Bryan Caplan  

Why Do People Keep Calling Tyler a Market Fundamentalist?

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I've often catalogued the errors of my dear friend Tyler Cowen. (See here, here, here, and here for starters).  But I can't stand to see him attacked unfairly.  The unfairest of the unfair: The strangely common charge that Tyler is a "market fundamentalist."

I first noticed this in 1999, when the JEL reviewed Tyler's In Praise of Commercial Culture:

Yet Cowen's core claims are poorly served by his arguments, many of which rest more on his fervent faith in the near infallibility of market forces rather than on empirical evidence, interpretation, and analysis.
The same charges frequently pop up on his blog.  The latest instance:

When are the free market fundamentalists such as Tyler going to admit that the failure to regulate under existing law is the proximate cause of the mortgage mess and consequent freezing up of the credit markets?
If you attentively read Tyler - or carefully listen to him for a few minutes - you're almost sure to hear him complain about  some market failure or other.  In fact, there's almost no market failure charge that he won't give a serious hearing.  He won't scoff at you (even on the inside)  unless you tell him about the wonders of East Germany.   (He has to draw the line there; he saw it with his own eyes in the mid-80s). 

Truth be told, Tyler is probably philosophically closer to Obama than he is to Milton Friedman.  So why can't the world criticize him for what he actually believes?  The best explanation, I suppose, is that his critics are so intolerant of free-market ideas that even Tyler's vestigial libertarianism blinds them with rage.


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COMMENTS (36 to date)
R. Pointer writes:

I have read Tyler for about 5 years. I think that these critics either don't understand market fundamentalism or are disingenuous. Tyler is pretty mild, all things considered.

Luke G. writes:

I remember Tyler getting pretty heated at someone extolling the wonder of Cuba, once, too.

So true Bryan, especially your point about Tyler leaning closer to Obama than to Milton Friedman. I've noticed Tyler has undertaken a general shift left since I started reading his blog a few years ago.

At best he is a reluctant statist whose only argument against importing scandinavian socialism here is that our population is too diverse to support it.

Deep down Tyler has been persuaded by prioritarians like Derek Parfit, the only man whose moral philosophy seems to put Tyler in awe.

what? writes:

Criticize him for what he actually believes? No one even knows what he actually believes

Trieu writes:

I don't have an explanation for this mis-perception of Tyler, but I can share my own early mis-perception of his online writing. In the early days of my MR reading, I took his series "Markets In Everything" to be a kind of quirky celebration of the free market. As it turned out, this couldn't be more incorrect. "Markets In Everything" is much closer to lament and criticism (in a wonderfully unstated tone) than it is to celebration (or even curiosity).

Matt C writes:

The point is not to accurately describe Tyler, but to sneer at free markets. If you're making a bot-style response to someone you think is a libertarian, "market fundamentalist" is an easy label to add to the mix.

Perry writes:

I share the puzzlement. Tyler is sufficiently far from being a libertarian at this point that I'm not sure why anyone would even bother to accuse him of it.

Scott Wentland writes:

I suspect "GMU" and "economics" tied to his name nudge some to assume that he's a market fundamentalist. Guilt by association perhaps.

Though I think it's been mentioned on this blog before that he's a contrarian by nature, and tends to push against his peers. Ironically, if he was at a less market friendly school his rhetoric would be more pro-market, but he'd be perceived by the same crowd as less market friendly by association.

Floccina writes:

I do not care what the super markets do, I am a freedom Fundamentalist.

Lord writes:

It is a mischaracterization of him, but it seems more likely ignorance than intolerance. Market fundamentalists are deeply dishonest though, so intolerance of them is warranted.

OneEyedMan writes:

There does seem to be something about studying government action that really makes it tempting to support the government doing something.

Maybe Tyler has drifted to the left, certainly Megan McArdle has for that reason.

The problem is that people don't understand that believing in the free market system is, unlike various forms of interventionism, socialism, fascism, and communism, not ideological. The market economy is a naturally occurring system, Thus, believing in the market economy is like believing in in deserts occurring around the globe on the 30th parallel. It's like believing in the ecosystem. Let me give a few examples of what I'm talking about:

Believing in evolution is not ideological; not believing in it is.

Believing in a heliocentric solar system is not ideological; not believing in it is.

