Jonathan Chait vs. Veronique de Rugy
Quote of the Day: February 9, 2012

Tracking the Forward March of Human Liberty...

From my perspective the nadir of human liberty in the twentieth century comes in the first half of the 1930s. Thereafter we have a long march--a march that was fastest in the North Atlantic from 1942 to 1975 or so, and that has continued (albeit at a slower pace) since then. But Milton Friedman thought not. And now it turns out that a surprisingly large number of people think not, even today.

With Friedman I think I understand. He was curiously blind to racism, sexism, etc.--and to the importance of their decline. As I see it, he saw only the failures of social democratic regulation (transportation, professional practice, nimbyism, drug war, etc.) and none of the successes (telecommunications, federalization of food and drug regulation, finance, etc.) and none of the places where society in 1980 was still underregulated (pollution, medical insurance, etc.). From my perspective, Friedman had a touching but naive faith in the bona fides, competence, and benevolence of his political masters. And he had a great overestimation of how successful the policies he believed in--stable money stock growth, deregulation, "starve the beast" through low taxes--would turn out to be.

With people today I don't understand. I really don't see a rationale for believing today that 1980 was in any sense a nadir of human liberty--a point well down the Road to Serfdom--or for believing that the progress of human liberty has been materially more rapid after 1980 than it was in the 50 years before.

Noah Smith performs the public good of picking up the litter with respect to John Cochrane:

Noahpinion: A standard intellectual-Republican narrative of history: John Cochrane has a new post up in which he discusses the historical importance of Milton Friedman's book Free to Choose…. The first half of the post is a discussion of the difference between negative and positive rights, with which I largely (but not completely) agree. But the second half consists of a reading of events since 1980 with which I take a number of exceptions….

1980 was an inflection point for the advance of freedom…! Yes, some of the Friedmans' dark worries did not pan out. Why not? Because people read the book! The Friedmans were fighting against the "tide of history." And turned it back…

[Cochrane's] appears to me to be a very standard intellectual Republican narrative of recent history; if you surveyed registered Republicans with postgraduate degrees, and then took an  average of their responses, it seems like you might get something like this. Now, standard narratives are not necessarily wrong. But this narrative happens to be one about which my feelings are quite mixed…. I agree about China. I basically agree about India (though where did Keynes support a "license raj"??). I agree about the Cold War and the spread of democracy. I agree about inflation. None of these positive developments should be forgotten or ignored.

But there are some points with which I strongly disagree. Let me address these:

  1. "[1980] was the end of stagnation in the US and UK." What? Really?? What about the Bush years? You know, the 8 years when the inflation-adjusted stock market did worse than in the 1970s, income stagnated, and GDP growth underperformed past booms, all despite massive tax cuts and substantial deregulation?

  2. "The economic and political ills of the 1970s seem to be returning." Really? Inflation?? No. I know there are some people who believe that a fiscally induced hyperinflation is just around the corner, but that is pure speculation...

  3. "US and UK inflation -- the result of mindless "stimulus"" Really?? But budget deficits were low in the 1970s, and only exploded in the Reagan years (and again in the Bush years). And most economists believe that the 70s inflation was caused by loose monetary policy (and possibly oil shocks), not by fiscal policy.

Basically, in 2000, this Republican narrative was looking pretty good - though not entirely thanks to Republicans. Bill Clinton seemed to have proven that market liberalism did not require exploding deficits and exploding inequality (the ills of the Reagan years) in order to create prosperity. But then came the Bush years, and America doubled down on the Milton Friedman program with more tax cuts, more deregulation, more privatization. And income stagnated, stocks stagnated, and growth was lackluster, while debt and inequality resumed the explosive growth of the Reagan years. By the eve of the financial crisis, the Republican narrative was looking pretty shopworn…

I would quibble with one point. I would say that it was not the Republican narrative of ever-more deregulation, ever-greater tax cuts, ever-higher degrees of inequality, and ever-larger structural deficits that looked good as of 2000. I would say it was, rather, the Clinton narrative of smart neoliberalism: using market incentives and mechanisms to achieve social democratic goals.

Paul Krugman piles on. Many hands make light work:

Reaganite Delusions: The great era of US economic growth was the postwar generation; even during the good years of the 90s we didn’t achieve comparable growth, and overall, the post-Reagan era was marked by slower growth than the equivalent period of time pre-Reagan. And I haven’t even gotten into the income distribution thing.

All of which makes me wonder: what goes on in these peoples’ minds? Do they never even think of actually looking at the numbers, because they know that Reagan ushered in a great boom? Inquiring minds (which they obviously don’t have) want to know.

I will leave the discussion of negative and positive liberty to the trained professionals in the field--but I would say that if you have not listened very closely on these issues to Amartya Sen, you should not claim to be an economist.

On the data issues... I am thinking, increasingly, that what is going on is a combination of selection by right-wing funding sources for complaisant intellectuals, of subservience to whatever their political masters set forth as the party line (individual mandate as a conservative responsibility principle, anybody?), and is at some level a simple lack of work ethic: people unwilling to open up their web browsers to look at the data, people unwilling to do their homework, and people unwilling to take even small steps to see whether their prejudices meet the test when marked to market. It is, after all, very hard not to notice that for America's lower, working, and middle classes, the economic stagnation in real compensation per hour that started in the early 1970s did not magically come to an end on January 21, 1981 but has--alas!--continued (with a short interruption in the Clinton years) to this day.

That is really hard to miss.