Crazy economists still believe in the free market
Click at your own risk. This is the NYT article explaining how ridiculous economists are for failing to embrace socialism in light of the current and perfectly obvious failure of the free market. So you can take a market and beat it, tax it, regulate it, subsidize it, flood it with fake money, punish its performers and reward its losers, hobble its capital sector, strangle consumers, nationalize stuff at will, and erect every barrier to trade and cooperation, and STILL call it a market. When the scheme fails, it's the free market that failed, so clearly we need the totalitarian state to sweep into action.
Comments (40)
I'm relatively new to this, but isn't the NYT article's "history" wrong? They present the Keynesians as always being cruelly marginalized and even now not being taken seriously. Given the government's non-stop intervention into the markets since before I was born, that doesn't pass the smell test.
Published: March 6, 2009 9:25 AM
Regarding articles such as the one referenced by Jeffrey, I guess when your goal is to remake the world into a heaven on earth, no form of dishonesty should serve as a hindrance. The facts, reasoned analysis, and intellectual integrity should be discarded when so lofty an ideal is there for the taking if only the correct government policy is implemented. Remember, one of Keynes's claims was that the scarcity of capital could be eliminated if his enlightened government policy regarding investment and interest rates was implemented.
Published: March 6, 2009 9:27 AM
Is it any wonder that a company that is currently being overblown by a Schumpeterian gale of Creative Destruction, so characteristic of the market, even one so severely restrained as that at present, would be critically opposed to its destroyer. I am not surprised that the NY Times would take such a stance.
The Mises Institute is doing good things. And the proliferation of a reasoned, comprehensive economic theory can only work to enlighten the masses of the poverty that the other side's ideas represent. At least this is what continues to give me hope.
Published: March 6, 2009 9:31 AM
Couldn't finish the article. It raises the eternal question, are they evil and knowingly lying, or ignorant yet articulate?
I guess there's some comfort in seeing that soapox of socialism, the gray lady, slowly being starved by the forces of the free market.
Published: March 6, 2009 10:05 AM
I didn't read the NYT article, but this statement pretty much sums up why I think many of today's 'free marketeers' are the worst possible friends the market process could ever have.
Every day I witness various "conservative" radio and television personalities decry recent actions of the Obama administration as "messing with the free market", as if what we had before Obama was a free market. The term "free market" has zero meaning now thanks to these "defenders". For them, "free market" = status quo.
Published: March 6, 2009 10:12 AM
Maybe we should start discussing our "free-market" as a percentage. Specifically, a % of GDP spent by all government agencies within the U.S. That would include state, local, county, federal. Then when discussing the free market, we could say, "we are 60% free market and the current administration wants us to be a 55% free market." More gov't spending = less freedom. These percentages are simply estimates and do not reflect any serious research done by me.
Now I know that using a % of government spending doesn't articulate the qualitative aspects a free market, but at least it begins to put a number to how un-free we are. For example, if we only have a 60% free market, that means we are 40% un-free. And as gov't spending goes up, we become more un-free.
Published: March 6, 2009 10:43 AM
Brian,
You are absolutely correct. Funny though, you never heard them mention the "free market" when Bush implemented his socialistic policies. Only when a true Marxist is in power do these "free market defenders" start shouting from the rooftops about socialism. Hypocrites to the core.
Published: March 6, 2009 11:15 AM
The cruel, heartless free market cuts out the middleman again. Today's NYTimes is delivered 4am sharp to the Fulton St fish market.
Published: March 6, 2009 11:23 AM
my email to her:
Dear Patricia,
What criteria do you have to consider yourself able to professionally write about the failure of the free market? I have come to the conclusion after reading simply the first 2 paragraphs of your article entitled "Ivory Tower Unswayed by Crashing Economy" that you have absolutely no idea what a free market is.
Let me help you out. A free market is an economy in which all production, prices, and exchanges are made voluntarily. If a market includes rampant crime, such as fraud or theft, there is no free market. If it involves an institution that is allowed to use force to guide production, alter prices, prevent free prices, or redistribute property, there is no free market.
Looking at this economic crisis, you should notice many things. First, tax revenues as a portion of GDP are higher than ever. Second, regulations have never been so numerous or complex. Third, regulatory enforcement has never been so well-funded and well-staffed. Fourth, almost every area of our economy requires government licensing or supervision. Fifth, corporate/investment fraudulent scandals are more rampant than ever.
In other words, using the definition of what a free market is, we are probably right now have the least free market in our nation's history, perhaps only excluding the Great Depression and WWII, although we are quickly approaching them.
