This is a simplification, of course, but I think that the underlying assumptions were (on his part) that economics is a form of political philosophy and (on my part) economics is a science that can be used to illuminate political decisions. How I came to this realization helps explain its significance.
My interlocutor had mentioned the Austrian school of economics and Ludwig von Mises. This recalled to my mind something that I had read about how von Mises had written an entire book purporting to show that redistribution of wealth is immoral. That struck me as grossly silly. Redistribution is a policy option, no different from any other. Is a gasoline tax immoral? Are national parks immoral? Is public education immoral? Is the existence of an army immoral? These questions all strike me as silly. Yes, the desirability of these policies is debatable -- but to reduce it all to black and white questions of morality strikes me as pure dogmatism.
However, history is on the other side. Adam Smith's first book (before his "On the Wealth of Nations") was entitled "Theory of Moral Sentiments" and indeed, much of the early work on economics was closely tied to philosophy.
However, I can counterargue that, in the 20th century economics moved away from philosophy and towards science. It embraced mathematics and developed a strong yen for empiricism.
Let's now apply this to a specific example. At one point, my interlocutor declared that free markets are the best way to organize economies. I agree with that statement; but I suspect that the two of us interpret that in completely different ways. I suspect (and I hope he'll correct me if I'm wrong), that my interlocutor means that in a moral or dogmatic sense: that the superiority of free markets is an axiom, a starting point, and that it might be necessary under some unfortunate circumstances to compromise on this basic principle, but we should nevertheless defer to this principle whenever possible.
My interpretation of the same statement is scientific: it represents a useful rule of thumb that has been shown to work well in many cases, but is always subject to modification based on immediate circumstances. For example, when we apply this concept to electrical power transmission lines, we both admit that it's best to have a single monopoly build and maintain those lines, and we both agree that this is an unfortunate necessity, but I shrug my shoulders and leave it at that, whereas I would expect my interlocutor to see this as a theoretical thorn in his side, desiring to figure out some way to make electrical transmission fit into his free market principle -- and failing.
The nub of the issue between us, I think, is the degree to which the free market principle must be compromised by real-world circumstances. I expect that my interlocutor would see such circumstances as rare, oddball situations that do not threaten the universality of the free market principle. I, however, see them as more frequent, so frequent, in fact, that we must downgrade the free market principle from Universal Principle to Rule of Thumb. My approach is more flexible; his is more principled. And this brings us to a question for which there is no real answer: should policy be made on pragmatic grounds or principled grounds?
I am very much the pragmatist, not because I am cynical, but for two reasons:
1. Principled approaches all too often lead to evil. There's no political principle that cannot, under the wrong circumstances, yield evil consequences. The noble desire to preserve life leads some people to bomb abortion clinics. The love of democracy contributes to America's decision to attack non-democratic nations. A respect for the value of labor leads to the starvation of those unfortunate enough to be unable to work. At every turn, the real world forces us to compromise one principle with another. When we have dozens of often-conflicting principles, how can they be of any value in guiding us?
2. Ultimately, principles are just shorthand for empiricism. Why is it wrong to lie? Because life experience shows that lies ultimately catch up with you and hurt you. So we boil the empirical results down to a principle. Killing is wrong because it only leads to more killing. Property crimes are wrong because they discourage people from creating wealth. In other words, principles are ultimately just shorthand for pragmatism. So why adulate the middleman? Why not put all our money on the true foundation on which the principles are based: empiricism?
This should get 'em going...
27 comments:
You say a lot in this post. I wish I had taken economics courses in college. I also wish I had been offered economics in elementary school or instead of Sunday school. There are interesting moral ideas in economics how to be fair to large groups -- it might be worthwhile to attempt to derive ethics from microeconomics and teach that to children instead of religious ethics.
Microeconomics seems to be progressing well. Macroeconomics is still not derivable from microeconomics so I wonder how sound it is.
