Which War Are We Fighting?
More Dave-James meta-economics. In this post, I want to spell out what I mean by "the last war."
As I've said all along, socialism will never go the way of crossing the T. The proper scope of markets and their relation to the other institutions of society are being hammered out all over the world. In China the state is gradually leaving more and more decisions up to the market. France just had an election in which the level of regulation was a major issue. You could easily find dozens more examples in the news.
This isn't one huge undifferentiated fight, though. Some fights are among sophisticated academics, who assume a base level of common knowledge and tend to argue about incremental changes in implementation. Others are public debates, often ill-informed, in which markets themselves are attacked, often on specious grounds.
My contention is that this second war is over in the sense that the bums have lost. It's not that people don't fight about this stuff, but that policy is firmly in the hands of professionals. These professionals might be bought off, as is so often the case with trade policy, but the outcome of the low-level war doesn't affect them much. The protestors in Seattle didn't have the ear of Clinton, for instance. To call the war over may be an overstatement, but I'm confident that in 10 years the United States will still enjoy free, if imperfect, markets.
The sophisticated war rages on, and in fact has been heating up. I'll write another post on the progress of that war, but the main point here is that academics continue to publish papers in which markets are depicted as imperfect. For instance, I'm taking a seminar on antitrust policy, and we've read several papers describing ways in which unconstrained markets don't maximize social welfare. Economists are trying to create a cohesive body of knowledge that will allow us to improve our society. This is a complicated undertaking, and no doubt there have been mistakes, but it seems crucial to me. One might doubt that this war has any influence on policy, either, but I actually think it does.
The intersection between these two struggles seems to be the problem, and I'll address it in another post. Just to sketch out the tradeoff, though, I think it is this. People like Rodrik can be open and honest in their critiques of, say, free trade, and it will improve our understanding of trade policy. Alternatively, Rodrik can self-censor, or at least use very careful phrasing, so that protectionists can't misuse his ideas. I think Dave and I disagree in part because we attach different weights to these consequences.
As I've said all along, socialism will never go the way of crossing the T. The proper scope of markets and their relation to the other institutions of society are being hammered out all over the world. In China the state is gradually leaving more and more decisions up to the market. France just had an election in which the level of regulation was a major issue. You could easily find dozens more examples in the news.
This isn't one huge undifferentiated fight, though. Some fights are among sophisticated academics, who assume a base level of common knowledge and tend to argue about incremental changes in implementation. Others are public debates, often ill-informed, in which markets themselves are attacked, often on specious grounds.
My contention is that this second war is over in the sense that the bums have lost. It's not that people don't fight about this stuff, but that policy is firmly in the hands of professionals. These professionals might be bought off, as is so often the case with trade policy, but the outcome of the low-level war doesn't affect them much. The protestors in Seattle didn't have the ear of Clinton, for instance. To call the war over may be an overstatement, but I'm confident that in 10 years the United States will still enjoy free, if imperfect, markets.
The sophisticated war rages on, and in fact has been heating up. I'll write another post on the progress of that war, but the main point here is that academics continue to publish papers in which markets are depicted as imperfect. For instance, I'm taking a seminar on antitrust policy, and we've read several papers describing ways in which unconstrained markets don't maximize social welfare. Economists are trying to create a cohesive body of knowledge that will allow us to improve our society. This is a complicated undertaking, and no doubt there have been mistakes, but it seems crucial to me. One might doubt that this war has any influence on policy, either, but I actually think it does.
The intersection between these two struggles seems to be the problem, and I'll address it in another post. Just to sketch out the tradeoff, though, I think it is this. People like Rodrik can be open and honest in their critiques of, say, free trade, and it will improve our understanding of trade policy. Alternatively, Rodrik can self-censor, or at least use very careful phrasing, so that protectionists can't misuse his ideas. I think Dave and I disagree in part because we attach different weights to these consequences.
posted by James | 12:33 PM
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