At base we are seeing a huge failure of expertise. We see this at home at the Federal Reserve and the Treasury Department and we see it abroad at the International Monetary Fund and the EU. What is so curious is that the policy experts are not called out for their bungling. Rather they are rewarded with more power. For instance, as I write, Congress passes federal legislation that will give greater power to the same regulators who failed to foresee and in many cases even created the current financial housing crisis in the United States. Surely this is one of the great curiosities of modern times. We moderns seem to prefer to turn our affairs over to experts, even ones who create asset bubbles, recessions and unemployment, than leave them to markets.
The trouble with markets is that they work beyond our control. Lobbying doesn’t help. There’s no one to demonstrate against. Human nature must find something comforting about having regulators to whom one can always appeal for special consideration. Even if the regulators make inflation and recession and high unemployment, at bottom they are well-intentioned. In sum, intentions seem to matter more than results. Future historians of the West (I hope not the decline of the West) will puzzle over the preference. Certainly I do.