Bush's continuing attack on the New Deal ??

“To be honest, I haven't had a chance to think about this carefully - but it looks interesting and I'll take some time to investigate more later. But, I always learn from what other TT'ers have to say, including the ones I end up completely agreeing with and the ones I completely disagree with.

http://www.dailykos.com/story/2005/6/29/17388/9747”

“The oligarchs are on the march.”

“The attack has been going on for four and a half years and will continue for at least another three and a half, but what the hey ... all the conservatives are happy and that's all that matters.”

“Reality-Based Community

A BUZZFLASH READER CONTRIBUTION

Buzz,

This deserves to be seen by all. I pulled it from the NYT article "Without a Doubt: Faith, Certainty and The Presidency of George W. Bush."

In an interview with a senior advisor to Bush:

The aide said that guys like me were ''in what we call the reality-based community,'' which he defined as people who ''believe that solutions emerge from your judicious study of discernible reality.'' I nodded and murmured something about enlightenment principles and empiricism. He cut me off. ''That's not the way the world really works anymore,'' he continued. ''We're an empire now, and when we act, we create our own reality. And while you're studying that reality -- judiciously, as you will -- we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do.''

Also, this part, in an interview with Mark McKinnon, senior media advisor to Bush:

He started by challenging me. ''You think he's an idiot, don't you?'' I said, no, I didn't. ''No, you do, all of you do, up and down the West Coast, the East Coast, a few blocks in southern Manhattan called Wall Street. Let me clue you in. We don't care. You see, you're outnumbered 2 to 1 by folks in the big, wide middle of America, busy working people who don't read The New York Times or Washington Post or The L.A. Times. And you know what they like? They like the way he walks and the way he points, the way he exudes confidence. They have faith in him. And when you attack him for his malaprops, his jumbled syntax, it's good for us. Because you know what those folks don't like? They don't like you!'' In this instance, the final ''you,'' of course, meant the entire reality-based community.

I don't know which part makes me angrier. From the best of my recollection, I don't remember the last administration demonstrating, with such apparent relish, an unchecked God complex. These people.....they are nuts.

Also, I'd like to clue Mark McKinnon in on something. I am not from the West or East coast, or Wall Street. And frankly, I don't like the way George walks.”

“I read that "Exponential Enrons Ahead" yesterday. This is exactly the type of corporatist crap they're going to slip in while we're all bickering about Iraq.”

“For how much longer is the New Deal gonna be considered "New"? I mean, by now it's gotta at LEAST be the "Slightly Used Deal", or "Like New Deal".”

“Raw Deal?

Perhaps the author of the Blog should do a review of Sarbanes-Oxley.”

“LOL! Good point Buck!”

“Why the Socialists are up in arms about the "attack” on their precious "New Deal" and its policies. Policies which “attacked” the way of life this country stood by for over 150 years before they were enacted. And why the left believes that the only reason socialism hasn’t worked anywhere anytime is because the right people haven’t been in charge.

Representing the intellectual opinions of the left, Dopey the dwarf.




Stay tooned for an unbiased report from the unbiased media at 11:00.”

“Gee Arc - any idea how the American economy did in the 1/2 century following the institution of the New Deal? How did that compare with other countries?

If the New Deal was socialism, then I guess there is evidence that one for of socialism worked very well indeed.”

“The basic argument makes sense as I read it. I'll have to learn more. The idea is that not allowing big conglomerates to own utilities and to gain monopolistic powers deepened the great depression. Partial repeal of the Public Utility Holding Company Act of 1935 enable the Enron abuses and market manipulations in California. Further deregulation invites foreign ownership of utilities, increased speculation and manipultion in the enrgy market and the risk of economic collapse bt owners of Utilities.

The Dems rolled over and played dead on this one. Is there a reason not to worry? Any one know more about this than I do?”

“Well yes, actually, pedxing. The US economy, and the British economy, had their fastest growth ever. My source is Milton Friedman.

Do you have any idea how long it took the U.S. to recover from the Great Depression, after the initiation of the New Deal, as opposed to other countries? I can reprint the stats for you.

I suggest you read Friedman. He's an economist, pedxing. Historians and journalists have an interesting take on what the causes of the depression where, and what effect the New Deal had on it, but you should probably read a Nobel Prize winning economist for economic analysis. After all, it’s been his life’s work to study all things economic.”

“Interestingly enough, economists (including "Nobel Prize winning" ones) dramatically disagree, so we still have to think for ourselves.

Recovery from the depression in the US was complicated by the dust bowl, by the collapse of unregulated utility companies and other factors. The thing is that our economy flourished after the New Deal and we acheived a level of middle class success and social security that's remarkable.

Have you noticed which over-regulated country has had the fastest economic growth in recent years?”

“"you should probably read a Nobel Prize winning economist for economic analysis"
- arclite
6:30:47 AM
7/05/05

I take that to mean that you have taken my suggestion to read some Joseph Stiglitz then? What have you learned from him? Compare and contrast his views with Friedman's.”

“"A little learning is a dangerous thing; drink deep, or taste not the Pierian spring: there shallow draughts intoxicate the brain, and drinking largely sobers us again."
- Alexander Pope”

“I was also thinking of the 1998 Nobel winner Amartya Sen.
http://almaz.com/nobel/economics/1998a.html”

“Sorry, violin, I haven’t read Stiglitz yet. But if you suggest it, I will definitely put it on my reading list.

I haven’t read Keynes yet either. I have read the writings of Ludwig von Mises, Friedrich von Hayek (Nobel Prize), Walter Block (The Austrian School has an impressive track record), Vernon Smith (Nobel Prize), James Buchanan (Nobel Prize), Thomas Sowell, Milton Friedman (Nobel Prize). It seems as if the Libertarians have quite a few very respected economists in their ranks. Go figure!

I’ve still got a long way to go but I’ve made a start at understanding something I never wanted to make my life’s work.




“Interestingly enough, economists (including "Nobel Prize winning" ones) dramatically disagree, so we still have to think for ourselves.”

Pedxing


Interesting answer Ped. So does this mean that you actually read any thoughts by any economists? Or are you thinking for yourself when you come to your understanding of how economics works?

That’s a nice history lesson, Ped. It’s somewhat lacking in economic analysis, but a nice history lesson nonetheless. Deep….


You may also want to read Murray Rothbard to broaden your historical knowledge:

“Then came America's Great Depression (1963) which makes clear that the Great Depression was caused not by reckless stock speculators or other alleged malefactors in the private sector, but by the government itself which had inflated bank credit, blocked trade with the notorious Smoot-Hawley tariff and throttled enterprise with big tax hikes.”


There’s also Richard Timberlake:

Timberlake has made the case that the federal government helped create -- and significantly prolonged -- the Depression by constricting the money supply and causing a "deflationary disaster." Without the Federal Reserve's efforts to decrease the amount of money in circulation, "the traditional gold standard and clearinghouse adjustments in the form of accommodation to the commercial banks would have righted the economy as early as 1931," Timberlake said in an interview with the Objectivist Center's Navigator (January 2001). "What is most important to understand is that the contraction [of the money supply] and Depression were not economic events, but the fruits of political decisions made by agencies of the federal government."


And then there’s Milton Friedman, who provides some very nice facts about how long it took the U.S. to recover from the depression after the New Deal. He also agrees with the assessment that government was the principle cause of the depression and it’s duration.


Are these economists disagreeable with the economists that you have read?”

“clinton left the economy in good shape with record surpluses-bush?-forget ti-”

“I'm always a bit surprised by this "argument by authority," but Arclite it does look like you have read more in economics than I have. I've seen a good deal of agreement on the role of Smoot-Hawley. But I've also seen a lot of criticism of the increased leveraging of businesses and economic speculation. Additionally there was the Revenue Act of 1926 which dramatically reduced income taxes in the USA. Minimum wage laws were ruled unconstitutional in 1923, there was a boom in the use of credit to make purchases.

