Home > World Events > Defining victory down, part 2 (Crossposted at CT)

Defining victory down, part 2 (Crossposted at CT)

January 10th, 2006

In this post, I mentioned that I hadn’t seen any commentary from pro-war bloggers on reports that the US will spend no more on Iraqi infrastructure once the current allocation of $18 billion, most of which was diverted to military projects, is exhausted. Although there was lengthy discussion both here and at Crooked Timber, no one pointed to any examples of comments on the topic.

I said at the time I didn’t want to get into a “Silence of the Hawks” pointscoring exercise on this. As a general rule, no particular blogger is obliged to post on any particular topic. But I would have thought, if you made it your business to report regularly on Iraqi reconstruction, that such a report was worth covering or correcting.

The Winds of Change website gives a weekly report on Iraq, with a focus on reconstruction news. It appears to be a successor to Chrenkoff’s Good News from Iraq, though less relentlessly upbeat. This week’s report contains no mention of the end of reconstruction funding. In case the WOC editors missed it, the WP report is here.

Update Armed Liberal at WoC responds (graciously) to this provocation, calling the Administration’s decision “bizarre” and pointing to an earlier critique of the wiretapping policy. That still leaves the policy undefended, so I thought I’d try again.

Instapundit is usually quick to disseminate pro-Administration talking points (for example on wiretapping) and has posted regularly on Iraqi reconstruction. Only a month ago, Instapundit linked to an Austin Bay post headed (rather ironically in retrospect) The White House Finally Gets Serious About Iraqi Reconstruction. So, now that the nature of “seriousness” in the White House has become clear, does Glenn Reynolds support the cessation of reconstruction funding? Does anybody? End update

Oddly enough WOC links to a WP piece from October 2004 on the diversion of funds to military purposes with the revealing quote

Pentagon spokesman Bryan Whitman said in a written statement that the administration always knew that “reconstructing Iraq’s infrastructure would require enormous resources beyond what the Congress appropriated — after 30 years of neglect, decay and corruption.”

Whitman said the United States is working to ensure it is “not starting any project without finishing it.”

Presumably that statement does not apply to the big project of building a “peaceful and prosperous” Iraq.

Winds of Change has done a more reasonable job than many of presenting a case for war, but they’ve relied heavily on the assumption that the Administration is committed to the task of leaving Iraq, in its own words “peaceful and prosperous”. Now that the second of these goals has been abandoned, thereby undermining the first (which in any case looks further away than ever), I’d be interested to know if their views have changed.

A final note on all this is that Kim Beazley, has finally called for the withdrawal of Coalition troops from Iraq, arguing, correctly in my view, that their presence is doing more harm than good. Given Beazley’s extreme caution and love of all things military, he must really believe that the whole project is beyond any chance of redemption.

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  1. Andrew Reynolds
    January 17th, 2006 at 16:36 | #1

    Katz,
    We seem to have got further from the point of this thread, but that has not stopped me before.
    I would also like it to be placed on record that I do not like it to be called capitalism, I just used it as a (lazy, in this case) shorthand. I believe that what is normally known a capitalism is just what happens when government largely stops interfering.
    On with the answer.
    I would disagee that the distortions have grown overall – the retreat from full ownership of the “commanding heights” of the economy by the government to a merely regulatory position is a distinct improvement, but one that should be built on, not regarded as completed. The nature and scale of tariffs and many other trade distortions has also been reduced.
    I believe that the rise of the professional manager, in part of those pension funds, is a symptom of this. The personal connections and nepotism that used to determine who was successful is reducing, along with their baleful effects.
    The reason for the stupidly complex tax and other associated laws is that politicians are people and tend to believe that they have been elected to legislate and regulate and they then proceed to do just that. We need to tackle this as an issue in itself (IMHO) without confusing it by saying that this means that freedom itself is unobtainable.

  2. Ian Gould
    January 17th, 2006 at 16:59 | #2

    >I believe that the rise of the professional manager, in part of those pension funds, is a symptom of this. The personal connections and nepotism that used to determine who was successful is reducing, along with their baleful effects.

    Hang around fund managers and other “professional manager” types and you’ll soon realsie nepotism has ended its jsut been relocated.

    >The reason for the stupidly complex tax and other associated laws is that politicians are people and tend to believe that they have been elected to legislate and regulate and they then proceed to do just that.

    No, they’re the logical result of 50-100 years of very smart people continually working to finding loop-holes in what were originally quite simple laws and equally smart people trying to close them as soon as they find them.

  3. Katz
    January 17th, 2006 at 17:18 | #3

    AR,

    I admit that the picture is more complex than suggested in my previous post.

    Assuredly, foreign exchange markets have mostly escaped governmental control. Central banks are now much more immediately vulnerable to international market sentiment than ever they were under the Bretton Wood System.

    And as you say many facets of international trade are freer now than they have been for a century and a half.

    State trading corporations worldwide have been privatised.

