Tuesday, June 19, 2012

In this I believe

As a supply-side libertarian, I firmly believe in the power of free markets, capitalism, the rule of law, and limited government. I believe in these things because they have proved to be the best way yet discovered to create the most prosperity for the greatest number of people. So naturally I believe that fiscal policies which respect free markets, capital, the rule of law and limited government are superior to those that do not. As an investor, I believe that such policies are more likely to lead to stronger economic growth, rising incomes and more widespread wealth gains.

Investors cannot live in a political vacuum, because politics and economics are firmly entwined; one can never underestimate the ability of policies to change the outlook, whether for better or worse. Policies informed by left-leaning politicians tend not to respect the things I believe in, while policies informed by right-leaning politicians do tend to. There exists the very real possibility that the November election may reinforce the message of the Nov. 2010 election, and lead to a rightward shift in policies going forward which could have huge and positive consequences for economic growth and financial markets. Moreover, the Supreme Court's decision on Obamacare, due out any day now, could have far-reaching consequences since it could put important limits on the scope and size of government.

Deirdre McCloskey has penned an eloquent summary of how the views of liberals and conservatives contrast, (HT Don Boudreaux) and I'm compelled to post this extract:

The liberals' narrative:

Modern life is complicated, and so we need government to regulate. Government can do so well, and will not be regularly corrupted. Since markets fail very frequently the government should step in to fix them. Without a big government we cannot do certain noble things (Hoover Dam, the Interstates, NASA). Antitrust works. Businesses will exploit workers if government regulation and union contracts do not intervene. Unions got us the 40-hour week. Poor people are better off chiefly because of big government and unions. The USA was never laissez faire. Internal improvements were a good idea, and governmental from the start. Profit is not a good guide. Consumers are usually misled. Advertising is bad.
Externalities, asymmetrical information, and other collective action problems are . . . pervasive in economic life. Countless ways of conducting business reap gains for some while imposing unjust costs on others. Create a cartel. Stuff rat feces in sausages. It is a truism to say that in order to achieve the benefits of an efficient market economy (increasing productivity, greater economic output, increasing productive capital, etc.), the basic rules of property, contract, and exchange must be structured [by government] to realize efficient market relations.

The conservatives' narrative:

Externalities do not imply that a government can do better. Publicity does better than inspectors in restraining the alleged desire of businesspeople to poison their customers. Efficiency is not the chief merit of a market economy: innovation is. 
... anyone who after the 20th century still thinks that thoroughgoing socialism, nationalism, imperialism, mobilization, central planning, regulation, zoning, price controls, tax policy, labor unions, business cartels, government spending, intrusive policing, adventurism in foreign policy, faith in entangling religion and politics, or most of the other thoroughgoing 19th-century proposals for governmental action are still neat, harmless ideas for improving our lives is not paying attention.
In the 19th and 20th centuries ordinary Europeans were hurt, not helped, by their colonial empires. Economic growth in Russia was slowed, not accelerated, by Soviet central planning. American Progressive regulation and its European anticipations protected monopolies of transportation like railways and protected monopolies of retailing like High-Street shops and protected monopolies of professional services like medicine, not the consumers. “Protective” legislation in the United States and “family-wage” legislation in Europe subordinated women. State-armed psychiatrists in America jailed homosexuals, and in Russia jailed democrats. Some of the New Deal prevented rather than aided America’s recovery from the Great Depression.
Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized. Minimum wages protected union jobs but made the poor unemployable. Building codes sometimes kept buildings from falling or burning down but always gave steady work to well-connected carpenters and electricians and made housing more expensive for the poor. Zoning and planning permission has protected rich landlords rather than helping the poor. 

Plus much more; read the whole thing, especially the comments section, where Deirdre addresses numerous criticisms.


brodero said...

Scott I appreciate your zeal for politics but if you really want to effect this election find an undecided voter residing in Ohio.Maybe an
undecided voter reads your blog or
someone who read your blog talks to an undecided voter in Ohio and convinces an undecided voter.

Unknown said...

After having once been "political" (I was slightly left-center) after some years of observation I decided, at least in the American context, that politics and ideology just aren't capable of making much difference in the US. The Founding Fathers went out of their way to ensure that change comes slowly and with great difficulty, if at all, and they sure did a good job of it. And frankly, I prefer it that way. The notion that Obama is some wild-eyed scheming socialist bent on destroying anything resembling free enterprise is enough to make me laugh; he's basically another republicrat, because circumstances have *forced* him to become just another republicrat. All presidents eventually gravitate toward the center, because the center is the only thing that really seems to work, and because circumstances always force the president that way. Before Obama was elected I *knew* this would happen, and that his hard-core liberal supporters would be disappointed after a while, and I was right.

