The problem with *most* criticisms of this article are that their entire rejection is based on two tired furphies:
• That this argument pretended to have any specific solutions. It was simply making the point that neo-liberalism had demonstateble failed to deliver better results that the previous “managed” approached.
In this aim he is incontestably correct. One critic claimed that every one has benefited, Try telling:
1. Self refunded retirees and who have worked hard to save a nest egg to watch it wiped out by lack of regulation.
2. The victims of high powered wanton corporate frauds or rogue behaviour (the most spectacular losses/crashes have happened in this time). Caveat Emptor is an excuse not a justification.
3. Middle aged people who saw their jobs follow greater profits overseas and who have no hope of a job and may lose everything. (Sit in on a crisis intervention line for a shift or two).
4. The 3rd world victims the “the coffee wars” et al.
5. Fixable diseases that aren’t profitable enough.
6. ‘Uneconomical’ dumped food etc then consider the poor/hungry.

A truism of capitalism is that where there’s an opportunity there is an entrepreneur it’s all a matter of proportion/expectation. (SA bottle refund)
The Neo’s simply want unlimited profit…hence the scramble for the most outrageous risky/highest/most exploitist.

• The second is that the absence of one extreme automatically implies the other extreme. This argument is common fare for the ideological recalcitrant.
As many have stated there are many degrees of legislative controls clearly more controls are required including government controls (but that is a separate question.)
‘Time and tide stop for no man’ one could add knowledge. Citing 1901 et al reasoning is of tenuous value as the context is very different today. We need a new Paradigm way of looking at the way we live…May your Gods (if you have them) be merciful if we don’t. To paraphrase one of the Kennedy's "think not of why we can't do better but think why not then do it because we must." (for all our sakes)

Geoff, I think it’s great that you’re challenging the pseudo-science and the narrow ways things are done on this planet with its attendant imbalances. Of course what you say is right, but the way I see it, there’s an even deeper underlying problem – an imbalance in man’s thinking and actions seemingly right at its core. It’s as though a template has been set at the beginning of man’s evolution that most people have unconsciously followed ever since. Basically, that winning is equated with taking the path of least resistance. In that sense, aren’t we all guilty? Not only the greedy or laissez faire capitalists but also the commentators?

You criticise Keating. One question: what do you think about his recent comment that debtor countries should spend less while the surplus countries spend more in order to bring the global financial system into better balance? I got the feeling that Keating had a smart side to him that would have liked to do something useful on the human and social side of the ledger, but that his actions in Government were shaped and steered by the stronger forces around him.

The only way we’re going to save the planet is to first attack the psychological basis of man’s thinking and actions. I’d suggest this can only now happen via a series of shocks to the system as crossing certain thresholds of behaviour is equated with pain or loss. This seems to have been acknowledged by Bernie Madoff, when he reportedly said that he always knew the day of reckoning was coming.

RobP, have a look at my Fears and Desires post on my weblog site:
http://betternature.wordpress.com/2009/03/12/book-extract-fears-and-desires/

No doubt Keating has some redeeming human values, but I think he was a clever fool in deregulating everything. He bragged he was a quick study of briefs. Without a deeper understanding, that made him a sitting duck for Treasury's ideologues, and he became their tool.

I think his recent proposal is very much at the level of symptoms rather than the disease.

Fatfingers-
You do at least address the main arguments, which most of the criticisers do not. The answer to your response about unrealistic assumptions is in the next paragraph, beginning "Nor is the neoclassical theory even remotely a useful first approximation." For the neoclassical theory to be useful, it has to bear some resemblance to the real world. But when you put in more realistic assumptions, the predicted behaviour changes radically, from a general equilibrium to a system full of internal instabilities. Therefore the highly restrictive neoclassical assumptions give you no guidance at all to the behaviour of a more realistic theory.

