Response to CPAC

It is fairly clear that the cause of the recent economic collapse had a lot to do with deregulation.

Contrary to Adam Smith's belief, markets are not perfectly efficient. From my understanding, efficient markets are based on many underlying utopian assumptions (every transaction has insurance against risk, people are completely rational consumers, transactions are completely transparent, and externalities are non-existent). Of course, this never happens in the real world.

As Joseph Stiglitz states in his 1986 paper "Externalities in Economies with Imperfect Information and Incomplete Markets":

"It has not, however, been widely recognized that the distortions that arise in economies in which there is imperfect information and incomplete markets-for practical purposes, all economies-result in there being real welfare consequences of what would otherwise be viewed as purely pecuniary effects. As a result, economies in which there are incomplete markets and imperfect information are not, in general, constrained Pareto efficient. There exist government interventions (e.g., taxes and subsidies) that can make everyone better off. Moreover, the distortions that arise from imperfect information or incomplete markets often look analytically like externalities of the familiar technological sort, and viewing them in this way helps identify the welfare consequences of government interventions. "

That is, all economies have externalities that prevent the economy from reaching the perfect Pareto efficient (free market efficiency) and there are certain actions that the government needs to take to ensure that markets work their best.

Unfettered and unregulated markets, as praised by ex-Fed Chairman Alan Greenspan, Clinton's Treasury Secretary Robert Rubin, Tim Geithner and Larry Summers, were whole-heartedly believed to be truly efficient. However, as we have seen in the economic collapse, they are not (and the guru of deregulation, Greenspan, has admitted this).

Instead, deregulated markets have lead to irresponsible financial practices that have created massive bubbles (tech in the 1990s and housing in the 2000s) that eventually pop with dire global consequences.

What have unregulated markets done? They may have increased US GDP and made a few people extremely rich but they have increased the inequality of wealth, crippled wages, sped up environmental disasters, and caused a horrible global recession.

I cannot believe that anyone would be calling for less government interference in an economy that clearly needs more. Our country needs a new vision for its future. We need to get passed our "rugged individual" and "big government is evil" mantra and join the 21st century. We have crumbling infrastructure, failing schools, outrageously expensive healthcare, immigration issues, trade imbalances, a huge debt, a disappearing manufacturing sector, horrible inequality of wealth, and depressing poverty that need to be fixed.

Look at most other advanced countries (all of Scandinavia, most of Western Europe, Canada, Australia, New Zealand etc.) and you see great public schools systems, wonderful public transportation, great technological innovation, clean cities, huge parks, and public health care that works. America is falling behind and our fear of "big government" and tax increases coupled with an inefficient Congress that is flush with corporate influences and cash are crippling our ability to act. Less government regulation means more money for the top 5% and little for everyone else.

We need to restore the balance between Government and Markets. They are both needed, they are both necessary, but both need to be adjusted to work in the 21st century.