Arnold Kling  

Other People's Money

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Is Ignorant Dogmatism Possible... Feynman on Suits vs. Geeks...

Tyler Cowen puts a lot of the blame for the financial crisis on leverage. He links to Robert Frank, who writes,


In financial markets, asset bubbles cause real trouble when investors can borrow freely to expand their holdings. To prevent such bubbles, we must limit the amounts that people can invest with borrowed money.

I want to extend the point to cover government, where the chief characteristic is playing with other people's money. Big Finance and Big Government have much in common. Both are coveted by Harvard graduates. Both are characterized by an arrogant sense of entitlement and importance.

Instead of thinking of the pending bailouts and financial regulation as a new era of government supervisions of markets, think of it as preserving the system in which a Harvard elite controls other people's money. In fact, very little is likely to change. Reading the news stories about how Secretary Paulson plans to implement the bailout, it seems as though the same people will be in charge of the money. Print some new business cards, change the logo on the front from "Goldman Sachs" to "U.S. Treasury," and everything else continues as it was. It's just that it becomes a lot more difficult for ordinary people to opt out of using the elite's money management services.


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The author at Samizdata.net in a related article titled Samizdata quote of the day writes:
    "Instead of thinking of the pending bailouts and financial regulation as a new era of government supervisions of markets, think of it as preserving the system in which a Harvard elite controls other people's money. In fact, very little is likely to cha... [Tracked on October 7, 2008 3:38 AM]
The author at sammytaylor.net in a related article titled Other Peoples Money writes:
    This is an interesting way of viewing the Paulson plan: Big Finance and Big Government have much in common. Both are coveted by Harvard graduates. Both are characterized by an arrogant sense of entitlement and importance. Instead of thinking of the pen... [Tracked on October 8, 2008 4:41 PM]
COMMENTS (45 to date)
MattYoung writes:

Harvard and our government grew up together, and it is hard to separate childhood friends.

Ajay writes:

It's a shame that such a shitty column as Frank's is printed, yet you can't get any newspaper to print your far superior pieces. There's probably no better reason for why most current newspapers deserve to and will go out of business over the coming decade. I look forward to the far better information I will be able to get online someday soon than is being provided now by these antiquated institutions known as newspapers.

Adam writes:

Amen. Contrary to Frank, the unchecked borrowing wasn't authorized by private investors, it was authorized by Congress. That's precisely what Fannie and Freddie were required by Congress to do--lend without limit. When loan standards became binding, loans standards were weakened over and over again so that more money could be lent. The bailout is just another example of a Congress willing to borrow without limit.

To apply an analogy from Malthus, if we don't apply preventive checks to the growth of public indebtedness, positive checks will intervene--insolvency, monetary instability, and economic decay. It's a terrible price to pay to keep Shumer, Dodd, Frank, Waters, and others in office.

Wishing you the best in these difficult times,

Adam

The Snob writes:

Well, if Cambridge and New Haven are at all evidentiary of rule-by-university-elite, I suppose we should prefer rule by Harvard over rule by Yale.

Speaking of Harvard and money, has anyone heard lately how their endowment has been doing? From what I recall, the real problem here is that it seems like the world's money is being managed by Harvard's dining clubs, rather than the guys and dolls who actually manage Harvard's money.

Unit writes:

I had never thought about it this way. So when government raises taxes it is in fact borrowing from us. It then invests our money and keeps the dividends.

Frejus writes:

The attempted analogy in this post is false.

The topic is leverage.

Taxes--and even government borrowing, which seems to be a GOP and libertarian/Norquist love/strategy--is not the type of leverage that produces bubbles.

ThomasL writes:

Frejus,

The point of comparison is not on bubbles; it is on the nature of actions taken when using other people's money, extending that from private borrowing, mentioned in the cited article, to public taxation. For my money, that comparison holds on the main point--they both deal with the handling of money that isn't naturally the property of the person spending it.

Where the liability of a person for their debts is eroded, it brings the relationship to borrowed money even closer to the relationship that can be observed between elected officials in government--who have little or no accountability attached to the money they have charge over--and tax revenues.

El Presidente writes:

Are you serious?

