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Open Letter to Brink Lindsey and Sam Hammond

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Messrs. Brink Lindsey and Samuel Hammond
Niskanen Center
Washington, D.C.

Brink and Sam:

I just read your new paper, “Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy [2].” I agree with much that you write, and I applaud your eloquence. But some key parts of your paper are mystifying – not least your unquestioned acceptance of the claim that America’s middle-class has stagnated economically for the past few decades. Equally mystifying is your endorsement of what you call “development policy.”

On the stagnation point, you ignore Michael Strain’s recent data-filled book [3] that challenges the stagnation thesis. You also overlook the anti-stagnation research of – to name only a few scholars – William Cline [4], Steve Horwitz [5], Scott Lincicome [6], Alan Reynolds [7], Bruce Sacerdote [8], Scott Winship [9], and even that of Stephen Rose [10]. (And although it’s now 21 years old, the work of Michael Cox and Richard Alm [11] nevertheless remains relevant – and ignored by you.)

Because much of the justification for your proposed policies depends upon the truth of the claim that ordinary Americans have for decades stagnated economically, you do your readers a disservice by pretending that middle-class stagnation is an established fact when, in reality, it most emphatically is not.

As for “development policy” (which is your new name for industrial policy) you write that “strategic federal investments should focus on spurring the creation of new markets and capacities” and that “policymakers should focus on ensuring the next generation of high-tech manufacturers have the capital they need to scale.” Such words are so very fun and easy to write!

But who will be the flesh-and-blood officials possessing the genius to know which “new markets and capacities” are the ones that should be goosed up with “strategic federal investments”? From where will these officials get their knowledge of which particular markets and “capacities” are best to stimulate, and which high-tech manufacturers are of “the next generation”? On these all-important questions you are utterly silent.

You’re silent also about how your “development policy” will escape being sabotaged by rent-seekers. For two reasons this silence is especially curious. First, elsewhere in your paper you correctly identify many of the ways that rent-seekers distort government policies. Second, the very purpose of your “development policy” is to create rents for favored firms. What miracle repellant do you envision will keep rent-seekers away from the special privileges that you propose be created? Your readers are left to guess.

Your case for “development policy,” in summary, is to cure an imaginary problem (that is, middle-class stagnation) by giving more discretionary power to imaginary government officials (that is, men and women possessing god-like knowledge and integrity).

Surely you can do better than this.

Sincerely,
Don

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