False Assumption of Libertarians

The whole Libertarian movement is based on a false assumption that the market place will pick the best solution. Some of this is based on Nobel Laureate Milton Friedman's economic work. Taking his work and applying it to the real world is making the false assumption that there is a true free market anywhere in the real world. It is human nature for people to gain an advantage over others. This alone will break the free market model.

People will use all available methods to game the system. Personal ethics may make some method unavailable to some people but this is unreliable at preventing them being used. People will use information not widely available, bribes, deceit, misinformation, and any number of other methods to tip the supposed free market favorably to their advantage. This part of human nature causes the free market model many issues in real life.

The best that can be hoped for is a mostly free market. That is where government regulations can help. They are not a perfect answer but in real life there rarely is. Those regulations will place rules with penalties on certain methods and tactics that one can use to leverage a market in favor of some at the detriment of others. This is the dreaded regulations. In the real world only a well regulated market is going to behave close to the theoretical free market.

As we have seen since the 1980's deregulation initially has benefits because for a short time the parties involved continue to follow the previous rules. Once they understand the new marketplace then they start using unfair methods and tactics that were previously prohibited for their personal gain at the expense of others. The longer the restrictions are missing the more the market deviates from a free market. Eventually the market has become so unbalanced that you start have wild fluctuations. The housing market price bubble of the early 2000's and its plummet in 2008 is a good example. Other outcomes in markets without proper regulation is persons or corporations taking on unreasonable risks due to the potential profits. The problem is that if those risky decisions go bad there is a fatal collapse. This happened to the "Savings and Loan" industry in the 1995 and the banking industry in 2008 where the institutions took on unsustainable levels of risk leading to a major government action to prevent an economic collapse.

It is often stated that government regulations stifle growth. While that is partially true the point is to make sure that the growth is only coming about through sustainable and equatable means. In the US one of the major battles between the two major parties has been over the amount and type regulations and not only the ones related to finance. Since the 1980's the GOP has been reducing regulations many of which were imposed after the market collapse that lead to the Great Depression and the Democratic Party has been either unwilling or unable to stem this tide. This has led to things like the Arthur Anderson facilitating the Enron bankruptcy and the need for the auto industry and banking bailouts.

We need to reinstate checks and balances on the markets. Not necessarily the exact ones removed but at least ones that will stabilize the marketplaces as well as the old ones did. This is the antithesis of the Libertarian agenda but is the only way to achieve a market which will perform closer to the theoretical free market of the economic models.