What exacerbates this issue even more (and once again, I consider this to be a good thing) is that the US and the US economy is just to friggin big to be able to change much. It's one thing to steer a little rowboat, but steering a giant tanker is another thing altogether. Anyone who tries to move it where it doesn't really want to move ends up frustrated and eventually decides to just go with the flow.

George Bush #1 is a great example of a president bending to reality on the other side of the political spectrum: Remember "Read my lips: No new taxes?" We know how that went. But frankly, I *liked* Bush for doing that because I like a guy who's capable of admitting he was wrong (which is essentially what happened) and also capable of admitting he needs to bend to political, economic and budgetary realities.

Colin said...

Scott, I also enjoyed that post. This is where McCloskey nails it:

How do I know that my narrative is better than yours? The experiments of the 20th century told me so.

Exactly. We've run huge numbers of public policy experiments over the last 100 years and in each of them the free market keeps coming up aces while central planning fails over and over again. East Germany vs. West Germany and North Korea vs. South Korea. Rankings of countries by economic freedom invariably have those with the most freedom performing best. Public housing is inferior to private housing. Private schools are better than public schools. The war on poverty has failed utterly, producing little in the way of poverty reduction while fostering dependence. Social Security and Medicare/aid are driving the US to fiscal ruin. The two most problematic sectors of the US economy, health care and finance, are also the most regulated. UPS and Fedex prosper while the USPS flounders.

On the other hand we have example after example of free market success. Railroad deregulation gave us what The Economist in 2010 called the best freight rail system in the world (in sharp contrast with Amtrak). Airline deregulation resulted in prices being slashed and a previous luxury becoming affordable for the masses. Trucking deregulation resulted in similar success. Welfare reform was arguably the greatest public policy success of the last 20 years. Free trade has led to growing worldwide prosperity.

Those who persist in clinging to leftist dogma have basically a theological viewpoint that is immune to evidence and observable reality.

Public Library said...

The problem with the narrative; there are no conservatives in this country ex Ron Paul.

I wouldn't even consider Scott a conservative. He is a major proponent of the Federal Reserve, Central Banking, and money printing. This is what you call centralized planning on a grand scale and it is far from true conservatives agenda.


It requires honesty to change this country and we simply have not arrived at the truth in government or amongst the people yet.

Benjamin said...

Happy to be a supply-side libertarian.

So, when do we abolish the Department of Agriculture, radically scale back overseas USA military adventures, privatize the VA, and eliminate the socialist ethanol program?

Legalize prostitution, gambling and opium use? And polygamy?

Side note: Yes, I am a supply-sider---but the supply side has been globalized. There is no shortage or bottlenecks in supply. (Save perhaps a crimp in labor markets due to right-wing obsession with immigrants).

What we need is demand.

(BTW, most people decide they are not libertarians anymore when they discover it means your neighbor can convert his house into a 7-11, brothel or opium den).

brodero said...

After looking at some polling data
on the Midwest..I was struck not by the fact it was a dead heat between
Romney and Obama but how both had unfavorable ratings above 50%...

burmanhands said...

Wealth is created by innovation in technology and cheap labour. Henry Ford and poor immigrants was a good combination. In Europe rising labour costs lead to colonialism. In USA digital innovation needed Chinese slave labour.The era of cheap labour and squandered wealth is coming to an end in the Western world - its nothing to do with this local Republicans versus Democrats issue.

Frozen in the North said...

what is the rule of law, when a particular individual can have the laws of the land re-written to benefit his enterprise?

What is the rule of law, when a lawmakers writes to large banks: "how can I make your life easier" If you actually believe in the rule of law, then large banks in America would have gone bust, those who wrote RMBS products would have gone to jail. What you mean is Capital can do what it pleases, as for the "little" people they should all go to jail.

Sir, you are fundamentally intellectually dishonest, because even as a libertarian, you know these things to be true!

Shame on you -- and this drivel

Squire said...

Benjamin, you forgot to mention that if supply side libertarians had their way there would be no traffic lights.

Stop with the false premises – strawmen. Hard core libertarians doen’t even say there should be no government. Stop saying that those who believe that limited government is best mean that no government is best. It is untrue so stop it.

If demand created by government is so good we all should retire and the government just hand out money to everyone not working. How is that for your method of argument?