In Case You were Wondering . . .

This paper and this op-ed sum up my view of the current economic "crisis:" outside the financial sector, there isn't one.

I haven't talked much about the "crisis" for this very reason. Contrary to the impression one gets from the vastly over-discussed economy in the media, there isn't much interesting to talk about.

Government is now engaging in an unprecedented level of economic intervention, of course. But this is hardly novel either. Most years government intervenes more in the market, driving intervention to an unprecedented level.

I totally oppose this intervention (just as I oppose the interventions that preceded it). But I doubt it will matter much. The pattern, at least, is nothing new: government intervenes some more in the economy; the market manages to 'outstrip' this intervention resulting in more progress, though less than we could have enjoyed without the intervention.

I'm not sure whether this makes me an eternal optimist or an eternal pessimist. The point is, I don't believe it matters. Life for most Americans will be essentially unchanged as a result of the "crisis" or government's attempts to "fix" it.

Comments

[David Carlson]

Peter,

Interesting perspective. I recently heard a political pundit talking about how this 'crisis' really is not affecting everyday American's lives as much as the nonstop media makes it seem like. I don't doubt that some people have definitely been affected by it, but generally not AS much so as media and the government makes it out to be.

Regardless, I do think the intervention being taken should cause alarm. I also do think that in the long run Americans will be changed by it. Americans will become accustomed (if they are not already) to government intervention and truly believe that it is the best solution to problems. I don't believe the recent government interventions, nor the interventions taken in the past, should be taken lightly. It's important for people opposed to it to be vocal about that opposition. Sitting idly and believing that it will not make a difference is a position that I just can't seem to justify. Maybe I'm just a hopeless optimist who believes things really can change for the better, but even if that was so - I wouldn't have it any other way.

David Carlson
http://www.davidcarlsonpolitics.com

[Adam Martin]

Pete's "unprecedented" comment reminds of Office Space:

"So I'm sitting in my cubicle today and I realized that ever since I started working, every single day of my life has been worse than the day before it. So it means that every single day you see me, that's on
the worst day of my life."

[Ivan Pongracic, Jr.]

"I don't believe it matters. Life for most Americans will be essentially unchanged as a result of the "crisis" or government's attempts to "fix" it."

Disappearance of multiple trillions of dollars from the financial markets (and we're not done yet - take a look at CNN right now), devastating many people's retirement savings and making it impossible for them to retire until much later than they planned, if ever; a large run-up in unemployment (and we haven't seen anything yet - unemployment numbers will definitely go up much higher than they are now); federal government becoming a part-owner in many American banks, leading to God-knows-what down the road; and probably the most problematic long-term development, a huge increase in the federal debt, leading to questions about the government's ability to repay it in the long-run and leading to the Chinese and Japanese slowing down in buying of the US treasuries (I believe that the federal govt will be facing a very real possibility of defaulting on debt within the next several years).

It doesn't matter? Most Americans will be unaffected by the current situation? Pete, I've got huge respect for you, you're an incredibly smart guy. But you've been hanging around
Cowen too much if you really believe this. The fact is that the current interventions are of a larger magnitude than anything we have seen in decades. Interventions matter and have real effects - I would think that somebody posting on something called "Austrian Economists Blog" would know that...

[liberty]

Damn, I thought you'd written an op-ed on the crisis. That I'd have been interested in.

As for your eternal optimism, I think you are basing it too much on statistical extrapolation :)

We haven't destroyed ourselves yet, but where is the tipping point? What if Obama gets everything he wants, more or less, as president, with a Democratic congress?

What if he is the "new FDR" and nationalizes banks and the mortgage market, institutes the EFCA, a living wage, tariffs and "labor standards" laws for trade, radical progressivity of the tax code, his Employer of Last Resort program ("Let's put the jobless back to work in transitional jobs that can give them a paycheck and a sense of pride.") and so on... not to mention all the new subsidies and bailouts already being passed, and which surely would expand under Obama.

The "crisis" is a great excuse, like it was for FDR, to push through everything under the sun.

