That is the title of this terrific, insightful essay by economist Arnold Kling.
Among other points, he shows the utter falsity of the post-financial crash narrative offered by defenders of big government (i.e., opponents of laissez-faire) that the crash was due to “de-regulation” under Republican administrations. On the contrary, Kling writes, “from the regulators’ point of view, it was the environment prior to 1980 that amounted to leaving the teenagers with the keys to the liquor cabinet. The post-1980 regulatory changes were believed to be in the direction of tighter supervision and more rational controls.”
The trouble was, as Kling’s title says, ignorance. Regulators did not understand how new regulations and market developments (especially securitization) that they believed made the financial system easier to control in fact did the opposite.
Kling concludes that these insights strengthen the case for minimal government and he’s right. I suggest reading the whole thing.
