[Note: Originally I was going to post this but then re-read it and, while I was satisfied with the concepts, I thought it came across too much as Freshman-in-College sounding…then I realized that was a perfect tone for the internet. No, actually I came across this post by Jonah Goldberg through this rebuttal, that is a continuance of something I wrote about here.
And since this really captured the essence of the disagreement, I thought I’d post it even though it is very long and less than polished. Plus, I wish to use it as a launching off point and will refer back to it often when I talk about some proposed ideas for integrating the two philosophies.]
Never being religious, I can say with certainty that the part of the Bible I’ve heard the most is Corinthians: Epistle 1, Chapter 13. You know, the one that they always say at weddings. The rabble rouser in me would question whether the reading is appropriate at all to weddings as it seems to me to be more about relationship to humanity and spirituality rather than another individual, but I digress.
For my purposes what’s intriguing is “for now we see through a glass darkly,” which is part of a phrase to point out that the mirrored reflection of reality does not capture its true nature, and suggests that accepting the universal love of God is the path to true wisdom. The Tao expounds on this point for many pages with a whole flurry of metaphors.
I want to contrast it with another variation on the theme and that is the story of the blind men and the elephant.
Looking through a glass darkly implies an imperfect view of the whole, by contrast the blind men have a perfect understanding but it was only on a part. They both point out universal truth, but have a subtle contradiction that is important to keep in mind. If we hope to move forward like I suggested in my introductory post, these distinctions aren’t just a philosophical exercise, but can actually provide a framework deciding how to create, destroy and merge our pieces into a coherent whole.
Indeed, on an ideological level is can be argued that conservatives ascribe failures to the Biblical mirror while Liberals to the blind men. In fact on some level they base their faith about the way forward on this understanding. Simply contrast the magical hand of the market with the alchemy of targeted Keynesian stimulus for an example. To Conservatives the primary evil is unintended consequences, and since we can never be fully sure of what the world is, then the goal is to basically keep what we have socially while moving towards a more connected system economically and literally to just hope that it works out. By contrast Liberals think the primary way forward is to do what we think is best, even if it means disassembling some things that “mostly work” and if we only gain more knowledge (about both the parts and the whole) then at some point things will be grand. [Current political discourse is more like the blind men, except beforehand swearing that you know what you’re going to feel, then feeling it and saying you were right regardless of what you are actually feeling, then bashing each other with the Biblical mirrors until they shatter.]
When I thought about this contrast I gave myself a pat on the back at the good fortune that the sense excluded in the blind men story was the one utilized in Corinthians. For it’s vision that is now required, and it would be good to remember that moral. Yet we have blindly groped in the sciences and economics until we’ve gotten a pretty good understanding of things, and a lot of those things are just being plain ignored. To complicate matters further, a lot being a good scientist is recognizing that regardless of what you think you know, the mirror makes it so there is a good chance that we’ll have to change our mindset – and on this matter scientists as a whole aren’t necessarily any better than the population writ large.
What I propose is to reevaluate some aims and look at the original intent behind policy. Then by using pieces of what seem most correct – while simultaneously realizing that they can’t be in full and looking at alternative explanations and recent discoveries – try to figure out whether the intent is being met, or whether we should even develop new intent.
As an example, I want to talk about the difference between government and private spending. A lot of the fight relies on two assumptions that are at times correct and at times not.
The intent behind spending is to allocate resources in a way that is efficient and sustainable. That’s it. If a system is not efficient then people’s lives won’t get any better and if it’s not sustainable then it will collapse.
The assumption of the free marketers is that private industry is able to allocate resources better than the government. That is the fundamental foundation of their philosophy and it shows. But is it true? No, that’s not the question; how is it true? That’s better.
In highly centralized economies they do a terrible job of allocating production of food and consumables and see little innovation because of it. This is in large part because there is little private capital for investment, but as this post points out, government spending can be investment too. The backbones of a society — its educational, transportation, and utility infrastructure – those are a requirement for all economic growth. They are public investment and quite frankly, the communist countries didn’t do a bad job of implementing those at one point.