Brokerage loans sky rocketed in the two years leading up to the crash of 1929.

Many economists and historians tie the unequal distribution of wealth, particularly the lack of money in the hands of the poor to a weakness in demand for goods that deepened the depression. I understand this is controversial.


The fact is that the Presidents from 1920 to 1933 were all laissez faire Republicans who slashed regulation, slashed taxes and let the monopolies grow without interference. Yes Hoover signed Smoot-Hawley as businesses craved protectionism in the wake of the crash and economic worries - but there were clear problems before Snmoot-Hawley. (From what I see, most economists now don't think this had a huge direct impact on the US, as imports were only 6% of the economy at the time). Inventories were already growing rapidly before the 1929 crash.

The worst years of the great depression were over by the time Roosevelt went to work and started on the New Deal. It may well be that the New Deal itself didn't do a great deal to get things going. A lot of people have said that WWII military spending was what really got things going great guns.

Anyhow, the fact is that we did fine under the New Deal. We had a period of unparalleled prosperity and growth. Our economy was shrinking as fast as China's is now growing when Roosevelt took office.”

“Interesting.

Ive read Stiglits, he has very insightful views behind the scenes. You will also like Jeffrey Sachs if you think along those same lines.

Smoot-Hawley (60% tarriffs) was enacted by Hoover, but I don't believe was a major cause in prolonging the depression. As was said before, the imports were not a significant % of GDP, and levels close to this were sustained before - the whole of the industrial revolution (except the 10s) - of 40-50% consistantly. As far as the reasons fot the cause of the crash and depression, I'll leave that for you to read for sake of time (I don;t want to type that much:D). But the other cautios actions by Hoover, such as trying to balance the damn budget!! and in 1931 outting the largest tax increase into effect.

As far as the New Deal, you have to give credit to FDR for at least trying something. But ecomically, the New Deal was a failure. Any plan after 6 years with 16% unemployment still, is not a a period of "unparalleled prosperity."”

“Here's a graph of the GNP rate in the 30s:



Here's a graph for unemployment:



Note that Roosevelt became president early in 1933 and that the last major New Deal legislation was filed in 1938. The Keynesian view is that increased government under the developing New Deal helped the economy, but that it was the War spending that really pulled us up. I think the New Deal helped put safeguards and structures in place that helped lay the foundation for post war stability. Whatever the cause and effect was, the New Deal didn't prevent an unparalled period of growth and prosperity. Keynsians will point out that the first countries to fully recover from the Depression were the ones that had the most stimulative economic policies, i.e. the big spenders (Sweeden, England, and Germany).”

“Thanks for joining the discussion Paul C. It sounds as if you know something about economics.




And I am surprised, Ped, when people, such as yourself, dismiss those “authority” figures when their ideas conflict with your own.

"Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof."

John Kenneth Galbraith

Did you have this much trouble with authority in school, Ped? I mean, did you believe any “authorities” on psychological thought or did you just reinvent the wheel and figure it all out for yourself?

I can hear the discussion: “Mr. Pedxing, have you read About Behaviorism/Beyond Freedom and Dignity/Walden 2 as you were assigned?” “No of course not Professor Shrinkwrapp. Skinner is an authority figure and as such it would be illogical to conclude that I need to think about his ideas.”

Oh I’ll bet that went over big!

I assure you, Ped, that I know more than you about energy efficiency strategies as they relate to buildings in Florida. If we have a discussion on that topic would you dismiss my ideas as “argument by authority”? How about if I were to provide you with references for some of my source ideas?

And when you present ideas about subjects in which you are not an “authority” should they be taken more seriously than someone who is an “authority”?



“But I've also seen a lot of criticism of the increased leveraging of businesses and economic speculation. “

Pedxing

These sound like valid points, but are they? It seems to me that someone who has studied economic thought as their life’s work, would be able to confirm or dismiss these ideas better than you or I. What are your sources here? You say you’ve “seen a lot of criticism” but you don’t allow me to check your sources. Or by providing me with the ability to check your sources do you believe that you would you be using "argument by authority”?



“Additionally there was the Revenue Act of 1926 which dramatically reduced income taxes in the USA. Minimum wage laws were ruled unconstitutional in 1923,...”

Pedxing

Do you suppose that by the time the act took effect that it was too little too late to reverse the oncoming recession? Were there other causes to blame that canceled out the effects of these supposedly good policies? Personally, I don’t know enough about economics. I’d want to ask (or read) some different authorities on the subject.




“Brokerage loans sky rocketed in the two years leading up to the crash of 1929.”

Pedxing

Is this relevant? Did brokerage loans play a “huge” (as you refer to Smoot-Hawley) role in the depression? Are there other issues to consider? I don’t know, but I’ll bet an economist could give us a better explanation of the relationship between brokerage loans and the crash. And I’ll bet a Noble Prize winning economist would be better to ask than a High School economics teacher. Especially one who has studied and written on the subject.




“Many economists and historians tie the unequal distribution of wealth, particularly the lack of money in the hands of the poor to a weakness in demand for goods that deepened the depression. I understand this is controversial.”

Pedxing

Which economists and historians? One benefit to my "argument by authority", as you call it, is that you can check my sources and review the entire line of reasoning that lead to their conclusions.



“The fact is that the Presidents from 1920 to 1933 were all laissez faire Republicans who slashed regulation, slashed taxes and let the monopolies grow without interference.”

Pedxing

What evidence do you have for these claims? It is my understanding that the Sherman Anti-Trust Act was in effect, and enforced, during the years from 1920-1933. Since you were not born then, what are your references? If you don’t list references, for things of which you have no first-hand knowledge, how can your arguments be better tested? You don’t use references and then you accuse me of "argument by authority" because I list references?

We do know for sure that, since the New Deal, government now holds monopolies on education, public works, professional licensure,…

Do you think lack of regulations had a negative effect on the economy during that time period? From where did you get that idea? Here are some thoughts about price control regulations:

“What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. …In every country, it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest, that it seems ridiculous to take any pains to prove it; nor could it ever have been called into question, had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people.”

Adam Smith
The Wealth of Nations




(regarding Smoot-Hawley)
“(From what I see, most economists now don't think this had a huge direct impact on the US, as imports were only 6% of the economy at the time).”

Pedxing

Again I ask, which economists? Because the three economists, who I have quoted, all believe that Smoot-Hawley played a role. A huge role? They don’t say so, but a role nonetheless. Do you not count the economists, I have quoted, in your “most economists” numbers? I mean, I’ve posted this thought by three economists so far (five, if you continue to read to the end of my post). So you’ve read analysis of tariffs, and their effect on the economy, by at least seven different economists?




“The worst years of the great depression were over by the time Roosevelt went to work and started on the New Deal. It may well be that the New Deal itself didn't do a great deal to get things going. A lot of people have said that WWII military spending was what really got things going great guns.

Anyhow, the fact is that we did fine under the New Deal. We had a period of unparalleled prosperity and growth.”

Pedxing

Paul C has a nice point. Additionally, if you are now qualifying the New Deal as maybe not such a wonderful thing for the economy, why are you still defending it with your life? Again I ask, did you ignore the “authority” figures that I previously posted?

Here’s Friedman again:

“From the founding of the Republic to 1929, spending by government at all levels, federal, state, and local, never exceeded 12 percent of the national income except in times of major war, and two-thirds of that was state and local spending. Federal spending typically amounted to 3 percent or less of the national income. Since 1933 government spending has never been less than 20 percent of national income and is now over 40 percent, and two-thirds of that is spending by the federal government.”

Milton Friedman
Free to Choose (pg 83)

The New Deal increased our tax burden. And that tax burden has grown dramatically since the New Deal programs were put in place. Did those economists you read discuss the effect of taxes on an economy?

