ECONOMY - Fox Guarding the Hen House

"But Who Shall Guard The Guardians?" Bill Moyers Journal 10/24/2008

This week on the JOURNAL, Bill Moyers spoke with economist James K. Galbraith about the causes of the economic crisis and how the U.S. might best move forward.

Galbraith advocated expanding government regulation of the economy:

"Here in the United States the capacity to handle the crisis exists. What we need is a government that's willing to use that capacity, that believes in it... Regulation is not a burden on business. When it's done properly, it's a framework which favors the more efficient, the more progressive, the more satisfactory elements of business that are prepared to work within the guidelines set by a larger public purpose."

Nearly two thousand years ago, the Roman satirical poet Juvenal asked “Sed quis custodiet ipsos custodes,” which translates to “But who shall guard the guardians?” Juvenal’s immediate topic was Roman licentiousness, but his famous question has come to stand for a more enduring problem: that those entrusted to enforce moral standards are subject to the same human failings as those they regulate.

Juvenal’s point is echoed by libertarians and others skeptical about the ability of government to enact sensible and fair policies. In a CHRISTIAN SCIENCE MONITOR column, economist Steven Horwitz wrote:

“In a free market, firms profit by satisfying their customers, investing wisely, and making prudent loans... To call the housing and credit crisis a failure of the free market or the product of unregulated greed is to overlook the myriad government regulations, policies, and political pronouncements that have both reduced the freedom of this market and led self-interested actors to produce disastrous consequences, often unintentionally... Regulations designed with the best of intentions are likely to lead to more crises if they distort incentives and thereby cause individual "greed" to undermine economic growth and harm millions. History is full of examples of politicians adopting short-run solutions without seeing the harmful long-run consequences.”