Social Engineering Vs. Piecemeal, Competitive Creation

by Don Boudreaux on March 31, 2009

in Complexity & Emergence

Here’s a letter that I sent to Newsweek in response to this article on Paul Krugman (an article, by the way, that quotes my GMU colleague Dan Klein):

Editor, Newsweek

Dear Editor:

Nobel laureate Paul Krugman says that he was attracted to economics because it seemed to him to reveal “the beauty of pushing a button to solve problems” (“Obama’s Nobel Headache,” April 6).  Alas, like all economists who mistake their theories for reality, Mr. Krugman misses far too many of the all-important nuanced and ever-changing real-world facts masked by the Greek letters that economists of Mr. Krugman’s ilk use in their complex-seeming but inevitably simplistic mathematical equations.

I was attracted to economics for a reason quite the opposite of the one that appealed to Mr. Krugman, namely, because it helps explain how incalculably complex and productive social orders emerge from billions of individual actions, where no one of these actions is meant to achieve anything more than improvement in the welfare of the individual actor.  This type of economics – associated most famously with Adam Smith – teaches that it is hubris of the most extreme sort to imagine that problems can be solved by pushing buttons.  Social-engineer wannabes such as Mr. Krugman might mean well, but they are dangerous; they suffer from what another Nobel laureate economist, F.A. Hayek, called “the fatal conceit.”

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

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{ 49 comments }

T Rich March 31, 2009 at 7:48 pm

Your points regarding the hubris of Krugman and other statist "leadership" is a perfect bullseye. These intellectuals think that they know better than all of us plebes about how to run our lives. I sense that many people are becoming fed up (nearing a breaking point) with the tyranny that is emanating from Washington DC these days. I have never been one to want to join a protest, but when there is a tea party on the National Mall, count me in with the millions that miss the USA that we grew up in.

Thanks Don and Russ for taking the time to keep the readers informed. Thanks to all of the posters for the excellent quality of the discussion. The tenor of the posts is much better these last few weeks – probably due mainly to the absence of certain trolls. I always learn from Methinks, Sam Grove, Randy, Vidyohs and other regulars. Daniel Kuehn has been a good addition to the conversation. Cheers!

vidyohs March 31, 2009 at 7:53 pm

Go get 'em Don, good man!

vidyohs March 31, 2009 at 8:12 pm

I must apologize in advance to Don, but I tried and tried and could not resist posting this:

New Stock Market Terms

CEO – Chief Embezzlement Officer

CFO – Corporate Fraud Officer

BULL MARKET – A random market movement causing an investor to mistake himself for a financial genius

BEAR MARKET – a 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.

VALUE INVESTING – The art of buying low and selling lower.

P/E RATIO – The percentage of investors wetting their pants as the market keeps crashing.

BROKER – What my financial planner has made me.

STANDARD & POOR – Your life in a nutshell.

STOCK ANALYST – Idiot who just downgraded your stock.

STOCK SPLIT – When your ex-wife and her lawyer split your assets equally between themselves.

MARKET CORRECTION – The day after you buy stocks.

CASH FLOW – The movement your money makes as it disappears down the toilet.

YAHOO – What you yell after selling it to some poor sucker for $240 per share.

WINDOWS – What you jump out of when you're the sucker who bought Yahoo at $240 per share.

INSTITUTIONAL INVESTOR – Past year investor who's now locked up in a nuthouse.

PROFIT – an archaic word no longer in use.
# # # # #

If you had purchased $1000 of shares in Delta Airlines one year ago, you will have $49.00 today.
If you had purchased $1000 of shares in AIG
one year ago, you will have $33.00 today.
If you had purchased $1000 of shares in Lehman Brothers one year ago, you will have $0.00 today.
But—- if you had purchased $1000 worth of beer one year ago, drank all the beer,
then turned in the aluminum cans for recycling refund, you will have received $214.00.

Based on the above, the best current investment plan is to drink heavily and recycle.

It's called the 401-Keg.

MnM March 31, 2009 at 8:33 pm

I freely admit that I studied economics for somewhat similar reasons as Krugman. It wasn't until I actually studied it that I realized the impossibility of the task. There aren't very many things that can be fixed with "the press of a button" and the economy is far more complex than most of them.

