It’s easy to see why John Kenneth Galbraith’s The Great Crash has a high place in the pantheon of mainstream economics books. His narrative moves crisply, and he does not get bogged down in the details. The economic information he shares must not be too difficult, for I have very little knowledge of economics and only failed to understand some of the book.
However, while the narrative moves along well, Galbraith sacrifices much to achieve this. He admits that the reasons for the Crash and the resulting depression are legion and difficult to know precisely, but he backs off any kind of in-depth treatment. At times he throws out lines about the need for regulation that I assume he agrees with, but he never develops this idea or the rationale for government regulation. I finished the book feeling like he had no interest in resolving or even tackling the main question his book raises.
The main question, I think, is this:
- Is liberty an absolute concept and therefore an absolute good? If so, any restrictions placed upon it done (if done at all) would be done only for emergencies, and then only temporarily.
- Or, is liberty in the end a relative concept, one that has meaning only within a given context. If so, societies should feel free to tinker with it, restricting it here and there, to achieve optimal balance. For example, inoculations make us healthier by giving us a small dose of disease.
Perhaps Galbraith avoids the question out of modesty, or out of fear of ruffling feathers. In his book The Servile State, Hillaire Belloc (who loved ruffling feathers and had no modesty) jumps right in. Liberty, he argues, like our appetites, must be kept in check if we are to have freedom in the end. Just as alcoholics lose their right to drink, so too abusers of liberty will be left with none of it. Like any admirer of medieval times, Belloc argues for a careful, measured approach, one that in the end values stability over wide-ranging opportunity.
He traces the development of capitalism not from the Industrial Revolution but from Henry VIII dissolution of the monasteries, allying his government with the wealthy class by distributing the land among them. What looked to be a bold move to secure his own power, Henry in fact only made his power subservient to the elite. This is not freedom for the state or freedom for the individual.
But he goes a bit further. Since full-boar capitalism produces instability in the end, the people will reject it, and swing the other way to a “servile-economy.” In this new economy they will have guarantees but much less freedom than before. They will in fact, be made to work as the government becomes more and more allied with businesses — a form of slavery. Belloc did not foresee the welfare-state, where it could become actually cheaper for some not to work at all, but this too would be a form of slavery for Belloc.
I believe that a free people should attempt to use government to help achieved legitimate societal ends, and in that way I have at least some sympathy with Galbraith and Belloc. The problem is, what should we regulate and how much? The article below from Matt Yglesias (thanks to a link from Marginal Revolution) exposes some of the problems when talking about regulation. Do we have the kind of society, and the kind of political environment we need, to successfully and appropriately regulate ourselves? We shall see.
I did a piece about how annoying the paperwork for getting even the simplest small-business license is, which prompted a lot of weird reactions from conservative readers, like “Obama lapdog Matt Yglesias has epiphany: Gee, it’s hard to start a small business in D.C.!” and various comments about how I’m reaping what I sow, and now I should understand why lots of people vote Republican.
This is something I think I actually understand very well. I voted for Republican Patrick Mara the last time he was on the ballot for a D.C. Council at-large seat, and I’ll probably vote for him again. I voted for Mitt Romney for governor in 2002. I would have voted for Michael Bloomberg in the 2005 or 2009 New York City mayoral races, and in general I think the conservative critique of municipal government in the United States has a lot of merit. Republicans might be interested in why someone like me—someone who sympathizes with many of their economic policy views—still hesitates to vote for their candidates for national office. One reason is that I tend to think conservatives place much too little emphasis on the rights and interests of religious and ethnic minority groups, gay people, and the like. Another reason is that conservatives have much too much affection for state-sponsored violence. In terms of economic policy, Republicans tend to deride the hugely successful practice of taking money from the rich and giving it to the poor. But even on the regulatory front, there are real shortcomings to the Republican approach.
The way I would put this is that the American economy is simultaneously overregulated and underregulated. It is much too difficult to get business and occupational licenses; there are excessive restrictions on the wholesaling and retailing of alcoholic beverages; exclusionary zoning codes cripple the economy; and I’m sure there are more problems than I’m even aware of.
At the same time, it continues to be the case that even if you ignore climate change, there are huge problematic environmental externalities involved in the energy production and industrial sectors of the economy. And you shouldn’t ignore climate change! We are much too lax about what firms are allowed to dump into the air. On the financial side, too, it’s become clear that there are really big problems with bank supervision. The existence of bad rent-seeking rules around who’s allowed to cut hair is not a good justification for the absence of rules around banks’ ability to issue no-doc liar’s loans. The fact that it’s too much of a pain in the ass to get a building permit is not a good justification for making it easier to poison children’s brains with mercury. Now obviously all these rules are incredibly annoying. I am really glad, personally, that I don’t need to take any time or effort to comply with the Environmental Protection Agency’s new mercury emissions rules. But at the same time, it ought to be a pain in the ass to put extra mercury into the air. We don’t want too much mercury! We don’t want too much bank leverage!
Business licensing is different. “This city has too many restaurants to choose from” is not a real public policy problem—it’s only a problem for incumbent restaurateurs who don’t want to face competition. But in other fields of endeavor—telecommunications, say—the absence of regulations can lead to an uncompetitive outcome. Partisan politics is pretty simple, since there are only two parties to choose from. But the underlying structure of reality is quite complicated, and it’s worth your time to try to understand the issues.