Archive for October 15th, 2009

Let the free market take care of all of our problems – except for our houses

| October 15, 2009 | 12 Replies
Let the free market take care of all of our problems – except for our houses

A couple days ago, I saw this video of Sen. Lindsey Graham, a conservative senator from South Carolina, being pummeled by members of the “tea party.” The problem is that he is apparently not conservative enough.

You can hear the first questioner recommending that we basically dismantle the entire federal government to allow the “free market” to solve all our problems. It’s amazing to hear how prevalent this viewpoint is. I often hear it from conservative acquaintances, that government is in the way that the free market will take care of us much like God will take care of us, if only we would stop trying to help ourselves and just let good things happen. There is much evidence that this “free market fundamentalism” is pie in the sky, and it is also a dangerous way to think. And see this analysis and here.

The idea of free market fundamentalists, that good things will simply happen in a systematic way is based upon a huge mistaken assumption that all people are selfish and rational and that this selfish rationality will drive the system in a coherent way. This guiding principle of widespread rational selfishness is often referred to as homo economicus. Also consider that regulation, formal or otherwise, is prevalent throughout nature.

This week, I had two experiences which served as powerful evidence to me that people are not necessarily rational or selfish. Both of these situations involve houses, which are typically the single largest investment made by most people.
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