Imagine that the TARP program had not passed in early October, 2008, and that in the months following the unemployment rate had soared to 8.1% in February with further rises expected, on March 9 the Dow Jones Industrial Average had dropped below 6650 in the most severe bear market since the Great Depression, and that the GDP had declined at a 6.3% rate in the fourth quarter of 2008. Do you doubt that those who voted nay on the bill would be blamed for the disastrous course of the economy and the financial markets followed? So why are we not damning those who voted for a bill that obviously did not meet the expectations of those who advanced and implemented it? It is because they can always reply that in the absence of action, the situation would be even worse. But there is no evidence for that and there cannot be because we do not know what would have happened if the bill had not passed. Logically if the bill had not passed and the same things had happened in the economy, those who had opposed the bill could say that if the bill had passed, things would be even worse. However, few would believe them. We live in a world that has great faith in the ability of government to right wrongs.
Asymmetry of this sort, in which there is risk in only one direction, causes bad decision. I have no idea of how to right this, but it should be mentioned when the topic of government failure is discussed.
Cicero: On Grazing, Money-Lending, and Murder
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