Friday, April 30, 2010

From Greg Mankiw

A Great Sentence

From David Brooks:

The premise of the current financial regulatory reform is that the establishment missed the last bubble and, therefore, more power should be vested in the establishment to foresee and prevent the next one.

I am not a Brooks fan, but this certainly captures many dimensions of the discussion that Boyes and I have focused on this month.

In particular - the confidence in power is troubling. A free society vests confidence in liberty, not power.

A second troubling issue is the knowledge confidence that Brooks uncovers. Rather than recognizing that we cannot know and this lack of knowledge can best be addressed by a decentralized market order that rests upon individualism, Brooks points out the individualism: false (a salute to Hayek) that is assumed when participants in a society falsely believe that they can foresee the future.

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