Moreover, it is an undeniable fact that money and banking, perhaps the most important part of any market economy, have never been allowed to operate unhampered from government.
You may wish to call the Federal Reserve a private bank and part of a free market. This is absurd. The FED has a government-granted monopoly on banknote issuance, and ALL national commercial banks MUST be a member of the FED to legally operate. The FED has no limits on monetizing debt, and thus is able to bail out any member bank. Its currency is the sole legal tender, a legal privilege that allows it to settle all debts, even if denominated in some other currency or commodity. It also regulates its member banks, particularly the size of their reserves vs. their liabilities.
In other words, your article is nothing less than propaganda piece attacking a "free market," by fooling your readers into believing that the Greenspan era was one of a free market. Do you not find it ironic that the head of a government agency who has legally-granted privileges backed by government violence is being used an example of the "American free market"?
I would like you to write a retraction...or at least some sort of clarification. Otherwise, I am accusing you of intellectual dishonesty. You can no longer claim ignorance.
Published: March 6, 2009 11:28 AM
Bob-- outstanding response. Too bad the odds of it being printed for the masses to read are slim to none.
Published: March 6, 2009 12:01 PM
Wow, you would LITERALLY be better off reading the tabloids -- at least everyone knows that is made up rubbish.
"True, some new approaches have been explored in recent years, particularly by behavioral economists who argue that human psychology is a crucial element in economic decision making."
Wow. Is this supposed to be the start of an attack on the Austrian view? If it is, isn't it hilarious that the author said "in recent years"? (Maybe it's more sad.)
This article is terrifying. It echoes the current global warming "debate" where the truth is overshadowed by the religious belief of one opinion over another. "Everyone" believes it, it has been drilled into "everyone's" brain for so long that they think anyone who even asks an honest question is delusional or a liar. She's writing this article in the same style.
I think there's a real danger that this will happen with Free Market vs. Socialism. It has already started, and given how well the tactic worked on the global warming "debate", it seems major media outlets are determined repeat the process...
Published: March 6, 2009 12:08 PM
Bob,
Yours is an excellent summary of the current magnitude of government intervention in the U.S. economy.
To your examples of government interventions, I would add the following since they are especially pertinent to the current economic crisis: Fannie Mae and Freddie Mac are government subsidized and protected entities that were given legal privileges by the federal government, including an implicit guarantee of their mortgage securities; and, the Community Reinvestment Act and other actions by the federal government bludgeoned lenders into extending mortgage loans to high credit risk customers that they arguably otherwise would not have made. By definition, these are not examples of the free market.
Published: March 6, 2009 12:13 PM
AC, the problem is that this vastly underestimates the extent of interference in a market. 50% government spending is one metric but the total extent of ripple effects it has must be taken into account too ("unintended consequences"), and then there is regulation which is even harder to quantify. You may end up with something that is even less than 40% free market, if one were to quantify.
Published: March 6, 2009 12:13 PM
Jeffrey, I read the NYT article and, while they did seem to portray people like Greenspan as "free market" advocates who have capitulated to socialism.
However, the point Patricia made that economists today focus on constructing mathematical models that may or may not have anything to do with reality is a good one, I thought.
Published: March 6, 2009 12:16 PM
I couldn't stomach clicking on that link. I've read several similar articles recently, and each made me want to throw myself off a bridge.
I liked your response, bob.
Published: March 6, 2009 12:25 PM
The basic problem has nothing to do with markets and economic systems. The basic problem is probably moral and psychological but it's pragmatic bottom line should be obvious.
Whatever the reason, moral or psychological, in good times and bad, in all of recorded history, 80% of all humans have been the working poor, living hand to mouth, economically or psychologically unable to defer gratification, to save for the future mostly because for the last 6000 years we know of, 80% of all humans have been living on the edge of starvation.
Throughout all of recorded history, for whatever the reason, the other 20% have had so much annual increase in personal assets, in their share of the worlds wealth, that they have to work hard at consuming 20% of their annual increase and use the rest for empire building and to keeping their children and grandchildren in the top 20%
With 20% (more or less) passing 80% of the world's assets on to their next generation and 80% passing on their funeral costs to the next generation, how can it NOT be that the rich are getting richer?
Neither Republicans, Democrats, nor Libertarians know/remember anything of human history. The good things are remembered and the bad things forgotten. Most all Americans have forgotten that their great grandparents lived in abject poverty, and that their grandparents built on the freak conditions of post WW2, and spoiled their children rotten, "We grew up in pre war poverty but our post war children are going to have the best we can provide."
