Tuesday, February 15, 2011

The Political Economy of Morality: Political Pretense vs. Market Performance | Library of Economics and Liberty

The continuing saga of my conversations at lunch. I would like to underscore that the discussions I have will colleagues at my institution tend to be civil, although I have a sense that the effort my colleagues invest in attempting to set aside preceptions to consider a liberal and responsible approach based upon individuality as an alternative to state action is rather limited.

A recent lunch conversation dealt with the cutbacks by the state to funding for education. The lamentations ran the expected range - this is a cost to the poor, the future of our country is at stake, the mean spirited actions of the dominant party in Arizona (I wondered if the dominant party in DC was also mean spirited). And can a party be mean spirited? I would think only individuals could evidence these characteristics . . . but I digress.

A fellow economist proposed a question for our interventionist colleagues - he wondered is part of a higher education a consumption good? That is, could education include both consumption and investment characteristics.

I image that the phds in the room were able to digest this, as there was silence . . . for a moment. And the chorus returned, in spite of a small consumption component, the state must fund education and cutting this support is tantamount to an attack on: fill in the blank.

It was interesting to see members of the left embrace the same war language as members of the right.

So, back to the question of morality and economics.

Dwight Lee makes a great point:

There is a large gap between the performance of markets and the public's approval of markets. Despite the clear superiority of free markets over other economic arrangements at protecting liberty, promoting social cooperation and creating general prosperity, they have always been subject to pervasive doubts and, often, outright hostility. Of course, many people are also skeptical about government. Yet when problems arise that can even remotely be blamed on markets, the strong tendency is to "correct" the "market failures" by substituting more government control for market incentives. Recent evidence of this bias is healthcare reform, which, instead of freeing up healthcare markets to correct the distortions created by government subsidies and mandates, made the distortions worse by expanding the subsidies and mandates.

Dwight R. Lee, The Political Economy of Morality: Political Pretense vs. Market Performance | Library of Economics and Liberty

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