Government is substantively different than private commerce in that it has incentives to actively pursue production of public goods.

Recommended reading for economists: Leviathan

Government is not an ideal social institution, it is a necessary evil. It is because we will devour each other if left to our own devices that government must stop us from destroying the most productive resources: people.

How is it that we have come to this point and the only thing we can do is resort to Reagan's economic philosophy - "Starve the Beast"? How is it that we have not yet learned that the failures of our society are failures of faith between individuals? How is it that we accept Reagan's assertion that government is the problem and ignore Reagan's statement that the role of government is not to protect us from ourselves, but to protect us from each other, then proceed to advocate the evisceration of the institution of government so that it can do neither? Where did this madness come from and when will it be gone?

Here's a question I would like you to answer, Arnold, if you're going to take this tact: What is the right size of government? Give me a dollar figure, a percentage of real output, a number of employees, something, and tell me why. Who will produce public goods if government does not? Is building infrastructure playing with other people's money? Is educating children playing with other people's money? Is operating police and fire departments playing with other people's money? What exactly are you getting at, and why does it require a wholesale assault on the institution of government? The profits of government are shareholders equity in "the full faith and credit of the United States of America". Is wealth not beneficial if it cannot be appropriated and monopolized? ABSURDITY!

The statement of the problem is lacking. The problem here, as in many of our past hardships, is failure of faith among individuals. In a fractional reserve banking system, honesty IS currency and lying IS larceny. Lying is the culprit and we don't have to look far in any direction to see that it has metastasized. We ought not tell people that we can make everything all better if we all will simply sign on to a libertarian agenda. It is folly and I am disappointed by the implied suggestion.

Instead, let us be accountable. Let us not have such disparate incomes and wealth that some believe, and rightly so, that they can afford the suffering, even premature death, of those around them and be alright in the end. Have we forgotten about the role of incentives in the decisions of individuals? Have we priced dishonestly correctly given the harm we now see it can cause?

Read Adam Smith, but read ALL of Adam Smith. Read about the role of empathy in creating morality within individuals. Then, ask yourself why you would bother with empathy for individuals whose fate you will never share. If you can't think of the answer, then you shouldn't have anything to say about the wellbeing of others, and you shouldn't be trusted to pursue it. I'll take advice from somebody else, thank you.

I think you'll have to admit that it is not the existence or the size of government that is to blame. It is instead the choices that governments, and firms, and individuals have made that are to blame. It is that government, not alone, failed to act responsibly. Can anybody say "Capital Gains Tax Cut", "Ownership Society" and "Stay the Course"? No, no, no. Let's not talk about that. That hits too close to home. This isn't an "oopsie-daisy" situation and "awe shucks" isn't going to cut it. The people responsible will pay, or we will all pay.

Grant writes:

El Presidente,

The government produces public goods, but it also produces public bads, because good governance is itself a public good. Do its goods outweigh its bads? On the federal level (along with many foreign countries such as Russia) I'd say the answer is "no". On the local level I have no idea, but my intuition is that its a lot more useful at building roads and parks than it is on national "defense".

There are, by the way, ways to voluntary fund public goods aside from government. Assurance games and other such things essentially lower the Coasian transaction costs to doing so. The Internet is a prime example of a market producing widespread public goods, as nearly every bit of electronic communication that goes on today is powered, at some level, by open-source software or protocols.

A few people educated at Harvard and/or Yale:

FDR
John F. Kennedy
George H.W. Bush
Bill Clinton
HIllary Clinton
George W. Bush
Al Gore
John Kerry
Barack Obama
Joe Biden
Michael Dukakis
Gerald Ford

I"m not sure I'd want to be included in this list if I were in politics.

John Fembup writes:

El Presidente, you have riffed on something that I think Kling neither asserts nor implies. While you do go off to an interesting place, you are still going off.

Thinking about how the power of government can best be controlled is sound public administration. IMO demanding to be told the exact scope, in dollars, of the optimal government is not a useful question. Kling's point is that people (whether elites or not, BTW) who spend other people's money behave differently from people who spend their own. I think that's true and helps inform the larger debate - which is how the power of government can best be controlled. The Bill of Rights is an example of the kind of control I mean.

