QotD: Redefining "market failure"

In an interview with The Los Angeles Times editorial board last December, Treasury Secretary Henry Paulson made clear that he defined "market failure" as any instance in which investors, including home owners, lost money. In discussing various grand plans to buoy the economy, Paulson said, "What we're doing is avoiding a market failure that would have forced housing values down in a way that was not in the investors' interest, and in a way that the market wasn't intended to work."

You can read more of that exchange here, where it's reprinted in a recent reason column by Tim Cavanaugh. It's a pretty stunning and open admission of how Paulson conceives his job. Basically, his job is to maintain or increase prices, period. He doesn't want to oversee a market that acts as a discovery process because, as Dr. Zaius, the patron saint of all great Platonic experts, could tell you, "You may not like what you find." Indeed, you might find that you misunderestimated what people think your crap is worth (has Paulson, one wonders, ever gone to a garage sale, that ultimate testing ground of the subjective theory of value?).

So Paulson wants to socialize losses by the investing class with his economic PATRIOT Act, a hasty, hurried, and not-clearly-warranted piece of legislation that will somehow manage to change everything without addressing basic incentives in the financial sector (other than underscoring the idea that the American economy is too big to fail, so the feds will oddly bail it out in the name of capitalism).

Nick Gillespie, "The Fearsome Fear of a Looming Recession", Hit and Run, 2008-10-01