Bryan Caplan On Doing 'Something' About The Modern Great Depression

My job at the MRC has me reading even more than I used to read in the past. I went from reading a lot of stuff to reading a heck of a lot of stuff. One of the new things I've come across and enjoyed reading is the Reason blog, Hit & Run. There's just something about their slogan--Free Minds and Free Markets--that I find incredibly appealing. I don't know what it is.

Let me think. For which of my biases does Reason serve as confirmation bias? Hmmm. They're certainly no great friend to conservatives--least of all social conservatives. Must be my knee-jerk fiscal libertarianism. Yup. That's got to be it.

At least I'm honest.

Recently, Reason convened an online meeting of the minds (via email) and asked a number of economics-types three questions:

1. How bad is the current market situation?
2. How bad are the current proposed bailout plans?
3. What's the one thing we should be doing that we're not?

Among the respondents was Bryan Caplan, associate professor of economics at George Mason University. Forthwith, his responses:

1. How bad is the current market situation?
To be honest, I'm not too sure. While we're blaming banks and investors for their "herd behavior," we should remember that politicians and the media often run with the herd, too. When the dust settles, I suspect we'll realize that conditions weren't as bad as people assumed—or at least they weren't until we tried to fix them.

2. How bad are the current proposed bailout plans?
Again, to be honest, I'm not too sure. The plans are creating a bad precedent—perhaps the worst precedent since the New Deal. But it's worth remembering that a "$700 billion bailout" doesn't literally mean that the government gives $700 billion to investors. Instead, it means that the government can buy $700 billion worth of assets; the transfer to investors is only the difference between $700 billion and the fair market value of the assets.

I should add, though, that I don't think the people spearheading the bailout have a clear idea about what they're doing either. They remind me of the old saying: "Something must be done. This is something. Therefore this must be done." I'm a former student of Chairman Ben Bernanke and his behavior during this mess has been a big disappointment.

3. What's the one thing we should be doing that we're not?
Waiting a couple of years. Unemployment is only 6.1 percent; by standard measures, we're still not in a recession. Even if you have no libertarian sympathies, shouldn't you at least give familiar, low-impact responses (especially standard monetary policy) before you throw caution to the wind?

(emphasis added)

Let me repeat his last question for the government-intervention inclined: shouldn't you at least give familiar, low-impact responses (especially standard monetary policy) before you throw caution to the wind?

Read the rest of the responses from the rest of the respondents.

It's informative and for all of you who disagree with me vehemently, one man's confirmation bias is another man's whatever the opposite of confirmation bias is.


If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.