The need to pay attention

This article is by Deirdre McCloskey. She will be coming to the Conference of Economists and the History of Economic Thought Society meetings at the start of July. Not to be missed. She is a great economist as well as being a great economic historian and historian of economics. Here she is discussing how the capitalist order is the only moral order. Governments, after they have made their contribution in providing political stability have a very restricted role in dealing with markets. Here she is in the midst of an argument with others who don’t see it the way she does:

How do I know that my narrative is better than yours? The experiments of the 20th century told me so. It would have been hard to know the wisdom of Friedrich Hayek or Milton Friedman or Matt Ridley or Deirdre McCloskey in August of 1914, before the experiments in large government were well begun. But anyone who after the 20th century still thinks that thoroughgoing socialism, nationalism, imperialism, mobilization, central planning, regulation, zoning, price controls, tax policy, labor unions, business cartels, government spending, intrusive policing, adventurism in foreign policy, faith in entangling religion and politics, or most of the other thoroughgoing 19th-century proposals for governmental action are still neat, harmless ideas for improving our lives is not paying attention.

Both the Conference of Economists and HETSA are in Melbourne this year.

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8 Responses to The need to pay attention

  1. Alan Moran

    I hopped onto the debate on the blog yesterday with this:
    For those of us taking the view that regulation is generally always bad it would be useful to start thinking of areas where it may be a Good Thing.

    Tariffs, quotas and barriers to new entrants have been the more egregious types of regulation. Their
    substantial reduction over recent decades has been the kernel of the deregulation program that has propelled economic growth throughout the world. Wage legislation, requirements to negotiate an unfair dismissal requirements are similar economic regulations with negative effects. And industry policy from Japan through South Korea has largely been cosmetic and where it had teeth it had negative impacts.

    Nor is there any case for preventing monopoly, even of “essential facilities”, not least because, as Adam Smith recognised, it resolves itself because the cartelisers, absent government support, will undermine their own agreements even if newcomers don’t arrive.

    So what areas of government intervention, outside of
    policing and protecting property rights and life and limb might be legitimately regarded as having had proven value?

    Deirdre has nominated the banning on coal burning in England, clearly an unambiguous benefit which would be difficult to have been achieved without regulation. Noise limitations on vehicles might fall in this category. She has apparently rejected patents, copyright, (trade marks, the right to obtain
    individual benefits in a mineral discovery?) and other extensions of traditional property rights that I would consider to have been, on balance, beneficial.

    Areas in consumer law where regulations might have had
    positive effects have been suggested to include, flammability of nightwear, slat sizes in cots where the risks were small and producers/customers might not have recognised them.

    Some areas like machine guards might also qualify even
    though safety has been subsequently used as an avenue for unions to seize control over enterprises.

    It seems that requiring portability of phone numbers has increased competition and provided benefits of the non-Schumpeterian kind.

    One area that, ostensibly, should clearly be ruled out is discriminatory taxes on sin goods (which actually soak the poor). They, like taxes on fat food taxes are an intolerable intrusion onto individual liberty. While “second hand” smoke from tobacco is a furphy, the regulations that have almost illegalised
    cigarette smoking around the western world have forced half the adult population to stop smoking, almost certainly to their benefit.

    Assembling a taxonomy of areas where regulatory intrusion by the state might be useful would clearly be challenging but is an area that is not explored except by those favouring big government.
    Alan Moran

    0 /0 *•
    Deirdre McCloskey • 4 hours ago•
    Yes, I entirely agree. It’s an empirical matter, an should be approached as a matter of fact in any particular case. I just don’t see what we gain by dogmatism

  2. Rafe

    This was cited on the Hayek site under the heading “the greatest blog post ever?”.

    Don’t be put off by Deirdre’s style, it is the content that matters.

    She is a great cricket follower as well, after spending some time in Oxford. That is a good sign. One of my forthcoming publications is “The Australian School of Economics” based on a close analysis of the great game.

  3. daddy dave

    Actually Alan, that’s a good idea. If you had a big, comprehensive collection of ‘good regulations’, you fend off the criticism of being against all of it.

    It occurs to me that you could do the same thing with government spending.

    But the problem is that over-regulation is out of control, driven by a mindset, a philosophy of ever-increasing regulation. And so conceding that under the forest of regulations are some good, useful things, is a secondary point.

  4. If the Great Fact that Deirdre describes so well in Borgeois Dignity were better known, perhaps we wouldn’t be dealing with all these terrible economic ideas being pushed all over the world now.

    Like sustainable devt will help the poor. Or we need to get rid of capitalism and move to a government directed economy to help the poor. Or free markets are harmful to the poor.

    Are the young people in Australia equally misled about not wanting to work at a company that seeks a profit? My niece said she was only comfortable working at a nonprofit. I asked how she thought it would go for her generation if they just tried to live off of what other generations had already created.

    She looked confused by her eccentric auntie.

  5. john malpas

    China seems to be doing ok. Nationalism etc personified.

  6. Rafe

    John, your point is…?

  7. DMS

    What a fantastic quote.
    Thanks for sharing the link

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