A challenge to Libertarian
Arnold Kling is taking up the case that less government is better than more government.
Since I have been banned at his site I will respond here.
From 1850 to 1950 US trend per capita real GDP growth was 1.4%.
Since 1950 US trend per capita real GDP growth has been 2.1%.
From 1850 to 1950 modern capitalism dominated by the limited liability corporation dominated the economy and the only big difference in the two eras is the existence of big government since 1950. Yes, the data was less reliable in the earlier era, but I know of no reputable economic historian that disagree with the statement that real per capita GDP growth has been significantly faster since 1950 than in the previous century. Moreover, if you only calcualte the trned to the late 1920s you still only get the 1.4% trend. the depression and WW II do not distort this trend.
I would argue strongly that this factual evidence strongly contradicts the libertarian case and it is up to them to disprove or contradict this factual evidence.
Some libertarians argue that rapid emigration from 1850 to 1950 significantly dampened US growth. I seriously doubt this and have seen no evidence to support this argument and considerable evidence to contradict the argument. For example migration in the earlier era was heavily concentrated in the northeastern cities and real per capita income in these cities was much, much greater than in other parts of the country where the dominant economic activity was small scale agriculture. Do you have any evidence that a new Irish emigrant in Boston was poorer than a tenant farmer in Mississippi in the 1870-80s ? Second I am using per capita data and this would include small children that even in the 1800s did not contribute to real GDP. Among native born Americans such children would have accounted for a much larger share of the population than among recent emigrants.
So again, what is actual factual evidence that rapid emigration significantly dampened the growth of per capita real GDP in the earlier evidence?
Is the view that Government is too big now (as opposed to 20 years ago)? I think there could be a case to be made for this (but have not looked at the data).
1950 saw the fruits of the GI Bill and expansion of college education in the US. We moved from a rural economy to manufacturing. Ag Production was mechanized and productivity soared. This made workers available to produce wealth elsewhere in the economy.
Free education to millions of Americans, business loans and home loans to GIs helped make this happen.
I don’t think the problem is the size of government so much as how it is paid for (or not).
We have disagreements about the general parameters of that conversation regionally though, which is why the US is ungovernable.
Off point to a more general point. I believe that the post WWII economic boom in this regard was an outlier which can never be repeated except from some much lower base. Unless we discover free energy like cold fusion or something. Therefore trying to fit this into a standard partisan model is missing the forest for the trees.
Rapier, I agree completely. Our economic studies are pertubed by two recent phenomena: 1) Post WWII economic growth as the only producrer of goods. 2) The impacts the Boomers have had on the variety of trends as they aged.
Spencer, if you can, could you show us the trend lines 50-75 and 75-2010? Just curious to see the growth differences I suspect are there.
The entire basis of spencer’s argument rests on several very shaky unsubstantiated bases…
First, it’s not up to Libertarians to disprove your thesis or to accept by assertion that the conclusions you draw are correct. For instance..GDP growth can be juiced by almost any Statist means necessary. Talking about “real” GDP growth during the 1950 period on depends on using actual..not government contrived…figures. The lumping together of 1850 thru 1950 is again absurd..in 1913 the single most inflationary event in US history took place..the establishment of the Federal Reserve…
Second..the period from 1950 to present involved the hyper-oil stage..Growth MUST always be measured in relation to the energy that allows an economy’s wheels to churn…that oil..the greatest energy source and growth stimulator in mankind’s history was State subsidized..and AT LEAST 50% OF THE COST OF MILITARILY SUPPORTING THAT PHONY PRICE WE ALL PAID SHOULD BE SUBTRACTED FROM GDP…
Third..The Libertarian argument is as much a moral argument as it is an economic one. This is why poster’s like spencer are simply “flashing” their audiences. He doesn’t have either the intellectual heft or the basic..I MEAN BEDROCK… understanding of the Libertarian position. Free markets aren’t just a way to “increase” GDP..they are moral imperatives that represent the exercise of individual human freedom.
Look spence..get some education and then comment on things you know little about.