How successful has the Democrat’s “War on Poverty” been since Johnson? Not enough tax funding say you?




I subscribe to an economic journal called The Independent Review a journal of political economy. I receive it quarterly. If you ever wondered what all of those “think tanks” do, here’s one example. They publish scholarly papers. Here is another quote in a long line of "argument by authority," Pedxing. Read it if you wish. Dismiss it as you wish.

BENDING BEFORE THE STORM
The U.S. Supreme Court in Economic Crisis, 1935-1937

William F. Shughart II (F.A.P. distinguished professor of economics and holder of the Robert M. Hearin Chair at the University of Mississippi)

The Independent Review a journal of political economy
Volume IX, Number 1, Summer 2004



“The Great Depression and the Political Economy of the New Deal

There are many theories of the causes of the Great Depression and of why the economic collapse was both more severe and longer lasting in the United States than anywhere else. Although scholarly consensus has not yet been reached, monetary policy certainly played a central role. A recession was under way by late summer of 1929, an unremarkable slowdown that has been attributed to the tight-money policy the Federal Reserve (the Fed) adopted in the spring of 1928 (Romer 1993, 26). That decision reversed the easy-money policy the Fed had pursued, following a clandestine July 1927 meeting with the heads of Great Britain’s and Germany’s central banks to support Great Britain’s return to the gold standard (Couch and Shughart 1998, 12). The restoration of monetary discipline was a belated attempt to reign in the bulls then running rampant on Wall Street (Williams 1994, 125-26).

In a series of moves that in hindsight appears ill conceived, the Federal Reserve Bank of New York raised the discount rate from 3.5 percent in February 1928 to 5 percent in July, the highest the rate had been since 1921. In addition, between January and July 1928, the Fed’s Open Market Committee sold government securities worth more than $480 million, thereby reducing the stock of money to an amount that was allowed to remain relatively constant until August 1929, when the discount rate was raised once again, to 6 percent. These monetary policy initiatives, which were in large part shaped by the Fed’s worries about a speculative bubble on Wall Street that was in all likelihood fueled by its earlier easy-money stance, did not have the intended effect: they “clearly failed to stop the stock market boom. But they did exert steady deflationary pressure on the economy” (Friedman and Schwartz 1963, 289-90).

The monetary roof then collapsed. Betweeen the economy’s peak in August 1929 to its trough in March 1933, “the stock of money fell by over a third,” a reduction more than triple the 9 percent monetary decilnes of 1875-79 and 1920-21, the two most severe contractionary periods in U.S. history prior to this point (Friedman and Schwartz 1963, 299) – and to the economy as a whole: “Net national product in current prices fell by more than one-half from 1929 to 1933 and net national product in constant prices fell by more than by more than one third.” ((Friedman and Schwartz 1963, 299). Real output per capita decreased by 31 percent over those four years (Vedder and Gallaway 1993, 75), producing dramatic increases in unemployment and extraordinary declines in personal incomes.

Monetary policy is also a prime suspect in precipitating “the brief but sharp recession of 1937-38” (Friedman and Schwartz 1963, 12). That downturn followed the Fed’s fateful decision in 1936, when recovery finally seemed to be well under way, to use its newly acquired powers to double member banks’ reserve requirements over the ensuing six months (Friedman and Schwartz 1963, 12).

Although the monetary policies of the 1920s and 1930s surely contributed to the economic Armageddon, the modern literature on the New Deal has advanced three complimentary explanations for the Roosevelt administration’s failure to end the Great Depression. Beginning with the work of Gavin Wright (1974), economic historians and public-choice economists have discovered evidence that presidential politics was a significant factor in determining the distribution of New Deal spending across states (Wallis 1984, 1987; Anderson and Tollison 1991; Couch and Shughart 1998). Other things being the same, including indicators of economic distress, states that were important to FDR politically, electoral-vote-rich states in which races for national elective office traditionally had been close, received disproportionate shares of the federal dollars appropriated for emergency relief. These findings help to explain why the solidly Democratic South, which FDR repeatedly called the “nations number one economic problem,” consistently was shortchanged by the New Dealers. Evidence of the vote motive underlying the federal government’s spending priorities also helps explain why the Great Depression persisted in the United States longer than anywhere else: rhetoric aside, FDR was more concerned with shoring up his electoral base than with responding to economic need.

Yet another explanation for the failure of the programs FDR launched, especially those enacted during the flurry of legislative activity remembered ever since as the First Hundred Days, focuses on the economic ideology that FDR and his “Brain Trust” carried to Washington. The administration’s mindset was colored strongly by Marxist notions that free-market institutions inevitably are self-destructive. Competition was seen not as beneficially expanding output, lowering prices, and increasing wealth, but as fostering ruinous overproduction that impoverished capitalists and workers alike. Confusing effect with cause, the New Dealers interpreted the unprecedented collapse of prices, wages, and unemployment that began in the fall of 1929 as evidence consistent with the supposed evils of unfettered markets. “Hence arose the anomolous but widely supported policy proposal to cure the depression, itself a catastrophic decline of real output and employment, by cutting back on production (Higgs 1987, 174).

Virtually all of the programs of the so-called First New Deal (1933-35) were aimed at raising prices and incomes by reducing the output of goods and services dramatically, notoriously so under the first Agricultural Adjustment Act, which sharply restricted farm acreage and mandated the wholesale slaughter of hogs during a period of widespread hunger, and more generally under the National Industrial Recovery Act’s “codes of fair competition,” which established output-restricting producer cartels in more than seven hundred U.S. industries. The First New Deal thus prescribed the wrong economic policy medicine at the worst possible time.

When in 1935 the Supreme Court declared key statutes enacted during FDR’s first term to be unconstitutional, the administration’s rhetoric turned decidedly more strident. Coupled with major new policy initiatives, including the Social Security Act and the Emergency Relief Appropriation Act, which established the Works Progress Administration at an annual cost of $5 billion, then “the largest appropriation in American history and the largest accretion to the national debt” (Conklin 1975, 76), the antibusiness tone of the Second New Deal (1935-41) created a climate of uncertainty that chilled the private investment incentives, thereby retarding the economy’s recovery (Higgs 1997).

Contradicting the predictions of the Keynesian model, the New Deal failed despite massive increases in federal government spending. Approximately $45 billion was spent altogether in priming the economic pump. That sum, which admittedly seems paltry by modern standards, amounted nonetheless to nearly half of the $97 billion in goods and services produced by the private sector in 1928, the last predepression year, and it came close to the amount of the U.S. economy’s 1933 GNP, $56 billion. Federal expenditures grew by 136 percent between 1932 and 1940, with little apparent stimulative effect (Couch and Shughart 1998, 22).

Within this environment of apparently intractable economic paralysis, the Supreme Court shifted position on important constitutional questions. Considered against the backdrop of policy failure, pro-New Deal scholars have missed the point in condemning the Old Court for frustrating FDR’s economic agenda. Recovery would not have materialized earlier had the majority been more submissive prior to 1937 because it simply is not possible to reverse declines in output and employment by restricting output even further. Rulings invalidating the administration’s wrong-headed efforts to prop up wages and prices did, however, allow FDR to make the Supreme Court a convenient scapegoat for the First New Deal’s policy failures…




…Christina Romer marks the following dates by which industrial production had recovered to predepression levels: “1932 for New Zealand; 1933 for Japan, Greece, and Romania; 1934 for Chile, Denmark, Finland, and Sweden, 1935 for Estonia, Hungary, Norway, and the United Kingdom; 1936 for Germany; and 1937 for Canada, Austria, and Italy.” In contrast, the United States…did not recover before the end of the sample in 1937.”




Pedxing, did you note the years when the major industrialized countries recovered from the depression? Did you note the accuracy of the Keynesian predictions?

I agree with Paul C. that you’ve got to credit Roosevelt with trying something. I also believe that some of the New Deal programs (WPA and CCC in particular) had a positive psychological effect on people who were out of work.

