The failure mechanism of the free market is essential to the maintain the optimum use of finite capital. Recall how fervently the left scolds us about “sustainability”. Yet, as we see in this case, very few leftist schemes are ever economically sustainable.
Leftists would also scold us about “ecosystems”, and always praise nature as the perfect example of how a “sustainable” system operates. What is the example here? It is like an old-growth forest where one of the giant oaks can no longer keep functioning. It dies and soon decay sets in. In a few years a strong wind topples it. As it lays on the ground, a vast new army of bacteria, microbes and insects set upon its giant corpse, reclaiming its chemical assets and converting them into new life for other organisms. It is upon these reclaimed chemical assets that new trees compete to replace the giant that died.
This is also how the free market works. It was best observed and documented by economist Joseph Schumpeter who coined the phrase “creative destruction”. The forest is “sustainable” when trees that no longer can make efficient use of the resources die and have those asset reclaimed by others who use them more efficient use of them. A very similar mechanism keeps the economy healthy and growing.
We do want the economy to grow don’t we?
Now where government can destroy economic sustainability is where it provides money to failing enterprises. When failure is forbidden, success becomes far more difficult.
This is doubly true when government subsidizes failing corporations by creating money out of thin air, mainly via creation of debt that it forces the market to accept.
One of the roots of our ailing economy at this very moment is the vast quantity of money that government is creating out of thin air. Near-infinite money buys near-infinite government. It used to be that the main limit on the size and power of the federal government was that taxpayers would only send so much of their incomes to Washington. Now that government has given itself the power to create all the money it needs, this limit is moot.
When the states call an Article V convention to consider amendments to the Constitution, the first order of business must be to devise ways to limit the amount of money the government can spend. This is a more important limit than limits on taxes or limits on borrowing. We cannot have a healthy and growing economy until we can stop it from thwarting the very mechanism that ensure our economy is sustainable.
The failure mechanism of the free market only works when you have a transaction conducted with a buyer and a seller. When you introduce a third party into the transaction to pay for the product or service, you end up with a complete disaster ... because you now have a buyer who doesn't care how much the product or service costs (he's not paying for it) and a "seller" (the third party) who doesn't care about the quality (because they don't have to live with the consequences).
True. And that has also led to our vastly overinflated markets. If they collapse bigtime, there will be blood on the walls.