We will continue to offer ideas on trade agreements and other specific measures. At bottom, however, rethinking trade means rethinking the theoretical foundations of economics and moving beyond the textbook abstractions that have justified decades of failed policy.
We support recent administration efforts to impose countervailing duties on various products.
I predict that departures from free trade will, in practice, continue to protect those who need and deserve protection the least.
In general, we support universal health care administered by the government. This could involve an outright “single-payer” system—which we have no ideological objection to—or something like a “Swiss system,” which continues to involve private parties but under which premiums exceeding a certain percentage of income are straightforwardly subsidized by the government. The government should also take a much clearer role in controlling costs and setting prices for procedures and prescription drugs.
Forcing down prices is not the same thing as controlling costs. That this is not understood shows a failure of basic economic education.
we oppose efforts to “reprivatize” government-sponsored enterprises (GSEs) such as Fannie Mae. The GSEs cannot serve two masters. As long as their business model depends upon a government guarantee, they should remain wholly owned by the government.
I happen to agree, although I would add that steps can and should be taken to reduce the GSE’s role in housing finance and in credit allocation in general. I disagree with everything else the editors say about financial regulation.
When American Affairs first was launched a few months ago, it struck me that as one of the few publications that leans in the direction of Donald Trump. I still hold out hope for good things from President Trump. I cannot say the same for this journal.
Although Arnold opposes any “departures from free trade,” it appears from the following article that you do not need to be a MAGA-hat-wearing Neanderthal to question free trade orthodoxy.
http://www.weeklystandard.com/print/retaliation-nation/article/2008115
But, of course, if your only concern is that the US unilaterally adhere to certain abstract principles without regard to the real-world result for American society, the easiest response to Stelzer is to throw up your hands and say any other course would be subject to abuse by those not needing protection.
It’s terrible when people let ivory tower principles like individual freedom get in the way of super pragmatic real world collectivism. Just terrible.
Thanks for illustrating my point.
Many of Trump supporters don’t remember he won stating he would protect Social Security, Medicare and Medicaid! Now I admit, Trump only agreed to Medicaid because he did not understand what it did during the campaign. So I don’t know why you are surprised by:
1) Steel tariffs are coming. Deal with it and figure it goes up by 5,000 workers.
2) There will be an interesting reality what Trump voters think when healthcare coverage gets worse. The fall in Trump’s approval started happening during the passage of AHCA according to Sean Trende.
3) Probably the main concern of privatizing Frannie is:
3a) It will have a short term slow down in housing markets which hurts approvals.
3b) Judging by the Goldman Sachs administration and Trump interest in public policy the government will both: 1) Underprice the sale (probably worth a lot) 2) Sell to as few buyers as possible (I don’t forsee he will break up much.)
4) I don’t know how the WWC voters will react as the Midwest towns are not going to get jobs back. My favorite irony here I bet the Hispanic-Americans in the Southwest are going to benefit the most.
5) The economy is at or near full employment. My question is do induce WWC in Midwest to move to high employment area. (Not just SF here but Texas, Inland Empire CA, Utah, etc.)
I suspect that what Trump wants to do very few people understand.
But he has to do it the way he is doing it to break the 2-party gridlock.
As for trade, we don’t have free trade. And we might have freer trade if Trump got what he actuslly wants. But I could be wrong, which makes me less confident than the conventional wisdom.
For example, despite the wall being the seemingly least negotiable campaign promise, I suspect Tep would accept a bi-partisan solution to rationalize out immigration policy that is currently nuts by any objective evaluation. For example, the fact that immigration collapses during a depression is used as a defense. It is not.
In healthcare forcing down prices is often the same as controlling costs. The same level of effective medical care gets provided. Marginal care gets squeezed out or providers make abbot less money. I’ve shoved a lot of big price decreases down providers throats and it was never the disaster of shortages the providers said it would be.
We should just admit healthcare is wildly overpriced and act accordingly. People are right to note that other systems get a lot more for less, which should be a credible sign we’re getting ripped off.
Price controls seem like a crude sledge-hammer when what’s needed is a scalpel, but apparently we don’t have a scalpel, and no one is qualified to use one competently even if we did.
It seems to me there are two kinds of Libertarian responses to medical care.
(1) The Free Market would work as well in medicine as anywhere else, and so the government should not intervene or regulate that commerce, and that restraint would yield the best results overall.
(2) The Free Market would not perform its various functions well in the context of the market for health care because of the unique way the provision of medical services in particular plays on human psychological instincts. Some limited government intervention is thus warranted and might, if handled wisely, even yield results that are better enough to compensate for likely harms due to political distortions.
I think (2) is a more accurate description of human reality. That’s too bad, but that’s how it is.
