I wrote this article as a response to some comments about the government response during the Crisis of 2008.
Life is not only black and white, there is a lot of gray in between. If we don’t agree with the free markets theory, it doesn’t mean that we want communism or total govt intervention! Far from it! Those philosophies are both extreme, at different ends of the spectrum, both are utopia and will never work in real life!
Both philosophies have a common flaw, they believe and trust human nature to be perfect! See below an over-simplified argument:
- Communism is at one end of the spectrum, far left, with total govt intervention in the economy, believing that we all can be equal!! But this is against our human nature, and destroys any motivation for hard work and creativity. – To simplify and summarize, communism denies the imperfection of human nature.
- Pure capitalism/"laissez faire" is at the other end of the spectrum, far right, with no govt intervention in the economy, believing that the markets will work on their own. In theory it sounds good, but in practice those markets end up being controlled by few individuals/institutions, and they become greedy and selfish, acting for their own interest only (because that's how they are rewarded/incentivized), and in the process creating externalities that have a great negative impact on the society as a whole. – this philosophy simply denies the human nature.
As you can see, I don’t believe in totally free markets, supply side economics etc (my professors at Chicago won’t like this)…that doesn’t mean that I want crazy regulations either…but I am sure that there is room for middle ground here…I don’t want over-regulations, I want common sense regulations, call them rules (it looks like the word “regulations” has a negative connotation), I want rules so there will be no incentives for banks to go wild and leverage 40 to 1 in assets that no-one understands…I want pragmatism and common sense, and not ideology!
And what is very interesting is that all the big investors are agreeing with these arguments, see Buffet, Soros, the guy from Pimco, etc, etc
My take on the role of government in different political systems:
Communism: The only player
Socialism: Major player
Pure Capitalism: Spectator
Ideal: Referee (Ensure that rules are respected by every single player, and don't get involved in the economy, with few exceptions)
And what is very interesting is that all the big investors are agreeing with these arguments, see Buffet, Soros, the guy from Pimco, etc, etc
My take on the role of government in different political systems:
Communism: The only player
Socialism: Major player
Pure Capitalism: Spectator
Ideal: Referee (Ensure that rules are respected by every single player, and don't get involved in the economy, with few exceptions)
