Suresh Haidu, Dani Rodrik, and Gabriel Zucman write,
Neoliberalism — or market fundamentalism, market fetishism, etc. — is a perversion of mainstream economics, rather than an application thereof. And contemporary economics research is rife with new ideas for creating a more inclusive society. But it is up to us economists to convince their audience about the merits of these claims.
Pointer from Tyler Cowen. The authors are launching a project called “Econoimsts for Inclusive Prosperity.”
1. The use of neoliberalism as a boo-word puts me off right away. I see it as a sign that this will be an exercise in government fundamentalism,, government fetishism, etc. When they are uncharitable to those of us who say “Markets fail. Use markets,” it becomes really hard for me to be charitable to them.
2. Anat Admati has an essay in which she advocates higher capital requirements for banks and opposes tax policy that encourages debt finance rather than equity finance. It is a reasonable case. But I recommend my essay on the book that she co-authored, in which I suggest that the households who ultimately supply the funds for banks might prefer less equity and more deposit-like liabilities than what the book proposes. That essay is a Kling Klassic on capital structure.
3. Atif Mian has an essay that suggests that the extravagant wealth of some people leads to an excess supply in the capital market. Less-wealthy people are lured by low interest rates and weak credit screening into borrowing too much, making the financial system unstable. His solution is to have government confiscate more from the wealthy and redistribute it to the less-wealthy. I think that there is only a low probability that he has correctly diagnosed a problem. Even if he has, I imagine that one can come up with much better solutions.
4. Those are the two essays about which I can be the most charitable.
5. My main point is that I am becoming quite allergic to phrases like “economists say” or “economics says.” I know that I used to employ such phrases, but I have done so only sparingly, and from now on I plan to avoid them completely. Don’t argue from authority. Just state your proposition and defend it. Along these lines, I have had a strict personal policy for many years of not signing petitions of the form “economists who favor X” or “economists opposed to Y.” I dislike the implied tone of “I have credentials, you must listen to me.” I would sign a petition in favor of refraining from ever using the phrase “Speaking as an economist. . .”
good preview of liz warren’s cea
The question of how to shorthand perspective and expertise is difficult.
Speaking as an evolutionary biologist; speaking as someone with 10 years service in the Army; speaking as a father of two… it doesn’t seem obvious that these claims should be excluded from the discourse. They prevent certain trivial counter arguments (you have no experience with Y), open up some relevant ones (your bias from X is showing), and frame the statement.
In Specialization and Trade, you make an extremely compelling argument that economists don’t understand the economy. Perhaps… there is an identity issue?
In many ways I agree with this post and I also disagree with a plan for too much government intrusion in private markets.
I do wish it was the position of the US government to keep labor markets as tight as possible, and such a stance might go miles and miles to undercutting socialism.
In many regards it has been the policy of the US government to keep labor markets loose. We see this in Federal Reserve policies, which have been obsessed with unemployment rates, and we also see it in the de facto open-border situation for illegal immigration. By the way, AOC wants open borders too. That girl may know what she is doing.
In countries where labor markets are very tight, there seems to be a great deal of social stability.
I do wish there was much greater emphasis among US economists towards decriminalizing all types of pushcart, truck or sidewalk vending. Ending property zoning is another good idea.
There are ways to make free markets and capitalism work for the broad middle-class. If free markets and capitalism do not work for the broad middle class, then expect socialist responses.
I’d judge #3 more charitably. Interest rates are extremely low, which is another way of saying there is plentiful supply in the capital market. The second part seems like Minsky’s idea that stable economies cause lower interest rates, low rates cause lenders to seek return through riskier lending, and risky lending destabilizes the economy. Using higher tax rates to fund (here I like your phrasing) “complements to work” is probably a better idea than just redistribution, but the gist of the idea seems reasonable. Sweden works.
Didn’t Tucker Carlson also use that “market fundamentalism” phrase? It’s a good phrase when applied to those who, on market principles, support higher tax rates on wage income and lower tax rates on capital income. The 24% income tax vs 14% capital gains tax.
As one who supports markets, I’d say both rates should be the same; and I’d prefer the income tax rate to come down.
Still, I’m not yet done reading the 87 pages. Tho the intro talks about:
Deregulation, financialization, dismantling of the welfare state, de-institutionalization of labor markets, reduction in corporate and progressive taxation, and the pursuit of hyper-globalization – the culprits behind rising inequalities – all seem to be rooted in conventional economic doctrines.
One big thing missing is that global inequality has been falling, and global absolute poverty has been falling, and global median income rising. It is in this reality of good global results, but poor US (and OECD) “middle class” results that there is a rise in populism.
We need to change our tax policies so that the growth of income for the middle class (median) is as high as the growth of income for the rich (top 10%? top 1%?). This 10%/50% income ratio should be tracked, as well as the numbers, so that policy has a more tangible target than the more known but less useful gini index.