    But the kind of intrusion in many other markets typified by Australia’s superannuation laws is growing. For example, the Bush administrations’ share of US GDP is higher than that of the Johnson administration.

    Let’s look at how this works. The Republicans know they have to buy votes. And deregulated capitalism has presented the US Federal Govt with a big problem. One of 1000kg gorillas is the fate of the US Pension Benefit Guarantee Corporation, which is a US Federal govt funded corporation to do exactly what it says in its name. The hollowing out of US corporations and the evaporation of their privately-funded pension funds has landed huge liabilities at the door of the US Federal Government.

    Popular politics and libertarianism point to opposite responses to this crisis.

    Only a very optimistic libertarian would expect that the US Govt may take this opportunity to abolish the PBGC, thereby pointing out the bad effects of government intrusion in the market place.

    This is just one of a myriad of government decisions that has enmeshed the US govt more deeply than ever in the US economy.

    Just as the nature of capitalism has changed over time (magnates to pension funds) so has the nature of government intrusion changed.

    It would be a mistake to see the changing nature of intrusion as a reduction in intrusion.

  4. Andrew Reynolds
    January 17th, 2006 at 18:50 | #4

    Ian,
    They are not the result of smart people trying to find their way around them. The best way to stop that is to have a principles based approach, rather than masses of black letter law we currently have. It is the result of people trying to be useful who should know to leave well enough alone. Politicians and regulators are constantly trying to remove the prerogative of judges to interpret the law and the result is what we have.
    .
    Katz,
    I agree that the PBGC and other such instrumentalities, like Fannie Mae and Freddie Mac (yes, I know they are at least nominally private) are unjustified intrusions. I would also agree with you that populism and liberalism are at odds in this. The PBGC and the others were set up years ago, however (the PBGC over 30 years ago and the others in the depression), for much the same reasons (a perceived, rather than actual, market failure). I would argue that this sort of populism is gradually reducing, while you, I take it, would argue the opposite. Fair enough, we disagree. The only really large commitment of this type taken on by the US government recently (as far as I can recall) is the medicare for drugs benefit. I can think of no similar commitments by our government.
    They just seem to be content to regulate us too much.
    Their website is worth a visit for its comedy value, though. I will be fascinated to see what it looks like after the inevitable bailout.

  5. Ernestine Gross
    January 17th, 2006 at 22:25 | #5

    Questions to Andrew Reynolds:

    1. How do you charaterise a ‘free market’? I am asking this question because Humphreys’ “definition” is unsatisfactory, relative to what is available and you did not object.

    2. How do you distinguish between “actual market failure” and “perceived market failure”
    a) conceptually
    b) empirically?

    3. I understand that you prefer the judiciary to interpret the law rather than having ‘black lether law’. Assuming my understanding of what you wrote is correct, what is the wealth distribution required under your preferred system which ensures ‘equal opportunity’ in achieving equal rights before the law?

    4. On what moral principle do you justify the wealth redistribution entailed by successfully advocating ‘free trade’?

    5. How would you characterise ‘free trade’?

    6. Is your conclusion regarding the desirability of free trade independent of a) uncertainty, b) market structure (eg complete, incomplete, partially segmented?)

    7. Are you prepared to take personal responsibility for the financial consequences of any goverment taking note of your advice?

    8. Which one, if any, of the two theoretical approaches in Economics, the theory of the core of an economy or the theory of competitive private ownership economies with complete markets, agree with your notion of your preferred society?

    9. What role to you assign to the role of ‘truth’ in judiciary systems?

    10. How does the first and second fundamental welfare theorems in Economics fit into your preferred society?

    11. I would appreciate getting a reference to your work where you provide necessary and sufficient conditions to prove, using the logic of mathematics, of existence of a solution to your preferred society.

  6. Andrew Reynolds
    January 18th, 2006 at 01:26 | #6

    Ernestine,
    To answer your questions, I suggest you start with the basics – “The Wealth of Nations” (shortened title) by Adam Smith. He made a couple of mistakes (like the labour theory of value), but it is a good primer. It also lets you know how an old text can still be relevant today. Once you have mastered that, a move on to David Ricardo for the basics on free trade, followed up with “The Road to Serfdom” by Hayek. “On Liberty” by John Stuart Mill should do for political theory. Once you know and understand these, you can consider yourself somewhat qualified in basic economics and politics and you may be able to answer your own questions.

  7. James Farrell
    January 18th, 2006 at 08:03 | #7

    I’m not sure which of you two reminds me more of Rafe Champion – Ernestine for style, or Andrew for content.

    By the way, Andrew, have you read WN yourself? Smith did not in fact subscribe to the labour theory of value.

  8. Ernestine Gross
    January 18th, 2006 at 08:04 | #8

    Dear Andrew,

    I am very familiar with Adam Smith “The Wealth of Nations”, David Ricardo, John Stuard Mill and van Hayek.

