Continuing Education... Ohanian, Kling, and Cochrane on the Future of Freedom, Prosperity, and Democracy

EconTalk Extra
by Amy Willis
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Lee Ohanian, Arnold Kling, and... Wences Casares on Bitcoin and ...

If the Magna Carta sowed the seeds of freedom and prosperity 800 years ago, what should we look forward to in the next 800 years? This week's episode, recorded before a live audience at the Hoover Institution, asks three EconTalk favorites to offer their thoughts.

And now it's time to share yours. Are you more of an optimist or pessimist about the future of freedom? Help us continue the conversation.

HooverMagnaCarta.jpg

1. After listening to the opening statements of each guest, which guest do you find most compelling? Explain.

2. The speakers were critical of the role of regulation or the size of government in holding back the US economy. Yet as Russ Roberts pointed out, the economy has grown fairly steadily in the post-WWII United States. How might defenders of regulation or those who support larger government answer critics of regulation and the growth of government?

3. If you had been a member of the live audience, what would you have asked during the Q&A? (Please note if your question would be a general one or directed to a particular speaker.)

4. What do the speakers mean by "political entrepreneurship," and how does it differ from other sorts of entrepreneurship? What type of entrepreneurship do you think we will see the most of in the future, and why?

5. Just after the halfway point, Kling suggests that "people fear other people's liberty." What does he mean by this, and to what extent do you think it's true?

6. It seems it would be easy to discern whether productivity in the United States is growing or not. Yet this week's guests suggest that may not be the case. How can there be such debate over whether productivity is increasing or decreasing? And which is it?

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COMMENTS (14 to date)
Kevin Johnson writes:

Re 2.:
As Russ's comment alludes, the discussion was opinion-heavy and evidence-light. One useful data point is "The Information Content of the ALEC-Laffer-Moore-Williams Economic Outlook Ranking" at Econbrowser ( http://econbrowser.com/archives/2015/07/the-information-content-of-the-alec-laffer-moore-williams-economic-outlook-ranking ).

Re 4.:
State and Congressional candidates will appear offering #revolutionarytransparency, following the lead of private, and local and administrative government organizations, including police forces.

[Full url substituted for shortened url. Please use full urls on EconTalk. We are not space-strapped, and our readers like knowing where they are going when they go to a link.--Econlib Ed.]

Mark Crankshaw writes:
4. What do the speakers mean by "political entrepreneurship," and how does it differ from other sorts of entrepreneurship? What type of entrepreneurship do you think we will see the most of in the future, and why?

Political entrepreneurship is the process of utilizing the political coercive power of the State to realize an economic gain or competitive advantage that could not be attained (or attained as easily) using solely the marketplace.

The marketplace provides an environment whereby it is possible that producers and consumers to willingly cooperate non-politically by each appealing to the interest of the other group for the mutual benefit of both parties. A "free" market is one in which there is no political obstacle to producers producing in free competition with other producers, and consumers freely compete against other consumers. If the consumer values the produced good more than an amount of stored value they possess (usually in the form of money or credit), and the producer values the amount of stored value possessed by the consumer more than the produced good, then an exchange can be made to their mutual satisfaction. A non-political entrepreneur relies solely on this type of non-coercive transaction.

In contrast, a political entrepreneur is seeking to exploit and harness the coercive power of the State. This is usually in the form an attempt to evade the constraints of a "free market" and to undermine the "free" exchanges that underpin it. The political entrepreneur will use the coercive political process to interfere in the competition between producers, and/or the competition between consumers. It can also take the form of interfering in the ability of one (or both parties) to come to an voluntary free exchange to the economic and/or political advantage of the political entrepreneur.

Both of forms of economic/political activity described are at least as old as civilization. Both forms will no doubt be with humanity for the foreseeable future. Although I am an self-described pessimist, I really think that "free markets" (which I much admire) are, and will continue to be, the "wave of the future". Throughout most of human history, technological, religious, and political barriers have stacked the deck against global "free" trade. For the first time in human history, these barriers have been waning and I think they will continue to do so.

