About a week ago I had an interesting conversation with my younger brother, who is currently attending college. When I told him that a total free market involves no regulations or government oversight, he was appalled that such a thing could happen. He worried about the “stupid people” who would be scammed by such a system.
I simply responded that stupid people need to face the consequences of their choices and not be sheltered from them by the government or any other institution. I know this seems like a cruel and heartless line of thinking, but can you honestly say that you are helping people with inferior intelligence if they are unable to face the consequences of their own stupidity?
In the long run, with our massive welfare state where the poor and the ultra-rich seem to get money from the government while the rich and middle class (or the producers) are by and large left with the bill. What happens is that those who receive welfare benefits stop behaving responsibly and instead are allowed to through caution to wind.
An great example in modern times are the banks here in the United States. In a truly free-market system, fractional reserve banking would be considered fraud. Instead we find that all banks have to engage in fractional reserve banking in order to prop up the Federal Reserve. On top of that, we have agencies like the FDIC which shield banks from the consequences of their own actions. If there is ever a bank run or a bank failure, the government will be there to either bail the bank or bail out the consumers. In this zero-accountability system of banking, is it no wonder that they sold bad mortgages to consumers and investors?
With the poor, we see them spending their welfare money on things that are not considered basic essentials to living, such as food, rent payments, and gasoline, and are instead blowing their money of luxuries. Of course, if we all voted to make such actions illegal, a Federal court judge would tell us we are violating their freedom of speech or privacy rights or whatever fallacious reasons that judges usually give.
To top that off, this country has made it much more beneficial to be poor by providing the poor with more access to disposable income than those who actually produce things and work hard and pay their own way. The welfare system provides disincentives to be a productive American.
This is a dangerous state to live with parasites at the top and moochers at the bottom with those of us in the middle dwindling as we begin to see no point to having integrity or dignity.
What most economists fail to recognize is that human nature is directly affected by the coercive use of force with regard to removing the consequences of failure. Failure is probably much more important than success in the market as it tells us what works and what doesn’t work. When you distort it, you end up with a B-Ark economy running on nothing but the full force and cruelty of the State.