Why Government Intervention Will Always Fail

Many people often claim that more government intervention is necessary for a market's success to become assured. Examples abound everywhere. Just recently, it has become a mantra of congress and the media (excluding Fox news and a few newspapers) that this entire crisis was caused by individuals not being regulated enough. The idea is, as a caller on a radio show I listen to on occasion said, is that if people are given less choice (his words, not mine) then the market will be less volatile. In other words, if people are controlled just right, the market itself can be controlled in a free market system.

The reason people want to control the market has not really changed much for a long time. It all revolves around this idea of 'social fairness'. The idea is that our current system allows for greed, and that these greedy people, through acting in their own best interest, affect the markets adversely. It is also claimed further that after these markets collapse, the “rich” come out on top while the “poor” lose their shirts. These cycles of greed as any good liberal may call them are what is supposed to cause the bubbles and bursts of a market.

A little more background before I start. In his work “The End of Laissez-Fair”(1926 ), John Maynard Keynes wrote about the most basic parts of this theory of why we were doomed to fail in a truly free market system. In section three of this particular article he made several claims that, given his description of laissez-fair, seemed to work.

To quote “...the conclusion that individuals acting independently for their own advantage will produce the greatest aggregate of wealth, depends on a variety of unreal assumptions to the effect that the processes of production and consumption are in no way organic, that there exists a sufficient foreknowledge of conditions and requirements, and that there are adequate opportunities of obtaining this foreknowledge.”

To put his statement simply, his strong refutation of laissez-fair is that people could never possibly be able to predict, and therefore control the market for their own benefit. Hence, the idea that everyone benefits in the long run due to individual initiative is a crock. Unfortunately for Keynes, this argument works far better against himself than it does against Laissez-Fair economics.

Keynes's idea is that while an individual would not likely be able to help himself, let alone the whole of the populous, a large group of people, like a government, could. It is s simple enough hypothesis. Suppose you were trying to make a million dollars. You try to do this in, say, corn. To make it easy, we could suppose you were an expert farmer. Even given all of this information, all of this declarative knowledge, you can't possibly know everything that will have an effect on the price of corn. That would require knowing what the harvest would be like in every country at every point in time in the year, the quality of that corn, what diseases are rampant in what area and at what times, what new technologies will come out to increase the price of corn, any and all food fads that affect demand, and then both the purchasing power, and the affinity for your particular product, corn. If it seems impossible to hold all of that in your head, don't worry, you should not be able to.

Instead of just one expert, as in the last example, Keynes suggests that a market can be controlled through the joint knowledge of many experts all studying one thing, the economy. This idea makes sense if you ignore some problems I mention later. Suppose you have four farmers all working together. One farmer focuses all his time on harvest yields, another on technologies,and another on food demand, and the last one on diseases. It would be a lot easier to study the entire system if everyone involved only studied a part of it. This is where Keynes is coming from, more people equals more knowledge, more knowledge allows for better control. So if you get enough experts into government, then that government can literally control the market for the greater good of all of mankind.

However as history shows us, his theory does not hold scientific water. Keynes was right, it is not possible for any individual to know what would happen everywhere all at once so that he/she could predict the markets. He was wrong about the reason though. His assumption is that a lack of knowledge was the cause of this individual not being an accurate predictor of the world, but it isn't the knowledge that he does not have, but the actions he makes based on the knowledge he does have.

A simple fact of life is that the market is made up of a lot of people, billions of people in fact, all making decisions on the basis of some incomplete knowledge of the world. Suppose though that a large entity like a government, based on more complete knowledge of the current market conditions decided to help farmers make more money by buying up corn. Farmers, knowing that corn is a favorite staple food, respond by planting more corn and consumers, expecting corn prices to go up, respond by switching to other staple foods. Suddenly farmers of corn that can't be sold fast enough and the excess rots.

Suppose I built a time machine and happen to discover that a certain stock increases in value by 300% next week. So I take a large amount of money and buy a large share of that stock. So everyone else noticing the decrease in availability in stock, sell to make a smaller, but more assured profit. The stock tanks and I lose my shirt.

The point is that you cannot know what will happen not because of a lack of knowledge, but because your very attempts to control the free market, affect the free market. Just like the Heisenberg uncertainty principal, the very act of measuring the market, affects the market. Further, the more people you get in the pool trying to make a large wave, the less predictable the waves become. Go back to the time travel story, if I had bought only 100 shares, would that have a smaller impact on the market than if I tried to buy one million?

Because individuals have a much smaller impact, the fact they know far less than the government is inconsequential to their success. They need only read a very small number of trends and then follow the wave long enough to get rooted. A government though will always create a large splash because 1) they are extremely visible, and therefor so are their actions, 2) their foreknowledge of the events are often public, if they think a bank will suffer, the fact they think that will make the bank suffer even if the information the government has is wrong, and 3) the actions tend to be very very large, so large in fact that a single small transaction by the government is equal to the net worth of even the richest of the rich. These facts make it so that every action the government makes will be anticipated and the market changes automatically.

Further, Keynes's assertion that the market would be more stable with more government is insane. Just suppose the government, after buying all that corn and forcing the prices to go up temporarily, decides to release its corn to the public to allow the prices to drop. What reactions would take place? People might not buy corn for a little while, and those who do (seeing the prices dropped back down) won't buy enough to make up for the decrease in profit. Suppose this continued with the government just 'tweaking everything until it gets it just right' for awhile. Would you invest in farms or corn futures? Would you even know? The short answer is no.

