But the purpose of the proposed systemic-risk regulator is not only to spot the impending systemic risk - but to intervene to prevent it from happening. Consider the power such a regulator would have. Consider that the existence of such a regulator would increase moral hazard - as it would be assumed that if the systemic regulator isn't warning of danger, market players would be more likely to assume risk is low. And consider the consequences of using such power mistakenly.

For example, let's say the regulator spots what he believes is a dangerous national real estate bubble. He acts quickly to snuff it out by raising interest rates or requiring minimum 40 percent down payments or some other intervention. What was a booming economy with 3 percent unemployment turns into a hard recession with 8 percent to 10 percent unemployment.

But later it is determined that it was not a bubble, but rather the beginning of what would have been a steady, healthy increase in value. Imagine if such a regulator had existed in 1955 and snuffed out the great post-World War II expansion that made America a prosperous middle-class nation of homeowners in suburbia rather than poorer renters in the city.

It is not given to the smartest people in the world the capacity to see the future, to discern with sufficient precision the details of the moment that cause the critical consequences in the future.

But it certainly is the lamentable history of man that we have the power to screw things up all the time. Remember the vaunted Japanese industrial policy of the 1970s that was going to permit Japan to shrewdly dominate the economic world over us hapless free-market countries with no governmental power to identify the industries of tomorrow?

In the end, the call for a systemic-risk regulator is yet another futile expression of faith in the power of government to outthink the markets. It is another foolish bet on bureaucrats and politicians in a tightly regulated economy being more likely to bring prosperity than free businessmen, investors and consumers in a free market. It is the biggest sucker bet in history: a bet on tyranny over liberty.

If economics is a science, it is more like biology than physics. Biologists try to understand the relationships in a complex system. That's hard enough. But they can't tell you what will happen with any precision to the population of a particular species of frog if rainfall goes up this year in a particular rain forest. They might not even be able to count the number of frogs right now with any exactness.

We have the same problems in economics. The economy is a complex system, our data are imperfect and our models inevitably fail to account for all the interactions.

Is the Dismal Science Really a Science?

Staiger acknowledges that it's impossible to pinpoint the exact cause for the decline. But the research team does have a "best guess": a combination of lower fees and increased market pressure. The drop in hours worked can be directly stacked up against the decline in doctors' fees over the past decade. And in metro areas, where fees dropped faster and doctors faced greater competition for plum jobs, hours dropped at a greater rate.

In fact, doctors' wages dropped about the same proportion as their work hours -- 7 percent, after adjusting for inflation -- from 1995 to 2003. By comparison, salaries for other professionals increased by 7 percent in the same span of time, according to a 2007 report from the Center for Studying Health System Change.

- Fewer Hours for Doctors -- and Less Pay

"not a single one of the 114 tests administered to first graders -- of academics, socio-emotional development, health care/health status and parenting practice -- showed a reliable, statistically significant effect from participating in Head Start.

Head Start: A tragic waste of money

Exxon Mobil (XOM) announced today that in 2009 the company's proven reserves increased by 133% of the amount of oil produced.

Exxon now has 23.3 billion oil-equivalent-barrels of reserves comprised of about half liquids and half gas. It's the largest amount in the company's history.

Amazingly, Exxon, who has been accused in the past of being too conservative in terms of exploration and development, has been finding more oil than it produces for each of the last 16 years, to the dismay of peak oil proponents.

- Exxon Hits Peak Oil... Reserves

The unspoken, bottom line: The federal government has already nationalized the housing industry. We're not just talking about Uncle Sam providing a few subsidies, or even taking over a few of the big players, as they have in the auto industry. This is a complete takeover. Every new mortgage today is a government mortgage.

Over the last two years, government mortgage and mortgage-backed holdings have grown on net by nearly $1 trillion. Private investors and institutions have shed more than $1.5 trillion -- through foreclosure losses, pay downs, and by selling to government.

The effective result is a government-run housing market. Barofsky reports that right now, the government is responsible for about 100 percent of all new mortgage activity. You read that correctly. To put it in his own words:

"According to Federal Reserve net borrowings data, the federal government and the organizations it backs now guarantee or issue almost all net new borrowings for mortgages and MBS."

Barofsky's warning: We're all on welfare now

"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom - go home from us in peace. We ask not your counsels or your arms. Crouch down and lick the hands which feed you. May your chains set lightly upon you, and may posterity forget that you were our countrymen."

- Samuel Adams (via Cafe Hayek)

In February 2010 there is no way to know what really lies ahead; there is no way to distinguish between stimulus and the real economy. Too many policy boulders are being dropped in the water. One can hardly determine the effects of one before another one is thrown in the pool.

There is stimulus one. Then stimulus two. And now talk of stimulus three. There is TARP. Cash for Clunkers. Cash for Appliances. First home buyers tax credits. Health care revision. Copenhagen. Cap and trade. Jobs programs. Financial reform. Each announced in short succession. The effects of some of these programs are so large that they are readily seen in GDP and construction data. By some counts, about half of 2009's fourth quarter 5.7 percent GDP growth is explained by Cash for Clunkers, a program that came on like gang busters and then faded into oblivion.

Imagine yourself as owner of a small business with 20 employees. You are trying to decide if you should build up inventories again, hire one or two people, and lease another pickup truck. Would you make your decision on the basis of the fourth quarter GDP numbers? Would you base your plans on the explosion of existing home sales that followed the first-home-buyer stimulus? Most likely not. I'll bet you would wait so that you could get a better fix on the real economy.

Perhaps we need six months of political silence.

- Producing Jobs: Thoughts on Obama's Plan for Small Businesses