Arnold Kling has another post up which I think is still problematic, but considerably more thoughtful. "More thoughtful" is probably even a little unfair insofar as it suggests the first one wasn't thoughtful - really it's "much better expressed".
That having been said, there are still problems. He's still shoe-horning modern conceptions of market failure into the Soviet outlook. This is simply wrong. I know the idea of "failure" is appealed to by both, but that doesn't quite cut it. Modern ideas of "market failure" are very specific, and they were around in some form or another when the Soviet Union was established, and they did a fine job distinguishing themselves from it then. I am not strictly in the Hayek-Friedman camp or the Lenin camp when it comes to my understanding of the market process. But if you were to figure out where I was, I'd be about six inches outside of the Hayek-Friedman camp and nowhere near the Lenin camp. This is where I think the vast majority of people who appeal to market failure are today. What the Soviet Union taught us is that governments can't plan economies and they can't do what the price mechanism does. It didn't teach us much of anything about the points that modern proponents of "market failure" are talking about.
One of the major mistakes I think Kling makes is in expressing the "market failure" perspective as "experts will know what to do". Needless to say, I disagree with that assessment, and its certainly not what I think. I don't have time to disagree in detail, but my series of posts contrasting "calculation problems" with "incentive problems" does a reasonable job sketching out my take on all that.
The bottom line is this: when we compare the U.S. to the U.S.S.R., what we are doing is comparing the Kuehn-Krugman-DeLong-Pigou-Mankiw "intervention in the case of market failures" position with the Marx-Lenin-Stalin-Lange-Lerner "socialism works" position. In that comparison, the Kuehn-Krugman-DeLong-Pigou-Mankiw position comes out unambiguously on top, and the example of the U.S.S.R. is very useful in that sense. What we don't have is a good clean example of the Hayek-Mises-Friedman-Kling-George-Mason position to compare to the Kuehn-Krugman-DeLong-Pigou-Mankiw position (and honestly, Friedman and Hayek could both arguably go with me in some cases!). As a rough cut, one can use the U.S.S.R. vs. U.S. example to compare the Hayek-Mises-Friedman-Kling-George-Mason position to the Marx-Lenin-Stalin-Lange-Lerner position, but that's only a very rough cut because:
(1.) The U.S. really isn't an example of the Hayek-Mises-Friedman-Kling-George-Mason position in aciton, and
(2.) To a large extent, the totalitarianism of the U.S.S.R. might even lead guys like Marx, Lange, and Lerner to say that that doesn't represent them (presumably Lenin and Stalin wouldn't hesitate to embrace it).
Why Kling thinks the Soviet Union can arbitrate between his position and mine I still don't think he adequately explains - and I think it's because he's stuck on this idea that we have some kind of mystical faith in experts and models.
Thursday, August 5, 2010
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By the way - he has a very good Robin Hanson quote in there. I'm again at a loss for understanding how it's some sort of refutation! But it's a good Hanosn quote nonetheless!
ReplyDeleteIf you manage to convince yourself that liberals are as whacky, naive, and trusting of experts as Kling has convinced himself that they are you can come up with some pretty strange logic.
Marx had no problem with terror and state terror as a means to an end. It is right there in the Manifesto (amongst other places). Indeed, if I recall correctly, Marx made one of the common arguments made by Lenin, etc. later on - that if Western states could use violence and state terror to prop up their colonial regimes and that since this was the way of the world, then it was wholly appropriate as a means to get to the socialist promised land. One more reason that colonialism/imperialism sucks - it provides succor and justification for advocates of state violence.
ReplyDeleteHere is what I posted over at Econlog:
ReplyDelete"The concept of market failure, as understood by modern economists, arises within a context of a modern economic theory. Since socialists like Lenin would, I think, reject most of modern economic theory, any notion of "market failure" they had would be quite different. Perhaps there would be some superficial similarity, but I doubt it would go far beyond that. Attempting to criticise modern notions of market failure vicariously through the ideas of people like Lenin borders on disingenuity.
I say this while agreeing with the sentiment of Arnold's post: markets fail, use markets."