Well said, Don.

nathan March 31, 2009 at 8:47 pm

Am I the only one who tried to read the article? ;)

The link seems to be broken.

Randy March 31, 2009 at 8:51 pm

That was good, Vidyohs. Thanks for the laughs :)

Oil Shock March 31, 2009 at 9:11 pm

Slightly off topic, but here is Bill Bonner's hilarious take on the Auto bailout.

We're delighted to see Mr. Obama in action…rolling up his sleeves and taking direct action to straighten out the U.S. auto business. In this world of collapsing asset values and depression, we needed a laugh.

Yes, dear reader…here we feel positively blessed. We are getting to see things we never thought we'd see: crash, depression, socialism, nationalizations…things that we'd read about in the history books. Things so preposterous, absurd and imbecilic that we never thought they'd be repeated…at least not in our lifetimes. We never imagined we see them in the 21st century…in the United States of America!

We used to laugh at foreign countries. They protected their auto industries…and paid fortunes for inferior cars. They pretended that their government hacks could do a better job of running an economy than hacks working for private industry. Their central banks printed money to try to boost domestic consumption. They meddled in markets. They fiddled their currency. Ha. Ha.

Other nations have taken over their car industries. That's what led to that marvelous breakthrough in automotive technology – the Trabant – for example. You remember the Trabant? We don't remember much about it. Except that it was a car so wonderful you had to wait many years to buy it. But this was in East Germany before the Wall fell. You had to wait many years to buy anything. And then, when the opportunity came…and the Wall came down…you could then buy a real car.

What did you do with Trabant? We don't know, but we remember reading stories about people who just left them on the street with the keys in the ignition…

But why shouldn't the feds be in the car business? It's right there in the U.S. Constitution, isn't it? The "Car Clause," as Byron King calls it: every American will have the "right to life, liberty and a four- door sedan." Heck, it's in the preamble too: "When in the course of human events, it becomes necessary to take over the automobile industry…"

Besides, the feds are already in the insurance business – big time. The U.S. government owns 80% of AIG. And we've seen what a great success they're making of it. And they've been in the passenger train business for a long time too. Amtrak has a franchise on what should be one of the most lucrative traffic corridors in the world – from Boston to Washington, DC. Somehow, the company keeps losing money.

But now the feds are taking over autos too. Rick Wagoner was forced out of GM on Sunday so that Obama can put his own man behind the wheel.

Said Obama: "It is my hope that the steps I am announcing today will go a long way toward answering many of the questions people may have about the future of GM and Chrysler. But just in case there are still nagging doubts, let me say it as plainly as I can – if you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always. Your warranty will be safe. In fact, it will be safer than it's ever been. Because starting today, the United States government will stand behind your warranty."

How about that guarantee? Five years…fifty thousand miles…or until the Feds run out of money – whichever comes first.

The stock market didn't seem to care for it. Wagoner was probably an incompetent suit. His strategy wasn't working and the company seems headed to bankruptcy. But so what? In a free market economy, companies have the right to go broke, don't they? Then, their capital assets can be taken up by other businesses and put to better use. That's the way it's supposed to work. But now, everyone seems to have lost faith in the "market's self-healing power." So they've invited the quacks with their magic elixirs and miracle potions to have a try.

vidyohs March 31, 2009 at 9:20 pm

You stung me brother Nathan, so I clicked the link (it did work for me) and read the article.

Don't want that experience again for a long time, thank you. :-)

Gil March 31, 2009 at 9:42 pm

BTW: Here's my respone to your asinine concept of U.S.A.s vidyohs (In "I am a Liberal" – some 210 comments deep). I hope you're not prone to ducking goosing around:

Um, nope, vidyohsgoosee, it's sounds as though I'm right on track. There's only one U.S.A. – the United States of America of 2009 A.D. with its current President – Barack H. Obama. You're playing some sort of 'should have' game. What sort of nation was the U.S.A. 'should have' been until it was hijacked by special interest groups. You're obviously dreaming of a U.S.A. that doesn't exist and are (apparently) pledging allegience to it and doing your best to ignore the one that actually is. By the same token I bet you do your best to ignore speed limits because you can remember a time when there wasn't any.

