1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/10626/did-small-government-cause-our-current-problems/

Did Small Government Cause Our Current Problems?

September 9, 2009 by

Those who continually blame insufficient regulation for our present plight offer little or no evidence. They rely instead on the implicit assumption that if only the regulations had been much stricter, the bankers and other business-sector malefactors never would have perpetrated their evil deeds. This faith in the regulators is touching, to be sure, but it is also extremely naïve. We now have — and long have had — miles of regulations on the books and legions of regulators at work in scores of government agencies. What specific power did they lack? And had they been given even greater powers, budgets, and staffs, what enchantment would have transformed these ostensible guardians into smart, dogged champions of the public interest, rather than the time-serving drones and co-conspirators with the regulated firms that they have always been? FULL ARTICLE


Barry Loberfeld September 9, 2009 at 8:15 am


Call it Mises’ Law: People of the most widely divergent views nonetheless always converge in condemning “free market” capitalism for whatever they believe wrong. Particularly relevant is its derivation, Loberfeld’s Law: In a mixed economy, it’s the market element that takes the blame. (See BAILOUT.) Statism is eternally innocent.

Christopher September 9, 2009 at 9:48 am

If anyone wants to email Mr. Cohan he can be reached at the following address: pcohan@babson.edu

Mattyoung September 9, 2009 at 10:50 am

You are right, and I now have to read your stuff.

Walt D. September 9, 2009 at 12:31 pm

Bernie Madoff used to be a regulator. Just think, with bigger government, we could have had hundreds or thousands or Bernie Madoffs regulating everything.
The problem is that the smart ones, like Bernie, will figure out just how corrupt the system is and run their own “Social Security Program for the Rich”. Alternatively, if you can figure out how a trader at Goldman Sachs can make $100 million a year, why would you settle for a low 6 figure income in your government job?

Walt D. September 9, 2009 at 1:35 pm

Robert wrote:

“We now have — and long have had — miles of regulations on the books and legions of regulators at work in scores of government agencies. What specific power did they lack?”

Intellectual prowess?
Logical reasoning?
A moral compass?

free liberty September 9, 2009 at 3:45 pm

This is a very good article.

Let H be the set of events that have happened.

Suppose B is an element of H. Or, ‘B e H’.

If ‘B e H’, then ‘A e H’ is a necessary but not sufficient condition for ‘A caused B’ to be true.

This is why social scientists who are trying to evaluate ideas of the form ‘A caused B’ need historical work, which can figure out to what extent ‘A e H’ is true.

Hopefully this example will illustrate to readers of this blog that a mathematics does, indeed, accurately express a point that Dr. Higgs was making in words. It might even add precision that would prevent a reader from getting it wrong, which often happens to me.

K Ackermann September 9, 2009 at 3:52 pm

So what is the solution?

As far as executive pay, there is clear evidence that the enormous bonuses place executive goals in conflict with shareholder goals.

All too often, board composition is not one of independent guidance and oversight, but of interlocking interests.

There has to be some analog to the Laffer curve with regards to executive pay. As a shareholder, I want a CEO who has incentive to grow the company for the longest period. His incentive, at a minimum, should vest according to the time that his actions are effectively playing out. Then, for my own benefit, I would want the incentive to vest over an independent, and quite lengthy period, and I would want it structured so most of it is on the back end. It is worth paying a larger bonus if it can be structured like that. If a prospective CEO says no, then he did you a favor.

If oversight is a bad thing, then why have board members to begin with? They seem every bit as fallible as government.

Naked swaps are a casino instrument. There is not getting around that fact. There is law prohibiting their regulation as such, and it was written by the banks. I forget where I read this, but someone said, “capital formation by a casino is unlikely to be market efficient”, or something like that.

When nothing prevents a company from writing $2 trillion in notional swaps, they are unlikely to be able to pay off an event if they are not hedged themselves. What harm would a regulation cause that provisioned a hedging requirement, especially since someone is using those swaps you wrote as credit toward capital reserves, allowing them to take on additional leverage?

I think there is a huge body of theory, and that it might be time to investigate specifics. Otherwise, it stays totally in the realm of religion.

Government was half the equation in the problems we face. There is another half to be addressed in the word of finance. Something allowed the ratings agencies to miss badly… what can only be criminally, and they were counted on to be the source of trust.

It’s old school mentality to say the market weeds out fraud. That’s like saying hunger cures itself.

Bill Ross September 9, 2009 at 3:56 pm

The root problem is none of the above. Even if regulators were uncorruptable, ruthlessly efficient accountable saints, regulation CANNOT EVER WORK (defined as controlling criminals).

The reason is simple: We live in an action precedes consequence reality.

