Monday, September 22, 2008

Clarifying the Debate with Wilson

I need to apologize to David Sloan Wilson, because I now agree with his complaint that I misread his blog post for the Huffington Post. Coming as it did in the context of the federal bailout proposal, Wilson's argument that more federal regulation of markets was required to resolve the present financial crisis seemed to me to endorse the bailout, which I have argued against. But now I can see that this is not a necessary implication of his post.

The critical point is in the last sentence of Wilson's post: "We can argue at length about smart vs. dumb regulation, but the concept of no regulation should be forever laid to rest." I agree with Wilson that the "concept of no regulation" is silly. I am not sure, however, that anyone other than a few anarchists has ever argued for "no regulation." At the very least, free markets require legally defined property rights, the enforcement of contracts, and punishment of force and fraud. And as I have indicated, Adam Smith's WEALTH OF NATIONS ends with a long section on the institutional structures that government must provide to promote commercial activity.

But then the really interesting question is "smart vs. dumb regulation." Wilson has nothing to say about that. But it seems to me--for the reasons I have indicated--that the bailout would be not just dumb but disastrous.

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