Econ 101: The Financial Crisis and Danger of Government Intervention

By Gary Wolfram
Business & Media Institute

Ludwig von Mises in a classic 1927 book, Liberalism, wrote that government intervention in markets would lead inevitably to unintended consequences that resulted in further government intervention.

The current financial difficulties are the result of a series of government actions that has culminated in vastly expanded government intervention in the credit markets, which may provide short-term relief but is dangerous in the long run.

It is difficult to correct a problem when the cause of the problem is misunderstood. The presidential and vice-presidential candidates have all said that “Wall Street greed” has led to the financial mess we are in. On the very face of it, this does not seem likely. Even if greed leads to problems, is it possible that greed has suddenly become much greater than before?

One beauty of the market system is that individual self-interest.....

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