Market fundamentalists would have us believe that our success comes in spite of government. There is literally no evidence for this. If less were always better, then the least regulated economies would be the most successful economies. The opposite holds. It is, in fact, the rules, regulations, standards, and accountability that government provides that fuel and lubricate markets. A robust state is not mutually exclusive with a free market; it is required for it. This is why there is no robust private sector on earth that isn't accompanied by an equally robust public sector.
1. On the whole, I would agree that the empirical evidence suggests that neither anarchy nor minarchism (minimal government) thrives anywhere. Prosperity is greatest in cities, and I agree with Ed Glaeser that cities do better with government. For a city to work, you need sewage treatment, you need well-articulated property rights, you must provide reliable mechanisms for resolving disputes among strangers peacefully.
2. That said, there is some evidence that the least regulated economies are the most successful economies. Do a Google search of "Economic Freedom." Read From Poverty to Prosperity, particularly chapter 2, which consists entirely of empirical evidence.
3. The phrase "the opposite holds" would imply that the most regulated societies are the most successful. That is clearly not the case. See North Korea.
4. Within the United States, how do we interpret the evidence? What determines the wealthiest regions? Today's Washington Post shows that the DC area is pulling ahead of the rest of the nation. This certainly shows that it is good to be the regulator, but it hardly makes a case that being more regulated is advantageous. Some blue states are the most affluent, but many are in decline. Some red states are among the fastest growing--although their growth probably lags that of the capital of the empire.
5. It is not clear, and in fact I strongly doubt, that it is necessary for the United States to be dominated by an intrusive national government, in which a relatively small cadre of legislators and technocrats makes decisions affecting 300 million people over a broad range of issues. As counterexamples to this, I offer the fact that much smaller polities (Denmark, Singapore) are able to thrive. There are successful countries where the central government is less dominant relaative to regional governments (Switzerland stands out, but I think that right now Canada is less centralized than we are).
There are more themes to the L-H article, which I will address below.
Government is what turns the jungle into a garden. To govern poorly is to "let nature take its course," which results in wild growth by a few noxious weeds and the eventual collapse of the garden. To govern well is to tend the garden: to weed, to seed, and to feed.
Compare this with my rain forest metaphor. This gets at a really fundamental issue. I do not think that government can in fact turn a jungle into a garden. L-H implicitly assume that technocrats have a lot of knowledge relative to the systems they are supposed to regulate, and I believe that they lack knowledge. This should be an empirical question, and we should be able to hash it out. I would be happy to have this debate, as long as the terms are "Do markets or technocrats work better?" Typically, progressives want to pose the question as "Do markets work perfectly?" and then declare victory when the answer is "No."
When a market is left to itself, what ensues is a race to the bottom. The government's job is to set in motion races to the top.
This is a remarkably strong assertion to make so cavalierly. The economic progress since the Industrial Revolution is easily documented. Again, see chapter two of From Poverty to Prosperity. Do H-L really think that this progress came in spite of the market and because of government? If so, then they have an enormous task ahead of them proving this assertion. If not, then they should ask themselves why this sort of claim slips into their writing.
If, as we propose, the federal government is to nationalize goals, then it needs also to radically relocalize the means-and, in contrast to the "devolution" of the Reagan era, actually provide robust funding for those local means. Obama's Race to the Top education initiative is a good example of combining leverage at a higher level of government in an area of strategic national interest with responsibility and creativity at lower levels. We would go even further. There should be strong national content standards in education, with far more federal education funding. And that funding should then go to a diverse ecosystem of educators who develop a multitude of ways to get kids to the standard. Thus, the parents at each public school should take far more ownership of the quality of the education within the building. That means having more choice about how to staff and run the school, and the style of pedagogy, but it also means taking more responsibility for the results. Creating high and common standards. Funding them fully. Pushing authority ever downward.
Why only trust parents with the "how" and not with the "what"? I am happy that H-L concede implicitly that national technocrats have no comparative advantage in telling local schools how to achieve better results. But why not go further and question the comparative advantage of national technocrats in setting standards? Is there evidence that parents want less for their children than the bureaucrats do?
At every level, we think the progressive imperative should be to shift responsibility for executing what are now government services to private competitive organizations. This can and should include non-profits
Just carry this a little further, and you will arrive at competitive government, as in Unchecked and Unbalanced. L-H are arguing for competition in the executive function of government--deciding how things get done. I say we should go beyond this, to allow competition in the legislative function--deciding what gets done. Again, if we think that technocrats lack special ability to execute, why do we think they have special ability to legislate?
Overall, I give Liu and Hanauer a lot of credit for going beyond just bad-mouthing markets and conservatives. It is refreshing to read something other than the old "We progressives want good things, like peace and prosperity, and our opponents want only bad things." When the discussion is about institutional effectiveness, we can have a conversation.
I think that our fundamental differences concern the distribution of knowledge. They write as if the knowledge of the right goals for everyone is concentrated in the hands of a few, who should set direction from Washington. i believe that all sorts of important knowledge is highly dispersed, and therefore power should be dispersed, also.