MnM March 31, 2009 at 10:17 pm

I'm with Randy. Thanks for the laugh Sir Vid. I needed it. ;o)

LowcountryJoe March 31, 2009 at 10:55 pm

the United States of America of 2009 A.D. with its current President – Barack H. Obama.

I cannot resist being a stickler here for details even though I seemingly always submit without proof reading myself…but what's up with the additional letter 's' that you've included in the word "State"? Wha's going on with that?

[/flippant]

Zac March 31, 2009 at 10:57 pm

I do hope they print this one.

vikingvista March 31, 2009 at 11:01 pm

The tinkerers undervalue the fact that individual players in an economy are not interchangeable members of an aggregate–that it is mostly unique differences in values that are the purpose for an economy and the reason an economy can be productive. A random exchange of values is at least as likely to impoverish as to enrich. Since a bureaucrat is unlikely to accurately guess the values of just one stranger let alone hundreds of millions of them, his forced trades are therefore almost guaranteed to impoverish.

But since the actors typically will act without prodding to gain their values, the bureaucrat's proper task is really an easy one–do not interfere.

Jeremy P March 31, 2009 at 11:09 pm

Nice and angry. I like it :)

Gil April 1, 2009 at 1:32 am

What – the 'United States of America' – LCJ? You're kidding right?

Karl April 1, 2009 at 3:22 am

From the Newsweek:

Krugman says he found himself in the science fiction of Isaac Asimov, especially the "Foundation" series—"It was nerds saving civilization, quants who had a theory of society, people writing equations on a blackboard, saying, 'See, unless you follow this formula, the empire will fail and be followed by a thousand years of barbarism'."

Who was that Popper guy again?

LowcountryJoe April 1, 2009 at 5:41 am

What – the 'United States of America' – LCJ? You're kidding right?

Posted by: Gil | Apr 1, 2009 1:32:45 AM

Mrs. White. In the study. With the sausage grinder that chewed up the 10th amendment. Those are the clues, Gil.

Daniel Kuehn April 1, 2009 at 6:07 am

Don -
An interesting response. I've always found that story from Krugman about his sci-fi inspirations surprisingly blatant! Still, I wouldn't read as much into it as you are. Krugman is not a dunce, and I'm confident he also accepts your reasoning, that:

"incalculably complex and productive social orders emerge from billions of individual actions, where no one of these actions is meant to achieve anything more than improvement in the welfare of the individual actor"

This is not a unique or rare insight that you're presenting – I'm sure Krugman shares it, even if he differs from you on what to do with it.

GIl April 1, 2009 at 6:11 am

You're not playing some word game as vidyohs would do LCJ? The U.S.A. stands for the United States of America. Simple. I'm guessing you're talking of "well it should be the United State of America because the fifty states don't have the individual soveignty that they used to". Or some crazy talk like that?

vidyohs April 1, 2009 at 6:27 am

Gilduck,

Thanks again for confirming what I said about the certain actions of an intelligent person; one of which you aren't, as proven by your actions.

I don't know your country of residence nor your nationality, but I have taken the sense that you aren't one of us though there is a possibility you might be living and working here in the united States.

But, you're a prime example of what is wrong with the world, particularly the USA; and, that is people who are too stupid to recognize that they don't know that they don't know, much less even suspect it.

geoih April 1, 2009 at 7:26 am

Quote from Gil: "By the same token I bet you do your best to ignore speed limits because you can remember a time when there wasn't any."

A perfect example of the silliness of central planning. Speed limits are completely arbitrary. For example, say a speed limit is 35 mph. It's exactly 35, not 34, not 36, but 35. Whether you're driving a 500 lb. motorcycle or a 5 ton truck, it's 35. Whether it's raining or snowing or sunny, day or night. Whether you're talking on your cell phone or actually paying attention to the road, it's 35. Makes complete sense.

vidyohs April 1, 2009 at 8:01 am

Geoih,

Indeed tis true. Speed limits are almost totally arbitrary if not totally so.

Speed limits are, I might add, very political as well. Consider the fact that during the early 80s the feds imposed a 55mph speed limit across the nation. That imposition had nothing to do with safety or traffic flow, and everything to do with forced gas consumption.

