Messing With The Price System

The general problem with bailouts (or tariffs or subsidies) is described well here. Any form of government interference messes with the market’s price system. So what? I’ve tried to explain the virtues of the price system, but the basic idea is that it keeps us from producing what no one wants and minimizes shortages of what we actually do want. Massive intereference with the price system (like what the Soviets did) results in chronic shortage of really important stuff (like food) and surpluses of less useful stuff like huge statues of Lenin and Stalin. Small interference results in small inefficiencies. The bailout is a pretty large tweak, which will have large repercussions. We got into our current situations because politicians played with the price system; it’s hard to believe that further messing about will make things better.

Politicians can’t seem to help messing with the price system, lowering your standard of living in the process. It’s probably inevitable due to the true nature of politics, but it sure would help if they would show some restraint.

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