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Innocent Again

Author: Amity Shlaes, Former Hayek Senior Fellow for Political Economy
March 11, 2010
Forbes Online

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"Nothing is new, it is just forgotten." That line was recently uttered in the rag trade in reference to our collective fashion memory. Jersey wrap dresses with plunging necklines from Diane von Furstenberg seem original. But this is because many women are too young to remember the German princess' debut collection four decades ago. Ditto small, odd-shaped autos and aviator sunglasses.

The rule of newness and forgetting also holds true with regard to financial memory. That's the only explanation for the equanimity with which the public is greeting the Obama Administration's move toward price controls on health insurance and credit cards. The Administration may not be calling its plans "price controls." It would describe what it's doing as establishing a Health Insurance Rate Authority and creating new offices and practices to protect consumers from predatory lenders. Still, such entities are laying the ground for price controls when they set premiums or the Visa interest rate.

For the consumer the whole experience will begin with an innocent appreciation, the amount of which sounds reasonable. Then will come confusion, followed by the bitter discovery that the low-price insurance or the low interest rate is unavailable. Finally the innocent becomes a cynic, a Third Man, an arb, who lives to beat regulations.

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