I suspect that what you suggest is close to the truth. There may be some helpful regulations along the lines of increased transparency and disclosure, but what we're likely to see resulting from current calls to do something will not be an improvement.

I think we're likely to fall victim to the Politician's Fallacy:

1) Something must be done.
2) This is something.
3) Therefore we must do it.

You're evidently unaware of such pro-free-market books like Larry Kudlow's “American Abundance: The New Economic & Moral Prosperity” and Brink Lindsey's “The Age Of Abundance: How Prosperity Transformed America's Politics and Culture”, both of which argue that the alleged “great” American economy of the past 30 years was the result of the American public's support of free market policies. (Brink Lindsey, btw, is, like yourself, a member of Cato's staff).

Will Wilkinson said: “We are lucky, I think, to have intelligent, highly professional planners…but the housing 'bubble'… and the historically high price of gas, which is to a large extent a function of the low value of the American dollar, probably has had a lot to do with the policies chosen by our monetary central planners. Failures of government planning don’t discredit free markets. Rather, they suggest free markets might be worth trying some time.”

Holy cow, does this need to be explained all over again? It was the deregulatory legislation of free-market towel-boys like Phil Gramm, aided by the free-market think tanks (repeal of the Glass-Steagall Act; the passing of the Commodity Futures Modernization Act) which allowed those “intelligent, highly professional” Fed Reserve planners to destroy the entire economic system in the first place. Do these words from free-marketeer Alan Greenspan ring a bell? “The Federal Reserve chairman, Alan Greenspan, urged Congress today to encourage the growth of complex financial contracts known as derivatives…United States laws impede its development, Mr. Greenspan said in testimony…” (http://query.nytimes.com/gst/fullpage.html?res=…)

We have deregulation to thank for the cheap, easy credit which led to the collapse of the housing market. We have deregulation to thank for Enron, as well as for the probable speculative abuses of today's energy markets. We have free-market suck-ups who wag their pompous fingers to society on the “virtues” of globalized cheap labor, yet who apparently lack the basic intelligence to figure out (or rather, the basic honesty to admit) that closed-border nations like India and China don't practice “free markets”, and that globalized cheap labor exists to enrich the global capital elite at the expense of everyone else.

It's not bogus to point out that a government policy is government's fault. What's bogus is to say that it's free market's fault to achive something that is government's function.

“That is basically the Republicans policy to get in there and destroy government bureaucracies to show how poorly they function…”

I don't buy manicheistic argument that put some side as 'evil', without conceding good faith. I'm pretty sure that corrupt Democrats exist too.

(Classical) liberal tradition is about institutions that make politicians to act on certain way, not about picking the right ones.

“And as I've always said why would you want some one who doesn't believe government can work running it?”

Good government function isn't about believing it will function, it's about make it function well. And to believe that something which doesn't work will not work is actually a good thing.

For example, a very sick person who's not afraid to die and because of this never go to the doctor is probably on a worse situation thant someone that don't 'believe' he will resist and because this starts a treatment. It's true that we can have some positive feedback because of our beliefs, but it doesn't mean that because we want that something will be true, that thing will be true.

“Free market failure is an abstraction because free markets are an abstraction.”

Yes, it's true that free markets are an abstraction, but it doesn't mean that it isn't a useful concept. To call some situation as 'free market' and ignoring that it isn't doesn't help to solve anything.

“As soon as you have a money system there really are no free markets.”

You're right about fiat money, but it's not true on early stages of money development. Even today, money is a phenomen that governments control very poorly.

“The goal of the “free marketeer” is to approach as free a market as possible…. the faith people have lost in the “free market” is that moving towards that goal is always a good idea as over and over again the results are not so good.”

The only free-market thinkers that procede this way are Rothbard and its followers. Neither Hayek, Adam Smith, Friedman, Buchanan or even Bastiat talk like this description.

1- Inflationary policies are policies, and policies are government decisions. “
Renato

So you kinda make my point. Any policy is a government policy so even if it's a policy pushed for by the “free marketeers”, their lobbyist or the Republicans it's always the governments fault. Obviously a bogus argument.

That is basically the Republicans policy to get in there and destroy government bureaucracies to show how poorly they function… and to make a killing in the process of doing so. And as I've always said why would you want some one who doesn't believe government can work running it?

I guess I'm saying the argument is kinda like me saying, “well we've never had TRUE COMMUNISM so you can not argue that communism failed.”

Free market failure is an abstraction because free markets are an abstraction. As soon as you have a money system there really are no free markets. The goal of the “free marketeer” is to approach as free a market as possible…. the faith people have lost in the “free market” is that moving towards that goal is always a good idea as over and over again the results are not so good.

People realize that markets need oversight. Allowing banks to offer complex financial instruments and unlimited credit is not a good idea. It was a policy decision, (actually under Clinton) but it was one the “free marketeers” argued for.

Here's my solution. Let there be both “free markets” and well regulated ones. Let Wall Street firms have complete freedom with the one requirement that they have NO backing of the US government or Treasury in any way what soevery except for the usual access to infrastructure and courts etc that their taxes pay for. They have to raise their own capital, insure themselves, oversee themselves ect. Let people dabble in those markets and exchanges as they wish. But let there be another one where banks have the backing of the FDIC and where very strict rules and protocols are followed and good oversight is the rule.

Put those two side by side and you will see which prospers. You will see why we are a nation of laws not of men. You will see why we are a nation of rules and not of anarchy. And regarding money you will understand why Aristotle claimed, “Money exist not by nature but by LAWS”.

So Will is right in one sense blaming free markets is bogus as the concept itself is bogus but the idea of blaming policy is likewise bogus because there must always be policy and the debate ultimately is a relatively boring one about which policy and which laws and which regulations works best. And people are figuring out that what's important is not the quantity of policy but the quality. Less is not always more.