Flailing and Bailing

Would you buy a house if you knew that the zoning commission was considering a change that would allow a garbage dump to be built next door? Most rational people wouldn’t. Of course, not everyone is rational, but there are enough rational people that markets more or less behave as if they were rational.

Economists are arguing about obscure factors, but what is plain is that rational people won’t invest in their businesses as long as the government is changing the rules of the game every other day. This is why the Great Depression lasted so long. This is why Paulson’s flailing and bailing is having so little effect. This is why I’m glum about economic prospects during the Obama administration. Change you can believe in? Only if you believe in high unemployment and reduced standards of living. What’s needed is a time out. Let events take their course. Let people study, plan, invest, and create jobs. We need to stop the flailing and bailing.

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