Must-Read: John Whitehead: The Conservative Bias in Economics?
Must-Read: I think the rather sharp John Whitehead gets this critique of Mark Thoma wrong. Rather than being “ultra conservative”, Milton Friedman is rather a squish. The Stigler-Coase position is:
- If the government does not prevent it via misregulation, the private sector will contract to internalize all externalities, and
- Even if the private sector does not, government failure is still much worse than market failure.
Those two arguments were necessary to move away from the Henry Simons position that the government must and shall enforce competition–that the FTC should be the largest and most aggressive arm of government. If Chicago wanted to influence in the business-governed councils of the Republican Party and to please donors to the university, it needed to find a way to wriggle out of that first-generation Chicago-school economics midwestern-populist commitment. And it did.
Friedman, by contrast, was more of a wet. He wanted to make the market work, and he wanted in the here-and-now to make the market work better. That meant: a k%/year monetary growth rule. That meant: Pigovian taxes to substitute for incredibly inefficient command-and-control regulation. Via clever rhetoric Friedman could minimize his philosophical differences with the von Miseses and company. And the question of what to do after the Revolution… that would never arise…
The Conservative Bias in Economics?: “Is [Thoma’s] argument liberal or conservative? I’d say neither…:
…I’m tempted to add [ultra] or something like that to conservative in this excerpt because the argument is straight from the conservative economist Milton Friedman…. I pulled my copy of Free to Choose off the shelf and read the section on the environment…. Rather than a description of Coasian free-market environmentalism, it is a description of mainstream Pigouvian environmental economics. For example, on page 207:
Most economists agree that a far better way to control pollution than the present method of specific regulation and supervision is to introduce market discipline by imposing effluent charges.
Mainstream economists tend to be in favor of imposing market discipline with pollution taxes or permit markets relative to the ‘idea that markets work best when they are left alone.’