Megan McArdle explains yet another example of the role of big government, this time the FHA, in interfering in internal market conditions to guarantee a specifically desired outcome, in this case, residential segregation in the 1930's through the 1950's: How Good Principles Can Make Bad Rules.
When we look at things like slavery, Jim Crow, segregation in the North, bans on interracial marriage and other various racial evils that our nation has endured, it always has to be remembered that those evils were maintained by intrusive governmental systems designed to suppress personal liberty and limit the power of the free market.
And that last point is why I am baffled when I run across libertarians who defend things like slavery and segregation. Even if such things are arrived at through individuals contracting between themselves, say with a contract where one person sells himself into slavery, or covenants on real estate to restrict sales to a particular racial or ethnic group, those private agreements (if they are to be effective) have to be enforced by the power of the courts, which is, after all, just one mechanism by which the State exercises its power.
The effectiveness of private contracts rests, ultimately, on the authority of the State. Thus to make an idol of private contracts in the way in which people's lives are ordered is a severe mistake if one seeks to limit the State's reach into people's private affairs. The State can be just as oppressive acting through the mechanisms of the judiciary as it can be when acting through the mechanisms of regulation or legislation. Here are some key examples of the U.S. Supreme Court standing by approvingly while human beings were denied their rights to life, liberty and property.