Monday, July 27, 2009

Amity Shlaes must read article on public choice theory

Read the whole thing. Here are a couple of excerpts:
Government reformers view themselves as morally superior, but that is an illusion. They are just like private-sector operators, who do things that are in their own interest, not society's, first. Those things include taking advantage of an economic crisis to aggregate power for themselves and their offices.

Five dramatic examples of PC in action in the U.S. spring to mind.

--The federal government exploits insurance company AIG ( AIG - news - people )'s crisis in order to regulate an area in which state law has traditionally held sway.

--The federal government exploits the auto industry crisis to get its nose into what has formerly been private-company territory: corporate management.

--The federal government exploits the mortgage and banking crisis, using it to capture the remaining private part of a sector in which it already has outposts: health care.

--The federal government exploits the Chrysler deal to reduce the credibility of commercially traded bonds--thus elevating the quality of its own bonds--by arbitrarily denying bondholders

--The federal government--wittingly or unwittingly--drives down the price of Citigroup ( C - news - people ) shares so it can pick up equity in a good bank on the cheap. But most PCers choose to look at this as mindless reflex, not considered intention, spurring the government's action.

The tragedy of such incursions is that once started they're hard to stop. But the first defense against them is to identify the government advance for what it is: a power grab.

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