Dear Doug,
We are looking at the same data and coming to
opposite conclusions. I must say that my criteria
for judgment is purely Hayekian, because I
believe that every idea deserves to be judged, in
the first instance at least, on its own criteria.
And on purely Hayekian grounds, I don't see any
of the "success" that you see. Certainly, it is
odd to find the communist gov't of China cited as
a libertarian success story. You might be right,
of course, but the conclusion must be that the
libertarian ideal is broad enough to include
socialism and communism. I don't know much about
Sweden's economy in the period you cite, but is
it not fair to ask, "If this supposedly Hayekian
economy was so successful, why did the Swedes abandon it so completely?"
>I know that Reagan cut marginal income tax
>rates. Reagan also raised social security taxes
>and ran huge deficits, so that is a mixed bag.
We would seem to agree, then, that Reagan did try
to implement Hayek's ideas, and that the best he
could achieve was a "mixed bag" (your
description) or a complete failure (my
description.) As far as Reagan "cutting taxes"
goes, it simply isn't true, because borrowing is
taxing too. This can't be said often enough. To
lower the rate and borrow the difference is not
tax-cutting, it is tax-shifting, from the current
generation to the next. Further, if we are
working with deficit financing, is that not more
Keynesian than Hayekian? Should we attribute any
"success," such as it is, to Keynes or to Hayek?
And was it really a success? It is very easy to
produce the illusion of wealth by borrowing a lot
of money. But it seems to me that our current
economic conditions of enormous debt and
diminishing economic power have their roots in
Reagan. And we need to dispel the myth that
Reagan raised revenues by cutting rates. The
Treasury's own office of Tax Analysis shows that
this is untrue
(http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf).
Reagan did raise revenues--by raising taxes, and
still managed to run record deficits.
>Dawson, John W. (2007) "Regulation and the
>Macroeconomy." Kyklos, Blackwell Publishing, vol. 60(1), pages 15?36, 02.
>Dawson, John W. & John J. Seater (2005) "The
>Macroeconomic Effects of Federal Regulation."
>Working Papers 05?02, Department of Economics, Appalachian State University
>Dawson and Seater find a negative correlation
>between regulation and growth. there was a drop
>in the level of regulation in 1985- that one
>year of the Reagan administration.
Yes, and I seem to remember that the most
immediate effect was the Savings and Loan crises. Was this success?
>There was also a drop in regulation for three
>years following the 1994 congressional election.
>Otherwise regulation has risen for every year in
>living memory. That is what the data shows.
>Depite this, the US remains less regulated than
>most nations in the world. Consequently the US
>can be seen as more Hayekian than other nations,
Exactly! And what are the results? Unmanageable
debts, a zero-savings rate, a bloated
bureaucracy, a diminishing industrial base (the
only real way to repay debts), a crumbling
infrastructure, a financial melt-down, diminished
labor force participation rates (giving the
illusion of low unemployment rates), a
health-care system in disarray, an increasingly
stratified educational system, a growing gap
between rich and poor, median wages static for 30
years, etc. If this is success, I would hate to see what failure looks like.
> but there has hardly been a Hayekian takeover.
> There is a large literature on the correlation
> between economic freedom and economic growth.
Does any of this literature define "economic
freedom"? I often see the term used, and never see it defined.
>Once more, the relative degree of free commerce
>correlates with actual results, real results,
>actual improved performance, not in theory, but
>in empirical observable measureable data.
But it is unclear if the data you cite supports
Keynes or Hayek. All we can say with certainty is
that the more one tries to be Hayekian, the more
the deficits and the government grows.
> The fact that Reagan was unable to translate
> his rhetoric into large and lasting results
> does not change the general
> correlation between economic freedom and
> economic performance. The US has less ecomomic
> freedom than libertatrians and economic
> conservatives would like, but more economic
> freedom that most other nations. The US also
> happens to be quite prosperous. I have not seen
> any credible evidence to the contrary.
This leads me to ask, "What would you accept as evidence?"
>People like Klein use examples of crony
>capitalism to condemn free market capitalism.
>The absurdity of this practice should be obvious.
But Doug, you miss the point. There is only crony
capitalism. That has always been the case. It was
the case in Adam Smith's day, when 3/4's of The
Wealth of Nations was devoted to documenting the
cronyism, and it is true in our day. Do you have
some day in mind when this wasn't true? Some exception to the rule?
Oh, one more thing. You mentioned somewhere
"privatization" as some sort of free-market
success. Privatization does not make a gov't
function "free market," and certainly not
competitive. You can turn the building of roads
and the collection of tolls over to a private
company, but that does not make it free market,
because you can't have competitive roads on the
same route. The best you can do is trade a gov't
monopoly for a private monopoly. Maybe that's
good and maybe that's bad, but it isn't free
market, unless your definition of the free market
includes monopolies, in which case, "freedom" is
a strange term here. By the way, what is your
definition of a free market; this is another term
that I often see used and never see defined.
John C. M?daille
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