In a truly free market system too big to fail can occur. Bank runs, financial panics and collapses occurred for centuries before governments made explicit or implicit guarantees to banks or other large enterprises.
That there wasn't a total collapse of the banking system in 2008 was precisely because of government intervention. Everyone would have withdrawn their funds from banks had it not been for FDIC. Imbalances can't be prevented. What can be prevented is a total collapse and the effects of imbalances can be mitigated. This is one of the main reasons for the modern interventionist view of governments with regard to market regulation.
The goal is to prevent millions of small bad decisions ending up adversely affecting the whole country. This is my problem with libertarianism. There is no mechanism for dealing with the scaling issue. Negative externalities are not dealt with.
That there wasn't a total collapse of the banking system in 2008 was precisely because of government intervention. Everyone would have withdrawn their funds from banks had it not been for FDIC. Imbalances can't be prevented. What can be prevented is a total collapse and the effects of imbalances can be mitigated. This is one of the main reasons for the modern interventionist view of governments with regard to market regulation.
The goal is to prevent millions of small bad decisions ending up adversely affecting the whole country. This is my problem with libertarianism. There is no mechanism for dealing with the scaling issue. Negative externalities are not dealt with.