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Picking Losers


A phrase used by libertarian-leaning thinkers is, “government should not pick winners.” It descends from the calculation problem.

An agency or bureau cannot possibly consider all the knowledge embodied in a market, and thus acts with at least partial blindness. They may get it right anyway, but more by luck than by smarts. Any errors are compounded and made persistent by bureaucratic inertia, politics, and rent seeking.

The current so-called bailouts have many clamoring against the government giving money to “the Wall Street fat cats” allegedly responsible for the situation. To the extent that government might hold people responsible for criminal acts, I agree.

Reaching further, into a rampage of class envy, where all the rich are punished even in the absence of their use of force or fraud, I think the populists go too far. The investment banker is not any more evil, more greedy or more selfish than the union schoolteacher who demands higher pay.

Anyone who acts in bad faith is, for that act, a criminal. But simply possessing wealth, or creating complex financial instruments, are not proof of bad faith.

But the popular opinion needs a scapegoat. Something bad is happening, it must be somebody’s fault, and that person must be made to lose.

The trouble is, if the government is bad at picking winners, it must similarly be bad at picking losers. It's essentially the same thing. Blame is zero-sum. Nothing is gained, nothing created through blind punishment.

Maybe there are no bad guys here. If there’s a loss, it must be shared. Or if there's a way to avoid a loss, and that means the rich still get the king’s share, wouldn’t that be better than making the economy smaller for everyone?

Picking losers is not justice. It’s just foolish.