Believing in the spontaneous order known as the free market system of economics is not ideological; not believing in it is.

Thus, you cannot be a free market "fundamentalist" any more than you can be an atom fundamentalist. It's nonsense.


Tyler Cowen writes:

As a good rule of thumb, Bryan's writings about me reflect more about him than me. A person with my views still could not run for office in the USA -- much less win -- and it is not because I am too far left. (I guess Ron Paul is an exception although I wonder how radical his initial campaigns was.) The financial crisis does call for more government than is usually a good idea. That's the new development, not any big change in my views overall. If for instance you consider the debates covered by Dani Rodrik I definitely stand on the "market fundamentalist" side, though I think that is a deliberately perjorative term. A good question to ask any market-oriented commentator is how the crisis has caused him to change any views; I am not sure how Bryan would answer this but for sure it has changed some of my views.

Milton Friedman often called himself a utilitarian, I call myself a pluralist with rights in the bundle too though not as absolutes. I'm not sure what Obama is, but in foundational terms maybe he isn't so far from Friedman. He is more egalitarian but in that regard I don't have so much in common with him. I've never been tempted by egalitarian reasoning of the sort found in today's Democratic Party. And at times Friedman would announce a belief in rights but it is not clear how he reconciled that with his utilitarianism.

I believe, quite frankly, that Bryan considers my stance a threat to his views because I understand those views very well yet in many cases I do not agree with them and, in my view at least, I know what is wrong with them. The more Bryan can paint me as "to the left," the less intensely he feels that threat. He can dismiss my views by classifying them with others he knows to be wrong. But the threat is still there and it is not going away...

fundamentalist writes:

What's wrong with people calling you a fundamentalist?

Paludicola writes:

Oh my... I wonder what, if they occur at all, the real-life analogues of this conversation are like.

Robb Lutton writes:

Tyler speaks and reveals the reason the "market fundamentalists" dislike his position. You see, Troy Camplin, PH.D., belief in markets CAN be ideological.

Fortunately we now have an easy test. If your ideas about markets are the same now as they were in 2002, your ideas are based on ideology, not like (let me see, how did Troy Camplin, PH.D put it?) your ideas about ecology and desert location.

Tyler admits his ideas evolve and respond to changes in the world; ANATHEMA!


Steve Roth writes:

Bryan, I find your argument here--and in your book--unconvincing. Many are happy to point out market failures, but nevertheless reflexively oppose regulation to address them, based on market-fundamentalist belief systems. And some of those have exerted extraordinary influence of the last three decades. I'm not sure if Phil Gramm has ever acknowledged a market failure, but if he has, I doubt that he saw regulation as a solution. Greenspan, likewise, has seen the risks of market failures, but fought hard against any regulatory prophylaxis.

But you're absolutely right that Tyler isn't (currently) one of these people. One example:

"Ideally we would like to make OTC derivatives more like exchange-traded derivatives and we should consider regulation toward that end. (Do note that private swaps regulators have already done quite a bit to clear up the issue of hanging and unconfirmed transactions.) At the margin the social benefits of such homogenization are higher than what the private swaps regulators will bring on their own accord. In essence homogenization and trading through a clearinghouse limits the leverage issue to a single, easily-regulated institution and therefore it limits the problem of counterparty risk.

The cost of such additional regulation will be higher transactions costs for the trades themselves and also greater contract homogeneity, which is a requirement for exchange trading, netting, and clearing. We need to make this move wisely and carefully, otherwise OTC derivatives could move to even wilder and less well regulated markets. Simply trying to shut down the OTC markets, even if that were the economically ideal vision (unlikely), would in terms of risk prove counterproductive. But the strong market positions of New York and London do make some effective regulatory action possible for OTC derivatives, especially if done in concert."

http://www.marginalrevolution.com/marginalrevolution/2008/09/the-regulation.html

If you look back, though, before recent market failures became so obvious, you'll be hard pressed to find him championing regulations to address the market failures that he and others have been happy to point out.

Market fundamentalism might be defined as a belief that market-created incentives always (or almost always) make for a more efficient market than government-created incentives.

That is like believing that natural selection always gives better results than artificial selection (breeding).

Would you rather live with a wolf, or Good Dog Carl?

Unit writes:

My worry about the government interventions we are going to get is that we will be stuck with them forever, whether good or bad.