Redistribution definitely makes sense for public goods we all agree on such as fire departments. It's unclear (at least to me) which possible benefits taxes should support. I suspect our intuition gets it wrong. It is easy to see how much more productive a farmer can make a field than can nature's claw. I suspect the analogy of governments to farmers and herdsman is deep-seated in our psyches -- I certainly feel in my gut that central planning helps a lot. In practice planning hasn't worked as well as markets. This suggests my gut is not trustworthy.
I wish there was more possibility to experiment with economies. The USA has 50 States; it would be nice to see each one try different things and see which states grow wealthy and sane. Instead our society has chosen to send 90% of taxes to the central government. The government strongly encourages states to adopt similar laws and practices.
I'm glad to see you understand people who burn babykilling abortion mills are doing it to save unborn babies from being murdered. Most people only have a knee jerk reaction and think there is something wrong if a babykilling abortion mill is burned or bomb. Which do they prefer, a pile of bricks or a pile of dead babies? Innocent unborn babies deserve to be protected just as born children deserve to be protected. They would have no problem protecting born children if they were about to be murdered.
SAY THIS PRAYER: Dear Jesus, I am a sinner and am headed to eternal hell because of my sins. I believe you died on the cross to take away my sins and to take me to heaven. Jesus, I ask you now to come into my heart and take away my sins and give me eternal life. http://www.armyofgod.com
Well, I must say, Rev. Spitz, you have certainly demonstrated beyond any doubt just how unprincipled "principled" people can be. I suspect that the Jesus you hold dear would be appalled by your bloodthirstiness.
Rev, maybe in a few decades we'll have the technology to move fetuses from mothers who don't want them to mothers who do. Then we can have a new discussion.
This nation tried banning abortion. The result was back-room operations that damaged and killed women. No one likes abortions! Clinics are just the best solution we have using today's technology to keep women healthy until they are ready to start families.
If you are going to keep burning down clinics *please* make sure no one is inside first.
Well, Chris, you really did get 'em going. Perhaps not in the way you expected, but anyway...
I'd like to know what book you're talking about. I'm not familiar with any book by Mises matching that description. Even if such a book does exist, it would not be representative of his work on economics, nor would he have presented it as a book on economic theory.
Mises viewed economics as a value-free science. Economics can tell you the effects of a particular government policy, but does not concern itself with the morality of the action.
Mises also rejected empirical observation as a basis for economic theory. Any conclusions drawn from such observation would be compromised, because the observer could not possibly recognize all the factors that contributed to the phenomenon being observed. The economy is far too complex.
The same is true for mathematical formulas and computer models. These are fundamentally subjective methods of investigation, with the outcome dependent on which factors are considered. Real human beings cannot be reduced to mathematical ratios or algorithms.
Mises (and the Austrian School generally) approached economics as a science of deductive reasoning. He started with the axiom that humans act purposively. From this basic a priori, he was able to deduce economic truths by applied logic. So long as the "action axiom" is irrefutable, and the step-by-step reasoning based thereon is sound, the conclusions arrived at must be logically necessary.
Of course, Austrians don't ignore empiricism or historical inquiry altogether. Rather, they maintain that the only way to comprehend these sources is through the lens of a correct theory, grounded in truths discovered by the rigorous application of logic.
Of course, having determined by objective means that a particular course of action is likely to be disastrous, it is incumbent on the economist (and everyone else) to oppose it. This was Mises' stand on socialism, for instance.
So, to summarize, I (following Mises) view economics as neither political philosophy nor empiricism.
I would like to comment on some of your other remarks, but that will have to wait until later. Bye for now!
In 2009, in America and in most developed coutries, it's almost palpably absurd to talk about "free markets". Government in America, and government in most developed countries, is a hugely influential player in the economy. This isn't a bad thing, as Grover Norquist et al. would have us believe, it's a necessary thing and a good thing; there are services which a civilized society requires which can best (and perhaps only) be provided by government, e.g., national defense, police and fire departments, highways and sanitation.
We don't have, and haven't had for more than a century, anything remotely close to "free" markets. And thank the Lord we don't.
(As for the Rev. Donald Spitz, he is another example of those who believe that human rights begin at conception and end at birth.)
