One thing that is conspicuously absent from a lot of discussions of policies aimed at creating “green jobs” or providing “affordable housing” is a clear recognition of the information-revealing properties of markets, prices, profits, and losses. The fact that people aren’t willing to put their own money at risk suggests that this or that business plan probably isn’t a very good idea. Interventionism of this sort also involves two inconsistent premises. First, greedy people will do anything to make a buck. Second, those greedy people will leave money on the sidewalk because they are too ignorant to recognize great investments like Solyndra or Associated Steel.

We are quickly approaching a tipping point where the have not are equal to the haves. That is bad for a democracy where voters can vote themselves benefits from the government. This is something that Mises and Hayek warned us about, rightly so. What we are seeing is the result of Keynesian economics and the welfare state. As the Fed and the government continue to destroy capital and destroy incentive through foolish regulations, we all become poorer, especially those on the bottom quintiles.

The idea of regime uncertainty had sound economic theory and substantial empirical evidence to support it from the beginning, and a great deal of additional evidence has accumulated over the past three years. Yet critics have continued to dismiss it either as Republican bunk bought and paid for by Obama-hating billionaires or as a sort of “just so” story concocted by flaky think-tank nobodies, such as yours truly. Now, however, the research reported by Baker, Bloom, and Davis knocks the ball firmly back into the critics’ court. Don’t be surprised if they take a whack at it. Whether their attempt will succed intellectually is another matter.

After damning politicians up hill and down dale for many years, as rogues and vagabonds, frauds and scoundrels, I sometimes suspect that, like everyone else, I often expect too much of them. Though faith and confidence are surely more or less foreign to my nature, I not infrequently find myself looking to them to be able, diligent, candid and even honest. Plainly enough, that is too large a order, as anyone must realize who reflects upon the manner in which they reach public office. They seldom if ever get there by merit alone, at least in democratic states. Sometimes, to be sure, it happens, but only by a kind of miracle. They are chosen normally for quite different reasons, the chief of which is simply their power to impress and enchant the intellectually underprivileged. It is a talent like any other, and when it is exercised by a radio crooner, a movie actor or a bishop, it even takes on a certain austere and sorry respectability. But it is obviously not identical with a capacity for the intricate problems of statecraft.

The best case is a slow decline in living standards and wealth as the excesses of the past are paid for. The risk of instability is very high; a more violent correction and a breakdown in markets like 2008 or worse are possible. Frequent bouts of panic and volatility as the global economy deleverages –reduces debt- are likely. Problems created gradually over more than the last three decades can only be corrected slowly and painfully.

The ongoing war on the poor is relentless. Pensioners just have to swallow a 30% pay cut. Forget looters in Tottenham, we will have geriatrics in the streets of green and leafy middle class suburbia smashing the place up if they are not careful. They will pay for the mistakes of past governments creating, with their private sector agents, the banks, the mother of all credit booms, which has led to the largest mis-allocation of resources since the 30’s.