But Pedxing, most of those programs were meant as a temporary measure. Many of those programs (and their offshoots) have grown out of control. They are hurting our economy. Large federal government hurts our economy. According to Friedman, large federal government also equates to loss of liberty for its populace. Having actually read his book, I would say that he makes a pretty good argument. Loosing New Deal programs is a good thing. Don’t worry, Ped, there are still plenty of other things to bash Bush about.
last edited: 7/10/05 6:47:03 PM”

“arc, no offense but do you think most people read your post. Some will some won't but dang it drags on forever. A condensed version would be nice ;)”

“I agree that many of the New Deal programs and groups were just haphazardly throwing programs at every new problems, with no true overhead planning.

But I will disagree with the thought that large gov't hurts our economy. It does equate to a loss of liberty for some, but a gain for others. Gov't is needed to run education, transportation, legal system, and the health system (economically at least). Using that thought, there is no way Gov't CANNOT be small. Without those programs and plocies the US would have more inaquality in income and opportunity.”

“Paul C, have you read Friedman's thoughts on government run education, and what the education system was like before the government monopoly on education? Have you read his thoughts about the rising cost of healthcare being attributed greatly to an increase in government intervention? What do you think about his ideas on the FDA?

What do you think about Friedman’s arguments about loss of liberty for all? What about his arguments about opportunity loss under “big government?” If government comprising 40% of our economy doesn’t make you think that we are moving in a socialist direction, exactly how big do you believe government should be? If you are going to make counter-claims to Friedman’s work, I would be interested in hearing exactly why you think his reasoning is flawed. That makes for a much better discussion rather than blanket statements.

“But it is not by the consolidation, or concentration, of powers, but by their distribution that good government is effected.”
Thomas Jefferson

“The natural progress of things is for liberty to yield and government to gain ground.”
Thomas Jefferson

Liberty- The power of choice.


I can transcribe some passages from the book (as I have in the past to support specific points), but it would be helpful if someone would actually read the book, and then discuss specific ideas presented therein. Because I am not the world’s greatest (even mediocre-est) typist, transcription takes a lot of my time. Aren’t “liberals” supposed to care about their fellow humans?”

“Arc – It’s fine if you want to argue from authority, but Friedman is a very old man whose views are often way outside of mainstream economics. That does not necessarily make him wrong, but it’s only fair to point out that many of his peers disagree with him (for reasons to diverse to get into here).

Adam Smith was published more than 200 years ago. Much has been learned in the field of Economics since both of these men were in their prime.

You really should try mixing up your reading selection a bit to get other points of view.”

“arclite, I'm not going to make this an essay and quote directly from a book (I'll save those for my thesis) but merely a good conversation. I can tell you're on the neo-liberal side, or lean right at least. So I will take the liberal side for dabate's sake (also please don't mind me for joining in:D).

My views aren't blanket statements butmerely my opinions based on my experience and my readings in the field.
I tend not to read much by Milton Freidman, as I believe he is a failure as an economist. Monetarisism was deemed a failure by mainstream economics and failed to forecast, well, anything, correctly.

I tell you what, I'll read Friedman if you read Polanyi, Kuznits, Galbraith and Korton and veblen. I will then relent my position if I agree with him.

Polanyi basically said free markets lead to collapse. And take it as you will, but the 20s were the freest that the US economy had ever been - and look what happened.

You may know of Kuznits, he developed the inverted u-curve that states income inequality grows as a country advances. You need something (Gov't) to control or at least help spread this wealth through society.

Galbraith's studies show that although the private sector is very rich in the advanced countries, we have poverty in public. he also came up with the idea of conventional wisdom - that people had a great solution for problems in [i]their own[i] time, not as an analysis for own time. You quote ASmith. market Economics as Smith wrote must be: 1)competative 2) firms muct have internalized costs and 3) localized ownership. Do any of these take into account the large corporations that now break them? That is the whole point in making profits, breaking them. You don;t think we need gov't intervention to stymie this waste of resources?

Veblanian economics is institutional economics - people centered. It focuses on social justice and says that instututional failure casues poverty, economic and social destruction.

You can think of prosperity in a country to be strictly GDP growth. But I believe it's more to it. You need a strength in society, equality in opportunity, and (more) equality in income. Growth itself is static. For instance in the neo-liberal (Friedman) view a country growing more cotton is growth. But I gaurantee you that any agricultural sciety is very poor. Developement is what you need (dynamic) - say, switching to manufacturing. This will not happen by itself. You say Friedman says there is a 40% opportunity cost to having a bg government. Where do you think that money would otherwise go? To the middle class? To the the schools so we can not have poor kids? No. It would go right into the majot corporations' deposit accounts. It's already bad as it is. We are a collectively rich country raising poor kids. We need more intervention for this. I think Bush left some children behind.”

“Sorry, Ewker. There is nothing I can do to change people’s attention span.




Violin, count ‘em (you can count I assume?). How many different economists have I quoted? I have many more articles, from different economists, to quote from. You've seen many of them in past discussion threads. I don't believe you're quite that absent-minded.

Yeah, and Jefferson isn’t worth reading either because we’ve learned so much more about philosophy and government since his time. Sir Isaac Newton’s also getting pretty dated. You’re getting older too, and apparently not smarter.

Adam Smith’s seminal work is still the basis for modern western economics. Friedman is well respected, except by a few left-wing wackos. You continue to quote an op-ed economist from the NYT for your economic authority. Oh yeah, a much better source.




I appreciate your viewpoint, Paul C. And I really appreciate you giving me more sources to broaden my understanding. Without challenges to my pre-existing understanding, I'd be uneducated. I thank you for broadening my education. But I ask, considered a failure by whom? Have you read this article:

Who Predicted the Bubble? Who Predicted the Crash?
Mark Thornton
The Independent Review a journal of political economy
Volume IX, Number 1, Summer 2004

I will spare you the reprinting of the article unless you’d like to read it. The article points to the accuracy of predictions made by different schools of economic thought before the stock market bubble burst in the late 90’s. The Austrians most correctly predicted the bubble and the subsequent crash. The monetarists followed in accuracy. The Keynesians where dead last. You may consider monetarists a failure, but their models appear to be more accurate than the Keynesians.


Friedman provides many examples of loss of liberty through government growth. Much of this is through government colluding with business. His examples show how, as government expands its influence on the market, we lose liberty. This is not a partisan political issue; it is an issue of “big government.” Here is a personal example of this:

I need a new condensing unit and coils for my HVAC system. There are two guys, here at work, who have been doing residential installations for years. They can provide me with good service and save me a lot of money as opposed to if I went through a large contractor. I am willing to assume the liability of the installation and will deal with these two guys if the installation goes badly.

New state regulations went into effect last month. You can no longer buy HVAC equipment unless you are licensed, bonded, and insured. In other words, only the large contractors, who comply with all state employment regulations, are now eligible to buy HVAC equipment and do the installation.

This is going to end up costing me at least half-again (maybe twice) the cost above what it would be for the two guys at work to do the installation.



What caused this? The contractors lobbied government to create the new regulations in order to increase their market share.



What are the economic effects? Large contractors benefit by using government to create a larger market share for themselves. The small businessman, especially those who wish to supplement their income by doing extra work, is out of business. His only choice is to pay government for licensure and to pay into government’s system of unemployment and health insurance. Most small business entrepreneurs (like my two friends at work) do not do the volume of work necessary to justify this expenditure. Most small businessmen will go out of business. Competition is lessened. We all pay more for the same service. Government expands its bureaucracies to police its regulations. As more workers join the public sector, we pay higher taxes to support their wages, benefits, and office space needs. We all pay a higher percentage of our income in order to support government growth.




This has been happening, and continues to happen, over and over for various occupations and industries. Most of us don’t complain because it has been happening slowly over time.



