Matt Zwolinski and some of the commentators on the new Bleeding Heart Libertarians blog take issue with the way I presented a libertarian approach to compassionate economic policy in this article. This is the kind of life that the blogosphere brings to the Great Conversation, and I’m glad Matt and his commenters picked up (and responded to) my article.
Unfortunately my answer is no. In the present article I’ll go over three possible exit options, and explain the flaws in each.
Before assessing the chances of escape, let’s first review what the problem is:
John Kasich, governor of Ohio, in his State of the State speech, said:
“It may lead to some temporary increments, ironically, to GDP, as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake, Japan actually gained some economic strength” – Lawrence Summers, president emeritus of Harvard University and former director of the White House National Economic Council.
William C. Dudley is the amazingly out-of-touch President of the New York Fed. Speaking in Queens today, he said the economy has improved, but a long way from improved employment and price stability.
The audience pressed Dudley about higher food prices, wherein Reuters reports “people forget that even as the price of food is rising, other prices are falling. He mentioned the price of the iPad 2, prompting guffaws from the audience.”
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What does it take to bring about a well-functioning market? Almost all economists agree that people should engage in cooperative exchange rather than predation, theft, or fraud, but how to ensure this is a matter of debate. Many neoclassical economists follow Thomas Hobbes and focus on changing legal arrangements to solve prisoners’ dilemma situations (Barzel, 2002, Hirshleifer, 2001; Tullock, 1972). Eliminating unwanted behavior is a matter of imposing optimal fines, the “price of an offense” (Becker, 1968, p.262), to alter the costs and benefits of different choices.