Some people argue that private industry could do those too, hence our move to privatization of government functions. But those have failed largely. Why? Sure corruption is a part of it, but a lot of it is that the scope and upfront cost of projects is prohibitive, or the nature of the task is already highly efficient and a profit motive doesn’t help change that. Corporations can’t put down infrastructure that will take twenty or thirty years to recoup the cost, only the government can. In fact, a big reason for our current mess is that the one sector that did rely on that model – finance – got impatient and tried to make a profit faster.
So the intent is to allocate resources efficiently and sustainably. The government has been shown to be bad at meeting immediate needs and being responsive to consumption changes/innovation but good at helping to lay down the groundwork for projects that will take years or decades to turn a profit but are necessary. Thus the question about whether to have large/small government seems simple: is the intermediate future of growth going to be constrained more by vast infrastructural deficits or more by individualized behavior?
The tricky areas are the things that are highly related to science, for corporations are awful at doing basic research and the government really should never forget about that. By contrast, infrastructure is related to current implementations and is going to be around for decades, and so it is easy to go with a bad implementation that the free market wouldn’t because of politics. There is no simple solution to pick the best road, because that would require clairvoyance, so the default has been to embrace the status quo and do patchwork implementation with the best current ideas. These ideas often fail because they are just drops into a vast sea, and this is why we are still so dependent on oil even though it’s long been known that particular fuel was unsustainable for the next century.
The only way we can possibly get around this that I can see is twofold. First of all, we need to have a lot more scientists involved in the political process. Corn based ethanol: that just doesn’t make sense from a scientific perspective and never did. People have been screaming that the math doesn’t work for decades now and yet because of political motivations no one cared.
Secondly, I think the government needs to be simultaneously more and less powerful in how it provides guidance and protects the status quo. The government seems to be wrong a lot in its regulations because they are process oriented, not goal oriented. Take fuel efficiency for instance. The government tells the car companies exactly the requirement to meet, and since they are so big then there is an implicit contract that the government will protect the status quo. This is partially what has given rise to suburban blight and other unsustainable results even after the 70s made it clear that lifestyle was risky.
Instead, I think the government should have certain broad targets that last X number of years and then move in a new direction if a) the targets are breached or b) the deadline expires and the cost-benefit analysis suggests new targets/directions are better. The government would then let the market sort out the way to accomplish these goals. The targets could be a combination of scientific and economic targets, for instance CO2 emissions or fuel consumption as a percentage of GDP. Once those started being breached then the government would move start looking for new objectives and move resources away from the industries that weren’t implementing them. This would give the market impetus to make sure that the targets were being met, as well as killing off policy when it was ineffective. At one point it made economic sense to have agricultural subsidies, that point has long past and any rational evaluation would have stopped them long ago.
The same even applies to welfare. In certain transitional periods like the one we are in now, millions of people are going to lose their jobs and quite frankly shouldn’t be encouraged to get new ones in the same industry. Housing construction, finance, retail services, certain areas of manufacturing: there is way too much capacity in those areas and they had become highly inefficient and detrimental to our economy, yet both sides (especially the left) say that they need to be protected because the alternative is unthinkable. It’s unthinkable in large part because we have such a bad social safety net. I’m not sure what the new economy is going to look like (and don’t think the government should dictate it completely, just help lay down the boundaries) but we’re not going to move forward until we have one that doesn’t rely 70% on consumer spending for largely discretionary goods with the difference made up largely through asset bubbles. The question is not if to expand welfare, but how to do it in the most sustainable and responsive way possible.
About sustainability. The two major problems I’ve talked about in my intro post (demographics and energy) have been popping their head for the last 30 years, and a lot of the reason we’ve gotten as far as we have is because of massive increases in debt. In essence, we were borrowing from the future by increasing resource usage without laying down much groundwork. See my economic posts here for my thoughts on that.
