One of the best books on political theory that I’ve read in years is Mark Pennington’s Robust Political Economy.  I’ll be writing more about it in the future.

Compared to many other bloggers, Arnold Kling is more polite – and thinks more much more deeply – about the state of economy (and about proposed ‘solutions’).

And while we’re highlighting Arnold’s work, don’t miss this gem of a post – in which, by the way, he mentions the important new study by my GMU Econ colleague Garett Jones and AEI’s Dan Rothschild.

Bob Higgs here discusses the relevance to economic theory of the recovery of consumer spending.

 In today’s Wall Street Journal, the Cato Institute’s Dan Ikenson argues that “the president should strongly advocate the elimination of duties on imported manufacturing inputs and other domestic impediments to U.S. competitiveness abroad and at home.”  [Dan's correct - although I pick a nit: talk of "U.S. competitiviveness," while it might help to better sell politically the case for freer trade, is wrong and misleading.  As Paul Krugman correctly argued in 1994, "competitiveness is a meaningless word when applied to national economies."]

Be Sociable, Share!

Comments

comments

22 comments    Share Share    Print    Email

{ 22 comments }

Daniel Kuehn September 10, 2011 at 7:10 am

Kling has also had good things to say about Pennington. I wrote about Pennington a little while back (here: http://factsandotherstubbornthings.blogspot.com/2011/06/robust-political-economy.html) some of which I hope you’d agree with, some of which you probably won’t. This is what I wrote at the time:

I recently watched a video of Mark Pennington discussing “robust political economy” and thought it was very good. Arnold Kling is promoting it as well, which inspires me to share it here. The robustness of political economy that Pennington discusses is robustness to human error, frailty, ignorance, etc.

I highly recommend the talk, but I also want to highlight something that bothers me about it. This is essentially an argument for a constitutionally limited republic, and it also makes a good case for a constitutionally limited federal republic, in particular. Pennington goes a little off the reservation in acting as if he has produced a case for libertarianism, however, as if libertarianism and constitutionally limited federal republicanism are coterminous.

You see this with public choice theory a lot as well, where the economics and political science gets mixed in with a particular ideological prerogative. I think that’s unfortunate. This is great political theory all around. In fact, he’s highlighting exactly why I support a constitutionally limited government as well as why I make a big deal on here about federalism, and Pennington highlights these classic elements of liberal political economy by drawing attention to perhaps their most important feature: their robustness. I think Pennington pushes away people who agree with him on robust political economy but not on the libertarianism, and I think libertarians who listen to this risk thinking this elaboration of good political theory is somehow a justification of libertarianism.

I would also caution listeners to take what he says about “market failure” arguments with a grain of salt. He makes good points about robust political economy but I think he presents a somewhat distorted picture of market failure to facilitate a juxtaposition he wants to make (a juxtaposition which I think is entirely unnecessary and comes across as forced).

Arnold Kling highlights this conclusion which I endorse: “Societies benefit from continual experimentation. Since no one knows enough to design a perfect system, more experimentation is better.”. Again, I’d highlight here the important difference between classical liberal robust political economy and modern libertarianism. One of the primary reasons for my unease at libertarianism is the threat that it poses to continual social experimentation. “There are a couple things we could try” is not a phrase you’ll hear a libertarian say very often.

Eric Hosemann September 10, 2011 at 8:54 am

“One of the primary reasons for my unease at libertarianism is the threat that it poses to continual social experimentation.”

Continual experimentation is the operating mode of a free society. There is no other way. Nothing in libertarian political economy even remotely whiffs of a threat to continual social experimentation. It is libertarians’ acceptance of the fruits of this experimentation–as long as they are not harvested through coercion–that gives you unease.

kyle8 September 10, 2011 at 8:57 am

I think coercion might be implied in that idea.

Don Boudreaux September 10, 2011 at 9:12 am

Daniel: There are legitimate disputes between classical liberals and libertarians, to be sure. (Although, compared to the differences that both have with today’s dominant mindset – especially that of the intelligentsia – the differences between classical liberals and libertarians are vanishingly small.)

But I’m taken aback by your “unease” generated by your mysterious belief that libertarianism poses a “threat…to continual social experimentation.” How can proposing maximum possible scope for individuals to pursue their own goals by whatever peaceful means and methods they choose pose a “threat” to social experimentation? Seems to me that libertarianism maximizes the scope for such experimentation.

Libertarianism poses a threat only to FORCED experimentation – a threat to the urge of some people to forcibly use other people as guinea pigs. But libertarianism allows – nay, encourages – people to experiment in all sorts of peaceful ways to act not only individually, but also to experiment with different modes of collective organization.