That slow speed was left in place until well into the 90s and according to the statistics my insurance salesman brother showed, those slow speeds nationwide also increased the death rate on the highways.

Speed limits can be the results of silliness/stupidity as well. There are excellent examples that also.

Then on top of the arbitrary assignment of speed limits we have the "discretionary" judgment of the individual patrolman, who may or may not stop a motorist who is operating over the posted limit but not beyond a "discretionary" range as interpreted by the individual patrolman.

BTW, the Texas code says specifically that speed limits apply only to commercial vehicles, no where is it mentioned to apply to a privately owned vehicle that can not be shown to be operating in a commercial fashion. ((There is a lot more in this issue than just meets the eye, but suffice it to say that the state has to cheat on this one in order to stop as a private person in your private vehicle))

Thanks geoih, I rarely respond to the immature illogic of Gilduck anymore, it is useless. Someday he will actually advance to the point of asking an intelligent question, but I hold no hopes it will be soon.

Rafe Champion April 1, 2009 at 8:03 am

Social engineering has a bad name because it is associated with destructive intervention, central planning and dirigism but piecemeal social reform a la Karl Popper is ok, even though he upset Hayek (and many others) by calling it "piecemeal social engineering". The point is to see whether your policies are having the desired effect, in the way that mechanics check to see if the machine runs better or worse after each adjustment. This does not mean that society or the economy is a machine, it just means that you need to adopt a critical approach to all reforms. Furthermore, the reforms will consist of carefully monitored changes to rules, rather than hasty orders issued to achieve immediate results, regardless of counter-arguments and the lessons of the past.

Gil April 1, 2009 at 8:08 am

*slaps forehead*

Aw, having a senior's moment there vidyohs? To think you knew were I comment from back in January 2008. Oh well it seems you're quite happy to walk around the mulberry bush and mutter that which make sense to you but no one else.

Michael Smith April 1, 2009 at 8:15 am

Don wrote:

I was attracted to economics for a reason quite the opposite of the one that appealed to Mr. Krugman, namely, because it helps explain how incalculably complex and productive social orders emerge from billions of individual actions, where no one of these actions is meant to achieve anything more than improvement in the welfare of the individual actor.

A fundamental reason why this productive social order emerges is that when physical force is banned from all relationships, men must deal with one another by voluntary, mutually-beneficial trade, exchanging value for value in a transaction that leaves both parties better off as a result. The cumulative effect of these on-going exchanges is the gradual, but steady, improvement in the standard of living of all those individuals willing to put forth the effort to produce (or earn) a value for which others are willing to trade.

At root, what the social-engineer wannabes like Krugman seek is the power to veto these voluntary exchanges and impose their own terms and conditions on the exchange — thereby substituting by force of law their judgment for the individual trader‘s judgment. So make no mistake about it — the desire to “tinker” in the economy, to “push buttons” — is at root a lust for power over other men’s lives, no matter what macro-ecospeak jargon is used to justify it.

Jeremy April 1, 2009 at 9:20 am

What first appealed to me about economics, was that it provided an abstract window into the world around me, and gave me the only reasonable means not to control things, as Krugman describes, but to understand things. This, of course, was all long before I really had a firm grasp on what an abstraction really is. The simple explanatory power of a few lines on a chart soon got my mind seeing it everywhere and in everything.

Unfortunately, this is not an insight that everybody possesses. I remember once talking with my mom about money. She of course was disgusted by my fascination with money because, as she understood it, money was the language of Ted Turner and all the evilness in the world. Although she was not interested in the finer points of a Carl Menger treatise, she still had formulated an opinion about money and how the world had a lot of it but she had none of it.

Don't get me wrong, I love my mom very much. But I think it highlights the gap that free market economics has to overcome against the people who side with the Paul Krugmans and the rest of the intellectually arrogant.

The question: How to make people see that their best interests lie in the wealth creation mechanisms of the market and not in a large bureaucratic government? I think it needs to be tied back to happiness. Nobody was ever made happy by government. If people are happy, it's because they manage to be happy IN SPITE of the government; not because of it!

Sam Grove April 1, 2009 at 10:41 am

Who gets to decide the goal of social engineering?

