Tuesday, September 23, 2008

How Much And What Kind Of Pain?

Anthony Randazzo gives a free market solution to the current crisis on Reason. It's interesting, but he asks the following:

"Ultimately, the debate over what to do comes down to a threshold of pain and perspective. Capitalist philosophy suggests that short-term financial pain—even a great degree of pain—will prevent long-term financial destruction. The markets, in other words, are going through a cleansing process. But this is not acceptable to many, particularly the politically motivated, who always prefer to solve future problems at a later date.

Here's the issue: Are we willing to consider all treatment options, or will we dive for the quick, easy, and untested procedure and then hope for the best?"

The problem is that some of the pain will fall on parts of the economy not directly involved in this financial crisis.

In order for people to accept such pain, I believe that we would have to put in place a more significant social safety net which would address the issue of people being destitute or wiped out in such a crisis.

So, there are really two options:

1) Put in place regulations to keep such crises from occurring.

2) Have a social safety net to address the problem of the truly needy, in which case such pain might be accepted.

Otherwise, no matter how much we might want to leave government totally out of this equation, it won't be possible.

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