Greg Pinelli,
You start by arguing against Spencer by adducing various special circumstances that should, you claim, lead us to disregard a very simple (and admittedly crude) indicator of economic growth: real GDP growth. However, though GDP growth is crude, it’s also comprehensive: all the good and the bad, the military spending as well as the cost of oil, are all in that kitchen sink.
Two thirds of the way though your post, you then discard the data-driven argument. Perhaps even you aren’t persuaded by your own bugaboos. (The creation of the Fed may have juiced inflation, but Spencer is speaking of real GDP growth, which is inflation corrected. Measuring and calculating ‘real’ inflation is notoriously difficult and assumption-dependent, but you offer no alternative; likewise, oil costs may be a major faculty in GDP variation, but unfortunately for your argument, oil costs are just as much part of GDP as any other factor of production, so your claim that we should deduct military costs from GDP makes little sense–and would, I suspect, make little difference.)
That leaves you with the “even if my other arguments are wrong, it’s not about those arguments, it’s a moral imperative” claim. That’s a lovely argument to make in response to a philosophical blog about political ethics. It’s not, however, an effective rejoinder to a specific empirical argument about GDP rates in eras of less regulatory and more regulatory politics.
Greg Pinelli,
You start by arguing against Spencer by adducing various special circumstances that should, you claim, lead us to disregard a very simple (and admittedly crude) indicator of economic growth: real GDP growth. However, though GDP growth is crude, it’s also comprehensive: all the good and the bad, the military spending as well as the cost of oil, are all in that kitchen sink.
Two thirds of the way though your post, you then discard the data-driven argument. Perhaps even you aren’t persuaded by your own bugaboos. (The creation of the Fed may have juiced inflation, but Spencer is speaking of real GDP growth, which is inflation corrected. Measuring and calculating ‘real’ inflation is notoriously difficult and assumption-dependent, but you offer no alternative; likewise, oil costs may be a major faculty in GDP variation, but unfortunately for your argument, oil costs are just as much part of GDP as any other factor of production, so your claim that we should deduct military costs from GDP makes little sense–and would, I suspect, make little difference.)
That leaves you with the “even if my other arguments are wrong, it’s not about those arguments, it’s a moral imperative” claim. That’s a lovely argument to make in response to a philosophical blog about political ethics. It’s not, however, an effective rejoinder to a specific empirical argument about GDP rates in eras of less regulatory and more regulatory politics.
Greg Pinelli,
You start by arguing against Spencer by adducing various special circumstances that should, you claim, lead us to disregard a very simple (and admittedly crude) indicator of economic growth: real GDP growth. However, though GDP growth is crude, it’s also comprehensive: all the good and the bad, the military spending as well as the cost of oil, are all in that kitchen sink.
Two thirds of the way though your post, you then discard the data-driven argument. Perhaps even you aren’t persuaded by your own bugaboos. (The creation of the Fed may have juiced inflation, but Spencer is speaking of real GDP growth, which is inflation corrected. Measuring and calculating ‘real’ inflation is notoriously difficult and assumption-dependent, but you offer no alternative; likewise, oil costs may be a major faculty in GDP variation, but unfortunately for your argument, oil costs are just as much part of GDP as any other factor of production, so your claim that we should deduct military costs from GDP makes little sense–and would, I suspect, make little difference.)
That leaves you with the “even if my other arguments are wrong, it’s not about those arguments, it’s a moral imperative” claim. That’s a lovely argument to make in response to a philosophical blog about political ethics. It’s not, however, an effective rejoinder to a specific empirical argument about GDP rates in eras of less regulatory and more regulatory politics.
Judging from the comments here, it looks like the libertarians have conceded.
I believe big government generally is better, though I suppose it ought to depend on the kind of bigness, etc. But left to it’s own devices, the “free market” doesn’t bother to do much long term investment like R&D, liquidation and/or gambling is always the quicker buck, as in USA since 1980. We’ve done the dereg/tax-cut experiment now, the result looks like disaster, and yet we keep going back for more. The research that brought us the computer age was largely government funded. And the jet age. The telecommunications age R&D (transistor, etc) was also highly government protected.
