In a free market, money doesn't grow on trees: supporters of big government have been blaming the current economic crisis on the free market. We shoot down five of their anti-free-market fallacies and show where the fault really lies.(ECONOMY)(Cover story)(Company overview)

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"Economics is haunted by more fallacies than any other study known to man," economist and journalist Henry Hazlitt once pointed out. "The inherent difficulties of the subject ... are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine--the special pleading of selfish interests." In the introduction to his epigrammatic classic, Economics in One Lesson, Hazlitt explained that special interests and their kept economists have always been skillful at sowing public confusion over sound economic principles: "The group that would benefit by [bad economic] policies, having ... a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible."

Not much has changed since Hazlitt first made those observations more than six decades ago, except that public confusion over free-market economics is deeper than ever and the free market is considerably more hamstrung by government interference than it has ever been previously.

The financial crisis that has engulfed the world in recent months has given more ammunition to the enemies of liberty, especially the rhetorical and political saboteurs whose aim it is to eradicate economic freedom with full-blown socialism. Their arguments--that the markets need "fixing," that private-sector greed is responsible for the mess, and that freedom, at least where the markets are concerned, simply does not work--are the same warmed-over fallacies that Hazlitt (and others before and since, like Bastiat and Rothbard) devoted his life to refuting. The truth is that the current financial crisis has been created not by the free market but by government interference in the operation of the free market.

But in times of crisis, anti-free-market fallacies have a way of reappearing and capturing the fancy of a public weary of bad news and desperate for anything that will restore market sanity and, more importantly, return their vanished wealth. Hazlitt and other champions of freedom and free markets understood that the enemies of freedom can be counted on to exploit every opportunity to spread their falsehoods, so they worked tirelessly to help the common man to understand and appreciate the virtues of free-market capitalism. In that same spirit, we presume to offer a timely treatment of some of the most conspicuous anti-free-market fallacies, to remind the reader of the virtues of economic freedom and of the root causes and cure for the financial and economic meltdown.

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FALLACY #1: The free market does not work perfectly because unfettered capitalism is too disorderly. Government is needed to impose limits on speculative excess, prevent price fluctuations from becoming too severe, and in general to exercise benign control over a lawless domain of human activity.

Answer: "Order" is a popular synonym for government, especially among those who believe no problem is too big or too complex to be solved by the creative application of government force. But is "order" more important than liberty? Other freedoms--the freedoms of speech and of religion spring immediately to mind--are also sometimes conducive to social …