I saw that and decided not to respond - however, I was considering:
ReplyDeletere: "Perhaps there would be some superficial similarity, but I doubt it would go far beyond that"
Although this may be a little too generous, unless by "superficial similarity" what you mean is the shared use of the verb "fail".
People have a very strange way of jumbling opposition positions together - and it gets done to libertarians too, don't get me wrong. The fact is that Marx was a classical economist with a radical program. You can't tie Keynesian/neo-classical economics with liberal (little "l") programs into that. No more than you can tie libertarians an anarchists or libertarians and conservatives together.
ReplyDelete"...(and honestly, Friedman and Hayek could both arguably go with me in some cases!)."
ReplyDeleteNot really.
"What the Soviet Union taught us is that governments can't plan economies and they can't do what the price mechanism does."
Then why are governments and liberals still proposing both? I guess one could argue that they only do so in "select areas," but those select areas always the ones which have all the signs of having the problems associated with planning, price controls, etc.
Or let's put it this way ... during the health care "debate" a major talking point amongst liberals was how health care was a "unique" good or service that just shouldn't be left up to the market. Of course, nearly every area of economic life turns out to be like that after a while according to liberal rhetoric.
ReplyDelete"Not really"
ReplyDeleteCentral banking and social insurance.
Yes, really.
Your short, flippant answers never really add much. I'm not sure if you realize that or not.
Which is not to say your long answer don't add much or your short, non-flippant, bibliographical answers don't add much. Those usually do add to the discussion.
ReplyDeleteSo you are suggesting that you agree with Friedman and Hayek's views on central banking and social insurance? Because both are fairly heterodox even when both argue that they are possible to have in a free society.
ReplyDeleteFor example, when Hayek discusses social insurance, he means nothing like that term is used currently either in Europe or the U.S. Same for Friedman.
I don't imagine I'm that far at all from Friedman on monetary policy... at worst I would say to him at a few times "eh - I agree it's worth trying, but its probably not going to work particularly well"
ReplyDeleteAs for social insurance - I don't really talk much about my views on that here so I'm not sure what your basis for comparison is. I haven't read too much of Hayek on that, but I've never read anything I particularly disagree with.
Daniel,
ReplyDeleteToward the end of Friedman's life he adjusted his views towards the Fed - namely he argued that it should be discretion free. Do you hold this position?
Hayek's notion of "social insurance" was catastrophic in nature. Almost all of what is considered social insurance today is deeply anti-Hayekian because it goes directly against what Hayek had to say about the price mechanism.
Anyway, it seems that my original response wasn't flippant after all.
ReplyDelete"Toward the end of Friedman's life he adjusted his views towards the Fed - namely he argued that it should be discretion free. Do you hold this position?"
ReplyDeleteAre you simply talking about something like an inflation rule? Ya - I haven't given it detailed thought but I could support something like that. Inflation targeting or NGDP targeting or whatever is the best way of doing it. Again, though, I may occasionally caution that "that's not going to work as well you think it will", but I still think it would be worth doing.
"Hayek's notion of "social insurance" was catastrophic in nature. Almost all of what is considered social insurance today is deeply anti-Hayekian because it goes directly against what Hayek had to say about the price mechanism."
I've opined in the past... maybe even on this blog, I forget... that my ideal system would be federal single-payer catastrophic coverage, strong provision of HSAs, the end of the tax break for employer-provided benefits, low-income subsidies, and substantial leeway and incentive for state-level experimentation. That's just my take on it, in a vaccuum, and as a non-health-policy expert. That doesn't seem that irreconcilable with Hayek. I think Hayek is talking about more than just catastrophic coverage, though - in a lot of cases he's making a minimum income requirement case. That is very similar to Friedman's negative income tax, by the way. And that's precisely how I see our income support programs - that we should continue this shift from TANF-type programs to EITC-type programs.
They're not identical - I never said they were. But on select issues, we could arguably be put in the same camp (you probably couldn't say that so much for me and Mises).
Daniel,
ReplyDeleteNever seen you opine that. There are plenty of liberals out there who think that Hayek was recommending what Sweden was in the 1970s (but no longer is).
On the Soviet Union - BBC program on "Useful Idiots": http://www.bbc.co.uk/programmes/p008vd41