The late, great economist Ludwig von Mises used to say that capitalism gets blamed for everything, even contradictory things. It has surely been one of the most convenient scapegoats in history. I am reminded of this by Alfred Malabre's "Three Grim Scenarios for Coping With an '88 Crash" {Outlook, May 17}. Mr. Malabre bemoans our "living beyond our means" and predicts greater government direction of the economy. And what is the culprit that has brought us to the brink of disaster? The free market, of course -- specifically, financial deregulation.

This is curious, though, because the problems he writes about have their roots not in a deregulated marketplace but rather in government direction of the economy. The free market has not caused the humongous federal budget deficit. The free-spending politicians who write the budgets are many things, but private entrepreneurs they are not. What about consumer debt? Mr. Malabre seems to ignore the role of Fed-caused inflation, which teaches people not to hold money because it loses value. We did not invent the borrow-now-repay-in-cheaper-dollarslater strategy. The government taught it to us.

Rather than blaming the modest deregulation that has occurred, it is high time we fingered the real culprit. It isn't laissez faire, but statism.