Anyway - - I think most people would agree with your statement that government is a necessary evil.

It also needs to be said: the necessary part must in no way be used to obscure or excuse the evil part.

frinstance, let's agree that home ownership is a public good.

And then let's observe that the manner in which the Congress chose to promote this particular public good, is unfolding into a public disaster. The ends certainly do not appear to justify the particular means. The necessary role of government in securing this particular public good must not be used to obscure or excuse the evil that Congress worked on the public thru the legislation that enable Fannie Mae and her siblings.

Randy writes:

El Presidente,

"The problem here, as in many of our past hardships, is failure of faith among individuals."

I agree, but it goes deeper than that. Why have individuals lost faith in one another? Because they are being pitted against one another by the divide and rule policies of the political class. Sorry, you don't get to have it both ways. You can't play the game of divide and rule and then complain about the lack of unity. And you certainly don't get to blame the libertarians who see the true nature of the game even through the fog of propaganda.

Thomas Dinsmore writes:

The obvious response to Frank's argument is that even if we stipulate that it is a good thing for the government to regulate leverage, how exactly does the regulatory authority determine what amount of leverage is appropriate?

El Presidente writes:

Arnold's point, as I understood it, was that the government should not be involved in moving markets through GSEs like Fannie and Freddie; that using market players to influence the terms of credit is tantamount to the use of leverage to garner very large profits while imperiling the wellbeing of everybody in the market.

Arnold's point, as he has not stated but seems to imply, is that markets are self correcting, a panacea for what ails you. That is the underlying problem that we keep returning to.

Political class? Who is this political class?

Individuals are not being pitted against one another by a political class. This is not a grand conspiracy. It simply the result of irresponsible policy covered with lies. Under a Democratic president and a Republican congress, there was an expansion of credit for mortgages. There was also a dramatic reduction in deficits from using pay-go. Beating up on Greenspan is in vogue these days, but Greenspan's methods work fairly well when the budget is in balance and real wages are rising. They begin to fail when we commit to spending trillions of dollars on war and then refuse to pay for it, all the while insisting it will pay for itself. Our leaders failed to ask us to sacrifice, but they didn't hesitate to pass the check. This is not a problem with the institution of government, but with particular policies. I fear we have not correctly identified which ones.

What is driving a wedge between Americans, pitting them against one another if you prefer, is a growing divide in income distribution that was stoked by irresponsible tax cuts and irresponsible financial commitments to destructive actions that ought not to have been undertaken. There are consequences to these mistakes. We were told there would be none. There are costs associated with these endeavors. We were told there would be none. These lies create the backdrop for a complete failure of trust in social institutions. When trust goes, fractional reserve banking is not far behind.

Libertarianism doesn't save you from the consequences of lying. It only seeks to make sure that though the lies are many they cannot ever get big enough to harm everybody at the same time. It seeks to do this, yet it fails. There is nothing about libertarianism that prevent private interests from gaining enough wealth to behave in the manner that Arnold suggests was repugnant on the part of the government. If something is harmful and destructive, it makes no difference whether the person doing it has a government office or not. Was Enron influenced by a GSE, or did they simply lie while using obscene amounts of leverage?

Demanding to know the prescription for the size of government is the only way to betray the flaws in the assumptions that lead a person to these conclusion. If nobody can tell me the right size of government, then how do we know that the current size is not right? If we cannot define size in a vacuum, then we must define it in terms of function. That is, what are the functions of government, and what size is necessary to fulfill these functions? Arnold has taken issue with the concept that government inserted itself into mortgage credit markets. He indicates that this is not the role of government. But he does not say what the role of government is because it is pretty much anathema to libertarianism to define a positive role for government. It's an unstated bias without sufficient reason.

The alternative to trying to narrow income and wealth gaps through credit markets is doing so through taxes and transfer payments (a la Friedmans negative income tax or the EITC). I don't believe Arnold would support expansion of either of these. Although, I could be wrong. Yet the reality remains that as incomes diverge, interests do also. The payoffs to particular actions begin to change in ways that cause us to think we are removed from the hardship our choices will cause to others. This is why leverage can become dangerous. The criticism is spot on.