My favored comparison years are 1933-1977 and 1977-present, 1977 was the beginning of the deregulation era, but you can choose the dividing point anywhere in the 1968-1981 and see the same pattern. And why not look further back in time, to economies dominated by aristocracies where growth was below 0.25%. Or do comparison of different countries. Success goes along with big government everywhere and anytime you look. Many of these comparisons have been done elsewhere.
Other factors are always at play, of course, and the trajectory of cheap energy is probably one of the main ones.
The moral imperative is nonsense also. We’re dealing entirely with socially generated wealth, it can’t really be assigned to individuals, but certain ones have more power to make claims on it. Thus personal wealth doesn’t really come from “contribution”, it comes from power. Often that power descends from greater power, so the more you serve the winning plutocrats, the more you get too. Everyone wants the better (more rapacious) CEO for their firm, but it works as a zero sum gain for the entire economy.
I don’t think you can make this comparison without looking at a lot of other variables.
The most important variable which you are neglecting is the use of non-renewable energy. How much has oil use per capita been increasing over this 160 year time period? The end of the era of cheap oil is likely to have more effect on GDP growth than our political system.
Another variable which I believe is important is debt. How much has debt (which is now deleveraging) contributed to the GDP over these time periods?
The last 60 years has also been very good demographically for GDP. Many women entered the workforce during this time and activities like child rearing which were not counted in GDP before are now.
Unfortunately, there is no good way to run a controlled experiment in the manner you are trying to do. First, it is of course to run a big government vs. small government experiment over identical environments. Things like wars, oil, and innovations do matter. Second, the time periods are much too short. The second time period you chose is only 60 years. Many countries grow very rapidly for several decades for reasons independent of government, but these high growth rates are never sustainable. You would need a much longer window to compare policy effects.
Thanks PQuincy
That was such a good takedown of the Libertard, it needed to be posted 4x.
Co REV here is data on the annual change in real per capita GDP since WW II
Note that the post WW II era, 1946 to 1946 was actually an era of sub par
growth– averaging around 1.5% from 1946 to 1960. So much for Greg
Pinelli. This was a product of the Fed inducing three recessions in the 1950s
to combat post war — including Korea — inflation.
The strongest period was the 1960-1980 era. Much of this was due to
the strong growth policies in the 1960s under Kennedy Johnston. Part
of this at the start was the aftermath of the subpar 1950s so the
economy could have strong growth in the 1960s without it being inflationary.
% real per capita GDP 1946 (11.86) 1947 (2.78) 1948 2.61 1949 (2.21) 1950 6.96 1951 5.91 1952 2.07 1953 2.89 1954 (2.36) 1955 5.33 1956 0.19 1957 0.20 1958 (2.54) 1959 5.36 1960 0.42 1961 0.67 1962 4.44 1963 2.88 1964 4.34 1965 5.10 1966 5.29 1967 1.42 1968 3.80 1969 2.09 1970 (0.96) 1971 2.06 1972 4.19 1973 4.79 1974 (1.46) 1975 (1.18) 1976 4.35 1977 3.55 1978 4.47 1979 1.99 1980 (1.42) 1981 1.52 1982 (2.87) 1983 3.58 1984 6.25 1985 3.22 1986 2.52 1987 2.28 1988 3.17 1989 2.60 1990 0.74 1991 (1.55) 1992 2.03 1993 1.53 1994 2.82 1995 1.31 1996 2.54 1997 3.22 1998 3.15 1999 3.64 2000 3.00 2001 0.06 2002 0.84 2003 1.59 2004 2.62 2005 2.11 2006 1.69 2007 0.94 2008 (0.93) 2009 (3.47)
We need less military, we need less invasions and miltary excursions. We need less senseless rent-seeking regulation. There is a rather long list of government nonsense we can do without like failed drug wars, and a long list of epic governmnet failures like Iraq. Governmnet spying on its citizens with Patriot acts, and Obama pushing for back doors on social networks. Patent reform is needed, as is copyright reform. Fed Reserve failure in the housing bubble. Maybe GDP would be higher if we had a little less or were a little more focused on some of the important things.
The Big Government is too big argument is BS. A better argument is Efficient Government. Tough to define just as Big Government is.
