Kilroy Was Here
April 18, 2004
Chance and the Markets
One other role of government would be to try and mitigate as much as possible (without destroying the free market) the role of chance in the market. Oftentimes competitors lose in the market not due to their own inefficiencies but due to chance in the market place. As Keynes noted, "The markets can be irrational longer than you can remain solvent."

One notion of the government would be to mitigate the effects of chance. This would include a large estate tax for the wealthies people (winning the sperm lottery) and providing some sort of temporary living assistance to people training for new jobs. This could help alleviate the burdens suffered by those whose jobs our outsourced.

Just some quick notes for myself.

Another Take on the Commanding Heights and the Liberal Vision
(The following was posted in response to Matt Yglesias's post on Tactics vs. Strategy)

Last week, I've just watched "The Commanding Heights", a documentary about the history of 21st century globalization, cast against the background of the economic arguments between central planning / regulatory pressures (Keynesian) and free markets
Hayek's theories).

One of the things I noticed is that, during the 90s, free market strategies won out. The Democratic Leadership (i.e. Clinton, Rubin, etc.) has given up on massive Keynesian programs to more free market based programs.

Even the so-called liberal Kerry campaign is consistently invoking the power of the markets. If you look at Kerry's performance on MTP this morning and if you look at many of Kerry's policies, you'll see him refering to using the power of the marketplace to make programs more efficient. (For example, the removal of incentives to move corporations overseas, see Tim Noah's take at Slate.)

In the last 30 years, Republicans have been trying to sell the Hayek based free market system under the slogan "Smaller Government. Lower Taxes."

(Unfortunately, I think many conservatives have bought into the slogan and forgotten the underlying goal. That is, free markets, amabandon wage and price controls, de-regulate government sponsored industries, such as communication, energy, coal mining in the UK, baseball, etc.)

Now that the conservatives have won this ideological contest and the Democrats have adopted the power of the free markets, both parties find themselves in deep water.

First, the Democrats are trying to enact a new vision of government that embraces more Hayek-like views of the economy while simultaneously educating their base that the downsides of free markets are far better than the downsides of central planning.

Second, the Republicans are continuing to "fight the last war" and pound lowering taxes and de-regulation. They haven't yet realized that they've won that battle, and need to come up with a new plan for government in the light of both parties adopting free market strategies.

My thoughts are that the new role of government in a society that, for the most part, universally accepts the free market strategy is the following:

1. Ensure that the markets remain efficient by eliminating corruption, streamlining tax codes, and enforcing transparency of information.

2. Prepare the citizenry for competition in the markets through effective education and efficient healthcare.

3. Protect the markets by implementing foreign policies that preserve free trade and prevent miltary and terrorist tactics from intefering with the liberty of the markets.

Given this view of the role of government, we could then discuss the best strategies for achieving it.

April 17, 2004
A New Liberal Vision?
(The following was posted in response to Mark Schmitt's Ideas in Liberal Politics and Peter Levine's
What's Wrong with the Left posts. )

I've been thinking about this a lot recently. I just watched the DVD of "The Commanding Heights", a 6-hour PBS supplement to the book by the same name.

The basic outline of this piece was to contrast central planning government, from the Marxist-Leninism of the Soviet Union to the Keynesian socialim of pre-Thatcher Britain, with the free market ideas proposed by Hayek. The piece then looked at the growth and problems of globalism from the Keynes vs. Hayek lens.

Ultimately, of course, the anti-regulation, pro-free market Hayek theory tends to come off a lot better than the Keynesian central planning socialism.

For the purposes of this discussion though, one can categorize the American political struggle as the Keynesian liberal vs the Hayek conservatives. And for most of the 20th century, this might have been a good categorization.

But with Clinton in the 90's, it seems as if the Democrats through in the towel on this issue. Many Democrats hated themselves for doing it, but they ultimately determined that the downsides of markets were on balance better than the downsides of central planning for the most part. In other words, on one of the most major differences between the two parties, the Democrats blinked and agreed with the Republicans.

Looking at things this way, one can see why the Republican conservatives tend to have a more centralized, coherent vision than Democrats. Republicans are working from a playbook that's existed for 30-40 yrs or more. Large blocks of the Democratic party think it was a mistake to throw in the towel and want to return to pre-Clinton Democratic economic parties.

OK, so let's assume that this is an accurate (if highly over-simplified) way of looking at the source of the 'vision problem' of the liberal movement. What should a new liberal strategy look like?

Well, at its core, a political vision comes back to the role of government. Republicans and conservatives have a very clear view on the roles of government. Democrats don't. What would a good liberal view of government might look like?

Well, here's one idea. Given that liberals and conservatives now agree (for the most part) that markets are the best way to allocate resources. A liberal vision on the role of government could have the following points.

Markets, when operating correctly, are the best way to allocate resources among the citizenry. (Insure the blessing of liberty.)

Prevent the corruption of the markets. (Establishing justice and insuring domestic tranquility) Free markets are very efficient as long as the playing field remains level. However, one problem with markets is that the 'winners' often want to retain the rewards of their winning without competing. This is anti-thetical to free markets. The Government needs to be the referee here and make sure that the winners only continue to win if their products, policies, etc. is better.

More importantly, the Government must prevent winners from using anti-market practices (collusion, bribery, secrecy, lying, etc.) from corrupting the market.

Prepare the citizens for competition in the global market and have the institutions in place to keep them competitive in the global market. (Promote the General Welfare) Our country can only continue to be competitive with other countries if we continue to have a well-educated, flexible, hard-working, innovative, and creative workforce. In fact, over the last 80 years, the countries with the most influence in the world have been those that dedicate the largest resources to their military. In the global marketplace of the future, the countries with the most influence may be those that dedicate the largest resources to the education of the citizenry. Furthermore, countries must find ways to keep their citizens healthy and working.

Build a foreign policy which allows us to compete equally with other countries in the world, and to move competition for international influence from the military realm to the economic realm as much as possible. (Provide for the Common Defense.)

This vision would tend to develop policies that would obviously be more liberal than our conservatives. Furthermore, it provides a better choice than the conservative 'small government' movement in a pro-market framerwork.

Well, these are just some initial thoughts and ramblings that haven't been well thought out.

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