What are the effects on liberty? The small businessman has no choice but to pay government for the privilege of working. We have less choice of who we can do business with. We all loose choice as to how to spend our income because we must now pay a higher percentage of our income to support government.




Some argue that since taxes are spread over a large percentage of the population, we don’t feel the bite. This is a spurious argument. We all loose choice. Liberty is eroded whether it is by monumental change, or incrementally. It is still a loss of liberty. When small losses of liberty happen over and over, the cumulative effects add up.

The larger that government grows, the less accountable to the electorate are all its many functions. And it becomes more difficult to trace the ways that special interest money makes its way into the system.




Do you believe that it is a healthy democracy that provides liberty for the few at the expense of the many? Can you provide me with some examples of a net increase in liberty, for the majority of a population, when government grows?
last edited: 7/12/05 6:28:48 AM”

“Paul C., you really are going to stretch the boundaries of my empirical reasoning with some of these works. I’m surprised you didn’t recommend that I read Marx himself. However, the basis of understanding lies in examining diverse viewpoints.

You and violin got me juiced by providing sources of thought. So I happily researched bios, and compiled a reading list. Stiglitz looks especially interesting, violin. Check out the web page, with his bio, that I list further down.

Of course, you are both the spawn of Satan for feeding my literary addiction. Enablers, both of you.

It will take me some time but, OK, I’m game. I could use a little help here. Could you please give me some specific book recommendations?




Karl Polanyi
The Great Transformation, 1944.
Trade and Markets in Early Empires, with K. Conrad, K. Arensburg and H.W. Pearson, 1957.
Dahomey and the Slave Trade, with A. Rotstein, 1966.
Primitive, Archaic and Modern Economics: Essays of Karl Polanyi, 1968.
The Livelihood of Man, with H.W. Pearson, 1977.

“…But the development of world-wide economic crisis and the example of a new type of economy in Russia led to increased interest in Marx’s analysis of the weaknesses of the capitalist system, and in the possibility of a socialist alternative. It was this which was to be the mainspring of Polanyi’s work on comparative economics. He contributed an article on socialist accounting to the Archiv für Sozialwissenscha ten in 1922, [10] in which he already voiced his belief in the social and moral superiority of the centrally planned socialist economy, guided by “social demand” rather than by the demands of individual consumers…”




Simon Kuznets (I assume you meant Kuznets not Kuznits)
National Income and Its Composition, 1919 to 1938 (1941)
National Income and Capital Formation (1938)
National Product Since 1869 (1946)
Economic Growth of Nations (1971)
Modern Economic Growth: Rate, Structure, and Spread,
Toward a theory of economic growth,: With Reflections on the economic growth of modern nations (The Norton library, N429)

Kuznets helped launch development economics.

Development economics is a branch of macroeconomics that deals with the study of the causes of long term economic growth, especially in developing countries. This may involve using mathematical methods from dynamical systems like differential equations and inter-temporal optimization, or it may involve a mixture of quantitative and qualitative methods.

Development economics also includes topics such as Third World debt, and the functions of such organisations as the IMF and World Bank. Many economists in this field are interested in ways of promoting stable and sustainable growth in poor countries and areas, by promoting self reliance and education in some of the lowest income countries in the world. Where economic issues merge with social and political ones, it is referred to as Development Studies.

More recent theories of Human Development have began to see beyond purely economic measures of development, for example with measures such as the Genuine Progress Indicator, and relate strongly to theories of distributive justice.

The most prominent contemporary development economist is perhaps the Nobel laureate Amartya Sen.

Development economics relates to theories of “distributive justice.”


The Distributive Justice of the Market
By: Dr. Sam Vaknin

“…Egalitarian thinkers proposed to equate everyone's income in each time frame (e.g., annually). But identical incomes do not automatically yield the same accrued wealth. The latter depends on how the income is used - saved, invested, or squandered. Relative disparities of wealth are bound to emerge, regardless of the nature of income distribution.

Some say that excess wealth should be confiscated and redistributed. Progressive taxation and the welfare state aim to secure this outcome. Redistributive mechanisms reset the "wealth clock" periodically (at the end of every month, or fiscal year). In many countries, the law dictates which portion of one's income must be saved and, by implication, how much can be consumed. This conflicts with basic rights like the freedom to make economic choices.

The legalized expropriation of income (i.e., taxes) is morally dubious. Anti-tax movements have sprung all over the world and their philosophy permeates the ideology of political parties in many countries, not least the USA. Taxes are punitive: they penalize enterprise, success, entrepreneurship, foresight, and risk assumption. Welfare, on the other hand, rewards dependence and parasitism…”


I find all this very interesting, Paul C. Can I call you Paul Cruxman? I’m glad we’re on the same page about the idea that the redistribution of wealth through taxation is “morally dubious.” At the same time it is good to understand that compensation (as in the case of CEOs) is often artificially inflated when compared to contribution to society.




Galbraith
The Great Crash (1955)
The Affluent Society (1958)
The Liberal Hour (1960), Made to Last (1964)
The New Industrial State (1967).

“Galbraith's first big seller was his Affluent Society (1958). It most likely contributed (and likely to a significant degree) to the "war on poverty," being a disastrous government spending policy first brought on by Kennedy and Johnson. This policy (both in the United States and in Canada) not only brought on ruinous levels of debt but split the country in to those who have the jobs and those who do not. "The war on poverty of which so much has been made since then has been able to make excellent careers and many thousands of civil servants of academic people who have been able to do study after study on poverty."

http://www.blupete.com/Literature/Biographies/Philosophy/Galbraith.htm




David C. Korton
The Post-Corporate World: Life After Capitalism
When Corporations Rule the World
Globalizing Civil Society: Reclaiming Our Right to Power

“Finally, Korten contends that mainstream economic theory is built upon a faulty assumption -- that the world is "empty" and that more ecological frontier exists. He holds that the theory collapses in light of true ecological limits, where man-made capital cannot be substituted for, but depends upon, natural capital. In his view, truly sustainable development will require that the global economy undergo fundamental changes such that it should be based upon systems of decentralized and locally accountable economies, transnational sharing of useful information technologies, and a democratic global movement to decentralize and localize transnational capital.”

http://www.wsu.edu/~susdev/Korten91-2.html

Decentralization. Cool, there’s another argument against “big government.”



Thorstein Veblen
What Veblen Taught. selected writings of thorstein veblen (1936)
Thorstein Veblen: Selections from His Work
Absentee Ownership and Business Enterprise in Recent Times: The Case of America
The Theory of the Leisure Class
The Higher Learning in America


“…Though Veblen makes for an interesting biographical sketch, what in economics he will be remembered for is his work, The Theory Of The Leisure Class. It came off the presses in 1899. It was first written in such a polysyllabic manner that the publisher had to get Veblen to re-write it several times. In it, Veblen set forth his corrosive view of society.

"For most people the book appeared to be nothing more than just ... a satire on the ways of the aristocratic class, and a telling attack on the foibles of the rich. ... Although Veblen might stop along the route to comment on the more striking local scenery, his interest lay at the terminus of his journey, in such questions as What is the nature of economic man? How does it happen that he builds his community that it will have a leisure class? What is the economic meaning of leisure itself?

Veblen's theory of the leisure class is to be compared to that of Marx's theory…”

http://www.blupete.com/Literature/Biographies/Philosophy/Galbraith.htm




Joseph E. Stiglitz
Economics of the Public Sector: Third Edition
Economics, Third Edition
Principles of Macroeconomics, Third Edition
Globalization and Its Discontents
The Roaring Nineties: A New History of the World's Most Prosperous Decade
Towards a New Paradigm in Monetary Economics (Raffaele Mattioli Lectures)

Cool bio: http://nobelprize.org/economics/laureates/2001/stiglitz-autobio.html




Jeffrey Sachs
The End of Poverty: Economic Possibilities for Our Time
Development Economics
Macroeconomics in the Global Economy
The Strategic Significance of Global Inequality (The Washington Quarterly)'', Vol. 24, No. 3, Summer 2001
Stagflation in the World Economy”

“You'll be bored to tears with Stiglitz's textbooks arc. "Globalization and Its Discontents" and "The Roaring Nineties: A New History of the World's Most Prosperous Decade" are both excellent reads geared toward the layperson.