Americans don't want to know that while they were living high on the hog, say from 1950-1990, most of the people in Asia, Africa, Central and South America were living hand to mouth of the edge of starvation as their people had done for the last 6000 years. During this time Western European workers did OK but not up to the US level because they were hanging on to our coat tails (as did the Japanese and South Koreans).
Further, most white people generally don't care if dark people in Asia, Africa, and the N&S; Americas kill each other and starve to death because it is generally good for business if they do.
But, as Rev Wright accurately noted, the biblical testing period of 40 years is over and we flunked. The chickens are coming home to roost. The world is regressing to the historical norm with the majority of the people in North America and Western Europe again living hand to mouth while maybe 5% have gold plated bath tubs.
It was fun while it lasted, yes? I'm not worried. Americans are fast learners and we will make the best of our new sort of poverty. The grand kids will have a tougher row to hoe but hoe it, they will.
Published: March 6, 2009 12:25 PM
I think I'm going to make a t-shirt that says:
Free Markets are blamed when Socialism Fails
Socialists take the credit when the markets do the work
and:
Free-Market Regulation is an Oxymoron
We could take up donations and send them to the staff at the Washup Post and the WSJ!
I think I'll send one to Krugman!
Published: March 6, 2009 12:36 PM
I love how they mention UMass Amherst and UMass Boston as if they are open-minded alternatives. I applied to UMass Boston's program a couple years ago and got an interview.
The women there couldn't be more hostile to me. After seeing that I had worked at the Beacon Hill Institute in the past, she snidely remarked "You know we don't do Friedman economics here" to which I replied "Me neither, I'm more of a Hayek guy." Needless to say, I got a rejection letter shortly there after.
Published: March 6, 2009 12:40 PM
Well I took the risk, and all I could find is a big giant straw man for sound free market economics, i.e. Austrian economics. The Galbraith quote was priceless, by the way. :)
Published: March 6, 2009 12:44 PM
Oh, and the statement (by Galbraith) that Keynes isn't part of the "core curriculum in most economics graduate programs", made me laugh a long time.
Published: March 6, 2009 12:48 PM
WOW! The nerve of these socialist pigs is absolutely beyond belief. How on earth can they insinuate that the Keynesian economic model has been marginalized? I have seen some amazing assertions made over the last 2 years (as we all have), but the gall the author has to pass this junk off as an interpretation of the economics of this day in age is disgusting. One of my favorite quotes (and I forget who said it can be summed up with what most mainstream economists and this writer are obviously advocating), "Socialism promises you the Garden of Eden but actually gives you a post office."
Published: March 6, 2009 2:28 PM
Inquisitor,
Oh I agree completely with the limitations of using a % based on all gov't spending. I know that it will ultimately understate the nasty effects gov't intrusion has on an economy. But at least it provides something to push back against individuals who have been told they live in the land of the free and home of the brave. Many of our founding fathers would've organized another revolt by now...well maybe not Hamilton. Although, I don't know, maybe even Alexander Hamilton wouldn't have been able to stomach this much gov't intrusion.
Most Americans believe they live in a country that has free market capitalism at its core. I am trying to search for a way to easily and quickly shock people back to reality that we don't have anything at all approaching a free market and at the same time get them to understand the link between big gov't and its negative effect on freedom. If you try to get into too many specifics, their eyes glaze over.
Perhaps some young enterprising economist in grad school could compile the data, present it, and even have historical info as well. Then we could use that information to at least pry people out of the notion that free market capitalism has brought down the economy.
I do, however, appreciate your thoughts, Inquisitor.
Published: March 6, 2009 3:42 PM
Bob,
Loved your email to Ms. Patricia Cohen.
Published: March 6, 2009 3:48 PM
Agree with Mark Knutson.
However, if they were ignorant, and truly interested in exploring an alternative explantion, then some of them might show some interest in the Austrian view point. By ignoring it they do not even make others aware of it.
If the banks do not get nationalized this time they will say the problems went on longer because the banks were not nationalized. Alternatively, they will say bailout actions were not taken quick enough or they might say ..... But never a mention of Austrian theory or the possibility the privileged banking/financial system might have a fundamental problem.
Published: March 6, 2009 3:51 PM
The free market is the scapegoat. The crony capitalists claim they believe in the free market while they merrily intervene to hamper the market, all to their advantage. The left, not liking what the "free marketers" do, rail against the free market. They do not realize that it is not the free market but the hampered market that is the problem. The crony capitalists are quite happy to have the misguided left rail against the free market because they can then accomodate the leftests by adding more regulations, further hampering the market, further making it operate to their advantage. And the misguided left is pleased.
Published: March 6, 2009 4:09 PM
Socialism isn't the answer. The debate is over and there is no point poking about in its entrails.
