Posts tagged Paul Samuelson

Column on Ignorance Amidst Erudition

Ignorance Amidst Erudition

Tibor R. Machan

Stanley Kauffmann is the film reviewer of The New Republic and his work in this area is worth the time it takes to read it, at least for me. He is what I would consider an erudite film critic, drawing on a vast familiarity with the history of cinema. Indeed, while the magazine has been turning more and more statist–in it early days it was actually an interesting ideological hybrid, guided by old or classical as well as new or modern liberal values–most of its good stuff comes from the back of the book, namely, the reviews it publishes. And from Kauffmann’s comments on films.

So I was taken aback when in a recent review of the movie Too Big to Fail by Curtis Hanson translation of Andrew Ross Sorkin’s book on the recent financial fiasco, Kauffmann opines that “The economy requires radical political intervention and we ducked that.” Just goes to show you that being knowledgeable and smart about movies can go hand in hand with utter ignorance of economic theory and history.

One need not be what Paul Kurgmann and even President Obama likes to refer to, disdainfully, as a market fundamentalist–i.e., someone who holds that as a general policy it is better to rely on free market processes than to trust the bureaucrats–to see that Kauffmann is way out of his depth. For starters, political intervention has been part of the norm in the American economic system from the beginning, with but very few lulls in that approach. (I once ran across a book published in the 1840s in which the author severely criticizes government involvement in the American economy and for its thwarting of free trade on innumerable fronts!) Alexander Hamilton, one of the prominent founders, had supported many measures that run against the principles of a free market economy and involve extensive and “radical political invention” in the economy. What is it that Kauffmann refers to when he states that “we ducked” such intervention? Does he mean the country never did opt for out and out socialism? On that score he is correct but such a remark assumes that financial and other economic messes are avoidable under a socialist economy. Yeah? Tell that to the former Soviet Union and its colonies and to the many European near-socialist governments that have been struggling with such problems.

Of course, Kauffmann’s idea is rather routine among intellectuals who take their economic education from the likes of the late Paul Samuelson (whose introductory text, Principles of Economics, was the main source of readings in college economics course for decades). While there have been some free market economists whose influence has been felt throughout higher education–and this is true now as well–the majority of students who take econ courses get mostly lessons in the wisdom of the mixed economy, the kind we see in most of Europe, North America, New Zealand and Australia. Such systems are riddled with political intervention!

The idea that such intervention is what an economic system needs so as to be functional itself rests on the myth that some people–politicians and bureaucrats–have special talents for guiding the economic conduct of others. This is quite literally a fascist conviction! It is diluted by mixing in democratic and capitalist and other features in the system–that’s why it is called a mixed economy–and it seems Kauffmann does not hesitate to embrace it.

Now mind you, what is really off in Kauffmann’s remark is the association with political intervention with radicalism. In fact it is the free market system that has brought to the fore a radical economic idea given that political intervention has been around from time immemorial. Mercantilism, which was the dominant economic doctrine prior to Adam Smith’s writings, especially his The Wealth of Nations (1776), is a thoroughly politicized economic system! Feudalism and nearly all the economic ideas and policies of the old order were nothing if not completely political.

So it seems that Mr. Kauffmann, who must be at least as old as I am by now, needs to go back to night school and take a good course in economic history. He would then perhaps admit that his comments about what the economy needs could at least use serious revision.

Column on Krugman’s Trashy Debating Style

Krugman’s Trashy Debating Style

Tibor R. Machan

Looks like critics of the free market are at their whit’s end. At least one of the most prominent of them clearly appears to be.

Princeton economics professor and columnist for The New York Times Paul Krugman has always been discourteous to those with whom he disagrees but his latest exhibition of his way of going about debating issues takes the cake. It used to be that he would call everyone who finds even the slightest merit in free market economic theory a “market fundamentalist,” suggesting thereby that such folks are, like all fundamentalists, mindless in their convictions and merely blindly follow some sacred text or book of instructions. Besides wishing to score points for his statist economic politics by smearing the ideas and methods of his intellectual adversaries, he also regularly distorts the scholarly lay of the land by claiming that America is in the grip of such fundamentalism. This basically meant that throughout the academic landscape departments of economics are filled by people who hold and teach views similar to those held by the late Milton Friedman, F. A. Hayek and Ludwig von Mises (among others).

While these thinkers did consider the free market superior to its statist alternatives–ones that give a decisive role to government intervention in the lives and activities of market agents–they did not, of course, hold identical views. Nonetheless, Krugman lumps them all as fundamentalists. Moreover, he rarely takes on living supporters of the free market, such as James Buchanan or Gary Becker, not to mention such current members of the Austrian School as NYU’s Israel Kirzner. Might we suppose that he doesn’t wish to engage anyone in a dialogue about economic policy but merely discredit them once they could not respond? (Just after Milton Friedman died, he and his frequent co-author Robin Wells penned an extensive and it turns out demonstrably inaccurate essay on Friedman for The New York Review of Books.) Also, despite Krugman’s allegation, there is plainly no dominance of free market thinking in American universities. Mainstream economists are mostly followers of such notables as Paul Samuelson and, of course, John Maynard Keynes, with quite a few who are influenced by the political economics of welfare statism. At the universities where I have taught throughout the last 40 plus years, economists may have been respectful toward free market theorists but were by no means fully in line with their views. So even in this elementary matter, Krugman has it wrong.

But the claim that the country is in the grips of market fundamentalism is also mistaken if it’s meant to apply to official public policies bearing on economic matters. Just for starters, the financial market place has been heavily regulated for over a hundred years–consistent free market theorists usually don’t favor a central bank such as the country’s Federal Reserve Bank (even though, somewhat paradoxically, Alan Greenspan had been such a consistent free market thinker before he was selected to head up the Fed). Furthermore, the plethora of government regulation of various elements of the economy, including virtually all professions (apart from the clergy, journalism, and writers of all stripes who are protected against such regulation by the First Amendment of the U. S. Constitution), is decisive evidence that free market thinking does not dominate public policy in America.

Yet, despite all this, here is a Nobel Laureate and professor from a most prestigious academic institution and columnist for a most distinguished newspaper who keeps trying to distort reality. Why? But I will not speculate, again. Who knows what Krugman’s agenda is.

One thing does clearly stand out in his approach to making a case for more and more government involvement in the economy. This is that he relies extensively on name calling, on besmirching those with whom he disagrees. In a recent column he went so far as to dismiss all those who hold views opposed to his as zombies! Yes, zombies. That means that people, some very distinguished scholars, who are convinced that a public policy of laissez-faire when it comes to a country’s economic affairs is best are all mindless. They do not merely think mistakenly but cannot think at all.

When a critic of a position needs to resort to this kind of technique with which to attract readers of his missives to his own outlook, it suggests that the intellectual merits of that position are truly hopeless. And that is precisely so. Statism in economics has for a long time been proven and shown to be utterly unsupportable, be this the Draconian sort one found in Soviet Russia and finds in North Korea or the less drastic kind that has just produced the worldwide financial meltdown, namely the more or less interventionist welfare state.