I've ordered Galbraith's "The Economics of Innocent Fraud : Truth For Our Time" to read on a fishing trip I'm taking in a couple of weeks. I'll let you know if it's worth the time.
last edited: 7/13/05 2:06:36 PM”

“Matt, could you please change the name of this thread to “Violin’s Continued Attack on Common Sense”?

Thanks…”

“Thanks, violin. Principles of Macroeconomics has a fascinating title. It sounds almost like a primer. But you say it's like a calculus primer, huh?

Thanks for the insight. I think I’ll start with Globalization and Its Discontents.


To continue the review of Galbraith (found on this site: http://www.blupete.com/Literature/Biographies/Philosophy/Galbraith.htm). I’m not sure that I will enjoy his work quite as much.



“…Professor Rothbard in his criticisms of the Affluent Society: It is "replete with fallacies ... dogmatic assertions and time-honoured rhetorical devices in place of reasoned argument."



The New Industrial State

Galbraith's book, The New Industrial State, was published in 1967. Milton Friedman thinks that this work is one were Galbraith attempts to update certain of the theories espoused by Veblen.

Galbraith thought, as so many did in the 1970s, that everything was run by five or six hundred companies, and the "technostructure."

"... technical change is the product of the matchless ingenuity of the small man forced by competition to employ his wits to better his neighbour. Unhappily, it is a fiction. Technical development has long since become the preserve of the scientist and the engineer." (Galbraith.)

A British economic authority of long standing, Professor John Jewkes, in his review of The New Industrial State, concluded that the facts on which Galbraith based his arguments were incorrect. Jewkes was of the view that Galbraith "merely repeats his unfounded assertions and dogmatically dismisses anyone who presumes to differ from him ..."6 In Friedman on Galbraith there is a reference to Sir Frank S. McFadzean; it was McFadzean's view that Galbraith displayed a "remarkable naivety as to how a business really operates ... [these monopolistic] events and markets ... exist only ... in the imagination of Professor Galbraith. ... a leap [not to] be justified by any objective analysis." G. C. Allen, a professor of Political Economy at University College, London ('47-'67) questions not only Galbraith's "facts" but also his methods. Allen did not think it quite proper for a "conversationalist" to give an "idiosyncratic interpretation of orthodox doctrine in order to give force to his own arguments." And while his lectures were full of interest and fire, Galbraith misled people.

"... he [Galbraith] put forward as if they were novel and heretical various propositions about industrial society which have been accepted as commonplaces by many economists for several decades. ... The notion that the economic history of modern times shows a steady progression from highly competitive markets to monopoly is remote from the truth. The industrial system is much more complicated and intricate than it appears in his version of it. And the solution of the problems created by economic growth and advanced technology cannot be found within the confines of his own ideology."



Galbraithian Philosophy

Galbraith, to Friedman, was a 20th-century version of the early 19th-century Tory Radical of Great Britain. Galbraith believed in the superiority of aristocracy and in its paternalistic authority. These sorts of people -- and they are all too common these days -- deny that the free market should rule, deny that consumers should be allowed choice; and assert that all should be determined by those with "higher minds." As Friedman says:

"Many reformers -- Galbraith is not alone in this -- have as their basic objection to a free market that it frustrates them in achieving their reforms, because it enables people to have what they want, not what the reformers want. Hence every reformer has a strong tendency to be adverse to a free market."

Like John Stuart Mill; Galbraith treated "his assertions as if they have scientific authority, as if they have been demonstrated, when they have not been at all."



Conclusions

John Kenneth Galbraith was a pop star, "fundamentally a one man crusade"; his "theories have never found any acceptance in the academic world --" He promoted the collectivist religion which believed that coercive government action against the individual would be in the best interests of the collective whole, of society. It is a false religion which has a perverse view of the nature of man (to Galbraith and his ilk, men are but like whining sheep). Man is an evolved creature which must, by natural law, proceed to serve his and his own family's best interests. As recent history will readily illustrate, it is when individuals serve their own bests interests that the public interests, in so doing, are also best served. Central control by the elite not only wastes precious resources, but splits society into those who have and those who do not. Only in a free market will people be able to lead independently sovereign lives; and only in a free market will people be able to be productive - helping themselves, their families, and their community as a whole. The market is simply another word for freedom. For the maximum good for the most people, we are obliged to proceed on this basis: "Liberty of each, limited by the like liberties of all, is the rule in conformity with which society must be organized."





Paul C? A little help, please?
last edited: 7/14/05 6:35:20 AM”

“Of the two arc, I'd start with "The Roaring Nineties".

I'll repeat my offer to lend you mine. You don't drool while reading, do you?”

“I drool ALL the time, violin.

That cat bears a striking resmblance to my reaction after reading Globalization and its Discontents.



I was able to purchase a copy of Globalization and its Discontents. I have only read the Preface, Acknowledgments, and first chapter: The Promise of Global Institutions. I’m already confused.

I have never been a believer in completely unrestricted markets. Nor am I an anarchist. I have always believed (sort of like faith in God) that government had a role to play in the economy, I just am not sure how much of a role. I believe that it is a limited role, but I am not sure how limited.


In his Preface, Stiglitz makes the following assertions:

“I believe that globalization – the removal of barriers to free trade and the closer integration of national economies - can be a force for good and that it has the potential to enrich everyone in the world, particularly the poor.”

“I believe in privatization (selling off, say, government monopolies to private companies), but only if it helps companies become more efficient and lowers prices for consumers. This is more likely to happen if markets are competitive, which is one reason I support strong competition policies.”

“For instance, as chairman of Clinton’s Council of Economic Advisors, I tired to forge an economic policy and philosophy that viewed the relationship between government and markets as complimentary, both working in partnership, and recognized that while markets were at the center of the economy, there was an important, if limited, role for government to play.”


He favors lowering of trade barriers and ending agricultural subsidies. These are all free market propositions. Then, in the first chapter, he goes on to slam believers of free market economics. Is he criticizing those who believe that government has no role to play in economic development? Is he criticizing anarchists? Friedman stated in his book, Free to Choose, that he believed government should have a limited role in the economy. Their positions don’t seem to be very far removed.


The “invisible hand” always seemed a bit hokey to me. I am not a believer in Chaos Theory (a purely uninformed opinion). I firmly believe, as Einstein said, “God does not throw dice.” I believe that economics encompasses sociology and psychology and that we just haven’t figured out all of the relevant variables.

Can you recommend any reading that discusses Stiglitz’s theories and/or models? I have the book, Relativity: The Special and the General Theory--A Clear Explanation that anyone can understand by Einstein. I don’t pretend to know all of the mathematics that went into Einstein’s theories, but he explains his theoretical work in a way that makes clear how his predictions should operate in the real world. I now have a working understanding of what physicists are looking for to prove or disprove his theories.

I haven’t studied mathematics beyond differential equations, but I would still be interested in mathematical discussions of Stiglitz’s models. I would like to know more about Stiglitz’s theories. I’d like to learn more about his branch of study called economics of information. I’d like to learn more about his ideas on asymmetries of information: differing levels of information between employers and workers, lenders and borrowers, insurance companies and the insured.


I like the way Stiglitz thinks. He presents his book as a beginning for discussion, not as a definitive answer. I’ve got to admire a Noble Prizewinner who maintains an inquisitive mind about his work.

I should finish the book this weekend. Maybe I’ll have a better understanding of my questions then. Any further suggestions on reading?”

