Arnold Kling  

What the Battle is About

Arts, Sciences, and the Future... More on the 30-year Fixed Rate...

Scott Sumner continues the discussion of the merits of neoliberalism. Here are some remarks of mine.

1. This relates to what Arthur Brooks calls The Battle. I have not read Brooks' book, and my guess is that I will have many problems with it, but the basic notion of a conflict between advocates of free enterprise and advocates of statism seems right to me.

2. At the margin, do you think that we need more decisions made by government experts and fewer decisions left to decentralized markets? If you consider an issue important (health care, energy, or whatever) and you think that the answer at the margin is more government experts, then you are on the statist side of the battle. If you think that the answer at the margin is more decentralized markets, then you are on the free enterprise side of the battle.

3. It is very hard to resolve the issue empirically. That is because very little empirical analysis focuses on the margins. The empirical arguments that Sumner describes all involve very crude averages. Does the level of government spending represent a good proxy for the marginal propensity to have government experts displace markets in making decisions? I don't know. I am not saying that no one should bother trying to measure the intrusiveness of government, but I think it's hard to expect broad aggregate measures to resolve fundamental disputes.

4. I believe that greater concentration of power in the hands of government experts is wrong for two reasons. First, other things equal, it diminishes the liberty and dignity of the typical individual. Second, I believe that experts systematically over-estimate the value of what they know and under-estimate the value of what they do not know.

This second problem is getting worse. As I argue in the widely-unread Unchecked and Unbalanced, knowledge is becoming more dispersed while political power in the United States is becoming more concentrated.

The battle is to dislodge the statists. I think that Brooks raises a red herring when he argues that those of us on the free enterprise side are the majority. I am, like Bryan, skeptical that we are the majority. Moreover, even if we were in the minority, I would not wish to concede the battle. Finally, I am not convinced that the electoral process should be the focal point for resolving the battle. It could be that statists inherently own the electoral process. We may be better off trying to keep alive private businesses, private schools, and so forth.

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CATEGORIES: Political Economy

COMMENTS (9 to date)
El Falcone writes:

For those of us too cheap to pay the $10 worth of shipping to Canada; do you have any idea if the book is going to be made available in Edmonton? The bookstores here offer your "under the radar" for christ's sake, but not U&U. what the heck?

And after I finish the book can you please refer to it as the "LESS widely unread U&U"? Or just quit whining about it altogether. gracias.

John Alcorn writes:

Arnold, Your blogpost concisely integrates all the themes you have developed lately about politics. The next step is to translate your insights into a few eloquent slogans. Then maybe you can get some traction.

Andy writes:

The problem, I think, with the "free enterprise" vs "statist" battle is a third bridging faction - corporatism. Too often I see corporatist policies passed off as "free market" policies.

pandaemoni writes:

I am not sure I see how power in the hands of a government official diminishes the "dignity" of the typical individual. Even with "liberty" I am not entirely sure, as I do not think that the legislative process is an entirely zero sum affair. On balance my impression is that liberty is lost (in the sense of the typical individual having fewer choices ti make himself or herself), so I would tend to concede that point...but dignity seems a bit more questionable. If my wife takes it upon herself to plan my birthday celebration without consulting me, I lose the ability to choose my own options, but I am not sure I lose any dignity.

A second point, if we are not to resolve the dispute using the electoral process, what else is there? At the end of the day, in a constitutional system like ours, and ignoring the possibility of revolution, to concede the electoral process is to lose the whole debate and to allow the free market side to be legislated out of existence. It is only because free market supporters are engaged in politics that, to the limited degree it does hold, free market ideals stand their ground.

Andy is right
As long as the statists use the boogieman of "BIG CORPORASHUNNN" to scare the electorate and conflate free-market policies with corporatist policies (which they themselves promote!), they will remain in charge. Electoral battles will always come down to simple slogans and weaving simple narratives from events.

MernaMoose writes:

Finally, I am not convinced that the electoral process should be the focal point for resolving the battle.

I'm not convinced it's a good focal point. But in the US, where else / how else are you going to resolve it?

It could be that statists inherently own the electoral process.

Could be? They own everything else that matters leading up to it (media, educational system).

We may be better off trying to keep alive private businesses, private schools, and so forth.

That'll work great until they essentially outlaw (in all but name) private business. For example through little things like ObamaCare.

I don't disagree with where you're trying to go. The question is, how to get there?

Ujjwal writes:

Thanks for another thoughtful post. I agree especially with Point #3 - it is very difficult to empirically prove either case. Which is why i'm always amazed at the confidence and surety which both sides exude - as if it were patently obvious that the "statist" or the "free markets" side is correct. I think this is what consigns economics to the level of pseudo-science in the minds of many people - if there is no right answer that you can verify experimentally, then it's just a lot of hand-waving, isn't it ?

fundamentalist writes:

Several organizations have published papers on the optimal size of government, which usually falls around 25% of gdp for all state spending, including local and state governments. So yes, there is epirical support for less government.

But empirical support isn't everything. Sometimes common sense is more valuable than empirical support. I had a class in organizational behavior years ago and the main point I got from it was the value of decentralized decision making. The prof used the book "The Great Escape" as one of the supplementary books for the class and he pointed out how different the organizational structures of the British and Germans were. The Germans were very centralized, or hierarchical, which limited innovation, motivation, and flexibility. And that describes why the British could outperform the Germans. But the prof also noted that those roles were reversed in British POW camps in which the Germans outwitted the British. So it wasn't a matter of national origins, but organizational structure. Other historians have commented that D-Day was a test of the two different types of organization.

This is fairly easy to see at the firm level, but does it scale to the national level? I think it does if Hayek was even remotely correct about information. Statism is central planning and control, like the Germans in "The Great Escape." Capitalism is decentralized planning and control, like the British. If the field of organizational behavior has any truth to it, decentralized planning and control always and everywhere outperforms centralized planning and control.

Tracy W writes:

pandaemoni - I suppose it depends on your definition of dignity. To take the extreme, when I think of people like Nelson Mandela or Gandhi I can see that in one sense they had/have dignity despite what their governments did to them, and despite all that their governments could do to them. On the other hand, I think I can understand what people mean when they talk about the petty indignities of a prison.

So if you think of dignity as what you have internally, then a government probably can't take that away, no matter what. But if we think of dignity as how other people think of us, then, well, would you think that a man whose wife always made decisions for him, and consistently overrode his choices about how to live his own life, was dignifed?

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