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Government's Place in the Market

Government's Place in the Market

Eliot Spitzer
Copyright Date: 2011
Published by: MIT Press
Pages: 96
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  • Book Info
    Government's Place in the Market
    Book Description:

    As New York State Attorney General from 1998 to 2006, Eliot Spitzer successfully pursued corporate crime, including stock price inflation, securities fraud, and predatory lending practices. Drawing on those experiences, in this book Spitzer considers when and how the government should intervene in the workings of the market. The 2009 American bank bailout, he argues, was the wrong way: it understandably turned government intervention into a flashpoint for public disgust because it socialized risk, privatized benefit, and left standing institutions too big to fail, incompetent regulators, and deficient corporate governance. That's unfortunate, because good regulatory policy, he claims, can make markets and firms work efficiently, equitably, and in service of fundamental public values. Spitzer lays out the right reasons for government intervention in the market: to guarantee transparency, to overcome market failures, and to guard our core values against the market's unfair biases such as racism. With specific proposals to serve those ends--from improving corporate governance to making firms responsible for their own risky behavior--he offers a much-needed blueprint for the proper role of government in the market. Finally, taking account of regulatory changes since the crash of 2008, he suggests how to rebuild public trust in government so real change is possible.Responses to Spitzer by Sarah Binder, Andrew Gelman, and John Sides, Dean Baker, and Robert Johnson, raise issues of politics, ideology, and policy.

    eISBN: 978-0-262-29598-7
    Subjects: Economics, Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Introduction
    (pp. 1-12)

    How quickly the moment passes! Merely two years after the worst economic crisis in nearly a century, we have forgotten what little we learned and have lapsed back into the rhetoric and behavior that caused the crisis in the first place.

    Let’s recap for a moment: in the immediate aftermath of the bankruptcy of the entire financial system, there was a consensus that the libertarianism that had dominated Washington for 30 years was an abject failure. The repeal of critical statutes that had structured the financial-services industry for decades and the lax enforcement of those few rules that remained simply...

  4. I Government’s Place in the Market
    (pp. 13-56)

    Every day we read the headlines, feel the tensions, observe the consequences of the recent failures of market and government. Having a serious conversation about how to remedy these failures lies at the heart of current American politics. And that conversation should address three distinct questions:

    What are the parameters of government intervention in the marketplace? What rules should we use in deciding when the government should act and when it should let the market take its course?

    Has our response to the immediate crisis been successful?

    How might we restore an effective structure for corporate governance, the failures of...

  5. II Forum

    • Dean Baker
      (pp. 59-66)

      Eliot Spitzer makes an effective argument against much of the corruption that has taken root in our economy and society over the last three decades. However, he makes a fundamental error in portraying his agenda as a case for government intervention at odds with the free-market principles of those who have been setting economic policy. Attributing such beliefs to our economic managers is far too generous. The role of the government in the economy has changed over the last 30 years, and in some cases grown—just not in ways that protect ordinary workers and consumers.

      Let’s start with the...

    • Robert Johnson
      (pp. 67-76)

      Eliot Spitzer examines the role of government in markets in a clear and compelling manner. He calls for government intervention in three ways: enforcing market integrity, correcting externalities, and defending core values.

      I agree that all three tasks are important, but we have to ask what it takes to have government implement them in the broad interests of society. Both left and right support enforcing market integrity over protecting specific individuals or institutions, but bringing that about in a money-drenched political system is challenging. As Mancur Olson famously pointed out inThe Logic of Collective Action, promoting public over special...

  6. III Common Sense
    (pp. 77-84)

    Dean Baker properly calls the libertarian ideology of the past 30 years a mere façade behind which government actively participated in the crafting of rules and priorities that benefited specific groups—banks, big pharma, certain land owners. I surely do not believe that more than a few intellectuals of the right actually subscribed to the theory that a market could exist without government and rules-enforcement. Virtually all who mouthed libertarian rhetoric fully understood that the battle was over whose interests would be protected and how the fruits of the economy would be distributed.

    Having said that, the total embrace of...

    (pp. 85-85)
  8. Back Matter
    (pp. 86-87)