    May I suggest you read L. Walras, Wald, G. Debreu, K. Arrow, F. Hahn, Mount and Reiter, F. Milne, R. Radner, Geneakopolos, Magill and Quinzii then you may understand my questions.

    I suspect there must be more to politics than regurgitating the words of 19th century authors. Incidentally, v. Hayek’s background is in law.

  9. Ian Gould
    January 18th, 2006 at 08:20 | #9

    Ernestine: “what is the wealth distribution required under your preferred system which ensures ‘equal opportunity’ in achieving equal rights before the law?”

    At least some libertarians argue for reviving “champery” – the practice of selling one’s right to legal action or of accepting funds to run an action in exchange for a share of any settlement.

    This would appear to offer those without substantial financial assets at least some chance at accessign the courts – it isn’t all that different from US contingency-based class actions.

  10. Ernestine Gross
    January 18th, 2006 at 08:32 | #10

    James, you made a fair comment.

    During my undergraduate and post-graduate studies in Economics I read through cubic metres of stuff. One can drown in the words without getting anywhere other than ‘he said that he said but I say, ……………’ ie adding more words to the volumes of words without achieving one inch of progress. I developed a liking for style which cuts to the bone as quickly as possible. Apologies if my style doesn’t read as well as that of, say John Quiggin’s or Katz’ or P.M. Lawrence’. I am a bit in a hurry; life is finite.

  11. James Farrell
    January 18th, 2006 at 08:45 | #11

    Ernestine, I didn’t mean you weren’t lucid. Rafe tends to set quizzes on Hayek and Popper, and play the Grand Inquisitor – as Jason Soon once put it – demanding that his antagonists explain why leftie hero X or Y did not denounce communism sooner.

  12. Katz
    January 18th, 2006 at 10:31 | #12

    Ernestine’s serried ranks of stern questions (above) have at least one sub-text: that markets cannot satisfy completely human needs. Thus market fundamentalism is seen to promote as complete and consistent an ideology that is either incomplete or internally inconsistent.

    It is not inconsistent to agree with both of the following propositions:

    1. Ernestine is correct.
    2. The market comes closer to producing the mechanisms capable of satisfying human needs than any other set of social arrangements.

    The question remains as to how to measure the utility of non-market methods of identifying and satisfying otherwise unsatisfied human needs.

    This brings me to AR’s observation above:

    ” I would argue that this sort of populism is gradually reducing, while you [Katz], I take it, would argue the opposite. ”

    AR has identified accurately one point of disagreement.

    The correct answer to this question can be achieved empirically. In other words, this is an historical question.

    Increased government intrusion in national economies might serve as important evidence favouring my argument. The dismantlement of government trading entities might favour AR’s argument.

    At least part of the argument involves measuring intentions. Thus, the Allies during WWII sought to bring peace to the world by causing to be formed the world’s biggest armies to combat fascist regimes. So AR may argue that in a complex world democratic leaders think it prudent to wean gradually their citizens from their dependence on government. This sophistcated solution may involve greater expenditure in the short term in order that there may a smooth transition to market solutions in the long term.

    One way to counter that argument is to draw attention to timing: Just how much time may one assign to short term before it ceases being short term and starts looking less like a transitional moment towards a new settlement and becomes the new settlement itself.

    Thus in answer to AR’s point:

    My reading of economic history suggests that policy makers more often react to contigency than set long term goals. Occasionally, huge reforms are deliberately formulated. The Bretton Woods Agreement is an example of this.

    But the story of the collapse of the Bretton Woods System is one of contingency. Only in retrospect does it look like a triumph of market ideologues. This collapse arose out of the accumulation of enormous sums of petrodollars that generated an extraterritorial market in credit–a state of affairs that contradicted the operational principles of Bretton Woods.

    The biggest financial contradiction today is that between the US Federal government and international creditors. US administrations are driven to satisfy the demands of American voters by populist means. Currently international creditors are willing to supply loans.

    However, just as owners of petrodollars in the late 1960s came to the conclusion that it ceased to be advantageous for them to recycle their money back into the US credit system, so it is likely that there will come a moment when the relationship between American borrowers and international lenders will cease to be perceived as mutually advantageous.

    At that moment the militarised populism of the US will collide with market discipline. This crash is likely to be spectacular. And I believe we won’t have to wait long to witness it.