Dither, I've never read any books by von Mises and wasn't aware of the Austrians until I started reading about Ron Paul.
The von Mises Institute's biography of von Mises says:
"He developed an entire new theory of interventionism showing that government intervention is inherently counterproductive. Practically this ruled out all variants of third-way policies and left laissez-faire capitalism as the only meaningful option on the political menu. In 1927, he published a concise presentation of his utilitarian political philosophy in _Liberalismus_."
http://mises.org/misestributes/misesjgh.asp
If intervention is *inherently* counter-productive it shouldn't be done -- or rather, we should intervene to do the opposite of what we want. What exactly did von Mises prove about intervention?
Dither, I was reading something about two weeks ago on von Mises and I know that essay talked about a moral refutation of socialism, but I cannot find the essay now, and I now suspect that it referred to somebody other than von Mises, and my weak memory connected the two. I must confess, however, that I have read only bits and pieces of his work, so I'll take your word that his approach is not essentially moralistic in style. Now I'll have to dig around trying to figure out where I saw that.
I will take issue with your assertion that "Real human beings cannot be reduced to mathematical ratios or algorithms." While this is true as stated, I'll argue that we can still come up with useful simplifications using algorithms. After all, is not any story a simplification of human nature? Would you any of the interesting characters from literature is a real human being? Real human beings are nowhere near as interesting as characters in stories, because the characters in stories are caricatures, and a caricature reveals truth by simplifying and exaggerating it.
I will take issue with your assertion that "Real human beings cannot be reduced to mathematical ratios or algorithms." While this is true as stated, I'll argue that we can still come up with useful simplifications using algorithms. After all, is not any story a simplification of human nature? Would you any of the interesting characters from literature is a real human being? Real human beings are nowhere near as interesting as characters in stories, because the characters in stories are caricatures, and a caricature reveals truth by simplifying and exaggerating it.
Once again, I must state my disagreement. Algorithmic models can tell us a story, but they cannot tell us a reliable prediction. Let's look at an example:
If one is playing billiards, one can reasonably calculate where all the balls will be after the first hit, so long as we know the initial setup. It will not be exact, but it will be good enough that it won't be a big deal. However, if we were to try to figure out what it looked like after 20 steps, we would likely get something wildly different because all of the negligible errors that come from external forces such as the wind, the floor that the table is on, irregularities in the materials, etc; add up after enough turns that the balls tend to move in a way that surprises us.
Same goes for economic models. We can discern some short term patterns empirically, but we have a problem once we're working in the real world, where the amount of moving parts will render long-range prediction impossible.
Simplifications are useful insofar that they can help us understand contributing factors; ultimately, all factors add up should enough time be given.
That said, stories are the same. They are simplifications that can give us an idea; but it would be foolish to use a narrative to bet on the future. Just like models, they powerfully illuminate ideas, but should be taken with a grain of salt.
Alex, I think you misunderstood my point, because I am in full agreement with your notion that algorithms cannot be used to make predictions -- although I'll restrict that to individual cases. If we're talking about statistical ensembles of people, algorithms can make useful predictions.
And in fact, when we bring stories into account, it becomes even more obvious. I don't expect that anybody would use a story to make specific predictions as to their own lives (as in, "hey, I'll go into the wardrobe and see if I don't discover a strange fantasy world inside." or "Gosh, if I can only find the right telephone, I can hold it up to my ear and I'll leave this make-believe world behind.")
On the other hand, I admit that the "Don't try this at home" admonition has real value for some teenagers.
"Instead our society has chosen to send 90% of taxes to the central government."
Ed: Where does that number come from, and what is supposed to mean? Is it saying that 90% of our tax dollars go to Washington? (If that's the intended meaning, it's nowhere near correct. State and local taxes don't equal the federal income tax, but their aggregate total isn't that far behind.)
I would also take issue with the statement "In practice planning hasn't worked as well as markets." The essence of the current situation is that ("free") markets *do not* work well, and it isn't the first time we've discovered this; see, for instance, the Great Depression.