Eric Hosemann September 10, 2011 at 9:51 am

+1

Daniel Kuehn September 10, 2011 at 5:51 pm

But it’s simply not the maximum possible scope for indiviudals to pursue their own goals. Libertarians shut off a variety avenues for individuals to pursue goals and experiment. You understand that they do that through markets too. That’s great. But the difference between you and me has never been over the value of people pursuing their goals in a market.

Methinks1776 September 10, 2011 at 9:27 pm

Libertarians shut off a variety avenues for individuals to pursue goals and experiment.

That it does. It shuts off the avenue which allows me to perform experiments on you without your expressed permission. You think my inability to hold a gun to your head is a mistake?

muirgeo September 10, 2011 at 9:38 pm

Oh my gosh… they’re doing experiments on Methinks….. like offering her really cheap short term interest rates…. oh the horror… some one quick call 911!!!

Methinks1776 September 11, 2011 at 9:28 am

Actually, Muirdiot, they’re making your dad pay for those near zero interest rates for me. Still happy?

muirgeo September 10, 2011 at 9:22 pm

“How can proposing maximum possible scope for individuals to pursue their own goals by whatever peaceful means and methods they choose pose a “threat” to social experimentation?”

Because such strict adherence to its principals excludes great things like the Hoover Dam, tons of patent protected productions, the Trans-Continental Railroad, Interstate Highways, the electric grid, levies, the internet, a Moonshot, the Manhattan project.

I think you fail to see how the market is not good at long term planning and coordination… especially the modern market traded on millisecond super fast computers that probably never would have existed with out loads of input from government research.

And finally….. when left to their own most individuals will decide to cooperate external to markets to provide social safety nets like Social Security, Medicare, common defense among many other advantages to good planning that you guys take for granted every day of your lives.

It’s funny to follow the New Hampshire Porcupine libertarian sect trying to birth itself. It’s a well intentioned version of society trying to form but looking more like the Keystone coops. The impracticalities arise ALL over the place making it look childish and silly.

kyle8 September 10, 2011 at 8:56 am

I just want to understand you clearly. You are saying that it is wrong to conflate a constitutionally limited republic with Libertarianism because it could damage both causes.

If this is what you mean I have to agree, however I would also say that I cannot in my limited capacity imagine any other sort of government than a limited constitutional republic in which any tru libertarian ideas could flourish.

The truth is that human nature tends toward people wanting to control and steal from others. Only by limiting the damage that government can do, both by a constitution and by separation of powers, and by federalism, can you allow even a modicum of personal freedom, or economic freedom.

And even then, as we see in the USA, over time the forces of control, rent seeking, and outright repression begin to pick away at all of the safeguards and eventually triumph.

Daniel Kuehn September 10, 2011 at 5:56 pm

re: “I just want to understand you clearly. You are saying that it is wrong to conflate a constitutionally limited republic with Libertarianism because it could damage both causes.”

I’m saying it’s wrong because libertarianism is only a small subset of perspectives supporting constitutionally limited republics. My only problem with Pennington (at least in the longer lecture I heard) is that he makes a great case for constitutionally limited republics but fails to make a case for libertarianism – which leaves other proponents of constitutionally limited republics like me in the awkward position of pointing out that he made a great argument for what we already believe but that we’re still not sure why he thinks we should be libertarians.

re: “I would also say that I cannot in my limited capacity imagine any other sort of government than a limited constitutional republic in which any tru libertarian ideas could flourish.”

I don’t think this is true. One could easily imagine a libertarian dictatorship where the state is kept minimal by a single, unelected monopolizer of violent force that doesn’t let anyone form a government. Many prominent libertarians talk fondly about precisely this sort of solution. I’m not saying libertarians are pro-dictatorship. Most aren’t. But libertarianism does not require republicanism, and since libertarianism often sits uneasily with democracy, even pro-constitutional republican libertarians don’t always make the best republicans.

Economic Freedom September 12, 2011 at 12:44 am

I’m saying it’s wrong because libertarianism is only a small subset of perspectives supporting constitutionally limited republics.

Right. For example, there’s the “mixed economy constitutionally limited republic”, the “corporate fascism constitutionally limited republic”, etc. But as Mises and Hayek both convincingly showed, “mixed economies” are not a “third way,” halfway between laissez faire and socialism. They are unstable because each government hampering of the market causes things to be worse off than they were before; so either the regulation has be repealed or yet another regulation has to be imposed to try to fix the problems caused by the first regulation. Before you know it, there’s all-round economic planning. The main thing standing in the way of this is the Constitution, which limits the power of centralized government. Thus, anything outside of libertarianism –by which I mean a classical liberal order — is incompatible with a constitutional republic that imposes constraints on government and limits its size and scope.

