LyrArc Article Gist
Richard Posner, who teaches at the University of Chicago, and is federal appellate judge, takes an incisive look at the economic crisis. Posner says this was not a failure in the sense of irresponsibility alone of people involved, but a failure of capitalism, and that capitalism is prone to failure unless properly governed. Markets left to their own devices can fail, monetary policy is not enough to counteract other deep seated problems. Under capitalist system people can make individually rational decisions like continuing to invest in mortgage securtite if they were financial institutions, or losing the profits to be made, and collectively make irrational and in time enormously costly decisions, with no less consequences on an individual basis when things collapse. "We are learning," he says "that we need a more active and intelligent government to keep our model of a capitalist economy from running off the rails." But that may be nothing more than returning to common sense, or a healthy dose of skepticism for overblown claims for any system or form of economics or politics.