In the spontaneous order of society and market, everyone gets to have a hand via their participation and choices.

Social engineers decide that they don't like various manifestations and seek to impose their vision of order through force of arms.

What they don't realize is that many negatives were produced by previous attempts at social engineering (alcohol prohibition and organized crime, drug prohibition and violent crime in the U.S. and Mexico).

Worse, they never make the connection.

LowcountryJoe April 1, 2009 at 10:49 am

Heinlein quotations from fictional characters in his book The Moon is a Harsh Mistress

- Thing that got me was not her list of things she hated, since she was obviously crazy as a Cyborg, but fact that always somebody agreed with her prohibitions. Must be a yearning deep in human heart to stop other people from doing as they please. Rules, laws— always for other fellow. A murky part of us, something we had before we came down out of trees, and failed to shuck when we stood up. Because not one of those people said: "Please pass this so that I won't be able to do something I know I should stop." Nyet, tovarishchee, was always something they hated to see neighbors doing. Stop them "for their own good"—not because speaker claimed to be harmed by it.

- What I fear most are affirmative actions of sober and well-intentioned men, granting to government powers to do something that appears to need doing.

- Seems to be a deep instinct in human beings for making everything compulsory that isn't forbidden.

My personal favorite, though, in not about the busybody types in society that like to plan and dictate but rather on how to best organize a legislative body:

I note one proposal to make this Congress a two-house body. Excellent— the more impediments to legislation the better. But, instead of following tradition, I suggest one house of legislators, another whose single duty is to repeal laws. Let the legislators pass laws only with a two-thirds majority… while the repealers are able to cancel any law through a mere one-third minority. Preposterous? Think about it. If a bill is so poor that it cannot command two-thirds of your consents, is it not likely that it would make a poor law? And if a law is disliked by as many as one-third is it not likely that you would be better off without it?

Have fun with those, pro-government, pro-bureaucrat types.

Daniel Kuehn April 1, 2009 at 10:55 am

Sam -
RE: "Social engineers decide that they don't like various manifestations and seek to impose their vision of order through force of arms."

When you sensationalize this idea of "social engineering" of course it sounds crazy. Same with the "they never make the connection" hyperbole. When you pretend that all that these people want is more regulation – no matter whether it makes sense or not – then of course they come out looking ridiculous. And Krugman and his ilk aren't Plato's philosopher-kings or Galbraith's technocrats.

John April 1, 2009 at 11:06 am

"What they don't realize is that many negatives were produced by previous attempts at social engineering (alcohol prohibition and organized crime, drug prohibition and violent crime in the U.S. and Mexico)."

I'm cynical enough to believe that the negative effects of social engineering are looked upon as opportunities for more social engineering.
Take the violence associated with black market drug sales or the overflowing prisons that wouldn't exist if the drugs were legal.
This is not a reason to repeal puritanical legislation, but rather an opportunity to impose greater restrictions on firearms as well as increased monitoring of citizens' private lives.

Trust me, these people know exactly what they are doing.

kingstu April 1, 2009 at 11:12 am

You people don't seem to understand something. When an individual borrows too much to spend on things he can't afford, that is bad. When the entire nation borrows too much to spend on things they can't afford, "aggregate demand" is stimulated, which is good.

Any questions?

Daniel Kuehn April 1, 2009 at 11:14 am

John -
RE: "Take the violence associated with black market drug sales or the overflowing prisons that wouldn't exist if the drugs were legal.
This is not a reason to repeal puritanical legislation, but rather an opportunity to impose greater restrictions on firearms as well as increased monitoring of citizens' private lives."

Perhaps. But I think the point is that that scarier solution is being put forward by politicians that get votes from law-and-order machismo. Social scientists like Krugman who take a more "social engineering" stance on these problems almost universally say "gee – we oughta release all the non-violent drug offenders", and I'd be a huge portion of them would also say "gee – we oughta legalize these drugs".

The scheming of politicians does not automatically refute a general "social engineering" perspective among social scientists. And as I said above, the adoption of a "social engineering" perspective doesn't prevent someone from recognizing the fundamental power of markets and liberty that Don points out.

