There are pros and cons with all things in life, including the manner in which to handle the economy. While I personally believe in personal responsibility, I do question if it is practical in today's world? After all, people will do whatever you allow them to do; I have found this to be true time and again in all aspects of life. Irrespective of your personal beliefs on this matter, the mortgage/real estate debacle has certainly fueled the fire for those who argue that we need bigger government to oversee the economy.
What say you? In principle, a free economy wins the day. But what about in reality?
3 Comments on Free Market or Managed Market?
FEB
20
2008
My educational background is in economics and generally speaking, I'm more for a hands off mentality when it comes to government regulation. That said, Government and government interdiction does have it's place. Even in a very conservative economic view the role of government is to provide those services that the free market either doesn't provide or doesn't provide in an adequate amount. The classic examples are roads and miliatary defense.
Regarding the mortgage meltdown I believe that this falls under this legitimate "role" of government in that the free markets obviously are not capable of providing an adequate amount of stability to the markets right now. Given a longer period of time, I'm sure that the free markets could and will work through this mess.
The question is, "At what cost to us all?"
In my opinion the cost of doing nothing is far too high to be an acceptable option. The government needs to step in and deal with this problem in a forthright manner. The current "half-thought out" steps that they are taking such as cutting the discount rate and the "stimulus" package are only making things worse!
In my MBA classes, professors certainly touted the virtues of a free economy. What they, and most economists fail to factor in, is the "fraud factor". There are rules in banking to ensure good lending, but some lenders stretch and bend these rules to improve sales and generate commissions. Businesses want to innovate to expand markets, and this has lead to products such as the pooling of mortgages into securities, many of which are worthless today. Innovation can be wonderful, but not if it is based on fraudulent practices. We need to get back to sound economic principles. As consumers, we need to demand fair and ethical business, and refuse to do business with bad companies. I believe in free markets, but also believe that the laws of the land should be enforced to punish Enron-type companies that take advantage of the consumer, and risk collapse the greater economy in the long run. I don't favor more government intervention, just the application of the existing laws. People do what they want, because there is so little consequence to their actions. As real estate agents, now is the time to surround ourselves with a team of ethical professionals. We also need to advise our clients to get their financial house in order before they apply for a mortgage. Many buyers will go to a lender that tells them what they want to hear, versus what they need to hear. A good lender will be truthful, and will benefit all of us in the long run.
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My educational background is in economics and generally speaking, I'm more for a hands off mentality when it comes to government regulation. That said, Government and government interdiction does have it's place. Even in a very conservative economic view the role of government is to provide those services that the free market either doesn't provide or doesn't provide in an adequate amount. The classic examples are roads and miliatary defense.
Regarding the mortgage meltdown I believe that this falls under this legitimate "role" of government in that the free markets obviously are not capable of providing an adequate amount of stability to the markets right now. Given a longer period of time, I'm sure that the free markets could and will work through this mess.
The question is, "At what cost to us all?"
In my opinion the cost of doing nothing is far too high to be an acceptable option. The government needs to step in and deal with this problem in a forthright manner. The current "half-thought out" steps that they are taking such as cutting the discount rate and the "stimulus" package are only making things worse!
Bob Mitchell
ValueList Real Estate Services, Inc.