By PAUL CRAIG ROBERTS
I admire Joselph E. Stiglitz, because he has a social conscience and a sense of justice, the absence of which turns economists into monsters.
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Social institutions are inanimate. They do not possess life and cannot impose good outcomes on human action.
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The market was transformed from an abstraction into a life form and became the actor instead of the humans operating within the institution.
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It is possible to clear away the confusion. First, understand that a free market is one in which prices are free to respond to supply and demand.
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Second, understand that regulation regulates human behavior, not the market. It is the actors in the market who are charged with regulatory infractions, not the institution itself.
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Third, understand that the problem of regulation is that it is done by flawed humans.
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The problem that the US economy faces is far more serious than the financial crisis resulting from financial deregulation. The reason that traditional monetary and fiscal policies cannot produce an economic recovery is that so much of the US economy has been moved offshore. As the jobs have departed, there is no work to which low interest rates and massive government spending can recall workers. This is the real freefall.
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