Daniel Kuehn April 1, 2009 at 11:22 am

kingstu -
RE: "You people don't seem to understand something. When an individual borrows too much to spend on things he can't afford, that is bad. When the entire nation borrows too much to spend on things they can't afford, "aggregate demand" is stimulated, which is good."

The operative word here being "too" much. How much is too much? National debt is something like 70% of GDP. By most reasonable standards, that isn't "too much". If a household restricted itself to borrowing 70% of it's annual salary to buy a house it would be considered prohibitively and unreasonably frugal. Now, perhaps the best statistic isn't federal debt over GDP – maybe it's the annual deficit as a percentage of revenue. But regardless which you use, the point is that by leaving "too much" nebulous and undefined, you aren't addressing the real question.

I'm a deficit hawk – I don't like all this debt either. But it's the long-term debt projections that scare me, not the current debt level or a counter-cyclical fiscal policy. Is this nation over-leveraged? Sure it is. But let's be more explicit about how overleveraged we are. The federal government's borrowing habits aren't nearly as atrocious as some of the banks or households that we've been hearing about the last couple months.

The big question for me is – are we going to keep it that way, or let it explode? The current budget plan raises big doubts about that in my mind.

LowcountryJoe April 1, 2009 at 11:39 am

When you pretend that all that these people want is more regulation – no matter whether it makes sense or not – then of course they come out looking ridiculous.

Who's pretending, Daniel? And I don't think that you'd find many here that would accuse the asshats of knowingly advocating/passing regulations that do not make sense. Most of us can imagine that these asshats are well meaning and think that their ideas make sense.

Most of us just do not agree that these proposals and legislation make sense. Further, we kind of wonder why trained economists try to make sense out of killing Homoeconomicus (the individual) and prefer to direct and control the economy to their whims instead of letting individuals determin the path of the economy; there has got to be a character flaw in those that would impose their own will on others. Are you not seeing that this is where the debate leads each and every time? Are you that blind to the foundation of the arguement?

Of course, these people (yourself included, it seems) come out looking ridiculous the way that we libertarians are framing the arguement with you. But more than ridiculous, you come off looking like advocates of tyrrany, central planners, and no friend of liberty.

So, it's like this, Daniel, you either enjoy your freedom and have a high tolerance for the freedom of others (particulrly economic freedom) or you do not. Yes, you can look for your safety gray area fence that you like to straddle, but in this forum, you are amongst many more men and women that enjoy their freedoms — AND the freedoms of those around them — more so than you seem to. For anyone who is willing to sacrfice their neighbor's freedoms [because the neighbor's choices don't seem to jive with your own, for example] is going to have their's taken away in short order, as well.

Sam Grove April 1, 2009 at 11:42 am

If a household restricted itself to borrowing 70% of it's annual salary to buy a house it would be considered prohibitively and unreasonably frugal. Now, perhaps the best statistic isn't federal debt over GDP – maybe it's the annual deficit as a percentage of revenue.

People usually do that with consideration of their income and the expectation that the debt will decline over a known period.

When government does it, it seems to be a perpetual policy.

No household run by sensible people would attempt to run at a 70% debt in perpetuity.

Sam Grove April 1, 2009 at 11:50 am

When you pretend that all that these people want is more regulation – no matter whether it makes sense or not – then of course they come out looking ridiculous.

I'm not saying they want more regulation, that's a side issue.

They want to attain a particular goal, and though they may not live long enough to see if it works or not, others will come along and use whatever power has been accumulated for that purpose to attempt to attain other goals.

Government is not an eternal wise man that can see these interventions from above and make corrections as we go along. The process is haphazard and, I think, destructive to the social fabric (whatever that is).

Daniel Kuehn April 1, 2009 at 11:55 am

Lowcountryjoe -
RE: "we kind of wonder why trained economists try to make sense out of killing Homoeconomicus (the individual) prefer to direct and control the economy to their whims instead of letting individuals determin the path of the economy"

Yes, clearly I was mistaken – you never argue over caraicatures of what people actually say, think, and do.

RE: "you are amongst many more men and women that enjoy their freedoms — AND the freedoms of those around them — more so than you seem to."

And there's another one!

John April 1, 2009 at 11:56 am

I'm trying to remember when, other than the repeal of Prohibition, that our government has admitted fault (attacking the opposition party doesn't count).

