Some conservatives believe that the depression is the result of unwise government policies. I believe it is a market failure. The government's myopia, passivity, and blunders played a critical role in allowing the recession to balloon into a depression, and so have several fortuitous factors. But without any government regulation of the financial industry, the economy would still, in all likelihood, be in a depression; what we have learned from the depression has shown that we need a more active and intelligent government to keep our model of a capitalist economy from running off the rails. The movement to deregulate the financial industry went too far by exaggerating the resilience--the self-healing powers--of laissez-faire capitalism.Well knock me over with a feather. Almost as shocking as Alan Greenspan's admission that Ayn Rand's philosophy might not be the final word on real-life markets.
To the extent schmucks like me can figure it out, the problem is that Wall Street guys knew that short-term, they could reap huge bonuses, and long-term ... well, why think about the long term?
I believe in markets. I believe that people follow incentives. Which is why, where bad incentives threaten to lead to economic depressions of Biblical proportions, I think government needs to regulate to reduce the bad incentives. Unfortunately, the people running Washington the past 8 years have had a different philosophy, for which we are all now paying.