  13. Andrew Reynolds
    January 18th, 2006 at 11:47 | #13

    In order:
    James, you flatter me to compare me to Rafe – but I did not mention Popper, so I am short on that. I have read WN, but about 20 years ago. From my reading he did support the labour theory of value, but I may be wrong. I was reading Das Kapital and The Communist Manifesto at about the same time, so I may have confused the errors. If so, I apologise unreservedly to Smith.
    .
    Ernestine,
    I presume those authors has written more than one book or article each – attempting to digest their entire output would be a bit much. I kept it to one book each. Can you do the same?
    A few points on the remainder – just because a book is old does not decrease its value. I think you would agree that there are quite a few new books of little value – we may just disagree on which ones. It has been a while since I was actively reading in this area, though.
    A quick check on your dates would be useful – Smith was writing in the 18th century, Mill and Ricardo in the 19th and von Hayek in the 20th. I like to spread my reading through centuries.
    .
    Katz,
    I would agree entirely that markets cannot satisfy every human need, which is why I have never claimed they can. Markets are what happen when people interact in a free and open way, as you appear to agree, but people should be free to interact in any way they choose, whether or not actual economic exchanges occur.
    I would also agree that politicians are driven by contingency – but I would argue that may of those contingencies are now driving towards a more liberal approach, particularly in the social sphere, but also in the economic. Both of the examples you gave tend (IMHO) to support this view.
    .
    One question, though. Ernestine asked a series of questions, so how can he be “correct”? Surely you are not claiming the questions were leading – that would be intellectually dishonest.

  14. Katz
    January 18th, 2006 at 12:16 | #14

    “I would argue that may of those contingencies are now driving towards a more liberal approach, particularly in the social sphere, but also in the economic. Both of the examples you gave tend (IMHO) to support this view.”

    Intelligent people made just that prediction in the Edwardian Indian summer leading up to the Great War. After 1914 the Great Powers of the world found they couldn’t sustain total war and simultaneously demonstrate themselves to be worthy of the loyalty of their citizens without massive intrusion into the economy, the end of the gold stardard, including death duties, income tax, rationing, the rise of government trading corporations, proscriptive labour laws, and all the rest. At the beginnng of the 21st century the GWOT serves as a similar justification for US administrations, already under financial pressure, to seek non-market solutions to their problems arising from financial fragility. These problems include funding the US Military Industrial Complex and purchasing continued loyalty from the US electorate.

    I’m inclined to agree with you that this effort won’t succeed. the market will impose a discipline on any US administration that believes they can get away with their profligacy forever. But odder things have happened.

    “One question, though. Ernestine asked a series of questions, so how can he be “correctâ€?? Surely you are not claiming the questions were leading – that would be intellectually dishonest.’

    I’m prepared to cut any man called Ernestine maximum slack.

  15. Ernestine Gross
    January 18th, 2006 at 14:03 | #15

    Ian, thanks for reminding of practices which are definitely supportive of the legal profession in the USA and which probably assist in sustaining the belief (perception?) among people in the ‘justice’ at least as a ‘desirable state’. It would seem to me that a person first has to know what his or her rights are before he or she can ‘sell a right to legal action’. What would be a ‘fair’ price of a gamble for which the odds are not known?

  16. Andrew Reynolds
    January 18th, 2006 at 15:39 | #16

    Katz,
    I think we have to disagree on that one point, but agree, substantially but not in tone, on the rest.
    Interesting thing about the “Great” War was that, in the years leading up to it, trade restrictions were gradually being put into place by the “Great” powers. This made actually going to war much easier when there was a trigger. The existence of large trade volumes between countries is a strong negative indicator of the likelihood of war between them.
    I will also cut Ernestine a bit of slack, then. I just think he would have had some trouble with his name at the school I went to.

  17. Ian Gould
    January 18th, 2006 at 16:55 | #17

    >It would seem to me that a person first has to know what his or her rights are before he or she can ’sell a right to legal action’. What would be a ‘fair’ price of a gamble for which the odds are not known?

    Ernestine, you’ll know if you’ve read my previous posts that I don;t consider myself a libertarian – left or right.

    I’m not advocating champery, much less attempting to argue that it’s an adequate defence of the rights of the poor (especially when you go beyond property rights).

    I’m simply pointing out that this is a possible mechanism, advocated by some libertarians for ensuring access to the justice system.

    Presumably, one could auction one’s tort or use an agent or soem other market mechanism to get a value.

  18. Andrew Reynolds
    January 18th, 2006 at 17:50 | #18

    Ian,
    Or, horrors, you could actually deal with the lawyer yourself. Go to a few different lawyers, do some negotiation, think about it and decide on the best deal. Scary.

  19. Ian Gould
    January 18th, 2006 at 18:21 | #19

    Yes, Andrew ,that would be one of those “other market mechanisms” I mentioned.

  20. Andrew Reynolds
    January 18th, 2006 at 18:50 | #20

    Sorry, possibly overblew the humour.

    So, you do not believe champery is appropriate?

  21. Ian Gould
    January 18th, 2006 at 19:08 | #21

    No.

    For a start, there are soem losses for which no level of economic compensation is acceptable – the life of a child or other family member is an obvious example.

    That’s why I think consumer protection and prodcut safety laws are one ofose residual functions you’d want to stay with the government.

  22. Ernestine Gross
    January 18th, 2006 at 19:47 | #22

    Andrew,

    “A few points on the remainder – just because a book is old does not decrease its value. I think you would agree that there are quite a few new books of little value – we may just disagree on which ones. It has been a while since I was actively reading in this area, though.â€?

