Posted by
Andrews on Monday, September 22, 2008 4:09:28 PM
I just realized there is going to be one bad consequence from the quick recovery the stock market seems to be making. Yes, on the positive side, without an economic crisis, Obama's chances grow every more slender, but, on the negative side, the government will think that their ill-conceived ban on short selling played some part in helping the recovery.
That is a problem with government intervention. While it often does harm, or even slows recovery, as FDR's meddling prolonged the Great Depression, the market eventually adjusts to any but the most drastic manipulation by the government, and that eventual recovery is often attributed to the government meddling, when in reality it came about in spite of, not because of, the government.
It is a
common problem, assuming that because some event came after another that the two must be related. Sometimes it is true, sometimes false, but we should be very careful in basing public policy on such simplistic assumptions. Unless the government can prove their meddling was the cause of recovery, they should not assume that meddling was beneficial. As the government involves itself in everything, it would be hard to find any recovery which didn't come after a government action, yet that hardly proves the government is responsible for all good in the world.