Tuesday, November 21, 2006

Market Faith

More from me when I have something to say. For now, I'll continue my reliance on other people. When those people are as smart as Richard Posner, the aforementioned reliance is probably all for the best. Here, from the blog he shares with Gary Becker, is Posner's take on the influential and recently deceased economist Milton Friedman:
I mention this example because I find slightly off-putting what I sensed to be a dogmatic streak in Milton Friedman. I think his belief in the superior efficiency of free markets to government as a means of resource allocation, though fruitful and largely correct, was embraced by him as an article of faith and not merely as a hypothesis. I think he considered it almost a personal affront that the Scandinavian nations, particularly Sweden, could achieve and maintain very high levels of economic output despite very high rates of taxation, an enormous public sector, and extensive wealth redistribution resulting in much greater economic equality than in the United States. I don't think his analytic apparatus could explain such an anomaly.

I also think that Friedman, again more as a matter of faith than of science, exaggerated the correlation between economic and political freedom. A country can be highly productive though it has an authoritarian political system, as in China, or democratic and impoverished, as was true for the first half century or so of India's democracy and remains true to a considerable extent, since India remains extremely poor though it has a large and thriving middle class--an expanding island in the sea of misery. What is true is that commercial values are in tension with aristocratic and militaristic values that support authoritarian government, and also that as people become economically independent they are less subservient, and so less willing to submit to control by politicians; and also that they become more concerned with the protection of property rights, which authoritarian government threatens. But Friedman seemed to share Friedrich Hayek's extreme and inaccurate view that socialism of the sort that Britain embraced under the old Labour Party was incompatible with democracy, and I don't think that there is a good theoretical or empirical basis for that view.
(Via, in a roundabout way, Cosmic Variance)


Anonymous Anonymous said...

Fascinating. Want to hear why I think this is surprising? Posner is the preeminent law and economics practitioner in the world today. Law & Econ is taught as a theory that logic can guide legal thought, and economics is a great way to apply pure logic to legal decisions. It apparently led Posner to support a market for human organs and the selling of orphans (because it more efficiently distributes children to people who want them and can care for them). That could be apocraphyl, but it's odd to think about this guy who supports a free market for children talking about someone else dogmatically supporting free markets.

But I love Posner. Back in college and law school, we'd read his opinions as examples of economic theory in the law. For fun, we'd dissect his opinions, because his purely logical and rational approach to the law was so different and intellectual. And he --

... Yes, I'm still single. Why do you ask? What does that have to do with anything?

Wait. Where are you going?

-- Comish

1:58 AM  

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