However that is not the problem. The problem is The Commons, defined here as the biospheres continued capacity to produce a livable conditions on earth.
The subsets of our dependency on the biosphere include resources, renewable and non-renewable, especially oil, arable land, sink capacity and the halting and reversal of extreme species loss.
Published: March 6, 2009 4:11 PM
inquisitor: "...then there is regulation which is even harder to quantify..."
I like AC's idea of trying to calculate the percentage of free versus state directed markets. The tax burden is a good start. It seems that someone quantifies the regulatory burden in dollar amounts. Anyone know who that is? We could take that figure as a % of GDP and add it to taxes and see where what we get.
Published: March 6, 2009 4:25 PM
I recall a particularly ignorant columnist in the Star Tribune called into a radio show and was ranting at someone who questioned the government spending millions of dollars expanding a local theater, and likening it to corporate welfare. This columnist yelled into the phone "HELLO! ITS A NON-PROFIT CORPORATION".
This puzzled me a bit that he put so much stock in the distinction. I ultimately recalled that marx was the one who assigned moral wrong to profit-making. The hostility toward private enterprise is based on this marxist notion, and it never occurs to the marxists that absent private enterprise, there would be no place for them to get their subsidies from.
This eagerness to bite the hand that feeds it strikes me as the most irrational of conceits--but marxism is a revealed religion, and rational thought has no place in such matters....
Published: March 6, 2009 4:27 PM
"Socialism isn't the answer. The debate is over and there is no point poking about in its entrails."
Amusing.
Published: March 6, 2009 4:57 PM
"I like AC's idea of trying to calculate the percentage of free versus state directed markets."
Same, my point was simply that it'd still be misleading unless one includes the total burden, which would be rather more difficult (though not necessarily impossible.)
Published: March 6, 2009 4:59 PM
I am re-reading Atlas Shrugged and buying a copy for each of my kids. Mind boggling stuff.
Published: March 6, 2009 5:33 PM
I am re-reading Atlas Shrugged and buying a copy for each of my kids. Mind boggling stuff.
Published: March 6, 2009 5:33 PM
Fred,
Your statement at 3/6/09 at 4:09 pm maybe more right than you know. It's already happening in this current round of potential new regulation offerings. See a recent mises blog post by Karen De Coster, http://blog.mises.org/archives/009564.asp
In short the Feds want to be able to change accounting rules when it suits their fancy.
Published: March 6, 2009 9:12 PM
I was so flabbergasted by the article when I first read it that I didn't know where to begin. The reporter obviously doesn't have a clue about economics as studied in the mainstream academy. Graduate students may not be studying Keynes because he's not at the "frontiers" of the science anymore - he's simply assumed as a starting point. I think the reporter missed this point.
As for all the talk about the failure of the "free market" in the current crisis, I thought of this line (borrowed from GK Chesterton): "The Free Market has not been tried and found wanting, but has been talked about and thought that it was tried."
Published: March 6, 2009 9:47 PM
If anyone who isn't a twit gets published in the NY Times, it's an oversight. It's worse than TIME magazine, which is only good for kindling.
Published: March 6, 2009 10:54 PM
Vichy, if only! Those magazines are all soot and no flame, much like the article in question.
Published: March 7, 2009 2:51 AM
There's nothing wrong with the article, except that Patricia Cohen has written "economists who have challenged free market theory" where she means "economists who have challenged government intervention". Small mistake. Anyone could make it.
Published: March 7, 2009 3:08 AM
george reisman put it nicely a while back:
"To complete this catalog of government interference and its trampling of any vestige of laissez faire, as of the end of 2007, the last full year for which data are available, the Federal Register contained fully seventy-three thousand pages of detailed government regulations. This is an increase of more than ten thousand pages since 1978, the very years during which our system, according to one of The New York Times articles quoted above, has been "tilted in favor of business deregulation and against new rules." Under laissez-faire capitalism, there would be no Federal Register."
to fundamentalist/inquisitor/ac: a page count of the federal register should be a handy proxy for regulation burden.
Published: March 7, 2009 5:14 AM
but how to evaluate regulatory burden imposed by local and state governments? probably another page count.
Published: March 7, 2009 5:27 AM
I just wrote her a nasty little email. These socialists disgust me. How can you blame a free market when our economy is far from a free market? I couldn't even read the article all the way through. It was just too much to bear. And why in God's name is Friedman the face of the free market? Mises is ten times the man Friedman was. Maybe because they have absolutely nothing on Mises? Or maybe "Human Action" was much harder to comprehend than "Capitalism and Freedom" so they completely skipped it.
Published: March 7, 2009 11:38 AM