New York Times columnist Paul Krugman and others who claim that the Enron scandal will be a watershed for regulation miss the point. Government regulation already dominates our economic landscape. Tossing on a few more rules might do damage, but it will not prevent fraud from occurring in the future.
While assorted financial journalists, market pundits, policy wonks, Fed governors and even mainstream macroeconomists have been thrown into a panic by the slight whiff of price deflation they detected in the last few months in the U.S. economy, they have almost completely ignored the wrenching confiscatory deflation that is now going on in Argentina.
During the early 1800s, the U.S. paper money in circulation was issued by banks, most of which were privately owned and state-chartered. There were, in fact, hundreds of banks across the country that issued their own--often distinctive--paper money. From these banking practices arose the infamous $3 bill.
CIA director George Tenet told the Senate Intelligence Committee that there is every reason to expect more terror attacks in the coming months, because al-Qaida has not been destroyed. He is probably right, and he might have gone on to note that government has failed in its promise to protect Americans against terrorism, and that would-be terrorists of the world are now more motivated than ever before. This should raise some fundamental questions about the whole rationale of the war and U.S. foreign policy.
Democracies have had their share of wartime civil libertarian outrages, despite the guarantees of constitutions and bills of rights. In Britain, at the outset of World War I, the passage of the Defense of the Realm Act--an act that destroyed the liberties of many Englishmen--led to such an environment of repression that even the English monarchy changed its German name to Windsor.
Was Röpke a classical liberal who stood in the tradition of Jean Baptiste Say, Lord Acton, and Ludwig von Mises? Zmirak says categorically that he was not, for Röpke rejected laissez-faire capitalism, radical individualism, and the night-watchman theory of the state (”deputized to defend property rights and national borders”).
Professional victimologists see bad investors as victims of biased research. But they ignore the fact that smart investors have plenty of chances to avoid bad advice. What the losers from the Enron collapse got taken in by was the Fed-induced Bubble, not someone else’s bad research. Those who would impose additional bureaucratic restrictions on Wall Street only penalize everyone to protect the gullible.
Far from an example of a market failure, Enron’s saga shows that firms that invest too much in politics can easily become complacent in the face of changing market conditions. In economics, this is called government failure, and we can blame the growing requirement for firms to divert resources to grease palms in Washington as a necessary business investment for its occurrence.