"Redistribution is a policy option, no different from any other. Is a gasoline tax immoral? Are national parks immoral? Is public education immoral? Is the existence of an army immoral? These questions all strike me as silly."
Chris, it seems to me that you are exempting any action taken by people, as agents of a government, from judgment as to its morality, with perhaps one caveat — the action must be lawful (i.e. it must accord with whatever is the current interpretation of existing law, as ultimately determined by the government's judges).
I could not disagree with you more. Moral principles carry weight precisely because of their universality. You pointed out that bombing abortion clinics is evil. What about bombing entire cities, killing hundreds of thousands of men, women and children in the process? This is, after all, a "policy option" — one that was undertaken on a grand scale by the U.S. government during World War II.
I suspect you will resist any such comparison because you don't want to call into doubt the legitimacy of government and its prerogatives. Indeed, doing so has radical implications. But the refusal to question a human institution, and to judge its actions according to a fixed and universal standard, is itself a form of dogmatism. What progress humanity has made, has often been the result of questioning institutions and social norms.
Gerald: I screwed up my tax numbers. http://www.retirementliving.com/RLtaxes.html gives the state tax burden as between 6.4-11.8% depending on state but they are talking % of income, not % of federal taxes. Looking at my actual paycheck I'm paying 20% of my federal income tax to the state and another 10% of my federal tax to the city of New York. The paycheck figures don't include property taxes (which I don't know as it comes out of my mortgage) and sales/gas taxes.
Gerald, you wrote:
"We don't have, and haven't had for more than a century, anything remotely close to 'free' markets. And thank the Lord we don't."
And then:
"The essence of the current situation is that ('free') markets *do not* work well, and it isn't the first time we've discovered this; see, for instance, the Great Depression."
You can't have your cake and eat it, too. If we haven't had free markets for more than a century, then the Great Depression and the current economic crisis cannot be blamed on free markets. As best I can tell, this implies one of the following:
1) Government intervention doesn't work. We need to return to a more laissez-faire approach.
2) Piecemeal government intervention doesn't work. We need full-blown central economic planning, a la the Soviet Union.
3) The current crop of government interventions doesn't work. We need to tweak it — change some, add some and possibly dump some.
Playing catchup here...
Ed wrote:
"What exactly did von Mises prove about intervention?"
Mises' contention was that, when government takes a major role in the economy (as it has in the United States), the result is not a "mixed" economy. That is to say, the result is not some ideal balance between capitalism and socialism. It is neither one nor the other, but something else entirely — something which is inherently unsustainable and will, absent a return to laissez-faire capitalism, inevitably move closer and closer to full-blown state planning of the economy, i.e. socialism or fascism (which is just a variant of socialism).
The reason for this outcome is that, when the government intervenes, it is by nature preventing the market from allocating resources as it would have absent the government intervention. This will cause economic distortions that are almost invariably addressed with further government intervention, which creates more problems that need to be "solved" by government, and so on.
A perfect example is the manipulation of interest rates by the Federal Reserve system. In general, the Fed keeps interest rates artificially low to spur lending and consumption. The flip side of this is that saving is discouraged. But savings is the foundation of capitalism. All capital must come out of savings. The long-term result is a depletion of the capital stock, and a lowered standard of living (fewer goods being produced, more expensively, for a growing population).
The shorter-term result is the boom-and-bust economic cycle. When excessive borrowing and spending is induced by the Fed's credit expansion, the economy is on an artificial "high". Decisions are made and businesses are started which are dependent on this easy money for validation. Simply put, resources are being allocated wastefully, diverted away from productive uses and toward unproductive uses. So when the Fed tightens up its credit stance (to stave off price inflation), these businesses and investments go belly up, all at once, leading to a depression.
As we are witnessing in the current crisis, the government's response to the problems caused by its central bank is to shift blame in all directions, ignore the root cause of the problems, and undertake massive new interventions: Spending trillions of dollars; trying to prevent the market from reallocating resources away from the wasteful activities by propping up failing businesses and bailing out its Wall Street buddies at taxpayer expense; and possibly nationalizing the banks.
