But this is not unusual. For all of the fits that anti-capitalists get themselves into about advertising and how corporations play mind games with people to get them to buy their products or do other awful things, that same action is either ignored when done by government or outright celebrated.  Here are two additional examples:

1. Paul Starr, in talking about the Clinton insurance exchanges: “Consumers would acquire that insurance through purchasing cooperatives, soon renamed “regional health alliances” at the instigation of political advisers who thought that the term “cooperative” sounded too leftist.
2. Paul Starr, in talking about the Clinton health plan: “As a little reflection will show, the capped premium had much the same incidence as a payroll tax graduated according to firm size and average wages, but the capped premium had the singular advantage of being called a premium rather than a tax.

It’s one thing for advertising firms to use subtle language to make you want to eat the hamburgers of their clients, and quite another when the force of coercion stands behind it. But for some, that is a distinction without a difference. I beg to differ.

What finally broke the grip of the hospitals (and later the doctors) on the methods of Medicare payment was the acute fiscal crisis that developed after Reagan cut taxes and increased military spending in 1981 and the economy then plunged into the worst recession in decades.

The dual recessions of the early 80s are largely thought to be the result of the necessary tightening of monetary policy at the time which was the unfortunate policy prescription (necessary) from the Keynesian unicorn period of the 1970s (high inflation and high unemployment). Indeed, the early 80s recession is known as the Volcker Recession after the chairman of the Fed who sharply and quickly increased the federal funds rate to stave off the inflation.

Interestingly, the narrative above is a little out of touch with modern stimulus advocates, no? Wouldn’t both cutting taxes and raising spending (whether on bombs or bridges or battery powered cars or basement digging for that matter) be precisely what the Keynesian doctor ordered? But is the author going to argue that doing this, only when Reagan was president, plunged us into recession? Seems like the opposite of the austerity fairy to me.

To give the author a little leeway, he did just remind readers on the page prior that Reagan himself was responsible for instituting both an expansion of Medicaid and in imposition of Medicare price controls. Remind your friends of that when you are at a dinner party.

This is odd. And it is wrong.

Do critics of markets actually understand what axiomatic principles are? Do critics of markets actually understand what the term “institutions” means? For those of us who are classically liberally oriented and prefer a much more market oriented economy, THE very fundamental premise of our economic and political worldview is the non-aggression axiom. Individuals may contract with one another and otherwise behave in ways that pursue their own interests so long as in doing so the property of others is not violated. If individuals violate the property of others, there is just cause for the situation to be rectified (let’s ignore how). In other words, the default “anarchist” position on things like pollution is, “no pollution allowed.”  And that position derives from the axiom that the rest of the classical liberal framework evolves from. For our utilitarian friends, upon what such axiomatic foundation does “environmental externalities are bad” derive? Keep searching … keep searching … keep searching … there is, of course, no such foundational reason outside of expediency.

Seriously, go ask someone what they think the default position of “free-marketers” is on pollution and I guarantee they’ll argue that “people who support free-markets are enemies of the environment.” But the default position of true market proponents is that injunctions against and damages for all forms of contamination of land, water and air are required when actual nuisance and damage occurs. Sure, there are cases when relying on the body of common-law and tort to deal with these intrusions will be costly or impossible, but the basic market approach provides a framework for understanding when this is likely and also a way to think about when those barriers to such implementation are likely to fall.

The ignorance, the almost proud ignorance, of anti-capitalists on this matter would be laughable if they didn’t have guns. The Keystone issue would be a good application. Does the fact that a pipeline exists mean that pollution is inevitable (ignoring the fact that there are already dozens of pipelines across the same area, and that pipeline safety is far better than transporting fuel in other ways)? Does the current body of environmental law, and the record of torts on environmental issue suggest that builders of the pipeline are going to be more or less sensitive to potential damages today than in the past? In this case too, you might think the conditions upon which market transactions can occur effectively would be violated – but it is clear where the pipeline would be travelling, and it is not hard to imagine that with today’s computing and communication technology that the pipeline owners could negotiate with all potential damaged parties to make it clear what might happen should a leak or explosion occur. Where in the entire discussion was the public made aware of what typically happens if a pipeline has an issue? Where in the entire discussion was the public made aware of tools they might have to become involved in the negotiations? Where in the entire discussion was the fact that Ogallala aquifer is a common-pool resources that is as much the source of the problem as the pipeline itself? Do you think if Warren Buffet owned the entire aquifer we’d have the same issues?

Finally, the existence of pollution and so-called externalities presents an opportunity for profit-seeking entrepreneurs to solve the problem. And while I understand that we don’t really want the problems to emerge in the first place, it is usually because of our problems that we are able to advance. For example, without copper prices skyrocketing, maybe we never stumble upon fiber optics.

