Hero Worship

The political right is deeply infected by libertarianism which tells the tale of "heroic individualism", i.e. nobody needs a government. Their myth is that people are by nature "free traders" and free markets will bloom if only governments keep their hands off the people.

Here is Dani Rodrik, a Harvard economist, to correct this political misconception with this article on Project Syndicate:

My discussant found it self-evident that allowing politicians greater room for maneuver was a cockamamie idea – and he assumed that the audience would concur. Remove constraints on what politicians can do, he implied, and all you will get are silly interventions that throttle markets and stall the engine of economic growth.

This criticism reflects a serious misunderstanding of how markets really function. Raised on textbooks that obscure the role of institutions, economists often imagine that markets arise on their own, with no help from purposeful, collective action. Adam Smith may have been right that “the propensity to truck, barter, and exchange” is innate to humans, but a panoply of non-market institutions is needed to realize this propensity.

Consider all that is required. Modern markets need an infrastructure of transport, logistics, and communication, much of it the result of public investments. They need systems of contract enforcement and property-rights protection. They need regulations to ensure that consumers make informed decisions, externalities are internalized, and market power is not abused. They need central banks and fiscal institutions to avert financial panics and moderate business cycles. They need social protections and safety nets to legitimize distributional outcomes.

Well-functioning markets are always embedded within broader mechanisms of collective governance. That is why the world’s wealthier economies, those with the most productive market systems, also have large public sectors.

Once we recognize that markets require rules, we must next ask who writes those rules. Economists who denigrate the value of democracy sometimes talk as if the alternative to democratic governance is decision-making by high-minded Platonic philosopher-kings – ideally economists!

But this scenario is neither relevant nor desirable. For one thing, the lower the political system’s transparency, representativeness, and accountability, the more likely it is that special interests will hijack the rules. Of course, democracies can be captured too. But they are still our best safeguard against arbitrary rule.

Moreover, rule-making is rarely about efficiency alone; it may entail trading off competing social objectives – stability versus innovation, for example – or making distributional choices. These are not tasks that we would want to entrust to economists, who might know the price of a lot of things, but not necessarily their value.

There is much more useful info. Go read the whole article.

I remember how Jeffrey Sachs rushed off to post-Communist Russia full of ideas for a "cold turkey" changeover from communism to a fundamentalist absolutist "free market". What Russia got was a huge depression and the ascendancy of crony capitalism and the Russian mafia.

The problem with libertarians is that they have a simplistic worldview. They see individuals as self sufficient islands unto themselves and the only social relationship to be a contract. The idea that familes don't run on contracts as a business, that social institutions are generally non-capitalist, that most of man's history was pre-Capitalist doesn't cross their minds. They have "Truth" by the tail and don't won't be be bothered by messy details. You know, silly things like "facts". When you have "Truth" you don't need to understand human nature, history, the arc of civilization, and even the real history of commerce and business. Nope. All you need is a dumbed down Adam Smith, a version that Adam Smith wouldn't recognize.