Isaac K. writes:

That is like believing that natural selection always gives better results than artificial selection (breeding).
Would you rather live with a wolf, or Good Dog Carl?

It depends on what my desire to live with a canine is rooted in. Wolves are a much more efficient animal (in your analogy), but dogs "play nicer."
Also; note that the dachschund (definitely spelled wrong) is a marvel of your selective breeding, and has horrible medical problems as a result of it's bizarre genetics.

I would rather have a market evolve itself to act like a market than be forcibly changed to fit the wills of a suspect government.

I'd rather take the wolf in wolf's clothing than the one masquerading as a dog; better performance, better security.

Isaac K. writes:

That is like believing that natural selection always gives better results than artificial selection (breeding).
Would you rather live with a wolf, or Good Dog Carl?

It depends on what my desire to live with a canine is rooted in. Wolves are a much more efficient animal (in your analogy), but dogs "play nicer."
Also; note that the dachschund (definitely spelled wrong) is a marvel of your selective breeding, and has horrible medical problems as a result of it's bizarre genetics.

I would rather have a market evolve itself to act like a market than be forcibly changed to fit the wills of a suspect government.

I'd rather take the wolf in wolf's clothing than the one masquerading as a dog; better performance, better security.

Robb Lutton writes:

Isaac K,

Let the battle of metaphors commence!

Unfortunately the question is which would you rather have in your economic backyard. You may prefer that in the wilderness that there are wolves rather than poodles (I can spell that), but I prefer a poodle playing with my children...or my savings.

Steve Roth writes:

Credit where due:

I took this incentive/evolution thinking from one of the best economics thinkers out there these days: Lane Kenworthy. I wrote it up here:

http://trueconservative.typepad.com/trueconservative/2008/03/attributing-the.html

Isaac K. writes:

Robb: what would you rather have protecting your house [and savings]?
a ditzy, frenetic dachschund that flips out at everything but, ultimately, provides no security?
Or a wolf?

I can give as good as I get.
metaphorically.


[hooray for the double entendre!]

Robb Lutton writes:

Ok Isaac K, you are going down;

I appeal to the world's collective folk wisdom...only a fool leaves his chickens/sheep in care of the wolf. This is a known truth in most cultures.

Back on the markets as religion, today in the NYT,

Casey B. Mulligan, professor of economics at the University of Chicago:

"...So, if you are not employed by the financial industry (94 percent of you are not), don’t worry. The current unemployment rate of 6.1 percent is not alarming, and we should reconsider whether it is worth it to spend $700 billion to bring it down to 5.9 percent."

Jason Malloy writes:

"Truth be told, Tyler is probably philosophically closer to Obama than he is to Milton Friedman."

As are the vast majority of economists... if not leftier.

Which is probably why even Cowen's "vestigial libertarianism" is so offensive to his peers.

happyjuggler0 writes:

What would Pigou say about the economics of government regulations? Oh wait, he did say something:

It is not sufficient to contrast the imperfect adjustments of unfettered enterprise with the best adjustment that economists in their studies can imagine. For we cannot expect that any State authority will attain, or will ever wholeheartedly seek, that ideal. Such authorities are liable alike to ignorance, to sectional pressure and to personal corruption by private interest. — Pigou A., Wealth and Welfare 1920, p. 296

So for those of you fundamentalists who repeatedly scream "market failure, we need a government regulation", just keep in mind that perfect regulations do not exist, let alone pefect regulators.

Good luck getting imperfect government to adjust, let alone efficiently adjust, the way that the price rule forces market particpants to adjust to failed practices.

Drawing together happyjuggler0's comment about imperfect regulation and the wolf/dog metaphor, and probably stretching it beyond all usefuless:

A number of dog breeds, the pug for example, have become unable to successfully deliver their own puppies: the heads will not pass through the birth canal. The puppies must be delivered by C-section.

By analogy, will regulation bring us a system in which entrepreneurship is dead, and innovation can only be achieved by government sponsorship?

Robb Lutton writes:

Chris,

You have to take the bigger picture. Which is more successful from a species point of view?

Clearly dogs are far more successful than wolves. In fact, wolves are in some small danger of extinction. Complaining about extreme breeds is like saying there is problem with car design in general by pointing to the yugo or the trabant.