If there are economies of scale (increasing returns to scale in the profession), then the largest firm can undercut rivals and grow until it takes over most of the market (a familiar real-world situation). You then do not have proper competition, and Adam Smith's argument will not apply. So a lack of economies of scale is essential to deducing the neoclassical general equilibrium, which is the result upon which rests the neoliberal belief that unfettered markets yield the optimal outcome. So the "skerrick of evidence" is that the theoretical argument falls apart in the presence of economies of scale.

"Free markets tend" - neither did I say they settle, I only said what you said, that they tend (according to the theory). "The self-correcting nature of supply and demand and prices" is precisely what I AM disputing, because you only get that result with wildly unrealistic assumptions - or perhaps in a village produce market, where information is cheap and fairly complete, the future doesn't need to be predicted, and no economies of scale are operating. Even there, fashion and irrationality could throw the market off.

Examinator
“That this argument pretended to have any specific solutions. It was simply making the point that neo-liberalism had demonstateble failed to deliver better results that the previous “managed” approached.”

Yes that is true, however the neo-liberal ie monetarist approach was still an approach based on governmental ‘economic management’, namely, continuing increase in the money supply, as well as the whole backdrop of inflationary institutions and policies. The tiredest furphy of all is that the failure of these policies is a failure of ‘unfetttered markets’. The current crisis and governments’ response to it demonstrates the cluelessness of all their pretensions to understand either the cause or the cure.

*But no-one has refuted the arguments that show that both the boom and the bust are the result of government policies to lower interest rates.*

Geoff Davies
"You may believe unfettered markets are innately good, but the evidence I cite (and the crashing sounds all around us) are against you."

You haven't cited any evidence of any unfettered markets.

The crashing sounds are the sounds of failed government pretensions to economic management based on endlessly inflating the money supply.

“There are a million ways to organise market economies.”

If, and as, the economy is ‘organised’ by government, a) it is not an ‘unfettered’ market so stop blaming unfetteredmarkets, b) the purpose and effect of government intervention is to change the price level from being what it otherwise would be, c) the same calculational chaos that afflicts the economic decisions of socialist governments in which private capital is abolished, *necessarily* affects the decisions of partial government control of capital. They can’t calculate economically, because their very actions are intended to abnegate the only means of economic calculation – via the price mechanism. And d) these interventions have major unintended disastrous economic consequences, which is what we are witnessing.

Mises has it in a nutshell:
'Many socialist authors emphasize that the recurrence of economic crises and business depressions is a phenomenon inherent in the capitalist mode of production. On the other hand, a socialist system is safe against this evil…..[However T]he cyclical fluctuations of

business are not an occurrence originating in the sphere of the unhampered market, but a product of *government interference with business conditions designed to lower the rate of interest below the height at which the free market would have fixed it* (emphasis added – that’s the part everybody doesn’t seem to get).

‘It is essential to realize that what makes the economic crisis emerge is the democratic process of the market. The consumers disapprove of the employment of the factors of production as effected by the entrepreneurs…. The entrepreneurs, misled by the illusions of the artificially lowered gross market rate of interest, have failed to invest in those lines in which the most urgent needs of the public would have been satisfied in the best possible way. As soon as the credit expansion comes to an end, these faults become manifest. The attitudes of the consumer force the businessmen to adjust their activities anew to the best possible want-satisfaction. It is this process of liquidation of the faults committed in the boom and of readjustment to the wishes of the consumers which is called the depression.

But in a socialist economy it is only the government’s value judgments that count, and the people are deprived of any means of making their own value judgments prevail. A dictator does not bother about whether or not the masses approve of his decision concerning how much to devote for current consumption and how much for additional investment. If the dictator invests more and thus curtails the means available for current consumption, the people must eat less and hold their tongues. No crisis emerges because the subjects have no opportunity to utter their dissatisfaction. Where there is no business at all, business can be neither good nor bad. There may be starvation and famine, but no depression in the sense in which this term is used in dealing with the problems of a market economy. Where the individuals are not free to choose, they cannot protest against the methods applied by those directing the course of production activities.’
Mises, Human Action, 1949, p.563