The effects of political entrepreneurship are very pernicious (with the Nation-State itself the worst offender). I liken it to the "religious" entrepreneurship that has plagued mankind since the dawn of civilization. We have witnessed a great diminution of religious power and religious entrepreneurship in the past century in large parts of the world. Never have so many been able to conceptualize a World without God (and the religious institutions that manufacture that "God"). I expect (and very much hope) that trend will continue. Likewise, we have seen at the same time the rise in the conceptualization of a World without Nation State. Never have so many been able to conceptualize a World without that particular stone-age legacy. If that trend continues (and I hope it does), then political entrepreneurship, dependent as it is on the Nation State for sustenance and survival, will likewise wither...

Mark Crankshaw writes:
5. Just after the halfway point, Kling suggests that "people fear other people's liberty." What does he mean by this, and to what extent do you think it's true?

Here is what I think is meant: one of the primary justifications for the support of the Nation State rests on the assumption that, if everyone were free to follow their unconstrained will (i.e., were granted absolute "liberty"), then the world would quickly (if not instantly) descend into a "Mad-Max" free-for-all violent chaotic hell.

Discuss the idea of having no government with most people in modern western society, and you will invariably get some variation on that theme. If government didn't constrain the "wealthy" then they would impoverish to death "the proletariat". Without a "strong" military, "they" would invade us tomorrow. The variations of this type of political argument are both voluminous and many are ancient. To extend the religious parallel from my previous post, one will get (and have always gotten) the argument that without "God" and "religion" serving as guide and providing "punishment", mankind would head in the same Mad Max, Sodom and Gomorrah direction.

Is it true that people have these "fears"? Manifestly true...

Having recently been charged with making political arguments (and holding ideological views) based on "mountains of assumptions", I have concluded that this is actually quite apt. Like all homo sapiens, I tend to view the world through an ideological lens that is based on layer upon layer of (often unchallenged or even unknowable) assumptions about the world, the nature of man and the universe. That's human, all too human.

In my view, this layering of assumptions helps explain the "fear" that results when people make judgements about hypothetically giving people complete discretion in terms of action.

The "fear", at some level, is connected to the adherents assumptions about the true nature of man, specifically, what actually motivates human action (i.e., is benevolence or treachery mere fear of authority, or is it vested genetic self-interest, or is it some other "assumptions" or combination of "assumptions"). That is further manifested in assumptions about the "true" nature of "ruling authorities" and their assumption about the ability of and attribution to authority to hold at bay the chaotic, exploitative, and violent action they fear (be that authority "God", the government, society, democracy, etc. etc). It is absolutely true that these layered "assumptions" are densely interconnected and "mountainous" in scale.

Michael Byrnes writes:

Mark Crankshaw wrote:

Political entrepreneurship is the process of utilizing the political coercive power of the State to realize an economic gain or competitive advantage that could not be attained (or attained as easily) using solely the marketplace.

I think the speakers' point about political entrepreneurship was that political entrepreneurs could be good or bad. For example, the politicians who supported 70s/80s dereguation were the good kind of political entrepreneur.


Mark Crankshaw writes:

@ Michael Byrnes

That's an excellent point, Michael, I hadn't thought of that possibility. I agree that possibility for "good" political entrepreneurship does exist and, further still, that those politicians (and voters) who favor rolling back the power of the State and the scope of its regulations are often doing "good", at least in my own book.

That said, there are some, who sit atop other mountains of assumptions, who might view the exact same set of "deregulations" as an example of the "bad" kind of political entrepreneurship and others who view any rollback in regulations as not only bad but "dangerous". Whether something is "good" or "bad" solely depends on the view from ones own mountain of assumptions...

R Richard Schweitzer writes:

1. By reason of bias from following the work of NWW over the past 8 or 9 years, Arnold Kling conveyed more to me. However John Cochran is a very, very close 2nd.

It should be kept in mind that the "Open Access" Arnold Kling refers to as a framework for understanding "our" freedom and prosperity has been in relatively full effect for not much more than the past 200 years; taking us through the 19th and 20th centuries.

However, with the periods of enormous conflict in Western Civilization in the 20th century, pulling us into participation, causing disruptions which were followed by various efforts at political manipulation of the economic order (and to some extent of the social order) and of the human relationships involved, which have produced the now well established Federal Administrative State with its own set of an unelected managerial class that in many aspects is directly confrontational with the managerial class of business and industry.

The expansions of regulations, interventions and interpositions in relationships (including those that affect the free formation and development of relationships), which have increased in numbers, varieties and objectives over the past 60 years are now past the lag time for the appearance of the breadth and depth of their effects; economically and socially. We are now "reaping what has been sown."

