Arnold Kling  

Summers to the Dark Side?

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David Leonhardt's story on Larry Summers makes it sound like Larry has moved to the dark side.

Summers says. “And I think now the challenge is, again, to protect a basic market system based on open trade and globalization, to make it one that works for everyone or for almost everyone, at a time when market forces are often producing outcomes that seem increasingly problematic to middle-class families.”

...Health care reform is another obvious priority. In Summers’s view, the current employer-based system, which creates insecurity for many families and big costs for companies, may need to be replaced by one in which the government pays for insurance but individuals choose what plan they want. It would be single payer, but not as England or Canada does it.

Summers becomes really excited by what he sees as the potential for a life-sciences revolution. It will happen only if government again does its part, though...He likes to talk about “clusters” like Silicon Valley — in the life sciences and other areas — where groups of companies can feed off one another to become more productive. Moving jobs to a low-wage country then becomes less attractive. And the government can help create clusters, just as it built the highway system and the Internet. If you didn’t know any better, you might even refer to this idea as industrial policy.

It sounds as though Larry has become focused on the distribution of income. My guess is that this is mostly a phony issue. My sense is that capitalism seems "increasingly problematic" only to people who have always thought it was problematic, people on the other side of the Great Tug-of-War.

But I would rather have Larry be the one worried about it than others on the Left. Larry is less likely to aggressively push really stupid policies. In general, the Democrats have lousy instincts when it comes to economics, but they have reliably good economists.

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CATEGORIES: Income Distribution

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The author at Caveat Bettor in a related article titled Libertarian reflections on The Sopranos writes:
    I continue to maintain that prediction markets will improve democratic capitalism from our current implementation. To quote Tony Soprano's jukebox preference: Don't Stop Believin' (by Journey). [Tracked on June 11, 2007 10:55 AM]
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Half Sigma writes:

Summers is 100% right that the employer-based healthcare system sucks, and that system has nothing to do with free market forces, it arose because of government laws which favor such a system.

Thus, the only way to improve the system is for the laws (which are currently anti-free market) to change.

If the only solution accepted by the public is that the government pays for a lot of healthcare, at least the government should pay in a way that makes more sense rather than the current patchwork socialism we have.

Horatio writes:

The US already has one of the most socialized health care systems, as measured by per capita government spending. In 2001, only the governments of Norway and Iceland spent more per capita.

If we replaced Medicare and Medicaid by no-strings attached vouchers, we could have universal coverage without increasing taxes and with lower prices than the current system. Naturally, a truly free market would perform better, but vouchers might actually sell to the paternofascists who are clamoring for more government intervention.

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