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domingo, maio 17, 2009

A Failure of Capitalism

During the housing bubble, for example, sitting out the mortgage boom meant forgoing large profits. “Even if you know you’re riding a bubble and are scared to be doing so,” Posner writes, “it is difficult to climb off without paying a big price.” So people made decisions that were individually rational but collectively irrational. To see the crisis through populist spectacles, as President Obama does when he attributes it to “irresponsibility,” is to misunderstand the whole problem by blaming capitalists for a failure of capitalism.

And so — here is the part libertarians will hate — markets, entirely of their own accord, will sometimes capsize and be unable to right themselves completely for years at a stretch. (See: Japan, “lost decade” of.) Nor can monetary policy be counted on to counteract markets’ tippy tendencies, as so many economists had come to believe.

Alas, economists and policy makers got cocksure. They thought they had consigned depressions to history. As a result, they missed warning signs and failed to prepare for the worst. “We are learning,” Posner writes, “that we need a more active and intelligent government to keep our model of a capitalist economy from running off the rails.”

By doing what, exactly? Posner thinks laissez-faire economics has nothing relevant to say. The rest of the economics profession is all over the map. The system of financial regulation will need an overhaul, but Posner argues that the time for that is not now, in the heat of crisis. Anyway, no one is sure what to do. He halfheartedly suggests a few reforms but concedes they are “pretty small beer.” If pressed, I suspect, he might also acknowledge some 20-20 hindsight in his insistence that the government should have prepared for an event that hardly anyone thought ­possible.

By the last page, not a single lazy generalization has survived Posner’s merciless scrutiny, not one populist cliché remains standing. “A Failure of Capitalism” clears away whole forests of cant but leaves readers at a loss as to where to go from here. In other words, it is only a starting point — but an indispensable one.


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