A good article...but a few objections/comments

"Above all, the implicit but universal understanding in the world's capital markets that the U.S. government would bail them out if helping home buyers led to some excessive risk-taking."

The risk taking was not really excessive, rather the risk-taking maximized the profit contingent upon the probability of a bailout. The certainty of a bailout therefore cheapened risk taking, and adjusted the actuarial calculations.

Which brings me to an objection or clarification. Greed in the common understanding is a constant...human nature. But greed in market parlance is very much a variable. Greed=the desire to maximize profit, if you figure out all the variables in your system then you can come up with an actuarial/econometric model that will allow you to maximize profit. Insurance companies are in theory greedy. But one insurance company will offer you a different rate than another. Why? Because each insurance company has a different group of economists/actuaries who weight different factors. They are equaly greedy but the relevant factors they measure have different weights. Progressive is not less greedy than the other insurance companies, they are just more clever. They run models off of models, sorting you to a different insurance company if they don't believe you are profitable. So greed is a variable when it becomes a question of epistemology/rationally defined positive expectations. Is oil at 140 greedy? That literally depends on if your "model"(to include your propensity to discard econometric thinking) tells you that it is rational.

If the picture changes in some way then what was greedy at one point is now non-greedy. A greedy insurance company might offer you a policy under the assumption that you smoke for say 300, but upon discovering that you do not lower your rate to 200. This represents a 33% reduction but is equally greedy.

Now the liberals/proffesional economists and lawyers are quite clever, so they will come in if Congress gets its way and argue that they can set up the same sort of models that the market players use. There are a several problems with doing this, but assuming that it is done perfectly according to the theory of second-best, the biggest problem is that you won't really remove the forces that led to the collapse of Fannie and Freddie in the first place. Under the direction of the market--which can be reduced with some difficulty to the particular actuarial models used, Fannie and Freddie did what congress mandated them to do, they loaned out large quantities of money so as to increase home ownership, they were sucessful. Had congress not madanted that they increase home ownership and structured incentives so as to achieve this goal, Fannie and Freddie would have opperated under different actuarial models and been more selective. Fewer people would have had the priveledge of home ownership, and a lot fewer would have defaulted. Even assuming that the economists and lawyers do the best they can in reworking the system, Fannie and Freddie will still have to have some sort of actuarial model that determines sensitivity to risk, and if they are forced by lawyers and congress to maintain the mandate of increasing home ownership then the true fraud is saying that this is in any sense functionally different from what got them in trouble in the first place. It would be very similar to mandating that an insurance company make insurance more affordable and cover more people. It sounds good and in certain periods smart actuaries could make the math line up and show profit, but they would be discounting risk by virtue of eliminating the factors that the companies use to discriminate in the first place. The question of what greed is in terms of the market is largely open-ended, in so far as it is completly contingent upon a question of judgement and model integrity. But don't take my word for it, Warren Buffet's Berkshire Hathaway newsletters tell a similar story.

I doubt that you meant to link to The Works of John Adams, Vol. 6, but that's where your link goes.

People mean a lot of different things when they say "free markets". In some peoples mouths the term includes slave labor camps.

Link to article.

The point is not that the principles of laissez faire are sacred. Rather, it is that the economy and the government work better when capitalists stick to capitalism and legislators stick to legislating. The next era of reforming capitalism will only avoid the mistakes of previous ones if we insist that legislators make capitalists adhere to clear rules rather than murky ones they are required to renegotiate endlessly.

Hard to argue with that. But like many on the right, Voegeli ingores that fact that it's the capitalists who actively create the government involvement. If there was no meddling and intrusive state then capitalism would create one.

"But like many on the right, Voegeli ingores that fact that it's the capitalists who actively create the government involvement. If there was no meddling and intrusive state then capitalism would create one."

Actually John it seems from his article that Voegelli is neutral as to whether the capitalists actively create the government involvement. I take him to be taking a sort of Bastiat/Hazlett/Sumner line. The entrepreneur creates wealth, but the government simply redistributes it. The gov. redistributes it poorly and perhaps unjustly when a and b get together to tax c to pay for d.

I take from Churchill the view that there has always existed a meddling and intrusive state, and that democracy is the worst form except for all the others that have been tried. You can probably say the same of capitalism. Mr. Vogeli seems to be suggesting that we have an excess of democracy and a shortage of capitalism, the sentence before your quote reads: "This infinitely malleable regime puts entrepreneurs who excel only at making their customers happy and their investors rich at a disadvantage, relative to those adept at forging and using political connections."

In some sense the old mercantilism protectionist argument is covered by Bastiat in his petition of the candle makers against the sun, where he argues that the protectionism desired by industry is counter productive and as ridiculous as rationing sun light to prop up the candle industry.

So Capitalism as the theory (microeconomics) does account for the fact that various interests to include industry will use the government to secure favors.

Microeconomics by and large holds that when government and established business meet deals are struck that restrict entry, thus hamstringing "perfect competition" thus creating a "negative externality".(Adam Smith says that when businessmen meet other businessmen the same thing occurs).

"People of the same trade seldom meet together ... but the conversation ends in ... some contrivance to raise prices ... [Government] ought to do nothing to facilitate such assemblies, much less render them necessary."

Mr Voegeli is very right that when government apllies murky rules, it gives an edge to companies that are best at gaming the rules rather than those that those that offer the best products at the lowest price. Conservatives (or at least Republicans of all ideologies) have used their recent span in power to reward their friends (in the domestic ethanol lobby among others) rather than foster a more efficient market. They though that this would extend their hold on power by recruiting and rewarding client groups, and for a short time maybe it worked. But in the long run it sapped the foundations of their appeal. When the party of the market succumbs to crony capitalism, it hurts the reputation of capitalism and opens the door to greater economic statism.

"People mean a lot of different things when they say "free markets". In some peoples mouths the term includes slave labor camps.

Do words mean whatever people want them to mean? The tenor of your comment is that that is an unreasonable definition of free market.

Do words mean whatever people want them to mean?

They do to the people making them. Lots of people are in favor of something called "free markets" even though many of them favor different things.

The tenor of your comment is that that is an unreasonable definition of free market.

I'd like to think so.

"This infinitely malleable regime puts entrepreneurs who excel only at making their customers happy and their investors rich at a disadvantage, relative to those adept at forging and using political connections."

Of course, both sets of people are capitalists and entrepreneurs. The latter set can be said to have an evolutionary avantage.

My point is that capitalists preceded the rise of the modern state, and had a good deal to do with its creation.