"The Redistribution Fallacy"

James Piereson tells the truth:

This is one reason that five of the seven wealthiest counties in the nation are on the outskirts of Washington D.C. and that the average income for the District of Columbia’s top 5 percent of households exceeds $500,000, the highest among major American cities. Washington is among the nation’s most unequal cities as measured by the income gap between the wealthy and everyone else. Those wealthy individuals did not descend upon the nation’s capital in order to redistribute income to the poor but to secure some benefit to their institutions, industries, and, incidentally, to themselves.

They understand a basic principle that has so far eluded progressives: The federal government is an effective engine for dispensing patronage, encouraging rent-seeking, and circulating money to important voting blocs and well-connected constituencies. It is not an effective engine for the redistribution of income.

UPDATE: link fixed now. Thanks, Michael.

"Why Dodd-Frank Is Already Failing"

This is really excellent:

Every major financial reform in U.S. history was enacted in the aftermath of a substantial decline in equity prices. Each, in other words, was crafted during a time of public anger that politicians hoped to deflect from themselves to Wall Street. The congressional authors always compose a narrative of the stock market crash that blames unscrupulous financial intermediaries or public companies and insufficient regulation of the markets. Just as inevitably, proponents studiously avoid any suggestion that their own prior regulatory innovations had unintended consequences that contributed to the crash. Meanwhile, firms in the regulated industry concentrate on determining who the winners and losers may be under a new regulatory regime, so they can make sure they end up on the winning side.

This routine ensures that the primary losers from financial reform are investors and small, regulated firms. Costly new rules simultaneously serve the ends of Congress and the major financial institutions. They allow Congress to argue that it filled the regulatory gaps that it claims caused the crisis. Large firms can spread the new costs over a large number of transactions, giving them a structural advantage over their smaller and previously nimbler competitors. All firms will seek to pass on to their customers as many of the regulatory costs as possible.

"Government Intervention Is Becoming Obsolete"

Remember Econ 101? Remember the "market failures" that could be fixed by government action? Fred Foldvary explains why technology is fixing them without government.

Much government intervention has no economic rationale and is due instead to pressure from special interests. However, some interventions have a public-welfare justification, backed by conventional economic theory. Textbooks in the field normally present four such rationales: asymmetric information, external effects, public goods, and monopoly.

Advances in technology are fast rendering these arguments obsolete.