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In Praise of Laissez Faire

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In my latest column for AIER I marvel at the deep insight that economics, well-taught and well-learned, gives us into reality [2]. A slice:

But even many economists whose introduction to economics was as splendid as was my own are nevertheless reluctant to endorse laissez-faire policies. I’m sure that the reasons for this reality are many, including even simple differences in personalities. Yet I suspect that many economists’ reluctance, shall we say, ‘to go full Friedman’ springs ironically from a deep appreciation – an appreciation no less real than my own – of the marvels of self-regulating market processes.

Once you firmly grasp the logic of market processes, and then compare the operation of real-world markets to the operation of real-world government interventions, the case for nearly all government intervention is revealed as dreadfully weak. The appropriate role for government in the economy shrinks to a pinpoint. But for many economists, I think, this conclusion is unacceptable psychologically. Such a conclusion feels too radical. Anyone who embraces it positions himself or herself very far from friends and family members – from the norm in polite society.

Can the vast majority of men and women be so far off in their assessments of markets and in their confidence in government officials? “Surely not” is an understandable answer. “The strong case for allowing markets in almost all cases to self-regulate, rather than displacing such regulation with government-issued commands, must reflect a bias created by immersion in the economic way of thinking.”

Likely also at work is a related factor – namely, the natural desire to fit in. Because the typical non-economist today thinks it lunatic, say, to do away with antitrust statutes, to abolish the Food and Drug Administration, to eliminate occupational-licensing restrictions, to get rid of legislated minimum wages, to repeal all protective tariffs, and to separate school and state, the economist is reluctant to mention in polite company that he or she sees potential merit in such policy moves. The reticence borne from such reluctance too easily is eventually transformed into a conviction that the general public must be correct in its rejection of laissez faire.