Austrians, intellectual fifth-columnists, and Friedman Uber Alles

The central flaw with the Hayekian argument seems to be that Hayek and his acolytes appear to disregard the nature of democracy. The institution is certainly imperfect in practice, but if one truly believes in democracy, then the state is the people, at least in the ideal. I think that many of those who seek to justify libertarianism with these arguments simply see themselves as above their state, and therefore above their fellows.

The Austrian school are keen to speak in absolutes when discussing their opposition. For example, in their view, the only alternative to wild-west-style free markets is communism. Their reliable argument against any sort of restraints upon the market is, 'See what happened in the Soviet Union.'

It is absurd to regard pollution controls, labor regulations, and other such corrections to externalities as the thin end of the wedge of a fully planned economy. This incapacity for nuance is endemic on the right. The true test of social and economic policy is not that it can be explained to people as if they are children. The left is by no means exempt from this criticism, but there is only one party in the states right now that relies upon faux-populist pandering as its only public position.

The fact that one of this party's chief publicity outlets, the once-respectable Wall Street Journal, has adopted a loud and vehement anti-education position should come as no surprise.

Income Inequality

I'm a bit late to the game on this one. About a year late, in fact. In short, this series is a staggering achievement. Timothy Noah is an example of the rare journalist blessed with both a deep and penetrating intellect and a gift for interpreting complex topics for his readers with remarkable clarity. General praise aside, the intention of this series was to 'understand income inequality, the most profound change in American society in [a] lifetime.' 

Mr Noah examined race, gender, government policy, emerging technology, immigration, politics, education, international trade, and the decline of organized labor in the search for causes of what Paul Krugman has called 'The Great Divergence,' namely, the startling social stratification along lines of income and wealth in the United States since roughly 1979. The fact is that the wealthiest one percent control nearly a quarter of the nation's income, half-again as much as they did in 1915. It is undeniable (by all but the most unrepentantly regressive) that this division stifles growth by unduly inhibiting full participation in the economy by vast swaths of the population.

Without revealing Mr Noah's conclusions, I will opine that they are only partly satisfying. It is only reasonable that easy answers to this problem are elusive. I was keen to know Mr Noah's views on what would constitute an acceptable division of income and wealth in a civilized and modern society. While he acknowledged that 'historically much mischief has been accomplished by addressing this question too precisely,' he largely left the determination of the answer to the creativity of the reader.

That I find this last issue so vexing is, perhaps, an indictment of my own creative capacity. Those of us who accept that The Great Divergence has been harmful both to those upon whom it has been inflicted, and to the economic growth of the nation collectively must recognize that to merely reverse the stratification would not suffice. We must know toward what goal we are striving.

The United States of Inequality, by Timothy Noah

Song For 'Centrist' Democrats

Jump to start of lyrics.

The Unshakable Confidence Of Those With Fancy Hair

from Ezra Klein:

Big government shrinks recessions:
My colleague Philip Rucker had a great piece today on Mitt Romney and Rick Perry’s lack of specifics on job creation. The closest thing you get to a plan from either of them is a general commitment to shrink government. “The right answer for America is to get government smaller,” Romney put it in a speech.

Many if not most experts would object to that prescription in the short-term. As Congressional Budget Office head Doug Elmendorf has said, cutting spending during a recovery tends to hurt growth. But it’s also not a long-term prescription. In fact, there’s a substantial body of economic research suggesting that if countries with bigger government actually do better at weathering recessions.
Jordi Galí, a Spanish economist, kicked off this line of research in 1994 with a paper finding that Organization for Economic Cooperation and Development countries where government spending is a larger share of the economy, such as the Netherlands and Sweden, experience less “output volatility” (that is, the size of swings in GDP growth) than ones with lower levels of spending, like Japan and Portugal.
Antonio Fatás and Ilian Milov replicated Galí’s findings in 2001, as did Daehaeng Kim and Chul-In Lee in 2007. The findings are not uncontroversial, especially given that they contradict popular “real business cycle” models of the economy. And while many studies find a straightforward linear relationship, others, as Xavier Debrun, Jean Pisani-Ferry, and André Sapir note in this literature review on the subject, suggest there could be a tipping point at which bigger government makes the economy more, not less volatile. But overall, the evidence indicates that bigger government makes for less sharp economic swings, including smaller recessions.
Of course, a stable economy isn’t everything. Most economists believe that sufficiently big government can slow down growth, though obviously the composition of spending matters tremendously. Slower growth with lower volatility may or may not be a good trade, depending on your preferences. But all else being equal, the data suggest that bigger government leads to less severe recessions. So playing up smaller government as a way to fight downturns doesn’t make a whole lot of sense.

In other words, if government employees are laid off, jobs are lost.

It is deeply appalling that those on the right cannot grasp this.

Report From The Road

I'm here in Asheville, NC, where the indicators of the Lesser Depression are myriad. Countless are the disused commercial spaces and empty houses scattered around the winding streets. These stand starkly in contrast to the sheer bloody beauty of the place. Many boutique shops seem to be thriving, but it is impossible to miss that many shops are closed early, Sunday afternoon notwithstanding. Clearly this was once a much more industrial place, as so many vacant places of business display not only the signage of the most recent occupant, frequently a bar or restaurant, but also the arcane built-in signage of tenants long passed. The effect is something like recessionary tree rings. One wouldn't learn of the current slowdown from speaking with the citizenry, however. Rather, people I've spoken with here are exceedingly friendly and upbeat. As regards the Lesser Depression, they seem to be damning it all to hell with positivity. A refreshing shift from Durhamite norms.

Welcome

This site is a forum for the discussion of economic and political issues. I am an economics student at North Carolina State University. I appreciate any commentary and constructive criticism, and look forward to discussing economics and politics with you. Many thanks for reading!