In such a republic, there’s zero call for Keynesiacs; you’d all be unemployed and unemployable. I’m not surprised, therefore, that you have a problem with the idea.

samgrove September 10, 2011 at 3:00 pm

One of the primary reasons for my unease at libertarianism is the threat that it poses to continual social experimentation.

Evidence of cluelessness.

Libertarians would say something more along the lines of: There are a great many things we could try. Collectivisim necessarily limits our options to “a couple of things we could try.”

Mark Pennington September 11, 2011 at 1:47 pm

Daniel,
Many thanks for the positive comment. On market failure – I think and hope that the book is more nuanced than the video you mentioned -which was my book launch at Cato – where I necessarily had to condense the argument. I do attempt to provide an argument for libertarianism, but that is developed in several chapters of the book and is based on much more than the usual market failure v government failure dichotomy – at least as it is presented by economists. Thanks again. Mark P.

Dan Ikenson September 10, 2011 at 11:13 am

Don – With a caveat, I agree that competitiveness is a “meaningless word when applied to national economies,” so I regret that you inferred that I was writing about “national” competitiveness.* The heresy of putting the word “U.S.” right beside the word “competitiveness” notwithstanding (which was done to economize on words, as opeds force us to do), I thought it was abundantly clear that I was writing about policies that would make U.S.-based firms more competitive at home and abroad. So, practically speaking, I don’t think there is anything “misleading” about the piece. Certainly, I hope most readers understand it the way I intended it.

- Dan

* Caveat: I think the concept of “national competitiveness” is perfectly legitimate in the context of policy competition. Liberalization of tax, trade, and investment policies, for example, in Country X makes the policy environment more competitive than it was before, and perhaps more competitive than in Country Y, which maintains firm restrictions. Country X is not more competitive than Country Y, but because of policy changes, firms operating in Country X are more competitive than before and more competitive than firms in Country Y.

Don Boudreaux September 10, 2011 at 12:48 pm

Dan: Fair enough. I hesitated to pick that nit. (My assumption was that the WSJ’s editors used that wording because it IS popular with the reading public.)

And I do accept your larger point. Still, the association of the word “competitiveness” with mercantilist and neo-mercantilist policies is too close for safety, in my judgment. I see (as I know you do, too) so very many mis-informed people prattling on about “competitiveness” in one breath and, in the next breath, endorsing this tariff or that subsidy.

Don Boudreaux September 10, 2011 at 12:57 pm

P.S. Great essay, btw!

indianajim September 10, 2011 at 4:09 pm

Higgs is hammering away solidly with the facts; thanks for the link Don.

Invisible Backhand September 10, 2011 at 7:24 pm

I took a look at “Did stimulus dollars hire the unemployed?”

In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at thetime they were hired (Appendix C).3 More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2). Thus, there was an almost even split between “job creating” and “job switching.” This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy: even in a weak economy, organizations hired the employed about as often as the unemployed.

Setting aside the leading and snarky “how hard it is for Keynesian job creation to work”, how is hiring 42% from the unemployed a failure? Even a layman knows that employees poached from elsewhere create vacancies. Why separate out the 6.5% and the 4.1% as well? Those employees don’t contribute to the economy?

It appears Jones and Rothschild had already decided on a narrative and thought no one would ever look at the data.

Ken Royall September 10, 2011 at 11:34 pm

Hiring the unemployed is great but you seem to be ignoring the enormous cost of the stimulus that supposedly caused this to happen. You are correct to cite the fact that vacancies are created when a worker switches jobs (although not always).

However, as the money for the stimulus must come from the private sector at some point, I am sure you would agree that economic expansion will be sacrificed to pay for the short term goal of hiring some workers with the real goal being getting some politicians re-elected.

The question becomes do politically motivated employment schemes do a better job of allocating these resources than the private sector? The private sector is where all of the money to fund these programs comes from. In my mind we are better off leaving the capital in their hands to invest as they see fit.

Even using the administrations own numbers, each “new job” cost the taxpayers in excess of 200 thousands dollars. That doesn’t seem that effective to me. Especially when you read about companies like Solyndra who hired some people and closed within a year of getting their government loans. The administration would count those short term jobs as a win.

Invisible Backhand September 11, 2011 at 10:41 am

Hiring the unemployed is great but you seem to be ignoring the enormous cost of the stimulus that supposedly caused this to happen.

I’m deeply sorry that the research I do for free and condense into a short blog post in response to a link posted by the moderator did not anticipate the concern of the first random commenter to come along.

Previous post:

Next post: