Arnold Kling  

The State of Conservatism

Kling on Financial Markets... Dean Baker...

P. J. O.Rourke writes,

The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment. The free market is a bathroom scale. You may hate what you see when you step on the scale. "Jeeze, 230 pounds!" But you can't pass a law making yourself weigh 185. Liberals think you can. And voters--all the voters, right up to the tippy-top corner office of Goldman Sachs--think so too.

Read the whole thing. For those who value liberty, the challenge is to find a way to escape the current government without disconnecting oneself from the community and the economy. I don't see a solution at hand (or even at sea). But maybe more people will become focused on the problem.

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CATEGORIES: Political Economy

COMMENTS (10 to date)
dearieme writes:

Haven't the Italians found practical ways of ignoring government? What can you learn from them?

Curt Doolittle writes:


From here in rome, overlooking the vatican, I can tell you that the south ignores everything. It is a place of poverty, ignorance, crime and moral turpitude. It's revolting to both experience and endure.

The north, and in particular, Milan, is wonderful.

Break the country into two, as it should be, north and south, and we would see the north do wonderful things, and the south descend even farther into destitution. The people are corrupt in every way possible.

The only way we will get our liberty back is with violence, or with secession. I don't like it. But that's the only way I can tell from history that it's done.

fundamentalist writes:

I love PJ O’Rourke, but I think the Reagan revolution fooled him. Conservatives thought that the conservative movement attracted new followers because of Reagan. Reagan was great, but he didn’t really expand the conservative movement. The movement only borrowed the Reagan Democrats for a while. They voted Republican on social issues, such as abortion, pornography and gay-rights, but if you got to know any of them, they were very socialist on economic issues. As long as the economy did well and the Moral Majority kept a fire built under them, they would vote Republican. But time taught them that the Republicans couldn’t accomplish much on the social issues and they lost interest. In addition, the Democrats, especially Bill and Hillary, learned that they could toss the defectors to Reagan a bone once in a while and make them feel better about social issues so they could come home to the party of socialism and they did.

There never was a Reagan revolution. Conservatism never surged. It was all an illusion. Both Bushes seemed to understand that and tried to lure the Reagan Democrats back with touches of socialism just as the Democrats had attracted them with touches of social conservativism. I remember Rush Limbaugh claiming that W. Bush would destroy the Democrat party with his massive drug plan by stealing social conservatives from them. Instead, all it did was alienate true conservatives and confuse Reagan Democrats because now they couldn’t tell the Republican party from the Democrat party. There seemed to be no difference any longer.

This presidential election has cleared the air. Obama won because real conservatives stayed home (actually, Bush and McCain froze us out) and socialists caught fire. If the Republican party wants to be socialist-lite, that’s fine. Real conservatives will continue to stay home. Some of us have switched to the Libertarian party. If the Republican party wants to be conservative it might be able to lure us back, but it has a lot of house cleaning to do first.

Kevin writes:

I think there are a lot of ex-Republicans that now identify more with Libertarians than Republicans. O'Rourke sounds like one.

Dr. T writes:

"I don't see a solution at hand (or even at sea). But maybe more people will become focused on the problem."

Our 150-year-old trend of decreased liberties steepened in recent decades, and very few cared. Over the next four years I expect reduced economic freedom (more taxes, regulations, certifications, impact studies, adverse zoning changes, government takings, etc.) and reduced personal freedom (more inspections and searches, confiscations without trials, restrictions on international travel, and 'politically correct' restrictions on speech). And few will care.

El Presidente writes:

The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment.

If it's just a measurement, do we really need to worship it?

Important questions we don't often consider: What is the benefit of market prices in relation to their cost? If I measure a price in money terms that has dubious correspondence to human terms, what does my price tell me?

To me, prices are not valuable because they tell me who is willing to pay what, but because they tell me that different people are willing to pay different amounts. This often says something important about how unreliable a single market price is in telling us about what matters to people. If we practice economics for the sake of people, then this is highly relevant. If we are engaged in Arnold Kling's infamous 'stochastic porn', then a single price is good enough and we don't need to ask any further questions because they would only complicate our math.

ES writes:

I love O'Rourke's humor, but the trouble with his analogy is that his statement is essentially that the price of a product in the market is always factually-correct.

No economics professor I've had has said such a thing, stating instead that prices are equilibrium-seeking -- never perfectly-accurate, but always trending towards the most-accurate value. Statistical variance describes this.

Moreover, one look at financial market history shows prices which represent not only the cost of production + producer's profit, but additional greed or fear.

Speculators demonstrate this behavior all the time. How else does one reasonably explain the rising price of crude oil from $22/bbl in Nov. 2003, to around $145/bbl around the end of June 2008, and is now back down to about $60/bbl? Generalized inflation (e.g. CPI) doesn't explain the 659% inflation in that 2003-2008 period, nor the roughly 59% deflation (over the course of 5 months!) in this particular market. Gold prices have seen similarly-peaky behavior over that same period driven, it's assumed, by fears of a housing bubble burst which we all know now came to roost.

Clearly these markets are seeking equilibria between those min-max values, but what, precisely, that price ought to be, nobody knows.

O'Rourke would do better to think of markets as a scale which isn't zeroed -- a scale which might display 0.3lbs, 3lbs, -3lbs, or even 30lbs or -30lbs, even before you step on. By the scale of the market, and depending on which market is under study and at over which period in time, you could be "weighed" as a fat-arse or an anorexic -- it depends on the investor community's mood (or their models, if trading algorithmically).

Natural scientists get to zero their measuring devices -- economists do not.

Thomas DeMeo writes:

The analogy police should arrest Mr. O'Rourke. Economics lacks credibility because it seems incapable of acknowledging just how wildly dynamic a measure pricing is. Prices are not like weight at all. A pound is a fixed unit of measure. A dollar is not.

Daniel Klein writes:

Sorry to see O'Rourke using "liberals" that way.

Jeff Hemminger writes:

You guys used to post interesting articles about the economy, but I'm unsubscribing now that you've changed your focus to nonsense political dribble.
Good luck

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