(Editor's note: Jeffrey A. Miron is senior lecturer in economics at Harvard University. A Libertarian, he was one of 166 academic economists who signed a letter to congressional leaders last week opposing the government bailout plan.)

This bailout was a terrible idea. Here's why.

The current mess would never have occurred in the absence of
ill-conceived federal policies.

The fact that government bears such a huge responsibility for the
current mess means any response should eliminate the conditions that
created this situation in the first place, not attempt to fix bad
government with more government.

In contrast, a bailout transfers enormous wealth from taxpayers to
those who knowingly engaged in risky subprime lending. Thus, the
bailout encourages companies to take large, imprudent risks and count
on getting bailed out by government.

Talk of Armageddon, however, is ridiculous scare-mongering. If
financial institutions cannot make productive loans, a profit
opportunity exists for someone else. This might not happen instantly,
but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope
of a bailout; bankers will not sell their lousy assets for 20 cents on
the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being
understated.

So what should the government do? Eliminate those policies that
generated the current mess.

http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html