So what do economists have to say when they speak as public intellectuals in the public square? As I see it, economists have five things to teach at the “micro” level–of how individuals act, and of their well-being as they try to make their way in the world. These are: the deep roots of markets in human psychology and society, the extroardinary [sic] power of markets as decentralized mechanisms for getting large groups of humans to work broadly together rather than at cross-purposes, the ways in which markets can powerfully reinforce and amplify the harm done by domination and oppression, the manifold other ways in which the market can go wrong because it is somewhat paradoxically so effective, and how the market needs the state to underpin and manage it on the “micro” level.
Pointer from Mark Thoma.
The phrase “the ways in which markets can powerfully reinforce and amplify the harm done by domination and oppression” locates Brad on the three-axis model, doesn’t it? You can read his post and see whether his examples prove his point. I tend to think not, but I do not want to focus my post on this issue.
What is absolutely missing in Brad’s list is any mention of public choice. Thus, we are left to take the enchanted view of the state as the cure for all of the market’s problems. Is he saying that economists are not qualified to speak about the flaws in government processes? Or is he saying that even though we know something about incentive problems and institutional weaknesses of government, we should shut up about it?
If Brad were to employ this gambit in a debate on economic philosophy, I think he would be dead out of the opening, as a chess player would put it.
Zow. What a sad set of axioms.
Shouldn’t number 1 of what “economists have.. to teach at the “micro” level–of how individuals act, and of their well-being as they try to make their way in the world” be that voluntary trade leaves both parties better off than before? Isn’t that the basis of all micro as well as a practically metaphysical law that entirely drives “the deep roots of markets in human psychology and society”.
I would think one would then make number 2 the generalization of this fundamental law into the theory of comparative advantage. Then we can use his 1 and 2 before lumping 3, 4, and 5 into something like “the state might have a limited role in securing rights of free trade, tuning rare instances of market failure, and preventing gross injustice.”
I will give him the slavery example as supporting his point about domination; were it not for the large domestic and international demand for cotton, slavery in the U.S. would probably not have been nearly as widespread as it was. The famine examples strike me as so obviously wide of the mark that they’re not worth addressing. Why didn’t he just stick with more obvious points colonialism, the Homestead Steel strike, etc?
Jeff, what does the slavery example have to do with markets? Is there a reason to believe that socialized cotton would have worked out better for the cotton pickers?
I find it conceivable that markets enable oppression, but I’ve never seen a very clear example of it, much less a trend. Most “examples” are cases where a dominant market player has out-done all of the competition. In such an example, the winner is doing an enormous public good, and the market has singled them out for just rewards.
On the fifht point, I don’t find it fully accurate to say markets “need” the state. Some markets do, but other markets are very effective without needing enforcement by a government. Examples are Craigslist and recreational drugs. They both do quite well.
You’d think this was easier, to identify major robust findings that economists ought to tell the public. Caplan’s work in this area seems better at finding concensus viewpoints….
“Jeff, what does the slavery example have to do with markets? Is there a reason to believe that socialized cotton would have worked out better for the cotton pickers?”
Possibly. In the absence of a market system, perhaps Eli Whitney has no incentive to invent the cotton gin resulting in less demand for slaves to pick it. Wikipedia:
Paradoxically, the cotton gin, a labor-saving device, helped preserve slavery in the U.S. Before the 1790s, slave labor was primarily employed in growing rice, tobacco, and indigo, none of which were especially profitable any more. Neither was cotton, due to the difficulty of seed removal. But with the gin, growing cotton with slave labor became highly profitable – the chief source of wealth in the American South, and the basis of frontier settlement from Georgia to Texas. “King Cotton” became a dominant economic force, and slavery was sustained as a key institution of Southern society.
http://en.wikipedia.org/wiki/Eli_Whitney
Then again, maybe the southern planters would have just found some other cash crop to get filthy rich on.
In the absence of a market system, perhaps Eli Whitney has no incentive to invent the cotton gin resulting in less demand for slaves to pick it.
From the same WIkipedia article:
Whitney’s incentive was not to make money selling cotton gins to plantations: rather it was to use the state’s patent regime to hold a monopoly on ginning cotton. I think at least as much blame, then, must be put on the state and its granting of patents as on the market here.
Far better than the enchanted view that markets are the solution to all problems, including markets, which is what their extraordinary power would lead to. The power of markets to undermine themselves is much broader than just the power they exert on and through public choice.
1 looks like anthropology or pyschology and 3,4, and 5 are politics. “Any sufficiently interesting issue of economics is indistinguishable from politics.”
Public choice is a “worldview issue”. If you pay much attention to public choice, you are forced to question the whole notion of a democratically-controllable bureaucracy. Once you go there, you have a hard time remaining a fan of the “problem-solver state”.
“Is [DeLong] saying that even though we know something about incentive problems and institutional weaknesses of government, we should shut up about it?”
No. That is not what I am saying at all.
Goodbye.
Brad DeLong
Assuming this is the real Professor DeLong, did anyone ever tell you that the opposite of love is not hate, but indifference?
Seems Arnold struck a nerve.
Again, I feel the correct answer here is to understand that the government-market dichotomy is a false one. Do you question the state’s ability to enforce property rights and contracts because it isn’t “omniscient”. Rules are rules, and designing them does not mean one has to be impervious to making the same mistakes they are intended to correct.
While we’re at it, public choice simply doesn’t have the explanatory power attributed to it by GMU economists and internet libertarians. As ‘experts’ on the subject, one would expect you to know of the comprehensive studies done by, say, Leif Lewin, or Steve Pressman. These generally show that political actors – whether voters, politicians or public sector workers – are motivated not by self interest but by the public good. I mean, hell, PCT can barely even explain why people vote in the first place.
I agree that voters, politicians, and public sector workers often think (or at least talk) in terms of the public good. But their idea of the public good is dominated by the belief that the public good requires their retention of power, and their retention of power in turn requires that they protect the interests of agribusiness, realtors, title insurance companies, big banks, and other rent-seekers. To me, rent-seeking and its success is the key insight of public choice.