Resorting to assailing government efforts to narrow the gaps is astonishing to me, especially since such measures were the linchpin of Friedman's work. It is the only way a committed Libertarian can advocate reducing the direct intervention of government with any intellectual integrity, except of course through owning the notion of social Darwinism. If Arnold wants to criticize the policies that were chosen, then let's hear how Arnold likes the alternatives. On the other hand, if Arnold will stipulate that this current crisis resulted not so much from government intervention in credit markets but more from a failure to adhere strictly to sound fiscal policy, then there may be some common ground on which reasonable debate can occur.

Patri Friedman writes:

Zing! I love it.

quadrupole writes:

One huge difference between big finance and big government is that the people who lent to big finance did so *voluntarily*. Nobody put a gun to their head and made them lend...

Big Government is notably different.

Additionally, when an Investment Bank screws up they go under. When Big Government fails they demand more money.

floccina writes:

Real returns have been on investment money have been falling since the beginning of the industrial revolution. So shouldn’t banks become lass important as returns fall? With the average stock market yield now only 2% cannot all public companies sell stock in place of going to a bank saving the bank’s overhead costs. Could not rent to own, which aligns the interests of the buyer and seller about as good as mortgage without all the overhead of a bank loan replace the mortgage. As people’s IRAs and 401ks grow and return less interest shouldn’t they borrow less from banks and more from their IRAs?

It seems to me that we are awash in invested money so do need banks less?

Am I wrong?

Randy writes:

"What is driving a wedge between Americans, pitting them against one another if you prefer, is a growing divide in income distribution..."

Right... Use of a divide and rule tactic to counter the accusation that the political class is using divide and rule tactics.

floccina writes:

The alternative to trying to narrow income and wealth gaps through credit markets is doing so through taxes and transfer payments (a la Friedmans negative income tax or the EITC). I don't believe Arnold would support expansion of either of these. Although, I could be wrong. Yet the reality remains that as incomes diverge, interests do also. The payoffs to particular actions begin to change in ways that cause us to think we are removed from the hardship our choices will cause to others. This is why leverage can become dangerous. The criticism is spot on.

El Presidente I used to be a big supporter of an hourly wage subsidy but IMO it would increase support for restritions on imigration. Maybe it would be better done world wide but this might create bigger problems than it would solve. I guess private charity is that way to go.

Student writes:

I believe that these bail-outs are nothing more than just excuses for the Government to toy with our finances again. They need to just keep their noses out of our lives and leave us be. I don't think that spending all this money on the failures and mistakes of other people will help much with our economy.
The only thing that is happening is that we're teaching those idiots that they can get away with mismanagement. The Government just needs to stay out of it.

El Presidente writes:

Randy:

I was quarreling with the notion of coordination. This is not coordinated; one class versus another. This is tragic. I am not aware of any policy of income distribution that would substantiate an argument that this is "divide and conquer", in a purposeful sense.

Furthermore, I am not without sympathy for those who didn't quite make the cut or those who may yet fall from their coveted positions of wealth or power. I am listening to a radio program right now discussing people who recently committed suicide due to failed development projects and financial ventures. These were not poor people. I feel bad for them too. I'm not advocating class warfare. I'm suggesting that we should reduce the disparity between classes.

Randy writes:

El Presidente,

"I'm not advocating class warfare. I'm suggesting that we should reduce the disparity between classes."

And I'm suggesting that the whole idea of income disparity is nothing but a political tactic. I am a member of the productive class, and I know who's ripping me off. I see it taken out of my paycheck every couple of weeks. I pay the fees and the higher prices. I've got evidence. The political class has nothing but theories of social justice - that they invented. You think there's no such thing as a "political class". Hey, you cut it your way, and I'll cut it mine.

And by the way, I am advocating class warfare.

El Presidente writes:

Randy:

I think we're talking past each other. I'm pretty sure that income distribution is an empirically verifiable phenomenon. I don't know that it matters who each income is going to as much as it matters that the incomes are disparate and they result in disparate wealth. I just don't see what the class argument brings to the table. It makes less difference what class I belong to if it might change tomorrow. It makes more difference if it seems it will never change. I'm advocating that we move toward a less static, but also less consequential reality of class.

