Markets v. Government: What Works?

In the wake of the financial crisis, I keep hearing claims about the discrediting of free markets. To begin with, there's a compelling narrative that the financial crisis was caused by government intervention rather than free market excess.

As to whether government intervention can get us out of this mess, it may well be that individuals and businesses--especially in the financial sector--need to reduce the amount of debt they carry. This podcast argues that this process of deleveraging (reducing debt) is necessary and may take years, but that government policy is trying to prevent this. But delaying spring cleaning keeps the house dirty.

The turmoil in heavily regulated financial markets sheds light on some important questions: which parts of the economy are we happiest with and which make us miserable, and does any link exist between government involvement and our level of satisfaction?

As a middle-class consumer, what works well for me?
- The internet.
- Retailing.
- Reading material like books and magazines.
- Restaurants

What drives me crazy?
- The post office (a government monopoly on first class mail).
- Flying (government owns the airports and air traffic control system, runs the security).
- Health care (government uses tax dollars to pay for half, tilts playing field against individual coverage, regulates health provision and insurance, and on and on).
- Commuting to work (government ownership precludes road expansion or other ways to reduce congestion, such as variable rate tolls).

Now, is there a pattern, or am I just cherry picking?

Well, whenever I've come across something that doesn't work the way it should, I've almost always found that politicians have messed up the incentives for producers to respond appropriately to their customers.

Does greater intervention yield greater dissatisfaction? I have no doubt.