The proponents of the benefits of that political manipulation of the past 60 years would probably find the best justification of those results in claims that more people have less to fear; more people are more secure; the difficulties of more choices have been mitigated; and the costs and burdens of doing so have been spread more equitably over those in society better able to bear them.

Thus Sprach Rawls.

Political entrepreneurship is deserving of separate attention and I hope to come back to it later.

R Richard Schweitzer writes:

Sorry, the third paragraph should read:

"However, with the periods of enormous conflict in Western Civilization in the 20th century, pulling us into participation, causing disruptions which were followed by various efforts at political manipulation of the economic order (and to some extent of the social order) and of the human relationships involved,the now well established Federal Administrative State was produced with its own set of an unelected managerial class that in many aspects is directly confrontational with the managerial class of business and industry."

Jeff writes:

Here's a general question.

Can some kinds of government regulation enhance competition? I think that anti-trust regulations do enhance competition. I think that it would benefit the economy greatly to have more of that type of regulation. I believe that the most competitive marketplace is one where many small to medium size firms compete, not one where two or three large firms compete. The level of innovation is higher, a failure is less likely to cascade across the economy, etc.

Michael Byrnes writes:

Jeff,

I think it is possible that some regulations can be beneficial, though others may not agree.

I think it is absolutely true that some regulations are more harmful than others. Imagine you own a power plant - a regulation that capped your carbon emissions would be far less harmful to you than a regulation that said "you must have a government-certified scrubber on type X". In the former case, it would be for you to decide/innovate about how to satisfy the regulation. In the latter case, you are forced into a particular solution and there is no incentive to find the best way to comply.

Then there is what Cochrane said - a regulation that is brief and clear, that you can read and understand ahead of time, is far better than one that is 1,000 pages long and delagates a lot of decision-making to regulators.

jw writes:

MB,

Of course, a worse situation would be the state requiring a CO2 scrubber when there was really no evidence that one was even required...

R Richard Schweitzer writes:
4. What do the speakers mean by "political entrepreneurship," and how does it differ from other sorts of entrepreneurship? What type of entrepreneurship do you think we will see the most of in the future, and why?

My take is not so much what they mean, as an activity they are trying to describe.

Entrepreneurship is motivated, objective oriented activity, called an enterprise. The speakers classified two objectives: economic and political.

As a reader of NWW I take it that Arnold Kling would observe the efforts to form or enlarge a coalition as an enterprise, that could be designated political entrepreneurship.

All entrepreneurship involves motivating others, almost universally for the objective of an enterprise. It is in the motives of the entrepreneurs that the enterprises differ, in the selection of their ends and means.

In economic enterprises, the motives are not limited to exclusively economic objectives. They may be for other forms of personal aggrandizement. Similarly, political or social enterprises do not exclude economic gratification motivations. However, its is the principal change in conditions (economic, political or social) that result from the enterprise which determine its classification.

Still, political enterprises have economic results and economic enterprises have political results which almost always produce changes of some type.

That is where we look to the predominant motivations of the actors for the differentiations.

What has been regarded in the past as economic entrepreneurship will be more prevalent to the extent that capitalism and "Open Access" are the prevailing conditions. As Open Access continues to be constrained, there is likely to be a rise in political entrepreneurship.

Amy Willis writes:

@Jeff, Great question, and several other commenters have noted that Cochrane suggests that indeed there are SOME regulations that DO promote economic freedom. I'm not sure about anti-trust, though...Here's a collection of Econlib stuff to consider. Also, it may be the case that individual regulations within a category (like antitrust) may be welfare-enhancing, while others are not.

Lowell Smith writes:

Russ:

I'd just like to say that I enjoyed listening to the speakers on this econ talk--actually listened to them twice.

Would really like to hear more speakers talk and perhaps tease apart some of the issues with respect to the way the country (and world) is heading, and maybe with an optimist like Matt Ridley to comment on some of the trends mentioned!

I'm afraid that, like some of your guests mentioned, the direction things have been going is toward more restriction and less freedom to oppose the status quo. I was hopeful when I was in college in the 60s that the future would be brighter than it was then, but, although many of us (including poor people) are better off economically, and safer in our cars, I think one has to keep an eye over his shoulder to be sure he won't be reported for doing something that could draw the attention of the regulators or worse.

Jesse writes:

@Amy: You said, "Here's a collection of Econlib stuff to consider"

Did you forgot a link?

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