Who is foolish enough to believe these new initiatives won't create even more problems down the line, requiring yet more government "fixes"? Where does it end?
"You can't have your cake and eat it, too. If we haven't had free markets for more than a century, then the Great Depression and the current economic crisis cannot be blamed on free markets."
Cut me a little slack here, Dither. By fits and starts, with backsliding at times (e.g., the W years for sure), the America economy has moved from a "free," unregulated market to a managed, regulated market, with the government assuming more and more influence over time.
Thank goodness it has. The ideological, right-wing position is YOYO: You're On Your Own. The liberal, left-wing position is WITT: We're In This Together. I believe, unreservedly and wholeheartedly, in WITT. I believe, unreservedly and wholeheartedly, in the role of government. Do you think it's an accident, a complete chance occurence, that the programs keeping people afloat today are *government* programs: Social Security, unemployment insurance, food stamps, etc.? WITT, and that means a substantial government role.
Does government make mistake? Of course it does. It there waste in government? Of course there is. (The answers would be the same if the questions were "Does private industry make mistakes," etc.)
Gerald,
I've heard that government has grown more under Republican administrations than it has under Democrats, and that Bush spent more than Clinton (even discounting spending on so-called "defense").
Bush also:
- Created a new federal bureaucracy, the "Department of Homeland Security"
- Nationalized airline security
- Expanded federal control over schools
- Expanded Medicare
- Bailed out the banks
So Bush could hardly be said to have rolled back government. Like all Republicans, he paid lip service to the free market. And what does that mean? Republicans pay lip service to Jesus, too. Does anyone think they really believe in following Jesus?
I remember during the bailout fiasco, a reporter asked Bush how this intervention squared with his alleged "small government" views. He said something like (I'm paraphrasing), "I believe in the free market, but this is a crisis." In other words, he doesn't believe in the free market, when it counts. He's like a person who goes to church every Sunday and solemnly says his prayers, but treats his neighbors poorly the other six days of the week.
Arg! You guys are having a really great discussion and I'm swamped with work. I'll try to join in tomorrow or Saturday, as soon as I've dug out.
Why do you guys DO this to me? Can't you have the really great discussions when I'm free?
Hang in there, Chris; I got a good night's sleep for the first time in days last night, and I'm still behind.
Dither: Bush (along with America's No. 1 "free market" advocate, Alan Greenspan) vehemently opposed every effort to impose the slightest regulation on the numerous and sundry juiced-up financial instruments that got us into this mess. Greenspan went even further, refusing to use the regulatory powers that the Fed already has. Greenspan, unlike Bush, has since recanted, admitting that his unswerving faith in the "free market" was in fact misplaced.
Free markets, and private enterprise, care not a whit about the well-being of individuals. Civilized societies, via government, do care, and should.
Gerald,
Piecemeal deregulation of a sector of the economy in which the government remains a major player does not constitute "free markets."
The government's involvement in lending -- which includes Fannie and Freddie, the CRA and the Fed's "interest rate targeting", for starters -- effectively voided the market's built-in self-regulation. So deregulating, without first eliminating these interventions, made no sense.
For example: Whereas, ordinarily, the greed for profit is tempered by the risk of loss, mortgage lenders knew that Fannie and Freddie would be bailed out by the government, so the risk of loss was borne by the taxpayers instead of those taking the risks. This situation bred a perverse incentive to take on extreme risk.
As for Greenspan being America's No. 1 "free market" advocate, the scare quotes are entirely appropriate. Perhaps, within the narrow range of opinion aired by the mainstream media, Greenspan qualifies as some sort of "free market" guy. But, in the real world, his job made him the U.S. government's most senior central economic planner. He fixed interest rates instead of allowing them to be set by market forces of supply and demand. The very existence of the Fed rests on the premise that there should be no free market in money and banking.
"Free markets, and private enterprise, care not a whit about the well-being of individuals. Civilized societies, via government, do care, and should."
