Wednesday, March 16, 2011

What We Need is A Competent Government

I've been commenting on Mises a bit lately. If you're not familiar with Mises it's a website filled with scholars from the Austrian school of economics, whose thinking has been gaining a ton of favor from the tea party crowds lately.

Their basic tenants, as far as I understand them, well, just listen to Ron Paul, or his son Rand. It's anti-fed, pro-gold standard, anti-government in practically every sense of the word. It seems they would like to shrink government's role down to simply one of contract enforcement between property owners and bend over backwards to show how literally every problem can be solved in this way. I'm sure I'm oversimplifying, but not by much.

They make solid points and it would be wrong to dismiss them completely. But I think this worldview is problematic in the same way any extreme view is: the world is too complex to be explained away so easily.

One of the strongest arguments libertarians make is to point out how badly central governments have messed up throughout history. The list is long - Hitler's Germany, Mao's China, Stalin's Russia. And you can literally go on and on throughout the world's history. People in power tend to abuse it and even well intentioned dictators from above can never properly manage the world's affairs.

Their answer, it seems, is to go to the other extreme - give all the power to the people. But this has it's problems as well. Most notably, populations ultimately get segmented between rich and poor, the weak and the powerful. There will always be ways for those with power to build up institutions (corporations) and use them to exploit others either explicitly or subtlety.

There are other problems as well. Obviously, it's really hard to imagine how our environment would be preserved through the markets. All it takes is one polluter to take short cuts on cleanliness so they can offer their goods at a cheaper price than that of another company trying to be green.

But so what that libertarianism has its problems, it's way better than the alternatives. At least, the people have freedom and no one is getting shipped off to Siberia.

But, I'm not sure people really understand how bad things can be without a government actively doing what it should be doing. Global warming, in theory and in fact most scientists agree, can lead to catastrophe and there is simply not a viable market solution for it. People have literally died because of poorly enforced or inadequate regulation. The economic meltdown we're experiencing now and the one we experienced in the 1930's was because the government fell asleep at the wheel allowing the markets to spin out of control.

There are a thousand reasons catastrophe can happen. Mostly we live in a world of black swans where extreme events that have enormous consequences are more common than people think. This happens no matter what simply because the world is complicated and unpredictable.

What we need is something more complex and admittedly tougher to get right in order to deal with a difficult world. We need good people in government and good people keeping those in government accountable. We need both a top down and a bottom up economy. We need a Central Bank, but we also need people generally to be responsible consumers, lenders and borrowers. We need accountability and responsibility, but we also need a safety net. We need charities to allow people to help others without compulsion because many problems will only be solved at the ground level. But we also need adequate taxation so that the government can provide resources and support in a way that would never be possible otherwise.

In short, we need something like we've got now, we just need to find ways to do it better. And for all of our problems, well, it's much better than the alternatives.


H said...

Very thoughtful, Scott. Sometimes I feel like the bottom up would work best, it's just that the bottom doesn't have it all together. You know, the church teaches that the family is the fundamental unit of society. Well, aren't consumers the driving force of the economy- at least in the retail sense? We live in a global economy where we buy and sell goods with other countries. We need to be aware of how and what those other countries are doing to provide us those good and services at low costs. Then, as informed consumers, we need to decide what accountability we have to the people providing us with those low priced goods. Americans are apathetic if it is not in their face and we can't rely on the govt. to inform us.

I thought your last 2 paragraphs were especially good. You made me think. And you are spot on when you say we need good people in high places. Goodness is a difficult thing to come by and then I think leaders get overwhelmed by the big picture. Down up or bottom down, I think we all need to work together. There are children being raised to do this right now, it's just that they are the minority and they are doing things differently. I fear it is going to take a long time for anyone to start listening. We should talk about that sometime. (maybe I'll post if I get a chance to gather my thoughts on the subject)

Anonymous said...

Sorry bro doesn't look like you understand what they were saying on mises very well. I can see how you got your impressions but you are missing the point ( saw your post on How important demand is). You seem smart though so keep trying!

tempe turley said...


Please, feel free to correct me with specifics. Would love to learn where I'm mistaken.