I was just reading an excerpt from Joseph Stiglitz’s The Roaring Nineties. In it, Stiglitz makes his usual argument that market failures are everywhere and that wise government policy can and has stepped in to the rescue. An illustration he uses is that during the 1930s when Fannie Mae was organized by the government, it was done to correct a huge market failure in the mortgage market, he says:
Fannie Mae was created in 1938 to provide mortgages to average Americans, because private mortgage markets were not doing their job. Fannie Mae has resulted both in lower mortgage rates and higher home ownership — which has broader social consequences. Homeowners are more likely to take better care of their houses and also to be more active in the community in which they live.
Four points:
Joe got his wish in the housing market. And Joe and his ilk are getting their wish in health care, pensions, retirement, the post office and education too. Unfortunately, the rest of us are the suckers holding the bag.
Market failures were everywhere? Give me a break! And the reason for our escape from oblivion were the interventions of wise men?
True, the Federal Home Loan Bank did not fail during the depression, and for that reason I had few qualms about recommending to risk-averse clients in 1986 that they buy such securities, for reliable income. Part of my thinking and my line to them was that they had not failed, even back in the depression.
My argument with Joe centers around his assertion that market failures imply the need for government to control, well, everything.
This is the same argument that the Pharoah, or the Emperor Caesar, or the feudal king, or King George, or the Kaiser, or Hitler made. We peons are too stupid to make wise choices about how to slice up the pie. Nietzche gave the secular kings the excuse not to have do bother with divine right to impose their will.
I agree that the big problem today is with defined-benefit pensions. I have heard little about the effect from the effort to undermine our wealth and to redrisbute it has had on the value of those same pension systems, which were flush in the days of Ronald Reagan.
Suppose our government supported growth. Would not those pension systems not enjoy the fruit?
In the movie 2001, the apes argue over the waterhole. We watch them kill each other over it. The progressives tell us how bad it is, that we kill each other, and we should share the waterhole.
I say, go out and find a new waterhole and plant something.