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The current crisis reminded us that it's still a bad idea for the government to distort prices on a so massive scale (through fake interest rates), because trut
by corentin 18y ago
The current crisis reminded us that it's still a bad idea for the government to distort prices on a so massive scale (through fake interest rates), because truth has to eventually emerge through the price system anyway, and corrections have to happen.
Failure can happen in the free market (that's how progress is made, through trial and error). But when governments decide that failure should never happen ("too big to fail", etc.) they make the free market itself fail, which is much bigger problem.
- anewaccountname 18y agoFinancial companies take calculated risks for themselves to make profits. But they don't have to take into account the effect of any losses they may cause in the economy as a whole (or more precisely, they only have to consider their share of them). How do you propose to get out of this collective action problem without some form of government regulation?
- corentin 18y agoThere is this moral hazard precisely because the government ends up bailing out the irresponsible (following the "too big to fail" mantra). Instead, just let the financial companies (in fact, all companies, including GM) take full responsibility for what they do.