Regulation limits choice by enumerating what is NOT allowed. Criminals are innovative. They obey regulation but find new ways to defraud us, in addition to the problem of selective non-prosecution of cronies. Regulators must by definition react to crime with NEW regulations. New frauds remain “legal” until countered by new regulation. In effect, we are trying to control infinite reality with regulations which must also tend to infinite complexity. The only beneficiaries are regulators, offensive / defensive lawyers and, of course, criminals and those they bribe. It is a negative sum game. The losers are US.

The remedy of course, is restoration of the “rule of law” and property rights. Then, control and proof of crime becomes a simple matter of determining whether force and / or fraud (lack of fully informed consent) was used to achieve a transaction (as opposed to obeying regulation).

The “rule of law” will destroy all of this folly and, the legal “profession” since they have devolved to criminals, bent on destroying civilization.


You don’t need to differentiate whether big or small government caused the meltdown (grand theft, civilization). Government and their cronies are the perps. States and their desire to consume without producing or accountability are the most destructive force known to mankind and civilization. Period.

Bill Ross
(Electronic Design Engineer)

geoih September 9, 2009 at 5:10 pm

There are too many ‘educated’ people in the world that only see economics as a mechanism for adjusting society toward their utopian or utilitarian goals, rather than as scientifically describing something naturally occurring.

Few rational people would consider building a garden without considering biology, or a river dam without considering physics and hydrology. Yet the world is full of ‘educated’ people who are more than willing to play around with society while not considering the most basic facts of economics. Until that happens, we will continue to see grand ideas for having water travel up hill.

K Ackermann September 9, 2009 at 5:26 pm

Bill Ross, this is off-topic, and I apologize to everyone for this..

I did not see a Contact… on your website. Anyway, as a design engineer, I don’t know if you do your own PCB layout, but I have been developing an autorouter that is quite unique. I have a test framework that parametrically generates random PCB layouts from small and easy, to massive and impossible.

Right now, it will route 10,000 fully connected pins (5000 connections) in under 2 seconds. A good chunk of that time is just updating the display. I have not yet written any translators to/from other design systems.

I have a installer for it if you want to check it out. It’s a technology demonstration, and not a finished product. I have a document with it explaining some of the principles involved, and the work that needs to be done.

What I need eventually is some advice on high-speed rules. The router could be roughly guided by piecewise approx. but it could also be driven from a SPICE simulation. That’s the theory, at least.

My goal is a $299 product that will be the final word in autorouters. :-)

My email is kackermann at molalla dot net.

Bill Ross September 9, 2009 at 5:35 pm

K Ackermann

I sub out this kind of rote work to cheaper specialists. Not interested. Suggest you post on appropriate sites such as mentor, orcad…

Please stay on topic here.

Agora September 9, 2009 at 7:19 pm

To geoih.

Well said!

K Ackermann September 9, 2009 at 8:37 pm

I sub out this kind of rote work to cheaper specialists. Not interested. Suggest you post on appropriate sites such as mentor, orcad…

You know, Bill, I tried getting your contact info from your own site that you pimped here, but I couldn’t find it.

The only reason I did was because you went out of your way to mention your occupation, so I figured I would give it some relevence – especially since there were only 10 comments all day on this post.

If you are subbing it out as rote work, then your designs are low-tech and the layout could be automated. You would save money by not having to sub it out, especially with a tool that routes in 2 seconds. It takes longer just to sign the invoice for the sub’s services.

Thank you for your suggestions on who to contact, though I’m not sure those companies would want to help someone else make a better product than theirs.

Bill Ross September 10, 2009 at 8:23 am

@K Ackermann

“I’m not sure those companies would want to help someone else make a better product than theirs”

You’re not much of a capitalist if you don’t realize that the highest value for your product can be achieved by exceeding value of existing offerings, threatening established market players with competition and then licensing to them.

Keith Ackermann September 10, 2009 at 4:31 pm

But I still need help with it. All I have is the fastest pathfinder, I believe, in existance. It’s so fast that I can spare a bunch of time performing rules adherence while it is routing. Not just moving geometry, but fine-adjusting trace widths per layer for impedence control.

Another unique characteristic is it can deterministically keep everything as far apart from everything else as possible. I’m thinking of add a Dial-A-Yield feature that allows for different manufacturing goals.

I don’t know. High speed is the big one. It’s worth triple the price, either retail, or OEM.

I may persue the OEM path, but I have access to money for marketing too. End user sales provides a spring board for other products and services, and for upgrades.

Cadence bought Cooper and Cyan for $360 million, and the only product they had was an autorouter. That was in the CAD hayday. CCT sold at the top of the market.


John Anthony September 10, 2009 at 6:45 pm

No.Big government neocon Republicrats like McCain and all those who ran in the 2008 primaries against our man Ron Paul.

RTRebel September 11, 2009 at 3:08 pm

“The Department of Defense, which since 1994 has been required by law to perform an annual financial audit, has yet to perform one.”

Uh oh, if Ron Paul’s Audit the Fed bill passes, will it be treated the same way?

Comments on this entry are closed.

Previous post:

Next post: