How You Know It's Bullshit

President Bush sez: "And I readily concede that I chucked aside some of my free market principles when I was told by chief economic advisers that the situation we were facing could be worse than the Great Depression,”

I'm not sure why this isn't clear by now, but free markets are an economic model, a necessarily simplified conceptual environment through which we can develop economic theories. As with all models, their usefulness as tools to anticipate market behavior is at best approximate, and certainly limited, and begin to totally break down as they approach these limits. It's the yin to the controlled economy yang, and about as useful. Its usefulness begins and ends as nothing more than a rhetorical platform for economic politics, and should never be considered a literal goal of economic policy. They do not, they can not, they will not exist in the real world. The idea that a free market can naturally exist outside of the abstract is a ridiculous assumption by stupid people.

Without regulating markets, they WILL shift to the extreme over time into an unsustainable rate of growth (positive or negative). The trick, and the genius of economic policy, is to find the ever-shifting sweet spot of the amount of regulation necessary to prevent unsustainable growth without choking it off, and until we develop better models, we will never know what that amount will be until we come out the other side. To cling to theory despite the facts is about as irrational as you can get.

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The reason I think the American economy has had so many bubbles over the past two decades is because the collapse of the Soviet Union has taught that controlled economies do not work in the real world, which I think has shifted the Overton window towards deregulation. I do not hope it necessary that we have to collapse yet again into depression to prove the counterpoint.