    I see no need for consensus on the present day ‘value’ of ‘old books’ unless you want to sell me one in the role of an antique dealer (in which case I would send my niece who has made some profitable transactions in this area).

    You ask for specific titles of the authors I have listed. It would be arrogant on my part to pre-select for you specific titles from the work of these authors. However, I am happy to provide you with reliable web-sites for some, provide a few specific references for those which may be a little harder to find, and make a few comments. I should also mention that the list of important contributors to 20th century economic theory in what I call ‘non-dictatorial resource allocation systems’ is not complete.

    1. Leon Walras, Elements of Pure Economics, 1874
    2. Gerard Debreu, http://cepa.newschool.edu/het/profiles/debreu.htm; Theory of Value, Wiley 1959 is helpful in providing a clear outline of the methodology.
    3. Kenneth Arrow, http://cepa.newschool.edu/het/profiles/arrow.htm. Perhaps Arrow is of most interest to you because the breadth of his work goes beyond the research program from 1874 to 1996.
    4. Frank Hahn. Again, it would be arrogant on my part of select specific contributions. However, Equilibrium and Macroeconomics, Basil Blackwell, 1984 and Critical Essay on Modern Macroeconomic Theory, with R.M. Solow, 1995 may be of particular interest.
    5. Mount and Reiter, “The Informational Size of Message Spaces�, Journal of Economic Theory, 8, 1974 (some may argue that v. Hayek, “The Use of Knowledge in Society�, AER, 35, 4 1945 constituted an input).
    6. Roy Radner, Existence of Equilibrium in Plans, Prices and Price Expectations in a Sequence of Markets�, Econometrica, 40, 1972, pp 289-303
    7. Michael Magill and Martine Quinzii, Theory of Incomplete Markets, MIT 1996 (contains references to contributors, including Geneakopolos).

    “A quick check on your dates would be useful – Smith was writing in the 18th century, Mill and Ricardo in the 19th and von Hayek in the 20th. I like to spread my reading through centuries.â€?

    You are perfectly correct, Adam Smith published his most widely known book in Economics in 1776 (ie 18th century) and Mill and Ricardo wrote in the 19th century. Van Hayek published in 1946 (ie 20th century). However, in terms of the development of 20th century economic theory, which takes the economic aspects of ‘liberty’ seriously, his work did not have an impact. But, please decide for yourself.

  23. Ernestine Gross
    January 18th, 2006 at 19:56 | #23

    1. “ ‘One question, though. Ernestine asked a series of questions, so how can he be “correctâ€?? Surely you are not claiming the questions were leading – that would be intellectually dishonest.’

    I’m prepared to cut any man called Ernestine maximum slack. ”

    2. “I will also cut Ernestine a bit of slack, then. I just think he would have had some trouble with his name at the school I went to. ”

    3. I will also be prepared to cut any man called Ernestine maximum slack”

  24. SJ
    January 18th, 2006 at 20:19 | #24

    Ian, Andrew:

    The word is “champerty”.

    And I don’t know the situation in other states, but the
    MAINTENANCE, CHAMPERTY AND BARRATRY ABOLITION ACT 1993 (NSW)
    is pretty clear:

    SECT 3

    Abolition of crime of maintenance (including champerty)

    The offence of maintenance (including champerty) that but for this section would be punishable by the common law is abolished.

  25. Ian Gould
    January 18th, 2006 at 20:38 | #25

    SJ,

    Damn it I’ve been using the wrong word for years (if only infrequently).

    I was aware that champerty and maintenance were recently legalised and should really have mentioned that.

    I wonder what they’ll do to prevent the problems arising which led to the original ban – such as financing frivolous lawsuits to bankrupt one’s political or business rrivals.

  26. Ernestine Gross
    January 18th, 2006 at 20:40 | #26

    Ian, thanks for your replies. The impression I gained from your posts is that you are non-doctrinaire on just about any topic and you are always happy to contribute constructively by digging out relevant statistics. It is a pleasure to read posts. I don’t have a clue about ‘libertarianism’ and their apparent spatial divisions (left, right) and I try to stay clear of any involvement with any ‘ism-words’.

  27. SJ
    January 18th, 2006 at 21:10 | #27

    SJ says:

    …the MAINTENANCE, CHAMPERTY AND BARRATRY ABOLITION ACT 1993 (NSW) is pretty clear:

    I’ll retract that. Whilst champerty is no longer a crime in NSW, it still might be a tort.

    I don’t have a ready answer to your question, Ian, about frivolous lawsuits, but it’s discussed in these two NSW Law Society papers:

    Champerty & Maintenance: Funding of civil litigation by commercial organisations – is it against public policy?

    Maintenance and Champerty: Litigation funding agreements by legal practitioners

  28. Andrew Reynolds
    January 19th, 2006 at 01:12 | #28

    Ernestine,

    Thanks for the references. I will have a look. I would dispute your point as regards Hayek not having an impact, though. Several of the most important economic developments of the post war period (for good or ill) had their foundations in his work. The work of such politicians as Thatcher and Reagan were founded, if on anything, on his work and that of the other Austrians.