The general problem is that the space of plausible games humans can play against each other while pursuing their own, instinct-influenced objectives with their imperfect brains and under government-free conditions is still large enough to lead to some predictably awful outcomes. Sometimes the least worst option is for a culture to use social pressure or a state to use coercive power in the attempt to avoid those outcomes, and without making things even worse. Regulation is for when self-regulation fails.
I think it’s possible to list four possible exceptions to non-interventionism that are reasonable and empirically-based correctives to Doctrinaire Libertarian Absolutism, and that could go provide a kind of basis for a Enlightened Libertarian theory of positive government legitimacy – that is – it is not only permissible for a government to do these things, it ought to do them if there is no superior alternative.
1. Rules Failure
2. Cognitive Failure
3. Market Failure
4. Social Failure
1. Rules Failure is what how Richard Epstein might describe Classical Liberalism + traditional Anglosphere common law, especially traditional contracts and torts law. A state using its unique leverage to take away the incentives for negative-sum predation via force and fraud by making those strategies predictably unprofitable and enforcing restitution for harms, and generally providing a reliable business environment with reasonably low security and transaction costs. Without the state apparatus, crime in the form of violence and misrepresentation pays too well, and that produces a Rules Failure.
2. Cognitive Failure is a much fuzzier concept, but I think it’s enough to say that enough humans in any society have brains that can’t produce ‘correct’ results, even when the owners want them to. There is the long list of cognitive biases, and there is also a particular problem with discipline, self-control, and harmful over-indulgence. These tendencies can probably only be matched by some form of paternalism, which doesn’t have to come from the state, but the alternative institutions that could perform these functions in the past are in very weakened condition these days.
3. Market failure is a favorite of the progressives, who demonstrate the obvious risk with this formulation by taking even the most marginal cases too far. Nevertheless, it seems to me most libertarians acknowledge there are a few instances in which various problems with coordination, externalities, natural monopolies, tragedies of the commons, etc., are simply seem too hard to solve in modern times without something like a state.
4. Social failure is more a more subtle and underappreciated notion, but often occurs in any circumstance of runaway positive-feedback loops in terms of status signalling, especially politically-consequential competitive sanctimony. In the case of conspicuous consumption, one ancient remedy were various sumptuary laws.
There are the four failure modes of freedom, which must of course be balanced in any analysis against the many and terribly severe failure modes of government intervention itself.
When I go though an analysis of how susceptible a hypothetical free market in medicine would be to any of these four failure modes, my diagnosis is that the market is special and particularly vulnerable to instances of all four.
This is not to diminish the influence of the corrosive incentives created by the third-party-payer problem, or the political difficulties of rationally constraining state expenditures in a Social Democracy like ours. It is merely to say that the market for medicine is unique, and that it is irremediably loaded with far too much psychological, social, and ideological baggage for the ordinarily operative free market mechanisms to function well.
Now, even if it were politically sustainable – which it wouldn’t be – that still doesn’t tell us whether the hypothetical free market for medicine would be inferior to one with government intervention. However, from the standpoint of the current US system looking abroad to other system with significant government intervention, it certainly does seem that there are systems with superior results and preferable outcomes to the one we have now. And it’s by no means clear that even the crude sledge-hammer of price controls would necessarily lead us into a worse situation than we have at the present, given that they might bring us into nearer convergence with those other superior alternatives.
Honest question: What is the basis for this hope?
I can’t answer for Arnold, but here’s my answer. Several major problems with our political system are deeply entrenched as a practical matter of what is, effectively, a bad but deeply bipartisan consensus. We just won’t get any positive change at all if we get Presidents who are beholden to donors, party machines, and the rules of social respectability among the elites.
Which is to see, practically any ordinary politician. Think of all the lobbies, special interests, financial companies, etc. which in terms of their bottom lines would have been more or less equally satisfied were either Hillary or ¡Jeb! to have taken office.
That’s a large part of the origin of “the new class war.” There are a few important areas of Republican and Democrat divergence that the parties will actually attempt to implement, but on many key matters, and regardless of what the electorate seems to want, the parties offer choices between Tweedle Dee and Tweedle Dum.
The only way out of that trap is to get a President who somehow isn’t beholden to those constraints, and the current solution on the right in Western Democracies seems to be “Crass yet Charismatic Billionaire”: Berlusconi in Italy, Trump in the US. Actually, the US has a long history of independently and extremely wealthy Presidents, which may have something to do with above-average rate of highly independent personalities.
Now, by the same token, it’s also true that:
(1) Trump may not actually use his unique independence to produce any positive change in those areas, and/or
(2) Trump could also be willing to buck the mainstream bipartisan consensus on areas where they are right and it’s important for bulls to be kept away from certain china shops.
That being said, for anyone with contrarian political ideas out of the mainstream, Trump certainly offers more hope of improvement in those fields than anybody else that will ever be allowed on the menu.