I think I understand your sentiment about a political class, but I fear that's shorthand for government itself. I mean, public administration is a profession, not a hobby. And I think it's probably best that those who govern treat it like a job. They just need to know that they have constraints too. For example, Schwarzenegger thought that he was up to the job as an amateur, railed against "the politicians in Sacramento", and told Warren Buffet to go do push ups when he suggested tax reform. Now he needs a loan from the federal government.

Ajay writes:

OK El Presidente, you believe that we should steal from the rich and give to the poor but why? I suspect that most people here would not accept that fundamental premise that you begin with, so you're lost when you start start arguing that we just need to find the best way to redistribute income. As for social darwinism, that is what I see as the guiding principle of free market capitalism, the engine that makes it run, and I'm glad for it. I'm all for letting the idiots in Europe opt of free markets if they choose, or allowing the dimwits in San Francisco to choose a lesser degree through federalism, as they pay the price themselves in stagnation and high unemployment rates. If you believe we need to help the poor simply because they will rise up in revolt if we don't, as a college buddy once argued to me, trust me, we have the police to put them down. If you believe that lower and middle class wages are unfair, you need to articulate an argument for why that is so, particularly considering that wages are more a function of supply and demand than any intrinsic calculation of the value of one's work. You cannot assume that a bunch of libertarians agree with your fundamental precept of redistribution to begin with. Given your extremely weak arguments for the causes of the current, supposedly unfair distribution of wealth- a 6-8% tax cut and Halliburton were the reasons for the rich getting richer? Please- you probably don't really understand what's going on with the current distribution and need to learn more about why things are the way they are today before you can start arguing for state-coerced changes.

Randy writes:

El Presidente,

"I'm pretty sure that income distribution is an empirically verifiable phenomenon."

True, but its meaning is subjective. The division between the political class (those who collect rent) and the productive class (those who pay rent) is also an empirically verifiable phenomenon.

"I just don't see what the class argument brings to the table."

The breakdown by income distribution has brought considerable power and wealth to the political class. They have been able to accumulate enormous profits by skimming from a wide variety of redistribution programs. The breakdown into political and productive classes will end the ability of the political class to advance its own interest at the expense of the productive class. It will force them to earn their keep, or find another line of work.

"I mean, public administration is a profession, not a hobby."

A professional creates something of value. The political class does not. A public administrator is a rent collector.

El Presidente writes:

Ajay:

I didn't say anything about redistributing wealth. I did talk about preventing or narrowing extreme disparities by way of income distribution (or the distribution of the collective tax burden). You may want to review my remarks. Unless current income taxes are theft, then your criticism of my position is inaccurate as you have misstated it in your reply. I want to adjust marginal tax rates and firm up the base. I also want to moderate rates across all forms of income.

"As for social darwinism, that is what I see as the guiding principle of free market capitalism, the engine that makes it run, and I'm glad for it."

You and I disagree about that. I thought that the supposed benefit of capitalism was that technologies and distributions of resources would be efficient and that real individual standards of living (not merely aggregated ones) would improve. Unfortunately, that isn't always reality. So, it takes something other than laissez faire to reach that end. I would prefer that intervention be as simple and even-handed as possible. That's why I focus on income, not wealth. You might still disagree.

"If you believe that lower and middle class wages are unfair, you need to articulate an argument for why that is so, particularly considering that wages are more a function of supply and demand than any intrinsic calculation of the value of one's work."

I'm not making an argument about fairness between individuals, or even classes, because I think that extreme disparity is "unfair" to everyone. It is inefficient and that burden falls on everyone, albeit unequally and intermittently. Maybe that got lost in the discussion. I don't believe that there is any such thing as an egotistical self-interest. It's oxymoronic. My argument is not that anybody should receive less income or have less wealth, just that nobody should receive so much more than anybody else. That was Friedman's notion too. You may not believe me, but I've read Friedman, and I am certain of it. He didn't advocate it because he was a socialist or was feeling charitable.