  29. Ernestine Gross
    January 19th, 2006 at 14:36 | #29

    Andrew Reynolds says: “Thanks for the references. I will have a look. I would dispute your point as regards Hayek not having an impact, though. Several of the most important economic developments of the post war period (for good or ill) had their foundations in his work. The work of such politicians as Thatcher and Reagan were founded, if on anything, on his work and that of the other Austrians.�

    Andrew, I did not say that van Hayek had no impact. I said: However, in terms of the development of 20th century economic theory, which takes the economic aspects of ‘liberty’ seriously, his work did not have an impact.

    To put it another way, whoever the people were who were ‘impacted’ by van Hayek (or used van Hayek’s polemical writings as ‘guru’ literature to push their own vague ideas or personal interests) they do not include the ‘big brains’ of the 20th century in the Economics departments of universities from the US to Japan and from Denmark to Australia. The van Hayek inspired policies are simply anachronistic with respect to both, economic theory and empirical research.

    Looking forward to getting the answers to my questions.

  30. Andrew Reynolds
    January 19th, 2006 at 15:47 | #30

    Ernestine,
    I thought we had agreed your questions were polemical in nature. In any case, several of them could easily be (and have been) rephrased to be the hypothesis behind a PhD. Nevertheless, I will, in my own humble way, try to answer in the context of a blog comment. This is a challenge in itself. I will try not to be too long.
    1. “How do you characterise a ‘free market’?� As you would be well aware, there is no such thing as a fully free market in the real world – nevertheless, the freer the market, the better. A few approach the ideal. A simple definition will suffice for the moment – “an economic market in which supply and demand are not regulated or are regulated with only minor restrictions.� The regulator in this case being any agent in the market capable of using force or its threat to alter the relative position of supply and demand.
    2. I would suggest a dictionary definitions of “actual� and “perceived� would suffice for the conceptual difference. For the empirical difference a full PhD thesis may answer, and many have been written. I suggest some research.
    3. None to minor. Black letter law greatly advantages those able to afford good legal representation. A more principles based approach, by allowing greater understanding, reduces the expense and time taken. A success fee based system then further improves the ability to afford to bring suit. In criminal law the role of the State would persist, particularly where the nature of the crime does not allow for financial compensation.
    4. Freedom itself is sufficient. I would strongly argue that resource allocation should be on the basis of what the owners of those resources want them to be allocated to, not on some arbitrary allocation decided on the basis of the use or threat of force.
    5. Free trade is analogous to the free market, just carried across borders.
    6. Yes.
    7. Yes – if they were ever to take note of my advice I would be very surprised, though. If I were to be given 0.0001% of the financial benefit, I suspect I would be a very rich person. However, I emphasise that the financial benefits are secondary to the main point – the ability of each individual to decide for themselves what to do with their own lives and to take responsibility for their own actions is more important.
    8. I have not come across a definition of these two approaches – please point me to one.
    9. I do not see how this is relevant, but I would be interested in your response to this – do you believe truth to be relative or absolute? I worked for some considerable time in prosecutions and I would tend towards the absolute.
    10. I believe that a system that allows free choice allows for pareto-optimisation. In any case, this is not my preferred society – it would be the society made up of the individual choices of all the agents in the society, rather than one imposed from above.
    11. Alfred Marshall:
    “I had a growing feeling in the later years of my work at the subject that a good mathematical theorem dealing with economic hypotheses was very unlikely to be good economics: and I went more and more on the rules
    1 Use mathematics as a shorthand language, rather than an engine of inquiry
    2 Keep to them until you have done
    3 Translate into English
    4 Then illustrate by examples that are important in real life
    5 Burn the mathematics
    If you can’t succeed in 4, burn 3. This last I did often.”
    .
    This is a quick response and I may have missed a subtlety or two, but that will have to do for the moment: I need some lunch.

  31. January 19th, 2006 at 17:52 | #31

    Ernestine — my definition of ‘free market’ is what it is. If that isn’t satisfactory, then the only solution for you is to perhaps use a different language.

    Katz — I agree there has been coersion in the past. Too much. No right-libertarian on earth believes in some mythical past of happiness and joy. I may as well say that all non-libertarians wear Stalin underwear. Lets stick to reality.

    I agree coercion continues today. More’s the pity. Libertarians do not support corporate welfare or special treatment for business, and never have. Being pro-market and being pro-business is not the same.

    I agree that government support for business (such as tariffs) is economic coercion. It should be stopped.

    Ian Gould — I note you’ve only responded to my ‘PS’. None of those things you mention (monopoly etc) are coercive. You are (perhaps wilfully) not using the word correctly. The points you raise are potential reasons for believing that voluntary outcomes may not be optimal. That is possible… but that doesn’t make the actions coercive! Me buying McDonalds might not be optimal… but it is not coercive. Debate is difficult if words change meaning whenever it is convenient.

