defending the right to innovate
Monopoly corrupts. Absolute monopoly corrupts absolutely.
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Binyamin Appelbaum and David Cho return to the problem of fixing America's credit system and of reforming the broken complex of supervisory authorities link here. The context is the reappointment of Ben Benanke to chair the FED and the push for regulatory reform which redefines the role of the FED, given the running failure of the regulators to protect consumers and the banking system from fraud or excess that produced the bubble and brought the economy down. The story has details that you probably haven't heard before and pins a fair amount of blame on Bernanke. In my mind, it raises a serious doubt about reappointing him in the absence of a prior major reassignment of regulatory duties, removing a number of them from the central role of the FED. The FED's primary duty remains using interest rates to control inflation and foster full employment. To argue as some do that the FED is ill-suited to preventing or popping bubbles doesn't persuade me that it shouldn't be done. The more deep seated issue is ending regulatory capture by Wall Street and that won't happen until we find a better way to finance politics.
I agree that Bernanke shouldn't be reappointed, and I would go further than this by not replacing him with anyone. In fact, I'd abolish the Fed and institute free banking (real free banking, not the phony kind the U.S. had during part of the antebellum era).
I think the Fed is no more competent to use interest rates (or anything else) to control inflation or maintain full employment, than Soviet Gosplanners were to put the market clearing number of refrigerators or other consumer goods on the store shelves in the USSR, and goods of the same (and ever improving) quality, and at the same costs! The problem is much the same in both cases--the impossibility of planners having all the disparate bits of knowledge available to buyers and sellers in a market economy, and then using these bits of knowledge to replicate "the results of human action but not of human design," as Hayek put it. George Selgin dscusses the Fed's problems in chap. 7, "The Dilemma of Central Banking," of his book The Theory of Free Banking.
The Fed can't prevent bubbles; indeed, it is their primary cause. The Fed can't reliably pop them either, for the same reason that Soviet planners can't reliably know how many refrigerators to produce. Asking the Fed to do these is like putting the proverbial fox on guard of the chicken coop. Free banking solves the problem for the most part. Selgin, Schuler, Dowd, White and other historians of free (and central) banking have written extensively about free banking's superior historical record in terms of economic stability, booms, busts, and financial panics.
Comrade Bernanke and his crew are unbelievably arrogant in thinking they can solve these sorts of problems, which should be left to the free market.
[Comment at 12/21/2009 05:23 PM by Bill Stepp]
Most Recent Comments
Killing people with patents I'm not really commenting the post, but rather asking if this blog is going to make a comeback
at 01/09/2018 03:46 AM by Anonymous
The right to rub smooth using a hardened steel tool with ridges Finally got around to looking at the comments, sorry for delay... Replying to Stephan: I'm sorry
at 05/08/2015 08:35 AM by Dan Dobkin
Let's See: Pallas, Pan, Patents, Persephone, Perses, Poseidon, Prometheus... Seems like a kinda bizarre proposal to me. We just need to abolish the patent system, not replace
at 04/10/2015 10:44 AM by Stephan Kinsella
The right to rub smooth using a hardened steel tool with ridges I'm a bit confused by this--even if "hired to invent" went away, that would just change the default
at 04/10/2015 10:34 AM by Stephan Kinsella
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at 11/17/2014 04:48 AM by David K. Levine
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at 10/29/2014 10:49 AM by Alexander Baker
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WKRP In Cincinnati - Requiem For A Masterpiece Hopefully some very good news. Shout! Factory is releasing the entire series of WKRP in Cincinnati,
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at 04/07/2014 04:47 AM by Dan McCracken
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Music without copyright Hundreds of businessmen are looking for premium quality article distribution services that can be
at 11/28/2013 05:03 PM by Stephanie Smith
at 11/28/2013 09:23 AM by Anonymous
at 11/28/2013 09:22 AM by Anonymous
Patent Lawyers Who Don't Toe the Line Should Be Punished! Moreover "the single most destructive force to innovation is patents". We'd like to unite with you
at 11/24/2013 10:48 AM by SpaceCorp Technologies
at 11/20/2013 03:18 PM by Anonymous
Does the decline in total factor productivity explain the drop in innovation? So, if our patent system was "broken," TFP of durable goods should have dropped. Conversely, since
at 11/02/2013 08:09 PM by Anonymous
Does the decline in total factor productivity explain the drop in innovation? I wondered about TFP, because I had heard that TFP was increasing. Apparently, it depends on who
at 11/02/2013 08:08 PM by Anonymous