[Roger Koppl]

Pete,

Shouldn't we be frightened, very frightened? Of course I do *not* mean we should be frightened of the supposed economic meltdown that would occur without the steady hand of government control and regulation. I mean we should be frightened by the recent increases in state power.

I think I have a reasonable grip on the expansion of liberty over time. Most blacks were enslaved before 1863. Then Jim Crow, lynchings, and other oppressions. Women has severely restricted property rights until quite recently. Rape was legally impossible within a marriage. And so on. Miranda rights go back only to 1964 (?) and Gideon rights to 1963. And so on. So we have been living in a freer country in recent decades than for much of our previous history, FDR notwithstanding.

Have not the last eight years, however, brought a sudden sharp increase in state power? Haven't they brought a sudden sharp increase in *arbitrary* state power? The Patriot act, presidential signing statements, illegal wiretapping, torture, renditions, the lapse of habeas corpus. The bailout adds a sudden sharp increase the role of discretionary authority in economic affairs at the same time as we have seen a sharp decline in civil liberties and the corresponding spike in arbitrary state power. Unless the Dems surprise us by unwinding Bush's handiwork, is it not simply a matter of time before we see practical restrictions on freedom of speech and, generally, a permanent regime of fear and paranoia? Aren't we teetering on the edge of a something relatively close to fascism? I hedge by saying "relatively close" mostly because of our strong liberal tradition, but I don't know for how much longer that will protect us. 100 years? 25? 2?

[Pete]

Roger, I agree that the last 8 years have brought lots more state power. But so have most 8-year periods in the 20th century. Don't get me wrong; I loath the recent increases in state power just as I loathed those before them. But I'm not convinced most Americans' quality of life is deteriorating.

The power of markets is such that we've progressed despite increased state power. Maybe the way to say it is that I'm more optimistic about the power of markets to overcome government than I'm pessimistic about government's ability to squelch markets.

So, I'm with you on the steady deterioration of liberty that's taken place over time. I just don't see the past 8 years as exceptional in that regard, as others seem to. And I still think that erosions notwithstanding, our forseeable economic future lies upward not downward, though, again, not as upward as it could be without government.

[Roger Koppl]

Pete,

Yeah, on the strictly "economic" question of material abundance, I think much -- most -- of the rhetoric has been waaay overblown. The Minnesota working paper is very good on this point. As you know, Mark Thoma bashed it. I think Alex Tabarrok's reply was right.

I'm somewhat more pessimistic than you because I think we might get a slide into a 70s redux economy with unemployment persistently at European levels and innovations somewhat muted. But I completely agree that we may dodge that economic bullet. Party on. It's the loss of civil liberties that bug me. You're focusing on the economy. And you can do that, of course. No problem. I was saying our liberties may have taken a black-swan dive.

[liberty]

Although Pete didn't bother to reply to my post, I want to jump back in and reply to something you said, Roger.

You said "Unless the Dems surprise us by unwinding Bush's handiwork, is it not simply a matter of time before we see practical restrictions on freedom of speech"

They are very much already in the works. I might post on this next week on the Heritage blog, although its getting a little late to say "no matter who wins," considering McCain has no chance, anymore.

But, no matter who wins, both have a serious anti-free speech agenda. McCain has his McCain/Feingold agenda, which is much more dangerous to free speech than most people seem to understand, and political speech no less. John Stossel talked about this in his "politically incorrect guide to politics." That kind of campaign finance regulation is just an attack on democracy and a worse attack on free speech. Even if you don't like democracy per se much, the loss of the freedoms involved in assembly and political campaign is serious. McCain does not seem to have learned this lesson, he still waves it around as if it was a major accomplishment, and he'd likely do more of same. Find hidden agendas or don't, its bad.

Obama, on the other hand, has two major evils in the free speech area. One is "net neutrality" which is the death of online speech and online freedom. The other is the Fairness Doctrine, which is the end of all media free speech at once, in one feel swoop. You really can't set censorship into motion more effectively than with real enforcement of the Fairness Doctrine. Obama has made it very clear that along with the economy-killing programs I mentioned above, he will enforce censorship on those speaking out against his policies, and kill the free media of the internet.

