Failings of Left-Wing and Market-Oriented Economists

David, I agree with you on the warfare/welfare bit. Our current bloated state programs were modeled primarily on benefits program originally created for war veterans. The first public pensions and public hospitals (charity hospitals existed for the poor) became the template for all kinds of welfare policies as the 20th century rolled on. The growth and development of veterans hospitals also were the main contributors to the neoplastic expansion of licensed health care professionals. Prior to WWI, there were doctors and nurses. By the middle of the last century, we were providing not only specialized training but also monopolistic licensing to physiotherapists, occupational therapists, recreational therapists, clinical social workers, psychologists (a wartime army invention) and a few others. I’m not trashing the work they do, and not denying the fact that their knowledge is a big part of improving health care, but the historical fact is that the tasks and knowledge they represented became licensed professions much faster under the government. These groups were not created in the private sector, and their growth contributed to the identification we now make of “specialized knowledge” with “licensed specialist”.

From Cowen:

1. There is excess fear of inflation and hyperinflation in the current economic environment.

I agree, but what economists really need is what Hayek called a fourth generation of monetary theory in which we understood the distorting effects on relative prices (of capital goods vs consumer good) of credit expansion.

2. We know much less about the causes and drivers of economic growth than we like to admit,

I think we admit less than we know. We know for a fact that some amount of private property and free markets are necessary for economic growth. China has proven that. And we know that savings and investment are necessary from the Solow model.

3. Lower taxes don’t spur economic development as much as it is often claimed,

There are plenty of studies available on the internet showing that the optimum tax rate for growth is around 25%. That’s quite a ways below Cowen’s 50% level.

7. When it comes to the historical determinants of the Industrial Revolution, the Great Divergence, and the like, the importance of state-building in that process is often neglected.

That’s probably because the state has never been anything but a hindrance to development. The history of development is primarily one of reining in state power.

9. The role of market failure in the recent financial crisis is underestimated.

Not at all. There was no market failure. There were many state interventions that had unintended consequences. Cowen seems to be one of those economists who think the market should always provide positive results and never negative ones. But the invisible hand will slap us if people or the state violate the principles of the market.

Doesn’t it define torture down to say that forcing someone to sleep naked is torture? There are plenty of words like “abuse” that seem much more apt. Compare what is happening to Manning with what McCain endured. Does using the same word to describe both illuminate the situation or is it used as a substitute for arguement?

Hummel will need to show more than “precursors” if he wants to say that our military adventures ‘led to’ our current Social Security and Medicaid/Medicare, etc…, debts.

On Manning, my problem is that you leaped without looking. You have made an enormous accusation. But you have done it from ignorance. That suggests an uniformed moral preening that I’m sure you see all the time on the left and the right: “Everyone must denounce this thing!”

If you said “We deserve to know all the facts about this right away, even if our finding them out may violate Manning’s legal privacy rights, and I want people in the White House, Congress and our military to drop other business and focus on this”, then I’d at least understand you were trying to learn about it. But you’ve reached your conclusion already, and it’s the big bad word TORTURE.

The only more conclusive conversation-enders are racism, homophobia and ad Hitlerum accusations.

Seems like a chicken and egg problem — why have a state if you don’t need protection from those who would hurt you? Hence it is kind of silly to worry about war leading to “the rise of the interventionist state” — we’ve had continuous warfare between people since the dawn of mankind so why is it that now all of the sudden war has led to Social Security, Medicare, and Medicaid?

Treatment of Manning has certainly been unusual, even if there’s a certain poetic justice regarding the whole “transparency” idea. Just have to establish a strong enough case for “cruel” and “punishment”.

If economists are too naive about this for your taste maybe you’d prefer it over here in sociology. One of Chuck Tilly’s slogans is “states make war and war makes states.”

Prisons and detention facilities do take on some legal risk when housing individuals and so precautionary measures will be taken if it is believed that a person poses a harm to themselves or others.

But, I think there is some tension in the letter you linked too. The group claims that no information has been made public that would lead them to believe Manning poses a risk to himself. But, if the military made public hypothetical psychological problems (“Manning has contemplated committing suicide”; “His mental state is not well”; etc.), people would claim the military is seeking to embarass him and is violating certain privacy rights.

Forced sleeping in the nude is considered harsh treatment when the person is subject to extreme cold.

Steve:

Vaccines, sewers, highways, the internet, antibiotics, modern agriculture…

You seem to be confused. Just because the state does something doesn’t mean it should or that it does it better than the free market could. The USSR did all of those things too. Were Russians better off for it?

Sewers and highways are the only things on your list that the state does and private businesses could do them better and with less waste.

The state is best at providing courts, police and national defense. It should stick with what it is best at and leave the rest to others who are better at it.

Of course, the state is necessary and good, as Mises wrote, for the things it does well. But the state has always tried to control the economy and it’s historical fact that the process of development has been one of reining in the state and forcing it out of the market.

It had occurred to me that two of the European countries with relatively free markets – Ireland and Switzerland – both avoided World War II and other wars. Neither are members of NATO. Ireland hasn’t gone to war since the 1920s, Switzerland since 1815.

…And then I remembered that other European country famous for its long peace: Sweden. That’s a country with a long experiment in the welfare state, yet without the provocations of war. Any thoughts on that?

Yes, David, you are entirely right. But I do understand at an almost visceral level why economists don’t comment on this stuff. I have thought of posting something on ThinkMarkets about Bradley Manning and associated matters. But I feel “untrained” in foreign affairs and get the sense that, qua economist, this is not my area. In addition, one continually runs into deliberate withholding of relevant data by the government. What exactly is going on is not an easy question to answer.

On the other hand, just how much do our foreign policy experts know about foreign affairs?

Francis Fukuyama is publishing a book in April that addresses human nature among other its propensity for war, his thesis is that the state, politcal, order grew out of warfare.

From NYT article on the coming book The Origins of Political Order

“But he explicitly assumes that human social nature is universal and is built around certain evolved behaviors like favoring relatives, reciprocal altruism, creating and following rules, and a propensity for warfare.

Because of this shared human nature, with its biological foundation, “human politics is subject to certain recurring patterns of behavior across time and across cultures,” he writes”

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“The book traces the development of political order from the earliest human societies, which were small groups of hunter-gatherers. The first major social development, in Dr. Fukuyama’s view, was the transition from hunter-gatherer bands to tribes, made possible by religious ideas that united large numbers of people in worship of a common ancestor. Since a tribe could quickly mobilize many men for warfare, neighboring bands had to tribalize too, or be defeated.

Warfare also forced the second major social transition, from tribe to state. States are better organized than tribes and more stable, since tribes tend to dissolve in fighting after the death of a leader. Only because states offered a better chance of survival did people give up the freedom of the tribe for the coercion of the state.”