November 03, 2008 - By True Patriot and
Congressman
Ron
Paul
Since the bailout bill passed, I have been frequently disturbed
to hear “experts” wrongly blaming the free market
for our recent economic problems and calling for more regulation.
In fact, further regulation can only make things worse.
It is important to understand that regulators are not omniscient.
It is not feasible for them to anticipate every possible thing
that could go wrong with whatever industry or activity they
are regulating. They are making their best guesses when formulating
rules. It is often difficult for those being regulated to understand
the many complex rules they are expected to follow. Very wealthy
corporations hire attorneys who may discover a myriad of loopholes
to exploit and render the spirit of the regulations null and
void. For this reason, heavy regulation favors big business
against those small businesses who cannot afford high-priced
attorneys.
The other problem is the trust that people blindly put in
regulations, and the moral hazard this creates. Too many people
trust government regulators so completely that they abdicate
their own common sense to these government bureaucrats. They
trust that if something violates no law, it must be safe. How
many scams have “It’s perfectly legal” as
a hypnotic selling point, luring in the gullible? Many people
did not understand the financial house of cards that are derivatives,
but since they were legal and promised a great return, people
invested. It is much the same in any area rife with government
involvement. Many feel that just because their children are
getting good grades at a government school, they are getting
a good education. After all, they are passing the government-mandated
litmus test. But, this does not guarantee educational excellence.
Neither is it always the case that a child who does NOT achieve
good marks in school is going to be unsuccessful in life. Is
your drinking water safe, just because the government says
it is? Is the internet going to magically become safer for
your children if the government approves regulations on it?
I would caution any parent against believing this would be
the case. Nothing should take the place of your own common
sense and due diligence.
These principles explain why the free market works so much
better than a centrally planned economy. With central planning,
everything shifts from one’s own judgment about safety,
wisdom and relative benefits of a behavior, to the discretion
of government bureaucrats. The question then becomes “what
can I get away with,” and there will always be advantages
for those who can afford lawyers to find the loopholes. The
result then is that bad behavior, that would quickly fail under
the free market, is propped up, protected and perpetuated,
and sometimes good behavior is actually discouraged.
Regulation can actually benefit big business and corporate
greed, while simultaneously killing small businesses that are
the backbone of our now faltering economy. This is why I get
so upset every time someone claims regulation can resolve the
crisis that we are in. Rather, it will only exacerbate it.
Read more Articles by Ron Paul at http://www.house.gov/paul/legis.shtml
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