Wanting to shore up my ignorance about most substantive economic arguments I requested of my good friend a couple of books to do just that.
He lent me Common Sense Economics by James Gwartney, et. al, and Knowledge and Decisions by Thomas Sowell.
Results
Both works contributed to a tempering of my unchecked bleeding heart, which I believe stemmed from both a harsh rejection of the moral leanings of the right to which I was exposed in childhood and an enchantment with the oratory and narrative of Barack Obama. Each work contained massive amounts of evidence for the superiority of free markets and argued for free markets, although much of Sowell’s substance flew over my head.
The Theory
One shadow of doubt convincingly cast was that of “hoped-for” results. Defining governmental programs and organizations up front by their hoped-for results helps mask their truly important parts: processes and actual results.
However, articulation also comes under fire as a force opposed to free market decision-making where inarticulate actions like purchases communicate many processes and actual results.
Sowell’s thesis seemed to focus on the differences in the costs of knowledge to different decision makers. He used this framework to explain various societal problems, historical events, and the economic/political/legal status quo. To be honest, the applications of this main point tended to fly over my head. What I take away from it is that those for whom knowledge is cheap and accessible (for example, connected politicians, organized labor unions) tend to hold more power in decision making. But should they? Another component of the argument seems to be that in our current societal setup these groups make damaging decisions because those making them are so distant from the first-hand knowledge held by those affected.
Oh who knows, I probably missed it completely. Seemed libertarian. But plenty of background in history, law, economics, and politics made the read well worth it.
The Content
A few crucial turns in recent American history were highlighted, most notably the expansion of power of the Executive and Judicial branches during the Warren court. I’m now reading Bob Woodward’s The Brethren, which has begun with an expository of how Burger follows Warren.
Certain commonly fallen for fallacies also made a lot of sense. For example, the democratic fallacy often hits American voters who think that options are unlimited and because we live in a democracy we can vote for anything we want. The animistic fallacy describes when one believes order must have been created by design, whereas many disparate chaotic events can actually amalgamate into order.
Common Sense Economics was a great brush up of aspects of econ that I had once known more closely in high school and college. The chapter on personal finance was especially great.
Provoked Thoughts
Telecom executives will complain about regulation stifling their investments then turn around in less than a month and try to perpetuate the regulation that has propped them up in the face of competition from Google. First, hypocritical. Second, a system in which that can be done is one in which government seems to be bought and sold with no real ethical direction.
The power of government with its “threat of violence” as the key mechanism for getting certain behaviors out of the populous is indeed vast, and as Sowell describes overwhelming to all individuals and organizations. Was it overwhelming just now to Goldman Sachs?
I agree that the term “self-made man” is ignorant and arrogant.
Unmonitored monitors, for example, mothers and entrepreneurs, are the most productive people in society. Again, I agree!
The sections on antitrust made me want to lawyer my way into M&A.
Sure, the Constitution has survived for 250 years. But I would ask those who decry some of its stretchier interpretations as perverse: hasn’t the leeway for such changes allowed that very survival?
Upon reading that the founding fathers explicitly rejected Utopian speculations, well, again, I found my suspicions about the left increasing.
#1 by Jason - MSU on November 19, 2009 - 10:44 am
Hey Bert,
Interesting stuff, but I just want to suggest a few readings to keep your left leaning principles with some meat on their bones
Economics philosophy is often based on a rational-choice model where humans make completely conscious decisions and are always fully aware of all of the alternatives to a possible choice and further, are capable of making every one of those alternatives. This model of humans is sometimes referred to “homo economicus”, and it is the model of human nature which works best with free-markets. For a critique of this, check out “The Philosophy of Social Science” by Martin Hollis.
Libertarianism operates under a similar model of human nature and decision-making, which almost completely ignores the concept of power (unless it is in the hands of the government) and social structure. Economic decisions are viewed in light of what they will do for the capital, disregarding the people who may be influenced by these decisions. I would check out “In Search of Respect” by Phillippe Bourgois. It’s an ethnography of East Harlem where Bourgois lived with crack dealers for 3.5 years. He is especially cognizant of social structure, power, and free-market decision making which has indeed increased profits (e.g., relocating manufacturing) has marginalized and permanently locked out inner city minorities from participation in meaningful work, and as a result creating a massive underground economy based on crime as an alternative to work in the service economy.
On that same note, I’d also read “The Truly Disadvantaged” by William Julius Wilson, which is about the economic plight of inner city minorities.