    As it happens, I think that volunary action does tend to lead to a better outcome than coercive actions. But my belief or yours doesn’t change the definitions of words. And none of this changes whether “left-libertarian” is internally inconsistent.

    Steve Munn — there is nothing fairyland about believing that free markets are good. However, there is something inevitable about leftists resorting to childish insults in the face of libertarians. Sigh.

    Libertarians believe in no restrictions on commercial television licences, so I don’t know what you’re trying to prove. If that is good or bad for Kerry Packer… so what? Once again you’re commiting the very simple error of thinking that libertarians believe in government intervention that is pro-business. This has never been the case. Sorry Steve, but ignorance is not a virtue that you should display with pride.

  32. SJ
    January 19th, 2006 at 18:19 | #32

    John Humphreys Says:

    However, there is something inevitable about leftists resorting to childish insults in the face of libertarians. Sigh.

    You should ask the government to outlaw the practice.

  33. Ian Gould
    January 19th, 2006 at 20:59 | #33

    “my definition of ‘free market’ is what it is. If that isn’t satisfactory, then the only solution for you is to perhaps use a different language.”

    So if I want to define sugar as “that brown runny stuff that comes out of my bum” everyone has to defer to that definition?

  34. Ian Gould
    January 19th, 2006 at 21:05 | #34

    “Ian Gould — I note you’ve only responded to my ‘PS’. None of those things you mention (monopoly etc) are coercive. You are (perhaps wilfully) not using the word correctly. The points you raise are potential reasons for believing that voluntary outcomes may not be optimal. That is possible… but that doesn’t make the actions coercive!”

    The definition of coercion from dictionary.com:

    “the use of express or implied threats of violence or reprisal (as discharge from employment) or other intimidating behavior that puts a person in immediate fear of the consequences in order to compel that person to act against his or her will”

    So an African prostitute having unprotected sex with 30 custoemrs a day because it’s the only way to feed her children isn’t being coerced?

    The victims of Minamata Disease weren’t being coerced?

    The Indian debt-slaves working unpaid to service debts incurred by their parents or grand-parents aren’t being coerced?

  35. Ian Gould
    January 19th, 2006 at 21:07 | #35

    John Humphreys: ” there is something inevitable about leftists resorting to childish insults in the face of libertarians. ”

    Aren’t you the person who a couple of weeks ago was fulminating about “lower class riff-raff”?

  36. Ernestine Gross
    January 20th, 2006 at 01:51 | #36

    Andrew,

    I thank you for your reply and I appreciate it. My questions were not polemic. I could not make sense of your comments – the underlying assumptions seemed to be ‘way off track’. Asking questions is one way to try to figure out whether there is any common ground. I prefer to assume differences in information rather than differences in attitudes or opinions.

    1. The reference Debreu (1959) contains a theoretical model of an economy where the only institution is ‘a market’ and there is no government or any other authority (or ‘strong man or woman’) who exerts any force, regulatory or otherwise. The model does not claim that this is how the world looks like nor is there any suggestion that this is how the world should look like. The model provides sufficient conditions for the existence of the (market) solution of the model and for efficiency properties. Let me know whether you still believe in the beliefs you have after you read it.
    2. No, I would not agree that a dictionary is of any help here. May I refer to last item on the list for (Maguill and Quinzii, 1996) for a definition of ‘market failure’ of the incomplete variety and may I suggest that anybody who promotes the idea that ‘market failure’ is only a problem of perception may wish to revise his or her perceptions by comparing observables with the assumptions of the complete market model.
    3. Thanks for your opinion on this one. I have no independent knowledge in this area. I suspect that, possibly quite wrongly, many if not most people who are knowledgeable in a particular discipline go for understanding of principles rather than prescriptive rules on the assumption that it reduces the expense and time taken for everybody else. However, the assumption may be a projection from the professional’s experience onto people in general. (This is my experience in relation to accountants – these people seem to need a prescriptive rule for just about every step – isn’t most of it ‘obvious’ given the underlying logic of the system – ie the principles?)
    4. Are you saying slavery is o.k.? I don’t assume you do. Ricardo’s international trade theory result has very little relationship to reality because most international trade is carried out by multinational firms. These ‘private’ enterprises do restrict trade too. There is plenty of empirical evidence on this one. Furthermore, my question is concerned with a change from one system (regulated by governments) to another one (managed by multinational corporations in an environment that can be characterised as a non-cooperative game rather than a ‘free market’ as in Ricardo’s theory.)
    5. Empirical research has found that most international trade is carried out by multinational corporations who have ‘market power’ and act, at times, very much like a ‘force from above’.
    6. Interesting. Between the time of Ricardo’s writings and now, it has been established that the policy recommendation from Ricardo’s (19th century) international trade model result does not generalise to the case when the future is uncertain or when markets are incomplete (a text by Krugman and Obsfield contain at least one result, namely on uncertainty).
    7. –
    8. Theory of the core: Edgworth. (19th and early 20th century) http://www.economyprofessor.com/theorists/francisedgeworth.php. , v. Neuman Neumann, John and Oskar Morgenstern. 1944. Theory of Games and Economic Behavior, Princeton Univ. Press, Princeton NJ., recent application: http://ideas.repec.org/a/spr/jogath/v26y1997i3p379-401.html.
    Other: already referenced.
    9. You are right, the question is not directly relevant. But I don’t regret having asked it. Given the context of the question – legal systems – I don’t know what relative truth means or could mean. The difficulty is how to establish the truth about events. I was quite shocked when a law graduate told me they were told in the proverbial first lecture that it is not the purpose of the legal system to discover the truth. It seems to me if this were true then any talk about ‘freedom’ is meaningless.
    10. No comment at present.
    11. You are not Alfred Marshall I gather.

