Patrick Sullivan claims that the very idea that there are conservatives who deny that markets fail is a straw man.
"No one believes that, certainly not Milton Friedman nor Scott Sumner, nor I. If you think I'm wrong, please find some economist saying anything like what you're claiming."
"But I can find examples of people like Krugman jumping on examples of what they thought was market failure...only to have to say, 'Never mind.'
"No one believes that, certainly not Milton Friedman nor Scott Sumner, nor I. If you think I'm wrong, please find some economist saying anything like what you're claiming."
"But I can find examples of people like Krugman jumping on examples of what they thought was market failure...only to have to say, 'Never mind.'
Notice how he contradicts himself right here-he tries to have his cake and eat it too. On the one hand no conservative anywhere has ever said markets can't fail. Then he attacks Krugman for saying that sometimes markets do, in fact, fail.
Listen. I wish it were true that no one denied markets do fail. Then we could put together the kind if thoughtful, rational regulatory framework that we need-and, yes, we would increase the government's footprint in those markets where more government and less free market leads to better outcomes.
So, I'm waiting with bated breath for Patrick-much less Scott Sumner-to join me here. Still believe markets fail?
By the very logic of their position, clearly the Republican party denies markets fail. If they didn't why do they object so much to such mild reforms as Obamacare?
The fact that they've voted 40 times to repeal Obamacare-tax dollars well spent-are now threatening a government shutdown and/or a debt ceiling default if Obamacare isn't defunded now belies the fact that they don't think market failures are possible.
If Patrick, Sumner, and Friedman believe market failure happens how come between the three of them we don't have a single, empirical example? When you say it's all about tight money-or Obamacare causing uncertainty, or because of Fannie and Freddie or because marginal tax rates are too high on the rich-by implication you don't believe in market failure. Because everything you say it about trying to pass the buck and claim that only governments fail, markets never do.
What's interesting is while today's conservatives deny that the market fails even in healthcare, even Kenneth Arrow himself didn't believe that. He was aware of the fact that one industry where the market doesn't lead to the best outcome is in healthcare. I doubt Patrick, Sumner, Friedman-or Marcus Nunes-would agree with Arrow there. Bear in mind that he was the one who gave the demonstrative proof of how efficient markets can be-and he denied that the market was as efficient as the government in the realm of healthcare.
How Markets Fail by John Cassidy, pg. 159.
'Notice how he contradicts himself right here-he tries to have his cake and eat it too. On the one hand no conservative anywhere has ever said markets can't fail. Then he attacks Krugman for saying that sometimes markets do, in fact, fail. '
ReplyDeleteWhich aren't contradictions. First, you've failed to find any 'conservative' economists who claim that markets never fail.
Then, what I'm claiming for Krugman is that he is too easily fooled into thinking he has a case of market failure, when, with a little thought (or a little research) he would have seen that he didn't.
For one example--that is close at hand for me--this summer, in Barcelona, Scottish economist Neil Kay gave a paper in which he caught the Krugmans saying something about market failure in their best selling textbook, that Paul had to concede he was wrong about back in 1998. Yet he's still peddling the example;
http://druid8.sit.aau.dk/acc_papers/rluar3kk4i5t4gelr7j36gx9hma5.pdf
'This paper reviews the emergence of the QWERTY standard which in turn has lent its name to what Krugman and Wells (2006) describe as the "QWERTY problem": an inferior industry standard that has prevailed possibly because of historical accident?.'
From an earlier Kay paper, quoting from the Krugman's textbook;
“Government can play a useful role both in helping an industry establish a standard and helping it avoid getting trapped in an inferior standard known as the QWERTY problem” (p.536) and they define this in their glossary as;
“QWERTY problem: an inferior industry standard that has prevailed possibly because of historical accident” (p. G-12)”
Now, let's go back to 1998;
http://online.wsj.com/article/SB888359975534853500.html
' "QWERTY is a great metaphor," [Krugman] says. But he concedes that evidence of being locked into a bad technology "turns out to be fairly weak."'
and
'"Really large mistakes offer profit opportunities," Prof. Krugman says. "If there is a really crummy technology out there that we have locked into, then it will be worth it for someone to pay the cost" involved in getting people to switch.'
Yet, he still can't let go of this 'market failure'. He's like an alcoholic who will only take one more drink before he stops completely.
'If Patrick, Sumner, and Friedman believe market failure happens how come between the three of them we don't have a single, empirical example?'
ReplyDeleteMilitary spending is the classic example. Police, courts, and fish and wildlife are others.
C'mon, make it harder.
Well obviously most people believe military spending is-though now the GOP is even happy to end this it seems.
DeleteThere are some extreme libertarians who claim even those things should be privatized-Bob Murphy is one. Still that's an extreme view. I don't count not wanting to privatize the police as meaning you acknowledge market failure. I mean how about the healthcare market, R&D, and the financial sector? Can they police themselves just fine-as Greenspan believed until his 'Damascus moment' in 2008 under drilling from Congressman Henry Waxman?
Still, if you claim that the 2008 crisis had nothing to do with market failure then you fit my descprition. Sumner clearly beieves that, Friemdan would. Conservatives blame the crisis on just about anything but a market failure-Obamacare-even though that came after 2008-high regulations, 'structural problems', 'killer taxes'-then there's Sumner: 'the tight money did it.'
To the contrary you haven't showed on conservative who doesn't believe markets don't fail. The entire Republican party is one example. Another example is Sumner-who claims that the only danger is tight money. Ditto Friedman.
