Helping people, not activities

If you put a rat with a two-degree fever into a very hot room, the rat activates its cooling mechanisms to keep its body temperature two degrees above normal. If you put it into a cooler room, it activates heat-conservation mechanisms to maintain that two-degree fever. Body temperature is carefully regulated even during fever; the thermostat is just set a bit higher. Why we get sick (page 27)

Fever, in other words, is not the problem, but the body's attempt to defend against infection, and medications that block fever 'interfere with the normal mechanisms that regulate the body's response to infection, with results that may be fatal.' This sort of adapative behaviour can apply to our social and environmental problems. Sometimes, not always, government intervention can accentuate and entrench the problem. Farm subsidies (this blog, passim) are a classic example, but thankfully we are becoming a little more cautious about rushing in to address the presenting problem whenever there's a crisis.

So the current Economist (subscription) recognises that markets can regulate more effectively than government when dealing with the subprime lending turmoil:

Shares of the most egregious mortgage lenders have plunged and dozens have gone bust. Loan-underwriting standards are tighter. The riskiest subprime securities have almost no takers. These spasms are how the market cleans up its mistakes and learns not to repeat them. That sounds cold-hearted, but pain is a necessary part of this correction. When politicians seek to deaden that pain and supplant those lessons with hasty fixes of their own, they almost always blunder.

If there's a general approach to such interventions, I would opt to aim for broad, objectively verifiable outcomes that are meaningful to natural persons, as distinct from corporations. Faced with, say, a plunge in agricultural product prices, the efficient approach would be to help farmers in their capacity as human beings rather than as farmers. Let the market decide on how people deploy their land, labour and capital. It does it more efficiently, because more adaptively, than government ever can. A government's duty is not to bail out inefficient industries, nor to maintain abstract economic growth figures, but to help its citizens.