory mortgages.

The libertarian solution is that “the market” is always right. It weeds out these predatory guys by… what? Destroying the entire financial system, along with half the world economy and generations of insurance? Small price to pay for an idealized version of reality?

I actually give some credit to this author for making the huge libertarian leap into the real world by admitting that some sort of assistance may have been necessary, but he is at odds with his free-market ideologue libertarian companions, like Ron Paul.

The libertarian attitude in a nutshell: If only there had been absolutely no rules for anybody, nobody would have done the wrong thing! ALL HAIL THE MARKET!!!

Thank you, Jazz, for your post. It made me smile. My compliments on doing a fine job of setting up a straw man argument against Libertarianism. Now, for the sake of hashing out decisions in this real world we live in, let’s handle the conversation in a balanced, real-world manner.

First, I must politely correct your understanding that Libertarians believe the market is always right. This is equivalent to saying that Democrats believe the market is always wrong. It would be silly to say, wouldn’t it? Further, you note that Libertarians are attempting to achieve an idealized version of reality. Really, it’s all I can do to stifle a laugh. It is a fundamental understanding of all Libertarians that there is no idealized version of reality in which human beings are involved. We are such realists, in fact, that our hope is simply to minimize the control of one set of human beings over another set. Our belief is that through the optimization of individual liberties we have the greatest chance of minimizing the chances for greater evil.

Here is an important example of this trade-off that we suffer through:

Maintaining a heavily armed civilian population (like that of the United States) is essential to the cause of minimizing evil. We (Libertarians) understand that there is an unfortunate trade-off in civilian murders that comes with gun ownership. However, the 15,000 – 20,000 civilian murder cases we have per year in our country of 300,000,000 residents is far less evil than the mega-atrocities committed by  totalitarian governments throughout history. The actions of despots and reigning ethnic groups have cost the lives of hundreds of thousands to millions human beings that weren’t able to defend themselves against their own governments. Just some examples: Russia (Stalin), Darfur, Iraq, Germany (Hitler), Rwanda, Ottoman Empire, etc.

I also want to quickly touch on the idea of market regulations. Again, I understand that some regulations in life are crucial. “Thou shalt not kill” is a pretty good one. So is the requirement to stopping at red stop lights. My mother likes to impose some regulations of her own.

Within the Financial Sector, it may surprise you to find that regulations have actually been a chief root for the global economic collapse we are now experiencing. One particular example is the requirement for institutions to mark-to-market various assets. If you’d like to dig deeper, this is a result of Sarbanes-Oxley. Originally intended to protect investors and consumers, this act actually forced banks to over-deflate the value of marginal assets over the past year, essentially causing their balance sheets to collapse. Another example of failed regulatory system would be the lack of “crystal ball” installations at the FDIC, the NCUA, and the OTS. These regulatory institutions have immense power over banks and credit unions. They audit everything about our various affairs right down to the individual loan and account level. However, like the rest of the world, these 100% autonomous, immensely powerful regulatory bodies completely failed to stymie the collapse of the financial industry.

I am not trying to say that regulation shouldn’t exist. What I AM saying is that, just as it would be silly to say that the market is always right, it would be equally silly to say that some God-like level of codes and regulations would actually prevent humans from being humans.

I admire the rhetoric of Sir Winston Churchill when he noted: “It has been said that democracy is the worst form of government except all the others that have been tried.” Likewise I say that free-market economics is the worst foundation of economy except all those other foundations that have been tried.

I would love to write a book about the subject, but alas I am a numbers geek, and this is just a blog.

Thank you for your time,

Brandon