Daniel Kuehn April 1, 2009 at 11:58 am

Sam -
RE: "No household run by sensible people would attempt to run at a 70% debt in perpetuity."

That's because people die and governments live for centuries. We've had a public debt since before the ink on the Constitution dried. It CLEARLY hasn't hindered us.

This is basic public finance stuff. People die. Governments take a whole lot longer to. That's why government can borrow with cheaper interest payments. That's why governments can run in perpetual debt. That's why Treasuries are considered safer than just about anything on the market. It's apples and oranges. Maybe I should have just left it at that in the first comment – it's apples and oranges.

John April 1, 2009 at 12:04 pm

DK,
I think Joe has a valid point.
Any use of government force that is not to prevent force or fraud, however well intentioned, goes against the core of libertarianism.
You seem to see "legitimate" uses of government force outside those narrow boundaries, which puts you immediately at odds with those who call themselves libertarians.

Daniel Kuehn April 1, 2009 at 12:05 pm

John -
Well absolutely. I'm not a libertarian. I don't think I ever claimed to be (actually, I did at one point for a couple years in undergrad… grew out of that though)

John April 1, 2009 at 12:09 pm

"grew out of that though"

Funny, I was a liberal while in college but I grew out of that.
Without telling you my life story, suffice it to say that circumstances forced me to question and finally relinquish any faith that I had in government, kind of like a Christian realizing that man created god.

Daniel Kuehn April 1, 2009 at 12:12 pm

John -
I fortunately never had to go through the liberal phase… took it from conservative to libertarian to moderate (trust, rebellion, realism?). Anyway "grew out of it" was meant to bait and tease… nobody needs to be concerned over it. I very much appreciate the insights of the libertarian perspective.

Garrett Schmitt April 1, 2009 at 12:13 pm

I'm similar to MnM and Krugman in that I was drawn to economics by the prospect of being able to "fix" things. I saw what natural order and prosperity there was in the world and asked whether, with a conscious effort (also known as interventionism), we couldn't have even more of it.

I couldn't pinpoint when I saw through that "fatal conceit", and I may be too young to be a good case study. I was frustrated by macroeconomic theories supporting interventionism, the more fanciful saying government or banking could create wealth from thin air, the simpler seemingly all but banishing the prospect of growth outside of exogenous shocks. However, my change of mind could equally have been some natural refinement of values.

Nonetheless, I'm sure many here would agree that there is, in fact, one push-button solution to many social problems: ending political interventionism in the economy.

John April 1, 2009 at 12:32 pm

"trust, rebellion, realism?"

From what I've gathered you went back to trust. Perhaps in a more limited way, but still back to trust.

indiana jim April 1, 2009 at 12:53 pm

Don,

I used you post (above) as a lead in to a lecture I gave this morning; thanks! It worked quite well I think in motivating students to think about the importance of the Smithian perspective relative to the simplistic machinations that are often held out as economics by folks (like Krugman) who frequently seem to suffer from appears to be a messiah-complex.

MnM April 1, 2009 at 1:08 pm

Garrett, "solution" might be a little strong. They'd sure as hell improve, however. I guess I'm just not the panacea type.

vikingvista April 1, 2009 at 1:16 pm

"The question: How to make people see that their best interests lie in the wealth creation mechanisms of the market and not in a large bureaucratic government?"

It's easy enough to explain how a free economy allows people to gain sometimes immense wealth without being at the expense of others. I think this is a concept still favored by most Americans.

But when people see the existence of an apparent moneyed class being defined by government favoritism and high taxes, they are skeptical about the extent to which a free economy exists, versus a nationwide plantation economy on the backs of taxpayers.

So for the political stability of the country, and the preservation of liberty in our economic decisions, separation of economy and state is vital.

And of course now we're going in exactly the wrong direction.

vikingvista April 1, 2009 at 1:32 pm

"People die. Governments take a whole lot longer to. That's why government can borrow with cheaper interest payments."

What blatant utter nonsense. Corporations have indefinite lifespans but given a debt load the size of Uncle Sam's, there is no way a company's bond rates would be anywhere near as low as t-bills.

It's the government's power to steal almost with impunity that keeps its interest rates low.

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