But beyond that, and really the reason I wanted to write this post, is to remember that there are people in the current intellectual environment who believe that smart regulation creates jobs. Let’s not dispute that. Then the same exact argument can be applied to the spurring of market solutions to externality problems. The same … exact … argument. Do anti-capitalists think that market forces harness greed only when it comes to doing damage and not preventing or cleaning damage? So we are only greedy when it wrecks the lives of others and wrecks the planet. Under what model are you operating if that is in fact your worldview?  So you may want to argue for regulation, but you really ought not do so on the premise that it creates jobs first because it obviously doesn’t, and second, if it does, it doesn’t appear that it would create ‘em any differently than would emerge otherwise particularly if the legal system works well.

Yet why should there have to be a next time? Why should keeping an ordinary driver’s license up to date oblige anyone to deal with a government agency, in person or online? I hadn’t even realized that my license was about to expire until an airport security agent pointed it out to me the last time I flew out of Logan. The Registry no longer sends renewal notices; and woe betide the motorist who gets pulled over with an expired license, an infraction that can trigger a fine of up to $1,000, not to mention a potential arrest.

Hey Nudgers, where are you?

If you want to learn more about the importance of model building and what it does and does not say about what we can know about the economic world, read anything by my excellent colleague Steve Landsburg. He’s got a nice chapter in his latest book, The Big Questions, on it too.

A common objection to free-trade, for example, (an article in the NYT last week about Apple and outsourcing sparked a good amount of chatter about this) is that “free-trade works on graphs and in equations” but that’s not the real world. I will not address that claim here. When you hear someone criticize an economic model/theory for not being realistic you can rest assured that the person has no idea what they are talking about. How so? Two major reasons I would suggest:

1. Many basic economic models seem to support the idea that a laissez-faire approach to economic activity tends to produce good outcomes. Have you ever heard a critic of such models argue that, “hey, that’s what the model says, but in the real world, even more laissez-faire than the models suggest would be even better?” Nope. And you never will. Generally speaking, the only criticisms I encounter are those that object to a model that suggests a smallish role for government. Seriously, how many of these same criticizers have you heard say, “gee, maybe we shouldn’t tax emitters of pollution – after all, the Pigovian tax comes from a model, not from what we actually see in the real world?” Or how many of these same criticizers have you heard say, “gee, maybe we should ignore the theory of adverse selection, after all, the idea that insurance markets unravel comes from an unrealistic model that assumes information asymmetries that don’t actually exist in the real world, and so maybe we should rethink how we regulate the health insurance industry?” And so on. I think you get my point.
2. That’s not exactly how these people behave in the real world and not how they respond to models that seem to suggest a world that they like better. Walk around today and ask people what they think about Global Warming. Ask them why we should increase taxes on carbon or perhaps scale back industrial civilization. Don’t just have them say, “because bad things may happen if we don’t.” Rather, ask them how they know this. Indeed, go one step further, ask them why global temperatures are not higher today than they are – after all, it was predicted that given the current levels and rates of emissions of carbon dioxide the planet would be hotter today than it is, and hotter in particular places than it is (such as the tropical upper troposphere). The entire global warming movement is based on totally unrealistic modeling. Note, that this does not mean I don’t believe them, I am raising a consistency point again. And the models indeed are unrealistic. We don’t even know how to model the impacts of water vapor, and we have to use calibration (and not theory) to figure out what feedback loops there are within climate systems, just to name a few of the uncertainties.

   But I’ve never heard a supporter of doing something about climate change condemn the models on the same grounds that they condemn economic models, particularly free trade. Furthermore, ask someone who favors economic stimulus in times of recession, or who wishes to argue that the 2009 stimulus should have been larger, or that we ought to do stimulus now, how they came to that decision and they’d have no choice but to say, “because our economic models tell us we ought to do so.” Seriously, there is absolutely no real world experience or evidence to confirm or deny any view on what economic stimulus actually does. Now, I like to argue from a microeconomic chain of logic about why it would be hard to believe that stimulus would be a good idea, but I have no serious real-world evidence to 100% make my case – nor do stimulus proponents. So, in the case of the proponents, their belief in stimulus has to be based on models. Never mind how utterly inconvenient that position may be given the complaint I encounter in the title of this post – I don’t think anyone who makes claims like this spends more than one iota asking themselves if they are making sense. Why? Because we are either so extraordinarily delusional, or that we so badly want to affiliate with a particular group or idea, that we just say what sounds reasonable and go no further.

To be honest, this state of affairs is perhaps the most depressing of all the aspects of having to be engaged in what people think is “serious intellectual discourse.” It’s not. Not because it’s not possible but rather because few people (myself perhaps included) really are interested in having it.

HT to William Tucker, writing recently in reference to anti-energy crusades. I used to reject this characterization. Not any more.