Not the Free Market’s Job

A bunch of people are tweeting and retweeting the question “I didn’t look today, did the free market clean up the oil yet?”

I have a couple of responses to that. First that there is no such thing as a free market. You’re not free to sell something unless someone else is willing to buy it. That points to the conclusion that there are only customer-regulated markets and government-regulated markets. And that poses the question: who’s the customer here, and if they’re not regulating
why not?

If customers can’t regulate the behavior of sellers, then it’s not even close to being that-thing-which-is-called-a-free-market. So that points to this: when governments regulate, they don’t regulate in a vacuum. Their regulation displaces customer regulation. If you look at the oil industry, you’ll find that it’s regulated up the wazoo and back down again.
Customers can’t regulate because they’re being prevented from doing so by government regulation.

Thus, to my friends who are asking this question, I suggest that since a free market isn’t present in the oil industry, it’s silly to expect that something which doesn’t exist is capable of taking action.

And my second response is to ask what would have hap;pened had this oil spill happened on private property. It’s certainly the case that the property owner would have a contract with BP, and the contract would specify remedies. One way or the other, the property owner is going to be compensated for the risk of oil risks.

Who is the property owner here? Why, it’s the federal government, which claims to own the seas off our coast. What does their contract with BP say?  If it doesn’t hold BP’s feet to the fire for enough money to clean up the
oil, then why did the government allow the drilling?

So the question is not why the free market hasn’t cleaned it up yet, but instead why the government screwed up. Private companies fire incompetent executives, and if they don’t do that, they go out of business.  Who’s going to lose their job over the irresponsible handling of the BP drilling? And if they don’t, will the government go out of business?

The answer is obviously “no” to the second, and probably “nobody” to the first. And that, my friends, is exactly why you want to limit the things you let your government do.

Tax Credit A Strong Stimulant For Exisiting Home Buyers In April

Existing home sales soared in April as existing home buyers rushed to take advantage of the tax credit that expired at the end of the month.

On Monday, the National Association of Realtors reported that existing home sales jumped 7.6% last month to a seasonally adjusted annual rate of 5.77 million units, up from a rate of 5.36 million in March. Sales year-over-year were up 22.8%.

Even though the jump was widely anticipated, it still beat forecasts. The consensus among economists was that resales in April would only rise at an annual rate of 5.65 million units.

The median price of all existing homes also rose in April. Existing home sales tally the number of previously constructed homes, condominium and co-ops in which a sale closed during the month.

Details of the report show comparable gains for both single-family homes, up 7.4%, and condos, up 9.1%. The Northeast led the regional breakdown of gains.

Economic Events on May 26, 2010

The Mortgage Bankers’ purchase index was released at 7:00 AM EDT, and there was a week to week decrease of 3.3% last week, showing continuing weakness in the housing market since the second financial stimulus program for home sales came to a close at the end of April.

At 8:30 AM EDT, the Durable Goods Orders report for April will be released.  The consensus is that there was a gain of 1.5% from March, which would continue the positive trend in this metric.

At 10:00 AM EDT, the New Home Sales report for April will be released.  The consensus is that 425,000 new homes were sold last month, which would be an increase over March, but was expected as the housing tax credit expired at the end of April.

At 10:30 AM EDT, the weekly Energy Information Administration Petroleum Status Report will be released, giving investors an update after a negative week for oil prices.

Join the forum discussion on this post - (1) Posts