And even taking your example of the pug, let us nott forget that it too is successful...after all according to you every existing pug has successfully arranged for some other species to pay for its expensive reproduction. I wish I could get some other animal to pay for my doctor visits.

You say;

By analogy, will regulation bring us a system in which entrepreneurship is dead, and innovation can only be achieved by government sponsorship?

My reply is

We have had eight years of cheap money and lessened regulation for entrepreneurs to bring us innovation and mostly the entrepreneurs brought us a financial crisis.

Jay in FL writes:

About these dog/wolf analogies: any veterinarian will tell you (my father has been one for thirty-six years) that it is precisely the pure breeds, the ones most subject to genetic pump-priming to horribly cross-breed the metaphors here, who as populations have the most health and behavioral problems. Mutts as a rule are healthier, better adjusted behaviorally, and tend to live longer. Often as not they are the result of serendipitous breeding rather than two owners trying to figure out who should get busy with whom.

So if the history of dog breeding in fact tells us anything about economics it is that a few wise regulations will get you great benefits (i.e. domestication) but that the more constrained that process becomes (breeding for protectiveness, speed, etc.) the more trade-offs you inevitably create.

Troy Camplin writes:

We're really talking about kinds of systems here. Which is more complex, a human-designed system, or a naturally occurring system with emergent properties? All human designed systems are simple, and require simplifying nature. When humans attempt to intervene in the economy, a complex, dynamic system with emergent properties, they attempt to simplify it. If you simplify an animal, you turn a complex biochemical system into a pile of chemicals -- in other words, when you simplify a dog, you kill it.

Jay in FL writes:

I suspect a better way of expressing it is not that you simplify - and therefore kill the dog- but that considered as a system dogs who are Mutts have better symmetry. Selective breeding necessarily cuts down on that symmetry and the resulting dog is less efficient overall. To walk across the analogical bridge once more, what this teaches is that humans can select for some things in a natural system that it can't do for itself (design a dog for quail hunting for instance) and in the economy create state institutions (like the defense department) that will do things we want or need that they system wouldn't do by itself. In both cases there are trade offs and inefficiencies. If artificial selection and gov't action/regulation are analogous the lesson is that both are useful for very specific goals, but create a lots of problems when you use them as general methods. Whether they are truly analogous I leave to better minds.

Jay in FL writes:

Re Robb Lutton at 3:03,

The reason that dogs are more successful than wolves is because humans prefer them. Put them in direct competition without the massive "subsidy" from mankind and see what happens. Your average pug ain't gonna last long.


Robb Lutton writes:

Jay said;

"The reason that dogs are more successful than wolves is because humans prefer them. Put them in direct competition without the massive "subsidy" from mankind and see what happens. Your average pug ain't gonna last long."

I would say that dogs are better in the world as it is, not in some model. That massive subsidy isn't going away.

Jay in FL writes:

"I would say that dogs are better in the world as it is, not in some model. That massive subsidy isn't going away."

I'm not saying dogs aren't better off. They are; good for them and good for us. The issue is what lessons we draw from that fact, and to not ignore the twin questions of why dogs do better than wolves (humans provide for them and insulate them from competition) and which dogs do better in the main under human dominion. If this whole analogy has any force that's the thing you want to know, and from what I know the more "regulated," a dog is, bred for specific traits in other words, the more likely it is to have health or behavioral problems.

Steve Roth writes:

Noboby's replying to Kenworthy, I see. Go buy his books, read them, come back when you're done.

His key point: it's the *constraints* that matter, not (just) the incentives. (i.e., Natural selection excludes the losers--prevents their propogation; it doesn't encourage the winners.)

Market-imposed constraints breed a certain type of economy. Societal/governement constraints breed (a) different type(s).

It's far from clear that market-imposed constraints, a priori, result in a better breed.

Market fundamentalism makes that a priori assummption.

That's a faith-based belief. Friedman repeatedly points out the need to look at situations on a case-by-case basis.

Troy Camplin's post rather embodies this. Make that a priori assumption, cast it as scientific fact, and build a hermetically sealed belief system upon it.

The bible is the word of god. Everything else follows.

Troy Camplin writes:

I can't figure out how regulations is in any way analogous to selective breeding, so the analogy is nowhere near apt. Certainly not all analogies are apt. "Achilles was a lion" works; "Achilles was a hamster" doesn't, for the same reason.

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