[Roger Koppl]

liberty,

I'm completely with you on McCain/Feingold. James C. Miller III's "monopoly politics" is quite important and grim IMHO.

I don't like the fairness docrtrine or "net neutrality" either, but I would trade them for McCain/Feingold if I could. BTW: I must confess that I don't really get the free speech issue with net neutrality. I agree that it's a solution in search of a problem, but I don't see the force in the free speech argument against it.

Anyway, I was really thinking of things like professors who get their tenure revoked or who can't get government grants needed for tenure. Newspapers whose reports are put in jail for contempt. Publishers that are audited by the IRS. That sort of thing.

[liberty]

Roger,

On net neutrality: if you can ban people from restricting speech, you can ban them from allowing it. If you can regulate the airwaves or who can own things, you have control over it. It is a first step, given it is a very new media, but right now it is completely free (in the US). Any regulations on it open the door to all regulations. That is my major concern -- there may be others.

On the second point- newspapers put in jail - what do you think the Fairness Doctrine is for??? If properly enforced to its letter, any media outlet that doesn't ensure "fair time" for free to an opposing viewpoint would be jailed. That is why it is most scary.

[Roger Koppl]

liberty,

You are making a slippery slope argument. That's cool. I buy it. Personally, I probably won't start calling it a free-speech issue, but now we're down to microscopic detail.

I'm not as freaked out by the fairness doctrine as you. I can remember when we had it and dinosaurs were walking around . . .

[liberty]

Roger,

Some would argue that the FCC regulations were part of why the New Deal got through, and of later left-wing wins. Have you read this?
http://www.cato.org/pubs/pas/pa-270.html

"Efforts to use content regulation as a form of political control began with the advent of radio regulation. In 1928 the FRC renewed the license for WEVD, owned by the Socialist Party, only with the stern warning that the New York station must "operate with due regard for the opinions of others." [26] Regulators had determined that programming that reflected the Socialist Party's agenda was not in the public interest. ...

A decade later conservative broadcasters were pressured when the FCC sought to protect President Roosevelt from pro-business commentators. The regulatory target then was a regional network in New England, the unabashedly right-wing Yankee Network, which controlled three radio stations and ran commentary from the likes of Father Charles Coughlin, a controversial figure of the far right who was fond of referring to FDR as "Franklin Double-crossing Roosevelt." [28] In 1939 the Mayflower Broadcasting Company submitted a competing application to be granted a license to operate WAAB, one of the Yankee Network's Boston stations.
...
Yankee managed to hang on to its license only by promising no further editorialization. The ruling in that case gave birth to the Mayflower Doctrine, which forbade broadcasters to editorialize, until the FCC reversed course and virtually imposed an obligation to editorialize in the 1949 report, Editorializing by Broadcast Licensees. [31] In the meantime, the FCC's decision shielded Roosevelt's New Deal from broadcast criticism."

It goes to Kennedy, Goldwater, etc.

For you, like for Pete, more of the same doesn't sound scary. From my POV, and maybe its because I am so new to the policy scene, it does seem a lot like a turning point. Sure, these laws have existed before - we've had more labor regulation and more censorship, and more nationalizations, more public works, at various points in the past. But they were bad points in the past, and we had been moving away from that. Suddenly we are headed there again, and in the meantime we've also grown a massive welfare state. So, the return to this old-school socialism, taken together with the huge increase in welfare spending (and intervention into these welfare areas of the economy like health care), could bring us to a new tipping point.

[Roger Koppl]

liberty,

I'm am up in arms too. See my comments above! I asked Plete "Aren't we teetering on the edge of a something relatively close to fascism?" I said I fear "our liberties may have taken a black-swan dive." I'm frightened. I'm very frightened. I happen to be *less* alarmed by *one* measure you mention, namely, the fairness doctrine. Okay, two: net neutrality. But I see the big picture in pretty much the same uncomfortable way you do. We'll have to see. I very much hope our native traditions of liberalism will see us through this period safely. Don't forget Mises' dictum: "Trends change." It cuts both ways.