    Hope you had a good lunch despite my questions.

  37. Ernestine Gross
    January 20th, 2006 at 01:57 | #37

    John Humphreys says: “Ernestine — my definition of ‘free market’ is what it is. If that isn’t satisfactory, then the only solution for you is to perhaps use a different language.”

    Indeed. Here it is: A ‘free market’ is characterised as a hyperplane with normal p in an n-dimensional Euclidean space where n is the number of commodities and p is an n-dimensional vector; a point in a simplex. (This definition assumes there are no financial markets and no sequence of markets and no partially segmented markets.) Let me know if you wish to have more.

  38. Katz
    January 20th, 2006 at 07:25 | #38

    John Humphreys

    1. Here is what I said:

    “Right libertarians tend to assume a quite mythical past. In general terms, this past is a gloss on Lockeanism. Human beings were supposed to have ventured out into the wilderness and transformed nature into product for the benefit of all. Right libertarians tend to assume that economic actors, corporations, partnerships, small businesses, are simply carrying on that fine Lockean tradition.”

    2. Here is your preposterous caricature of what I said:

    “No right-libertarian on earth believes in some mythical past of happiness and joy. I may as well say that all non-libertarians wear Stalin underwear. Lets stick to reality.’

    In the cool light of reason I hope that you can recognise that you’ve leeched all nuance out of my formulation. If you can’t recognise that stop reading now because intelligent exchange would be impossible.

    3. Here is the formulation of a Right Libertarian about the history of human liberty. This fellow is just one of thousands whose statements can be found on the WWW:

    http://www.chuckbraman.com/Personal/PersonalPolitics.htm

    “I’m an advocate of 100% political and economic freedom, i.e., of laissez-faire capitalism.

    “The biggest influences on my politics (apart from current and historical observation) are the political philosophy of John Locke and the philosophic system of Ayn Rand. Locke argued that each individual possesses the rights to life, liberty and property, *that these rights exist in nature prior to the formation of government*, and that the only legitimate government is one whose function is limited to protecting these rights. Rand argued that man’s essential nature is to use his reason to produce the values on which his life depends, which in turn requires a government whose function is strictly limited to protecting him from the initiation of physical force by other men. Locke’s ideas were the basis for The Declaration of Independence and the Constitution the United States.”

    You can test the representativeness of this formulation of Right Libertarian ideas yourself by Googling “Locke, libertarian, nature, government”.

  39. Ernestine Gross
    January 20th, 2006 at 10:06 | #39

    John Humphreys says: “There is nothing fairyland about believing that free markets are good.”

    True. There is also nothing fairyland if a person believes the moon is a piece of Swiss cheese unless the person holds this belief in the 20th century and wants to act as adviser to NASA.

    Consider:

    a) The 19th century marginal productivity theory of income distribution implies that in the labour market, people’s wages will approximate their marginal product.

    b) The 20th century theoretical models of competitive private ownership economies with complete markets imply that in addition to the explicit assumptions A1, to An, underlying the 19th century marginal productivity theory of income distribution, assumptions B1 to Bm are implicit.

    c) “In the labour market, people’s wages will approximate their level of marginal productivity.” (John Humphreys, Reform 30/30: Rebuilding Australia’s Tax and Welfare System, Perspective on Tax Reform, CIS Policy Monograph 70, 2005, p 11). Evidence: NONE.

    How would you describe the content of item c?

  40. January 21st, 2006 at 11:52 | #40

    Katz, you wrote “In fact all economic relations, from the lord-serf relationship of the Middle Ages… have been promoted and protected by state power.”

    That particular example is false. The feudal system enforced that one, in an era before the revival of state power. In fact, state power revived by making use of the feudal system; it was carried by it, not the other way around.

  41. Katz
    January 21st, 2006 at 12:56 | #41

    PML, in the narrow sense you’re correct. But I’d draw a bright line between the period of “revival” of state power and the period of the maturation of state power.

    The temptation to use the broad brush on a blog is very powerful.

  42. January 22nd, 2006 at 18:56 | #42

    Still, Katz, the existence of a counterxample like that disproves your very general assertion. It will need to be modified accordingly.

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