When the market becomes unstable it becomes hard to predict. It would be like trying to predict the waves in a pond that was shot with a hundred rounds. The only option is to sit back and wait for things to calm down and become more predictable. This is also true of the economy. Suppose the economy became extremely unstable, would you invest or wait to see how things go? The problem is that when the market becomes unstable due to these effects, people don't invest money in the market in the form of businesses and jobs. This means that government intervention, which naturally causes instability, causes job losses and therefor recessions. This is true no matter the type of intervention used.

The only way Keynes could ever be proven right is to remove the free market altogether. You see, Keynesian economics works only in the event every facet can be controlled, including the people in the free market. However without free people making free choices, you do not have a free market. You have a government market. Only when freedom, or at least all forms of economic freedom are abolished can the market become truly predictable and controllable.

The conclusion then is that the government, assuming they are not stupid, wants to and needs to destroy the free market and replace it with some sort of feudalism. People cannot be permitted to make decisions of any sort. Not even about what he or she wants to eat or what doctor he or she wants to see. If you can make that decision, then the government cannot control the market, and as the market is made up of the people, controlling the market necessarily requires controlling the people.

Remember, the only people who will ever tell you they can control the market for you is either an idiot or a tyrant. Don't be fooled into thinking you are getting a sweet deal, because the cards will fall and the house always wins when you choose to gamble with them.

It is Time to Drop the Word Conservative

Let me start by saying first-of-all that I am not claiming that we abandon the 'conservative' principles we hold dear. So do not reply telling me that I have given up, threw in the towel, betrayed the movement, etc... I also am not saying that we begin trying our hand at the liberals game and try to 'control the language'. What I am saying though is that we need to stop letting ourselves be branded or that we cease to hold on to a term we have held for long and that we simply begin to call ourselves and the people we oppose by their correct names.

The word "Conservative" refers to someone who wishes to retain, to 'conserve' the current order of the world. In simpler terms, a conservative seeks to ensure that things remain the same. Let me be clear, under this definition, we are no longer 'conservatives'. This is an obvious point as we no longer wish to conserve our current position in the world.

On the off chance you do not believe me, consider:

• We have sought, not the continuation of things as they are, but of things as they were.
• To this end we have sought not our current government, but a smaller one. i.e. different government.
• We have argued for lower spending, not our current budget, but a smaller different one.
• We have argued against the high taxes we have had repeatedly imposed upon us, and argued against this continued practice. i.e. we have argued for an end to the current system.
• We wish our government to be held accountable to the people, and held in check by its laws and restrictions, especially its limits on power. In other words, we want our system to be governed differently from the way it is now.
• We seek an end to government handouts and demand a return to self-reliance.

This list could go on, but the point is obvious. Even arguing that the things that we want were in the past, it cannot be argued that these things persist still. We do not live under a constitutional republic any longer, we wish to impose it and make it permanent. We do not live in a free-market system any longer, but wish to create it so that the forces natural to it can take over. We no longer have individual freedoms that are protected by our government, but we instead have freedoms that are routinely violated by the same government we wish to reform.

Simply put, the very system we are said to want to protect and 'conserve' no longer exists. Today, to be a conservative is to want government intervention, to desire handouts, and to accept taxation as a necessity for the common good. In other words, to be a conservative today, is simply to be a slightly less radical liberal. This is because the beliefs held by the people that call themselves conservatives are no longer in place. The things that are in place are the very government programs that we want to end, the taxes we want removed, the bureaucracies we want dissolved, the regulations we want lifted, the practices we want ended. Nothing in our current government is left to us to conserve. Even our founding document is now more of a decoration than a document to be enforced. It would be simpler to find a genie to grant wishes than to find things we wish to conserve.

In short, we are now the radicals. If you do not believe me then read the tenth amendment to someone who calls themselves a liberal. If you are not hounded for being 'crazy' then I am truly amazed. We are now the crazies. This sounds insane to think, but consider the crazy ideas many people now accept without question. We now live in the world that gives credence to the remark that "the lunatics are running the asylum." When it is the lunatics who run the world, is it not logical to assume that it is the sane who are called crazy? Insane? Radical?

The term conservative no longer applies to us anymore and so it seems we need a new word to identify ourselves with. This term already exists. That term is "Classical Liberal". A word from which Progressives originally snaked the term 'Liberal' in order to change their colors for a time. The simple fact is that we have always been Classical Liberals. We simply have allowed the Progressive movement to re-brand us as conservatives in order to make us sound old and dusty. This no longer has to be.

That term is our term and many already identify with it. As long as we allow ourselves to be called conservatives, the progressive movement will always be able to tell the world how it seeks to change the world. As the very word conservative contains within it the meanings they need to place the blame on our shoulders, our possessing it, even reveling in it will simply be a hindrance.

In order for us to win this battle, we must educate everyone and tell them what it is we mean. The word conservative cannot be tolerated anymore as confusion can only be created by such a word. In preaching a change of government, we must not also incorporate words that confuse our intent. We cannot preach change as the "Conservative Party" or as the "Grand Ole Party". We must leave behind us our tendency to cling to things that possess a certain tenacity for it is this tendency toward the present that people wish to avoid.

This world can still be won with ideas as long as their exists one person's mind which is not yet made up. These minds however do ask for consistency in message, and it is best that we choose even our words carefully so that we do not get confused with the current set of ideals.