If you think about the benefit that comes from income or wealth, do you think there are diminishing marginal returns to income? If so, it provides greater utility to spend dollars on those who have fewer. So, are you a libertarian or an economist? Without redistribution of income, it is very difficult to be both.

I won't presume to tell you what you know or need to learn. but I hope you take the time to entertain the concepts before passing judgment on them. Maybe you already have. How would I know? Maybe I know what I'm talking about. How would you know? Maybe you can enlighten me. Why are things the way they are?

El Presidente writes:

Randy:

A professional creates something of value. The political class does not. A public administrator is a rent collector.

I disagree in concept, though I cannot disagree in all cases. For instance, I work in government under somebody who rails on government for being as you describe then actively prevents me from implementing efficiencies. It's not the first boss I've had like this. It's a mixed bag in my field. It is a profession, but there are a number of unprofessional individuals. I hope and believe that I provide value, but how does one measure the value of eliminating negative externalities and creating positive ones where none were evident? How does one value efficient urban design, environmental sustainability, adherence to social contracts, dissemination of information? Not easily.

Randy writes:

El Presidente,

Good answer. My contention isn't personal. Its a simple matter of how value is measured. In a typical transaction, the value to each party is measured by what they are freely willing to part with to obtain what the other party offers in return. As there is no such free exchange in a transaction with the state, there can be no assumption of value. In other words, as long as force is used to collect, the value cannot be measured, and the assumption must be that state services have no value. Taxes are rent. Make the purchase of state services voluntary, and then we'll know.

El Presidente writes:

Randy:

Pricing government goods and services (I won't presume to say they are all public) is a formidable challenge. I don't know that I would say they have no value, just that they often do not or cannot have a demonstrable market price. I think that confounding "value" and "price" makes the job more difficult still. If price always equalled value, Warren Buffet might be broke.

Your offer on complete privatization is tempting. I will take it to my boss and see if he agrees. :-)

Matthew C. writes:

Yet another example of why you are the most salient blogger on economics and current issues around. . .

James writes:

El Presidente writes:

"Government is not an ideal social institution, it is a necessary evil. It is because we will devour each other if left to our own devices that government must stop us from destroying the most productive resources: people."

Clearly it is a fallacy to reason from "We will devour each other if left to our own devices, therefore James, or the president of General Motors, or my bowling team, etc, have a claim on the liberty and property of others." Substituting "government" for James' bowling team leaves the logical structure of the argument unchanged, so this is a fallacy as well.

Having said that, I doubt that logic will be persuasive to folks like El Presidente. Perhaps an empirical argument will carry more weight: In the last few thousand years of human history, referring to the "we" as "government" and the "ourselves" as "citizens" has not stopped much devouring. In nearly all cases, it has only made the devouring easier as the institutions of the state have all of the features that best facilitate maximal devouring.

El Presidente writes:

James:

You have heard of social contract theory, no? Jean Jacques Rousseau? Ring any bells? Eh, you're right. He's French. What would he know?

Seriously, we have a social contract that gives government the power to seize property, incarcerate suspects, and kill convicts. You can hardly make me responsible for the existence or content of our Constitution. Are you going to rewrite it? I'm curious to see what you come up with. In the mean time, I will endeavor to make the best of it for as many people as I can.

You are right. I did not reason from Hobbes to Keynes and Friedman. It would indeed be an illogical argument without some intervening steps. For starters, Leviathan advocates a monarch. I do not. The part of the argument that is compelling is that a sovereign wields power over life and death, and may thus portend reciprocity for the basest of human behavior. This imposition of order is a necessary and insufficient condition for government provision of public goods, not to mention security of property rights in the first place, which you undoubtedly feel are the cornerstone of private investment. When wielded by many collectively, this power is sometimes called "popular sovereignty". Are we getting closer to something familiar? As for whether or not the government should provide public goods or levy taxes, I think that depends on whether we collectively agree it should according to a, um, uh, I know this one, oh yeah, a social contract.

Here's a challenge to your empirical argument. Give me a regression model that shows how many people would have been killed, better yet, how many people would have lived, if we did not have government. Maximal devouring? Stop the nonsense.

