Free Market Dogma Fails. Philosophy of Optimal Governance Wins

December 23, 2008

Sankarshan Acharya
Pro-Prosperity.Com and Citizens for Development

An article published by Bloomberg today shows the rancor of the proponents of free-market, deregulatory dogma towards optimal government regulation that my research has pushed forward since the savings and loans crisis of 1989 with my publication in the Journal of Finance on optimal bank reorganization policies and pricing of federal deposit insurance. 

The Bloomberg article shows how the financial meltdown has forced the government run by the deregulation-free-market proponents to undo their own dogma in favor of optimal regulation. 

Certain policies (like direct lending, cutting rates by coordinated moves among central banks around the world) that I have written lately to stem the domino were announced by the current US government within days of circulation of my memos to the Senate and House Leaders, Presidential Candidates and Administration officials. 

The U.S. government has been in a panic due to the failure of the dogma of deregulation and free markets.  I have dutifully helped the government through policy suggestions originating from my research.  I have written about these policies to avert the panic anticipated in 2003 in my Safe Banking Paper published then and in a book written in 2003 but published in 2005. 

The other dogma that is poised to destroy the virtues of capitalism is greed driven by the doctrine of maximization of the utility of individual wealth without consideration for the adverse effect of individual actions on collective welfare.  The alternative paradigm I have enunciated is “Prosperity amid Stability: A New Economic Paradigm for Democratic Capitalism.”

The third point of my fundamental research is detection of the onset of events like great global depression.  Prime Minister Gordon Brown of U.K has echoed it as an early warning system.  Vice President Joe Biden is now working on implementation of a system for such monitoring that I have proposed to President-elect Obama in early 2005: measuring and broadcasting the growth in net assets of households of the middle 75% as a barometer of prosperity and not simply relying on the GDP growth as has been the case so far.  GDP growth is a misleading indicator of prosperity of the vast majority as I have argued since 2003.

In other words, what has been in vogue and dogma in the fields of economics and finance for centuries is being challenged by my research.  My point has been that policymakers will willy-nilly accept policy proposals originating from my research, but they could avoid the pain through recurrence of events like Great Depression if they adopted the optimal policies preemptively. 

There is no self-interest pushed forward through my research.  I have, in fact, made enormous sacrifices in terms of facing rancor from proponents of the prevailing system, and forfeiting other pecuniary and nonpecuniary benefits due to such research efforts. Only credible sacrifice can measure one's love for humanity.

Sankarshan Acharya