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Tuesday, October 21, 2008

Libertarian purism watch

There's a debate going on about whether the financial crisis means "The End of Libertarianism," as Jacob Weisberg argued. I agree with many of the criticisms directed against Weisberg (see here and here). The crisis was caused in large part--nobody honestly knows how large--by government actions that libertarians thoroughly disapproved of from the get-go.

However, I must admit I am underwhelmed by this response piece from Jeffrey Miron, which argues that zero percent of the problem stemmed from free markets, and that indeed America has had nothing resembling free markets since (cue villainous music) "a brief moment before Alexander Hamilton engineered the first U.S. bailout of financial markets." What about the unregulated derivatives that spread bad mortgage liabilities far and wide? Apparently, to Miron, that doesn't count as a free market because it didn't exist in a purely free-market economy (the kind, I guess, where you can wall in your neighbor and starve him to death).

It seems to me that a counterargument such as Miron's plays into the stereotype of libertarians as dogmatists whose ideas have no applicability to the real world. Sadly, there's some truth to that stereotype.

UPDATE 4PM: By the way, I wonder exactly what financial markets prior to Hamilton's intervention Miron would characterize as free. Bank of the United States scrip? U.S. treasuries?

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