The problem is traditional liberal economic thought (uh I’ll talk about this in more detail, but I’m referring to both Keynesian and a lot of monetarist policies combined, even though it doesn’t line up perfectly with political liberalism/conservatism) is that it doesn’t pay enough attention to resource constraints and too much attention to abstract models. It wouldn’t matter how inefficient programs were if we had infinite resources, nor would it matter how much debt piled up. In fact money would have no meaning. But by not paying attention to those constraints in advocating policy nor external changes in the resources available, then there are some conclusions I find quite specious: for instance, economic stimulus. Paul Krugman had a post about how much stimulus we’ll need and pointed to theory of why this would work. Well, money actually represents something, and at this point we are highly in debt and are resource constrained. Quite frankly, I’m not sure that the Great Depression/WWII outcome would have been like it was if it happened now. There were still a lot of easy places to expand, the oil based technologies were just being perfected but there was still a large and cheap supply, and we had the agricultural revolution. Are the hypothetical models derived because they represent “nature” or did they just apply to a period that had a particular macro environment? Also, back to Krugman, even if there is a “gap” is that gap in something we actually need or is it mostly refuse?
I think having massive bailouts and stimulus trying to keep the current system has a good chance of just making things explode and leading to hyperinflation that will prevent us from moving forward for decades…yet few economists are worried about that for some reason. Again, my prior posts detail some of the reasons why. Some respond that the emphasis should not be on money but on labor and that’s what Keynes meant. This is partially true, but giving people money to do things that are unproductive won’t help either. Others still point out that “proper” Keynesian policy requires counter-cyclical policies, and part of the problem is that we didn’t save for a rainy day when the sun was bright. This is a very valid critique and opens up a whole flurry of points about how political considerations are innate to social “science.” The more direct control we exert over a system, the greater chance that it will become very sensitive to bad decisions. I’ll mention a lot more about this in future posts.
Of course it’s ironic because so called “conservatives” got us in this particular place. Traditional conservative economic thought worries greatly about current spending (in theory) but doesn’t pay much attention to future sustainability. They try to optimize for short term growth and seem to assume that all government sponsored slow down is a loss of innovation…even though they are the “innovation party.” I find the arguments about trying to fight global warming – with all their fancy looking growth projections – humorous because they only count the costs and don’t take into account the benefits, like, uh all the massive new and greatly cheaper energy sources. I have yet to see anyone make a good faith effort to figure out the hit to short term economic growth and try to figure out long term growth under various energy production efficiency assumptions.
So if someone asked whether the liberal or conservative economic thought was correct, I’d say: it depends. At some points the stars align and we have a lot of underutilized technology and resources where some good old stimulus would work wonders. A lot of the time we’re in the “normal” zone where the downturns try to purge out the inefficiencies and the liberal approach just papers over a dead zone that then rots and spreads. And today I think we’re lucky because neither approach is going to work. We have to do something but we have to do it in a way and at a time that will work.
For example Krugman (in a different article) claims that Roosevelt wasn’t successful in the short term because he didn’t do enough stimulus. I’d argue that he wasn’t successful because there was still way too much bad debt and it had to be completely wiped out of the system before the stimulus/infrastructural improvements had positive effects. If Roosevelt had as much stimulus as was needed, then there is a good chance that the bad bets would not have been unwound and the future growth would not have occurred. When too much rot is built up and cannot be covered up any longer without killing the patient, there is also so much rot that not much of a patient left…
Of course there is a lot of speculation in the world because certain parts are just unknowable and that should go into our calculus as well. Cheney had his 1% Doctrine but our economic plan seems to be a 20% Doctrine: there is a 20% chance it’ll work perfectly, but if it doesn’t we’re royally messed up far more than if we’d done nothing. (I might be a tad generous with the chances of it working…) Maybe we need to look at an elephant in a mirror.
Also, I know it sounds rather demanding, but if there are points of interest you have or points that weren’t clear, please point those out too. I have a hard time guessing what will click with people and what won’t so I’m relying on you guys to tell me.
I really like the moral of the blind men:
So oft in theologic wars,
The disputants, I ween,
Rail on in utter ignorance
Of what each other mean,
And prate about an Elephant
Not one of them has seen!