If we are going to have Big Business, Big Ag, Big Army, Big Navy, Big Airforce, Big GDP, Continental Spread and Rule The World, we are going to have a really large government. Anyone who wants Small Government will have to tell us how to go back to the original 13 states and the political and business situation at that time. Good Luck
All growth rates decay over time; it’s probably some sort of mathematical law.
I’m a little baffled. If you don’t know that government is bigger now than 20 years ago, and don’t offer any other method of understanding when government is too big, how would you comt to think a case could be made for the government being too big?
Importantly, education was not free to society. We paid for it through taxes, and still it was a boon to the economy.
All statements which include the word “all” are wrong. It’s probably some sort of universal irony.
First, any broad argument about how things do work or ought to work cannot be taken seriously if its supporters refuse to allow it to be examined.
Second, an accounting system along the lines of “add up GDP, but make sure you subtract oil twice and use lots of CAPLOCK WHILE YOU’RE AT IT” will need to be laid out in greater detail before anyone can actually make use of it.
Third, if the libertarian argument is “as much moral as economic” then it is as much economic as moral, and ought to be able to roll down the road without the wheels comimg off every time somebody puts a bit of weight on it.
Your defense of libertarianism is essentially that any question it cannot address is not a valid question, that when it suits libertarians to make economic claims, they can, but no fair asking them to defend those claims as economics cause it was really a moral argument.
Evolutionary theory stands against all comers. There have been some problems, but mostly the problems have shown that evolutionary theory is a real scientific theory, because it can be extended to account for problems without changing fundamentall.y.
Neo-Marshallian Economic theory stands against all comers. There have been some prblems, and they keep reminding us that social sciences are just flimsier than physical sciences. But there stands economics, still in the ring, taking its licks.
Libertarianims apparently wants to post all the ads for a title bout against Neo-Marshallian Economics, but then disqualify economics before entering the ring – “Sorry, you’re disqualifed for being inadequately philosophical” – and then declare victory by disqualification.
But not all the blame can be heaped on libertarianism. Some of it goes to Greg alone, for the cheap shot about getting some education. This was not libertarianism trying to declare a victory by disqualification – just Greg.
Let’s compare two examples of Libertarian and Socialist policies:
1. Tax cuts leave me with an extra $10k, lower interest rates and financial dereg make it easier for me to borrow money. So I remodel my home with granite counters, etc. for $100k. $50k stays in country (labor), $50k goes to the Chinese suppliers. I know, this is very simplified, but you get the point.
2. Tax increases leave me with $10k less in savings, and greater financial regulation makes it more difficult to get a loan, so I don’t do the remodel. Instead, the $10k I paid in taxes goes 25% to defense, 25% to Medicare, 25% to Social Security and 25% for all other government services.
Example #1 “creates” $100k of “free” spending vs. only $10k of “forced” spending. Libertarians prefer the “freedom” over the “force”, and most of us would generally agree. But there is really no economic difference between a private person spending $10k and a government taking that $10k and spending it for him. The difference is moral, not economic.
Finally, note that the greater economic benefits of Example #1 come from the leverage, i.e., the debt, and not from the “freedom” of the spending. In other words, trying to judge two philosophies by their relative economic effects is hopelessly futile given the complexity and inter-relatedness of many other variables.
A challenge to Paul Krugman…
Put your money where your mouth is, folks. Can we get him him out of hiding to debate Robert Murphy on Keynesian vs. Austrian biz cycle theory?
THE PITCH:
See Paul Krugman debate Robert Murphy on Keynesian versus Austrian business cycle theory! Moderated by Ezra Klein, or another moderator of mutual choosing. All proceeds (less The Point’s 5% fee) will be donated to the Fresh Food Program of FoodBankNYC.org, a non-profit dedicated to feeding the hungry of NYC.
To see a video explaining the campaign, go to:
http://www.youtube.com/watch?v=6cFXRFlvE3s
I’m a bit late to this part, but I happen to have that trend line data in my hip pocket.
http://jazzbumpa.blogspot.com/2010/10/us-economy-is-dying.html