Only individual human beings are capable of caring about anyone. Both the market and the government are composed of individuals.
The fact is, capitalism has brought about the most rapid rise in the standard of living of human beings in all of history. It has made possible the most rapid growth of the human population. Caring or not, it is the market that provides for our well-being, by supplying us with an abundance of desirable goods and services.
In countries where the government has suppressed the market entirely, the result has been economic chaos, famine and privation, not to mention political violence of the worst kind.
The 20th century, which might well be called "the century of the state," gave us wars and anti-capitalist political ideologies (communism, fascism and nazism) that killed hundreds of millions of human beings.
So, government's role has often been one of de-civilization, whereas the market, with its peaceful, voluntary exchange based on mutual benefit, is the very pith of civilization.
Just want to note: I've got a sick toddler and sick wife to take care of at the moment. So, I might not be able to post here for a while, especially if I end up getting sick as well. (I hope not!)
I finally have some free time, and I have spent most of it composing a completely new topic on moral principles and policymaking. However, I'd like to take some time now to directly address one of the points that has been made concerning the efficacy of free markets.
I think that the free market of pure theory is naive and unrealistic, because it does not take into account the creativity of human perfidy. There are plenty of examples of free market behavior that is clearly destructive to the common good. The first of these is the tragedy of the commons: in those cases where property assignments cannot clearly be made, the resource will surely be overtapped to everybody's detriment.
Another example arises from various systems for moving people and goods around. Be they road systems, pipelines, or powerlines, we cannot afford to have a dozen different sets of competing systems. We need to establish a single system -- a monopoly. That's not free market at all.
A third example, related to the first, is the problem of environmental insult. If Joe the power plant owner spews harmful pollutants into the air, there's no way for the free market to correct the problem. Even if we used standard tort law, establishing the harm done to individuals would be prohibitively expensive. Moreover, the cost to each victim is miniscule, but the benefit to Joe is very large, and in such asymmetric situations, it's almost impossible to guarantee justice.
Or how about the role of privileged information in the free market? Joe the manufacturer knows full well that his products will slowly poison his customers, but it will be decades before people will start dying, and by then Joe will have died himself. So Joe gets to live it up for now and everybody else gets to die later.
But the single most important factor here is the growing asymmetry between producer and consumer. As markets grow larger, producers get bigger and bigger, but consumers remain the same size. In such highly asymmetric situations, the producers are able to tweak the system to their benefit. An obvious application of this is political influence through campaign contributions. But there are lots more examples, such as the ability to use the legal system to their advantage (they have the lawyers).
Accordingly, I think it naive to simply declare the free market as the perfect solution to all our problems. There are simply too many real-world complexities to make so simple-minded an approach reasonable. It's a messy, complicated world out there and we simply have to consider its problems in all their ugly detail.
"[M]ortgage lenders knew that Fannie and Freddie would be bailed out by the government, so the risk of loss was borne by the taxpayers instead of those taking the risks. This situation bred a perverse incentive to take on extreme risk."
The last part of that quote ("a perverse incentive to take on extreme risk") is exactly, precisely what your beloved free market cooked up with all of the fancy financial products it created; we are now reaping the whirlwind (even the creators, whom we have no choice but to bail out).
"The 20th century...gave us wars and anti-capitalist political ideologies (communism, fascism and nazism) that killed hundreds of millions of human beings."
The 19th century gave us the Civil War, which killed more Americans than all the other wars combined.
I have no objection to markets or to capitalism; my objections are to untrammelled, unregulated markets and untrammelled, unregulated capitalism. FDR in fact rescued capitalism; Obama now needs to do more of the same.
Chris: I can't give a proper response to all your points in a single post, but I'd like to make a few observations.
Firstly, most of the arguments of the laissez-faire proponents, such as Mises and Hayek, were not arguments against government roads and the like. They were arguments against government economic planning, including such activities as: central banking/fractional reserves, wage and price controls, protective tariffs, Keynesianism, welfarism and the nationalization of industry. In short, they were argument against the "fatal conceit" that government bureaucrats were capable of running an economy as well as, or better than, the spontaneous order of the market itself.