Chirag writes:

Difficult to understand that even after the best eduacation, exposure, environment at harvard, these graduates made trillion dollar mistakes.
Can someone could explain that too.... [ plz. email me the reply or post it on my blog ]

Randy writes:

El Presidente,

"...we have a social contract that gives government the power to seize property, incarcerate suspects, and kill convicts."

There is no social contract. There is only a political class that has the power to seize property, incarcerate suspects, kill convicts, collect rent, start wars, draft young people, and generally speaking, just do whatever the hell it wants to do. Spouting off about "social contracts" and other similar self aggrandizing nonsense is just a part of the whatever it wants to do. Human nature being what it is, there will always be a political class. I have to live with it. That doesn't mean I have to respect those who participate in it.

Randy writes:

James,

"In nearly all cases, it has only made the devouring easier as the institutions of the state have all of the features that best facilitate maximal devouring."

You're absolutely right. Throughout history it has been the political classes that have instigated and carried out the great atrocities.

John Fembup writes:

El Presidente you continue to meander off the road:

"if we did not have government"

jefe, this "no government" idea is a straw man that you and you alone keep dragging into the conversation. Absolutely no one on this string including Arnold Kling has remotely suggested "no government". Your thousands of words to the contrary notwithstanding.

Standing up to those millions of "no government" advocates that you apparently believe are out there somewhere is a brave act on your part and would be even braver if any of those advocates were actually, you know, here.

dearieme writes:

"Jean Jacques Rousseau? Ring any bells? Eh, you're right. He's French." Swiss; the evil sod was Swiss.

El Presidente writes:

dearieme,

"Jean Jacques Rousseau? Ring any bells? Eh, you're right. He's French." Swiss; the evil sod was Swiss.

Swiss it is. Swiss, then French, then Swiss again.

El Presidente writes:

jefe, this "no government" idea is a straw man that you and you alone keep dragging into the conversation. Absolutely no one on this string including Arnold Kling has remotely suggested "no government". Your thousands of words to the contrary notwithstanding.

Standing up to those millions of "no government" advocates that you apparently believe are out there somewhere is a brave act on your part and would be even braver if any of those advocates were actually, you know, here.

Would your straw man care to sit beside mine? Nowhere did I say that there was a "no government" crowd in the audience, though there are some that do not believe in social contracts - the original explicit basis of our present form of government. I attempted to revisit the theory underlying it's existence with the hope it might enlighten our discussion on it's purpose, role, functions; a discussion that we have yet to engage in.

Arnold is curiously absent. Is Arnold's criticism of this particular policy used to expand home ownership, or is it of any policy used to moderate disparities in income and wealth? His comment that government is simply playing with other people's money is remarkably contemptuous of the very institution that serves as the basis for the modern property rights he holds so dear; the ones that give him the context in which to discuss whether money belongs to anyone in the first place.

Equally important, is his criticism of all government or simply "Big Government"; a rallying cry for Reaganites and libertarians who believe in a "starve the beast" strategy? I am not running far afield. I won't say that Laffer was completely wrong, but if Arnold's is not a wholesale criticism, if it is rather a more refined distaste for a particular size of government, then my question is relevant: What is the optimal size of government, numerically or functionally? and why? What is the libertarian concensus, if there can be such a thing?

aaron writes:

The problem with starve the beast is that if you let it get hungry, it'll just eat you.

John Fembup writes:

El Presidente habla

"then my question is relevant: What is the optimal size of government"

Back to that distraction huh?

See, some people can be boring in few words. Like me. Others require thousands of words to demonstrate how boring they can be. Like you.

I think Kling's absence from this thread is easily explained. He's elsewhere looking for interesting stuff.

El Presidente writes:

Wow, John Fembup. Personal attacks. How very mature.

You're right, it only takes you a few words. But, since you seem to speak for Arnold, would you care to answer on his behalf?

Randy writes:

"...the original explicit basis of our present form of government."

I.e., the original propaganda. There is no "contract" and there never has been.

John Fembup writes:

[Comment removed for rudeness.Please see this comment for information about EconLog comment policies.--Econlib Ed.]

El Presidente writes:

Arnold,

I don't think you want him to speak for you.

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