What is getting us into trouble is the belief that the “instability” of an apparently random system, such as the free market, is dangerous because it has no “control.” This is a false assumption.
The free market, like any “apparently random” system has controls, or more accurately, feed-back loops, by which the chaotic changes that take place within the system “feed back” into the system, stabilizing it.
A simple example of such chaos can be found in most homes. Your washing machine is “self-balancing” during the spin cycle. How does this happen? Chaos.
There are two fly-weights inside and underneath the tub. They are attached only at the center and are free to move around that center in either direction. The weights are dissimilar and will move at different speeds, and in different directions depending on the forces applied. When the load is off-balance, these fly weights shift, automatically, in response to the shifting of the center as the load spins. Their movement is out of sync with the movement of the load, and also with the other fly-weight. The result is that some of the movement counters the movement of the load, centering the mass of the whole system.
Free markets, and all chaotic systems, have these same tendencies. What Keynes and his disciples in government are afraid of is precisely what makes it work! If in the above example, one or more of the fly-weights were “regulated,” then the system would fail to achieve the same level of balance, or, would be more stable for a single cycle and less stable when the load shifted. Manual controls are inherently incapable of predicting future loads, and because of bureaucratic lag, incapable of being adjusted in time with the changing load. Only the free moving, chaotic fly-weights are capable, without any intervention whatsoever, of balancing the load in real time.
It could be argued that if enough controls are put into place, the system could not get out of balance. However, this would make the washing machine very inefficient, as it would require actively (with additional energy), countering the movements of the load. Or, the load would have to be the exact same load, distributed exactly the same each time.
The market analogy would be either a completely controlled economy (Soviet Union) or a static economy (1990’s Japan).
Another problem with Keynes’ fear of the free market is the notion that the market is participated in by un-thinking robots or static points of market interaction. This is definitely not so. It is the diversity of thought among the players, the innovation and planning by the entities involved, the thinking and reasoning, good or bad, which makes the market come alive. The market is a super system of free-thinking and free-acting fundamentals, not static points.
Keynes, Obama, and the last century’s worth of Presidents, would rather trust in the thinking of a select few, than have faith in their fellow man. I happen to believe that most people are mostly good most of the time, and take full faith in their ability to make decisions and act rightly. That is the belief that must be maintained, and even protected by Freedom seeking people, and is the cornerstone of free-markets and free-trade economies.
The United States, through the Constitution, was the first ever country to fully take this view seriously and implement a set of checks and balances in government institutions to protect it. Unfortunately, over time, we have forgotten how important our faith in each other really is, and have regulated our freedoms away, all the while singing the songs of Keynes and his fearful ilk.
It is long past due we give freedom and liberty a concerted effort. Prosperity would return in no time!