“I'm sorry to be slow in responding here, there have been some interesting and thoughtful posts.

Arc: You analogy to Skinner is apt. and interesting. I read Skinner and I read rebuttals and refutations of Skinner. I would not have rejected reading him on the basis of his authority status. What I would do is reject the claim that X is true because Skinner said so. In psychology, a lot of truisms end up being overthrown. In the 1950s, the Skinnerian dogma was that any behavior can be equally effectively paired with any stimulus. The dictum was held so firmly that studies finding the opposite weren't published in Behaviorist journals because reviewers wouldn't accept data from neophites who contradicted their authority.

On economics, I must admit I did my heaviest economics reasoning years ago. I was partly interested how Marx and Marxists could offer great insights into Capitalism, but seemed worse than useless in terms of generating an understanding of what on earth to do about it. Communism repeatedly enslaved workers more extremely than just about any other society. My best conclusion was that Marx never had a chance to see what happened under communism (alternate theory: the pre-conditions for a successful communist society never existed and Lenninism jumped the gun by a few centuries).

Anyhow. I am more a student of history than of economic theory. While there is controversy as to how much the New Deal helped, there is everything to show that things have gone very well indeed since it was put into place and that it has provided a great deal of economic security.

Keynesians complained that Roosevelt was not active enough in stimulating the economy and that the economy suffered when he became too worried about deficits.

You mention freedom and economic policy. Conservatives seem to be more concerned about the freedom of people who own things to use what they own. Leftists tend to be concerned about the freedom and quality of life for those who lack things.

Public transportation and roads, for example require infringments on property rights - but they make mobility possible for many more. Public transportation, especially allows those who have little means to afford travel to travel more widely.

I'm leaving Monday and working long hours this weekend. I wish I could dwell more on the issues raised. Perhaps some day I will give Rothbard or Friedman a try (although Rothbard seemed like too much of a dogmatic polemicist when I did sample him).

I've come to view capitalism as an enormously dynamic, but blind and amoral force - just like internal combustion, or the atom - it's power is immense, but it requires harnessing and direction.”

“I have heard that marriage does to lust what capitalism does (or should do) to greed, controls it and directs it to the common good. Though this is probably debatable these days.”

“Ped, I thought you might like the Skinner deal. I used to hang with a group of psych PHDs when I was in school. I read those three books I listed. We used to have some interesting philosophical discussions back then. He’s interesting, but not the entire answer. I remember two guys (not part of my group, and not PHDs) who went off the deep end with Skinner. They dropped out of school, did too many drugs, and tried to convince everyone that there was no such thing as free choice.

Some folks can carry authority too far. I assure you that I do not. I still live by the credo, “Question Authority.” But in order to question it, you’ve got to listen to it. And it’s best if you listen to many differing opinions. Too many people don’t read anything but what agrees with their preconceived ideas.

It goes without saying that we should not assume one person has all of the answers. It also goes without saying that it’s good to keep an open mind to most ideas. Violin suggested Stiglitz (I plan to make my way through a number of suggestions from Paul C. as well). Stiglitz appears to somewhat Keynesian, but he believes in many free market ideas. My favorite books so far have been The Road to Serfdom by Hayek, Free to Choose by Friedman, and Globalism and its Discontents by Stiglitz. All express somewhat different personal philosophies.

After reading Stiglitz, I’ve got more ammo for why “big government” is a bad idea. Thanks to violin.

You’re absolutely right. There never has been a pure form of Communism. Nor has there ever been a totally Free Market.




“You mention freedom and economic policy. Conservatives seem to be more concerned about the freedom of people who own things to use what they own. Leftists tend to be concerned about the freedom and quality of life for those who lack things.”

pedxing


Oooooo, you may want to check your motives there, Ped. That sounds a bit like the party line. My take is that conservatives want to guarantee that everyone has a somewhat equal opportunity to succeed. Leftists want to guarantee that everyone succeeds somewhat equally. I think both positions have good intentions. I think both positions have good and bad consequences.




“Public transportation, especially allows those who have little means to afford travel to travel more widely.”

pedxing


Stiglitz has an interesting example about infrastructure as it applies to developing countries. Farmers, who live a long way from produce markets, have a difficult time getting their goods to market without roads. He makes a good case for government intervention where markets have not provided services. He also is in favor of privatization of those services once institutions are in place that ensure competition.




I've come to view capitalism as an enormously dynamic, but blind and amoral force - just like internal combustion, or the atom - it's power is immense, but it requires harnessing and direction.”

pedxing


I’ve come to appreciate dynamic but blind and amoral systems. The problem associated with “harnessing and direction” is that they depend on who is in charge. Unless we live in a totalitarian system, where your party is always in charge, there will be many times that people will harness and direct economics in a way you disagree with, Ped. Do you believe that everyone always acts in the best interest of the majority? I believe that people act in their own self-interest. That is why I like systems that operate independently of man-made “harnessing and direction.”

Besides offering advice, I don’t want others to decide what morals I should live by. I agree with a social contract that says I cannot harm others by taking their property by force nor should I intentionally cause them physical harm. How I choose to help others is nobody else’s business. That’s freedom. That’s liberty.

That’s what cracks me up so much about many who call themselves “liberals.” They spend their time complaining about the “religious right” while they try to gerrymander an economic system that forces people to conform to their morals. Then when you question their ideas, they call you greedy, stupid, and worse. Self-examination seems to be a foreign concept to these people.




It would be wonderful if there are others here who will read some of those book suggestions from Violin and Paul C. Maybe someone will even read Friedman. Education should be a continuing process for the informed voter.
last edited: 7/26/05 5:28:36 PM”

“I'm not sure where you got the idea that Stiglitz would favor privatizing roadways, arc. Maybe its just been too long but I seem to remember him saying that part of the trouble with those championing privatization in the US and UK is that there are very few state run enterprises that are amenable to privatization. It's not like we have government run coal mines, factories and the like.

Anyway, I’m glad you liked it. I’d urge you to read The Roaring 90’s. As one of Clinton’s key advisors, he has some great insight into what went right and wrong during that decade. He deals with the issue of privatization quite a bit.”

“He doesn't specifically mention privatizing "public works", violin. But privatizing government functions is mentioned throughout the book, within the same context.

One thing I find funny (and typically “liberal”) is how he criticizes the “free market” ideas of the IMF. He criticizes them after telling us how the IMF is a government organization. He even points out that one of their previous heads was a socialist. He says that the IMF forces its ideas on the host country (which is typical “big government” bureaucracy). He tells us that the IMF is not accountable to anyone but the respective governments who support it. In other words, the IMF is not composed of elected officials who are accountable to voters (which is typical “big government” bureaucracy). Nothing about the way the IMF forces its bureaucratic government mandates on the host countries is consistent with a free market.

Stiglitz goes on to say that if only the people who ran the IMF all followed his economic advice, everything would be peachy. Bwaaaaahahahaha. Again, there seems to be this delusion that government organizations will always act in a rational manner if only the right people are in charge.

I really do like Stiglitz, but I’d like to know more about his model(s). The man has some truly interesting thoughts. I'm rethinking some positions. I highly recommend Globalization and its Discontents, especially with all the news about Globalization. How about China readjusting its currency, huh?

Paul C. never got back with us. So I’m going to guess as to what’s good by the authors he suggests.

Thanks again for the reading ideas. You've come up with some good stuff.”

“I think you need to realize that a ‘free market’ is an ideal. For markets to operate efficiently there must be competition. Trouble is, economic theory tells us that competition eventually drives profits to zero. The drive to maintain profits gives rise to monopolies, oligopolies, etc. An oligopoly is far from the free market that Adam Smith based his writings on. Without a strong government to counter the power of the modern corporation, trusts will develop and cause all sorts of economic inefficiencies. The IMF policies that Stiglitz opposes tend to favor large corporations at the expense of small, making a “free market” impossible.”

