The theme of the upcoming election will center on the economy because, as hard as Mr. Obama will work to talk about something else, it is the elephant in the room.  The Obama campaign has an ad ready to run supporting the use of President Clinton as keynote at the DNC where he complains that deregulation was the cause of the current economic woes.  The facts could not be more to the contrary.  It seems as if many politicians regardless of affiliation are unwilling to take on the failures caused by hyper regulation of the banking industry.  Some claim it is just too wonk-ish for the average voter to get.  I accept that this is true to a certain extent but only to the extent that the voters who are too stupid to get it are already going to vote for Mr. Obama.  Those on the fence and needing motivation are in a place where learning the facts is a game changer.  Now is the time to trumpet the fundamentals and morality of free markets.  I am suspicious that too many of our politicians are loath to describe the nightmare that the Community Reinvestment Acts, Dodd-Frank and more have been because they do not want to back themselves in the corner where they find it hard to commit the same atrocities on the American public. Nonetheless, it seems beyond them to fight this fight and the economists I see on the TV are ill-equipped as well.  In an effort to prove to everybody how smart they are they seem incapable of delivering a decipherable message to the great unwashed.  The question is why is it better to get the boot of regulation off of the financial industry?  Here is why.

I am not an economist.  I consider this a good thing.  I note in the papers that there is hardly a month that goes by where the governmental reports on nearly any segment of the economy were unexpected by economists.  I am a business man.  I have owned and operated my own businesses for over 25 years and I am an aggressive proponent of free markets not because I can go out and do whatever I want. Rather free markets allow me to do what every successful business person has done since the beginning of time: Learn from other people’s mistakes.  When markets are unregulated, small business persons go out into the market and try to create a business. Now, no matter how much effort an entrepreneur puts into planning his business start-up, there is a moment where risk is taken, the loan papers are signed and the doors are opened.  The economist might refer to the economic activity created as a lab exercise.  In this I agree. Each time a business is opened or a risk taken an experiment is underway.  Each and every experiment in entrepreneurship provides data back to the market about what is successful and when.  And, each of these experiments succeeds in supporting the hypothesis or not but something is learned every time.  When the market is free of regulation the experiments are done by small businesses with little or no initial economic impact taken individually.  If I have myriad options and choose to open a coffee shop and it fails, there is a tragedy at my house but really only at my house. If markets are regulated and I have few options and I and all the other start-ups are limited to opening very similar coffee shops and we all fail the economic impact is not individual but collective and the impact is great.  This was the avalanche caused by the Community Reinvestment Act.  A purchase of a house is a business transaction.  I bought a house not just to have a place to live but also as an investment to help with my retirement.  Toward that end, I maintain the home, improve the property, pester my neighbors to do the same so that when it comes time to sell, I will have bought low and sold high.  I am not unique in this way.  Nearly every home owner does that.  And, when the market for the money to buy that house is unregulated the experiment in real estate I undertake succeeds or fails and affects mostly just me.  When the government tells the banking/mortgage industry to let everyone regardless of qualification take part in this experiment, when the failures happen the effect is collective and huge.  The housing bubble was the lead domino in the economic collapse and the reason it had such impact was because of regulation, not the lack of it.  Getting the government out of markets to the greatest degree possible allows for greater and more diverse experimentation in the economic lab.  And, the information flows freely when the financial industry is free to participate.  If you have ever been in a meeting with an investment banker or a venture capitalist you learn volumes by listening to them describe what they have seen succeed or fail.  Business men who are successful are more than willing to share why and failures are trumpeted in every way possible because success breeds success and failure drags on us all.  The learning from micro-economic experiments in capitalism has a macro-economic impact to the good. But, when the government enters markets it creates pathways to entrepreneurship that collect the impact and when failures occur they are massive.  Now this is not rocket science.  So, why do governments insist on regulation so often?  Because of two reasons that are really mutually exclusive and tragic when applied simultaneously: compassion and arrogance.  Collectivists like Mr.’s Obama, Clinton, and Carter seek to remove the risk from starting a business and they presume to know better in all cases as to how to go about it.  The compassion is misplaced and the arrogance is unearned.  It takes the economic laboratory of free markets to filter out all of the impurities inevitable in even the most well thought out business plan.  There has never been a central planner that always got it right and the impact of a centrally planned failure is definitionally catastrophic.  The compassionate goal of limiting risk is both foolish and misplaced.  In short, risk cannot be avoided only shared.  Allowing me to fail and others to succeed based on the merits of our business acumen allows for far more success across the economy. My failure informs the experiment of many and those successes lead to jobs; maybe for me. It is fundamental that free markets react more quickly and with greater accuracy than centrally planned government regulated markets.  Bureaucracies creep and markets fly and in an era of Internets and wireless connectivity, the secrets of success and the pitfalls of failure are available to any who is willing to listen.  It is so fundamental it is impossible to trust a politician who is not willing to espouse the value and morality of free markets.  It is so fundamental that you can be certain that if your candidate is espousing greater regulation and shared risks, your candidate does not have a clue as to what to do to solve our economic problems.  That too is fundamental.