Some of the later followers of Mises (most notably Rothbard) became anarchists and argued that the market could provide for even such goods as those normally regarded as the exclusive purview of government: security, arbitration and the like. Some of this is highly theoretical, and some of it is based on historical precedent. Look it up if you're interested; for a few reasons, it's not an avenue I've pursued in my own thinking about the problems we've been discussing.
Finally, regarding your comment about asymmetry, and how big business influences politics through campaign contributions: This is one of the best arguments for small, restrained government. A government that's big enough to do what ours does is a target for all manner of corruption.
In fact, much of the regulation of business that began during the Progressive Era (and is portrayed as a victory for "the people") was actually lobbied for by big business, because such regulation imposes costs that are harder for its smaller, upstart challengers to absorb. So regulation often has the effect of entrenching the established players in business. Once you're aware of this, you'll notice it happening all the time.
OK, Dither, let's see if we can't narrow our differences. There are some government services that you appear to support, such as road building. And there are some government activities that I oppose, such as any kind of import duties. Let me walk down your list and comment on the advisability here:
1. Central banking. The problem here is the government's role as maintainer of the currency. Yes, we could have banks issuing their own scrip -- this was in fact a method employed during the 17th, 18th, and even into the 19th centuries. However, I don't think it would be useful today because we'd have a zillion problems reconciling different scrips. So we definitely want the government issuing currency. And that leads us almost inevitably into problems with the government controlling the money supply. It really does have to print money to keep the money supply in step with the economy. And how much should that be? Here comes the Fed, here comes the Fed! I don't quite like it but I see no workable alternative.
2. Wage and price controls. I'm with you on this one. I don't think that wage and price controls have no place in a modern economy. However, I do believe that worker protection programs such as OSHA are necessary, because workers cannot be expected to keep up with the latest developments in safety and hazards.
3. tariffs. We're in agreement there.
4. Keynesianism. On this I differ with you. When the government increases spending to stimulate the economy, it's really borrowing from the future. Now, many can borrow against their future, but nobody can get rates as good as the government. On the downside, anybody can spend the money better than the government can. So we end up trading off an upside against a downside. Which is bigger? I think the upside, but that's an impossible judgement for anybody to make.
5. Welfarism. I also disagree with you here. The basis of my argument here is not any bleeding heart, but a rational self-interest. Countries with higher Gini Indexes tend to have less social capital. It appears that the optimum trade-off between social capital and welfare spending comes when the Gini Index is between 0.25 and 0.30, maybe even 0.35. The USA is currently around, what, 0.4 something? In any case, I argue that a Byzantine strategy here is more efficacious.
6. Nationalization of industry. I am almost but not quite with you on this one. The only exception concerns the banking industry, which is now so totally screwed up that nationalism may be the only way to put that house back in order. I'm still skeptical of nationalization in this matter, but I think that there's an arguable case for it.
Lastly, you make the excellent point that big government is easier for the wealthy to manipulate, and that small government is ultimately more democratic. I confess that I am attracted by this argument, but I remain unconvinced because there are too many non-governmental ways in which industry can injure the public. Without strong governmental controls, we would surely be poisoned by industry within a generation. And the trade-off between economies of scale versus market competitiveness also requires government supervision. Financial shenanigans are another way that producers can cheat the public, and only the government was the resources and the power to prevent such abuses.
It would be best if there were some sort of grand consumer alliance that acted as a counterweight to producers. If that alliance found that Peter Producer was doing something nasty, they could put out the word and tell all the consumers to boycott Peter, and he'd be run out of business. But such an organization would wield near-totalitarian powers, and it's not something I want to see.
This quote from a letter in the 2/23 NY Times testifies to the need for government in a capitalist system:
"There is no system that is both moral and economic. Individual responsibility in a moral system is based on ethics and good behavior. Individual responsibility in an economic system is based on financial success. *The amorality of our economic system, with its indifference to the social consequences of its actions, is the problem.*"
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