ReplyDeleteYou're the one who made the original claim; 'Over the last 5 years, we continue to have conservatives who insist the market can't fail-the words market failure are simply an oxymoron.....'
ReplyDeleteYet, you can't find even one economist who has said that. I can find many who say the opposite, like Greg Mankiw, in his textbook;
http://www.slideshare.net/greenopaz/principles-of-economics-n-gregory-mankiw
' The invisible hand usually leads markets to allocate resources efficiently. Nonetheless, for various reasons, the invisible hand sometimes does not work. Economists use the term market failure to refer to a situation in which the market market failure on its own fails to allocate resources efficiently.'
Or Gwartney and Stroup;
http://www.cram.com/cards/as-economics-market-and-market-failure-806338
'Methods of Government
Intervention to Correct
Distortions in Individual
Markets
'Candidates should be able to use basic economic models to analyse
and evaluate the use of indirect taxation, subsidies, price controls, buffer stocks, pollution permits, state provision and regulation to correct market failure.'
Fish...barrel
"You're the one who made the original claim; 'Over the last 5 years, we continue to have conservatives who insist the market can't fail-the words market failure are simply an oxymoron.....'"
ReplyDeleteAnd I've given you examples. The point was that conservatives over the last 5 years have claimed that what's happened since 2008 hasn't in anyway been a market failure. Youre trouble is you keep trying to seize on categorical claims. So I say conservatives don't believe in market failures and you say well they believe in the police and the standing army. So it's like I say you're a vegetarian and you 'rebut' this by pointing out that you're not a vegan.
It's true that most conservatives believe in the police and the army-indeed, they probably believe in the army a little too much. However, they don't see the govt as having a role beyond this very basic and narrow role.
The real point I am getting at is about the last 5 years-you have Sumner claiming that market failure had nothing to do with it. He's trying to say it was all about tight money.
Other conservatives claim it was all about structural problems-taxes, regulations, Obamacare-then there's the usual Fannie and Freddie punching bag. Now these conservatives want us to believe that the market itself is in no way implicated-it was all government failure.
Now you might try to argue that while they deny market failure a role in this crisis they haven't ruled out that there could be a crisis that the market could have some responsiblity in. However, using simple logic if the market had no role in 1929 and 2008 it's unlikely there could ever be a deep recession or depression that they would see the market in any way being a contributing factor in.
What Mankiw may say in theory has little bearing once he works for George W. Bush or Mitt Romney. It's not just about theory it's how he applies it.
ReplyDeleteIf he actually admits it had a role in 2008 and actually wants to do something about it then he should support Dodd-Frank, yet he was on Romney's team who planned to gut Dodd-Frank.
Patrick you're putting up a red herring. If I say that 10% of American husbands beat their wives and you say "Name me one man in all of American who says this? You got no one? Gotcha!"
ReplyDeleteWhat have you really proven? Whether or not anyone simply declares 'Market failures don't happen' by implication that's what they're saying if they can't give one historical example of a market failure-rather than chalking it up in some way to a government failure of some kind or other.
I take for the symptonatic case the Great Recession of the last 5 years. If you don't think there was a market failure here you in reality will never see one. Yet what we have conservatives claiming is that it was just about Fannie and Freddie, it was structural-too much regulation, too much taxes on the rich, too much Obamacare-and in Sumner's case in the tradition of Friedman, it was the tight money that made it happen.
As for your saw about no one believes markets can't fail as they believe in the police and the army, that's a very weak arugment. It's sort of like 'proving' your not a vegetarian by proving you're not a vegan.
Most conservatives to the Left of say your old buddy Major Freedom-or Bob Murphy for that matter-believe the government has a role in national defense and the police but that's about all. They don't see the government as having any real legitimate role beyond defending the country and protecting private property. If taht's someone's belief then fits my definition of someone who denies markets can fail.
So your answers have been simply deflecting from my main point rather than meeting it head on. It's basically quibbling about whether a particular i is dotted or t is crossed rather than meeting the main points head on.
My original claim was that conservatives have spent the last 5 years claiming there was no market failure that contributed to the crisis. Instead they talk about structural issues or tight money or Obama.
You tried to deflect by claiming that there are conservatives who think a market failure is possible-just not in this crisis. I think if you don't think there was any in the worst crisis since the Great Depression than by implication you don't believe market failures ever contribute to major macroeconomic crises.
Maybe you should learn to write what you mean to say.
ReplyDeleteNo I did write what I meant to say you just like to focus on a few trees and ignore the forest. Here's what I initially said:
Delete"Over the last 5 years, we continue to have conservatives who insist the market can't fail-the words market failure are simply an oxymoron. The market by definition cannot fail. I should say that Scott Sumner is probably the best of this breed-in that his argument is probably the most compelling. The Monetarist case for the impossibility of the market failing has always been the most subtle conservative attempt to explain the Great Depression-and now the Great Recession-as not a market failure, but a government failure."
http://diaryofarepublicanhater.blogspot.com/2013/08/what-caused-great-recession-if-very-few.html?showComment=1375912969054#c5840032505518238359
Obviously I was talking about the last 5 years-many conservatives have claimed that market failure has nothing to do with it. Now, to me, if you think the market had nothing to do with this crisis then it's hard to see a scenario where it would as this is the once in lifetime crisis. So implicitly I read them as not believing market failures can lead to deep recessions and depressions.
I don't think anyone who isn't trying to draw a red herring would argue that to say someone doesn't believe in market failure means they have to oppose a standing army government run police.
Certainly you can't judge whether someone believes a market failure is possible based on wether he says "a market failure is impossible" or not just like you can't say that the only men who beat their wives are those who say "I beat my wife."