By Gary S. Becker and John Cassidy
The Chicago School’s economic insights have been severely tested, but Hoover fellow Gary S. Becker insists they still hold.
Gary S. Becker: No. I think the past twelve months have shown that free markets sometimes don’t do a very good job. There’s no question, financial markets in the United States and elsewhere didn’t do a good job over this period of time, but if I take the first proposition of Chicago economics—that free markets generally do a good job—I think that still holds.
If I were running an economy, and I were looking for the best way to run it, I would do what India and China did—move much more to a free-market economy. The second proposition of Chicago economics: that governments don’t do a good job. . . . I don’t think the government did a good job in the run-up to the crisis. Posner has himself criticized Alan Greenspan’s low-interest-rate policy. The SEC [Securities and Exchange Commission] should have done a lot of things it didn’t do. It’s hard to sustain the belief that governments do well.
What I have always learned to be the Chicago view, and taught to be the Chicago view, is that free markets do a good job. They are not perfect, but governments do a worse job. Again, in some cases we need government; it is not an anarchistic position. But in general, governments do a worse job. I haven’t seen any reason to change that other than, yes, we’ve seen another example where free markets didn’t do a good job: they did a bad job. But to me there is no evidence the government did a good job, either, leading up to or during the process.