“If Bush was serious about attacking the New Deal, he'd use Lockheed-Martin F-22 Advanced Stealth Tactical Fighters heavily laden with laser-guided air-to-surface missiles followed by ground forces charging behind M-1A2 Abrams Tanks with Raytheon Commander's Independent Thermal Viewer and DRS Techologies second generation GEN II TIS thermal imaging gunner’s sight with increased range and Standard Advanced Dewar Assembly detectors, coupled an eyesafe laser rangefinder, north-finding module and precision lightweight global positioning receiver which provide targeting solutions for the new Far Target Locate (FTL) function. You'd KNOW it if Bush attacked the New Deal.”

“There is no free market. Ever. Even when there is no governement controlling the market, there will always be somone/something controlling it (eg. corporations). We will never have a truly competative market, either. Most markets you see are monopolistic competition - that the firm DOES have an effect on price.

Arclite, The free-market ideology (WA consensus) that the IMF forces on developing coutries forces them to open up their borders for free trade and foreign investment, that IS consistent. But the reasons they do it for are not. They do it too quickly and in the wrong order generally.This benefits short-temr trade and investment, but before there is a stable "bed" to plant on (policies, social structure, laws) The only country to survive the east asian crisis without serious currency failure ignored the IMF's policies, thought the stock market crashed. The IMF needs a serious realignment in their ideologies.”

“Birch, the greed/lust market/marriage metaphor is an intersting one.

In terms of harnessing and direction, Arclite, it sounds like you acknowledge that sometimes state intervention makes sense, but you wish it applied very conservatively and to have the power released at the earliest feasible moment.

For me, I worry both about the tendency of the State and of the very rich to accumulate power and financial assets. I also believe that ultimately the only values the financial markets recognize are financial values, and when there are other values we want to assert - we need to assert them from outside the market. In that sense, I see your (Arclite's) analogy between the leftist and the fundamentalist - both call for State interventions in defense of values they hold dear.”

“BTW: Here is a brief review of an interesting book I read on the recent era of deregulation (actually, I never finished it as a co-worker borrowed and never returned it):

http://www.alibris.com/search/search.cfm?chunk=25&mtype=&wauth=Vogel%2C%20Steven&qwork=2453222&page=1&matches=15&qsort=r&browse=1&full=1”

“I'll have to check that book out ped. And you'll have to watch the documentary "The Corporation". They both speak to the same issues. Corps need heavy regulation, for it's against the law for them to do anything that would deter the company from making a profit, including poisoning the atmosphere, making products that harm humanity, etc. IT'S LITERALLY AGAINST THE LAW! If it's more cost effecive for a company to pollute the environment (ie, pay a fine of $1,000,000 to do something illegal to the environment when you can produce a profit of $1,000,001 as a reslut of the illegality), companies are in comliance with the law. Regulation is the key. Ask yourself, who promotes regulation, and who does everything in it's power to promote a free maket, void of regulation?”

“What's the deal cornmeal?”

“Yes, yes, yes, pedxing. But you may want to read some of the books mentioned here. I prefer mechanisms that work outside of people's "good intentions." What both Friedman and Hayek point out so clearly is that terrible things can be imposed by people with good intentions, while good things can happen by people with no other intentions but their own personal gain.

I don't want to impose my morality on others, ped. That's what you're advocating whether you believe that or not.


Thanks to violin and Paul C. (for their research recommendations) there's some meat to this discussion.


From what I've learned from Globalization and its Discontents, you are absolutely correct, Paul C. A (as) free (a ) market (as we'll ever achieve) needs banking institutions and some regulatory controls in place.


What makes this book such a wonderful example of how horrible “big government” really is in the application of these economic “reforms.”

The IMF is a government bureaucracy that is practically answerable to nobody. They are an unelected bureaucracy. This is typical of government as it grows.

The only tool for trade, other than a free market, is use of force. If a country wants IMF money there is no negotiation, no trading, the IMF forces the host country to comply with their policies. The host country has no input.

The very idea of the IMF may need to be completely revamped. People in power, who pay no price for being wrong, have almost always used that power to further their own agenda. All in the name of progress of course.

The IMF is a wonderful example of government bureaucracy out of control.




My reading suggestion is The Road to Serfdom by Hayek.
last edited: 8/24/05 4:50:27 PM”

“Pedxing, here are some excerpts from a couple of the books mentioned here.

There are some profound thoughts in these writings:



“I believe that globalization – the removal of barriers to free trade and the closer integration of national economies - can be a force for good and that it has the potential to enrich everyone in the world, particularly the poor.”

“I believe in privatization (selling off, say, government monopolies to private companies), but only if it helps companies become more efficient and lowers prices for consumers. This is more likely to happen if markets are competitive, which is one reason I support strong competition policies.”

“For instance, as chairman of Clinton’s Council of Economic Advisors, I tired to forge an economic policy and philosophy that viewed the relationship between government and markets as complimentary, both working in partnership, and recognized that while markets were at the center of the economy, there was an important, if limited, role for government to play."

Joseph E. Stiglitz



“Unfortunately, the relation between the ends and the means remains widely misunderstood. Many of those who profess the most individualistic objectives support collectivist means without recognizing the contradiction. It is tempting to believe that social evils arise from the activities of evil men and that if only good men (like ourselves, naturally) wielded power, all would be well. That view requires only emotion and self-praise – easy to come by and satisfying as well. To understand why it is that ‘good’ men in positions of power will produce evil, while the ordinary man without power but able to engage in voluntary cooperation with his neighbors will produce good, requires analysis and thought, subordinating the emotions to the rational faculty. Surely this is one answer to the perennial mystery of why collectivism, with its demonstrated record of producing tyranny and misery, is so widely regarded as superior to individualism, with its demonstrated record of producing freedom and plenty. The argument for collectivism is simple and false; it is an immediate emotional argument. The argument for individualism is subtle and sophisticated; it is an indirect rational argument. And the emotional faculties are more highly developed in most men than the rational, paradoxically or especially even in those who regard themselves as intellectuals.”

Milton Friedman



Yet though hot socialism is probably a thing of the past, some of its conceptions have penetrated far too deeply into the whole structure of current thought to justify complacency. If few people in the Western world now want to remake society from the bottom according to some ideal blueprint, a great many still believe in measures which, though not designed to completely remodel the economy, in their aggregate effect may well unintentionally produce this result. And, even more than at the time when I wrote this book, the advocacy of policies which in the long run cannot be reconciled with the preservation of a free society is no longer a party matter. That hodgepodge of ill-assembled and often inconsistent ideals which under the name of the Welfare State has largely replaced socialism as the goal of the reformers needs very careful sorting-out if its results are not to be very similar to those of full-fledged socialism. This is not to say that some of its aims are not both practicable and laudable. But there are many ways in which we can work toward the same goal, and in the present state of opinion there is some danger that our impatience for quick results may lead us to choose instruments which, though perhaps more efficient for achieving the particular ends, are not compatible with the preservation of a free society. The increasing tendency to rely on administrative coercion and discrimination where a modification of the general rules of law might, perhaps more slowly, achieve the same object, and to resort to direct state controls or to the creation of monopolistic institutions where judicious use of financial inducements might evoke spontaneous efforts is still a powerful legacy of the socialist period which is likely to influence policy for a long time to come.

Just because in the years ahead of us political ideology is not likely to aim at a clearly defined goal but toward piecemeal change, a full understanding of the process through which certain kinds of measures can destroy the bases of an economy based on the market and gradually smother the creative powers of a free civilization seems now of the greatest importance. Only if we understand why and how certain kinds of economic controls tend to paralyze the driving forces of a free society, and which kinds of measures are particularly dangerous in this respect, can we hope that social experimentation will not lead us into situations none of us want.”

F.A. Hayek
last edited: 8/25/05 6:48:23 AM”