Bryan Caplan on unemployment and free market economists

[Garth Zietsman]

Here is Bryan Caplan - libertarian economist at George Mason University - saying the kind of thing I've been trying to say.  Basically we don't need to deny real problems in order to remain free market fans.

Garth

[Colin Bower]

I am surprised no-one has responded to this.

Caplan's smokescreen is to call himself a free market economist. He actually provides a middle of the road, politically correct, collectivist account of the causes of unemployment, and is excessively patronising about libertarians. He says libertarians don't care about unemployment - that we are "callous" about it. If there were degrees of untruth, this would rank as about the most untrue thing a person could say about libertarians.  As the libertarian labour economist Loane Sharp has shown us so many times at our seminars, allow business to recruit non-unionised labour and to negotiate bipartisan agreements on wages and you would mop up a vast number of currently unemployed. Collectivist and socialist policies create unemployment; a libertarian economy frees people to work at whatever level they choose. I know this is all known to libertarians, which is why I am really surprised that Garth brings this article to our attention, and appears to make common cause with it. Libertarians don't "deny" the "real problems", they simply understand them differently.  Incidentally, if your follow the comments at the end of the article, look for the one by David McDonagh (April 25) of the Libertarian Alliance. He provides more than an effective antidote to the Caplan poison, and reminds me of the truism: we don't have to "fight" anything - not unemployment, not inflation, probably not crime, certainly not HIV/Aids, and absolutely not wars. We just get the known outcome of the policies we implement. What's difficult to understand about that?

Colin B.

On Tue, Apr 23, 2013 at 11:24 PM, Garth Zietsman <garth.z...@gmail.com> wrote:

Here is Bryan Caplan - libertarian economist at George Mason University - saying the kind of thing I've been trying to say.  Basically we don't need to deny real problems in order to remain free market fans.

Garth

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[Garth Zietsman]

Colin Caplan has very solid libertarian and a free market credentials which is why I used him as an example.  He devoured Rothbard as a youth, regularly attended libertarian summer camps and is now a tenured professor of economics in probably the most libertarian economics department in the US.  He regularly and consistently argues for rather strong forms of libertarianism e.g. anarchism or markets over democracy.

Yet you quickly dismiss both his understanding of economics and his legitimacy as a free market economist because he accepts that the standard economic explanation of unemployment sometimes applies.    

The fact that some libertarians care about unemployment doesn't invalidate Caplan's observation that a large fraction of libertarians (and he is very active in libertarian circles) don't care about it.  My observations, of libertarians I know, agree with his.  For example I have yet to find one who doesn't think inflation at low rates e.g. 2-3% is a more serious moral and economic problem than 8-10% unemployment. 

Yes I know most think they aren't opposed but that doesn't change the relative values.  They also argue that it's not that they don't care but rather that any kind of stimulus won't work, and anyway unemployment is the state's fault and is impossible under a fully free market.  Firstly that doesn't establish that they do care.  Secondly the notion that unemployment is never a free market and always a statist phenomenon is questionable.  Also questionable is the notion that the state (or Fed) could never fix it.  I say questionable because mainstream economics does question these things.  

Does it seem likely to you that only real libertarians have an unerring and unbiased ability to tell sound from unsound economics,

and respected professional economists (of all ideological stripes) do not?.

Anothing thing I hoped Caplan would show was that accepting the validity of standard economic accounts of unemployment doesn't mean one has to dump liberty and accept an anti free market solution.  Unfortunately I failed in my objectives.

OK I guess you guys don't want to see this stuff - so I'll stop.  

Garth

[Stephen vJ]

No, please don't stop Garth ! This debate and others like it has been the most stimulating thing around this year. I have not read Caplan's article yet, but we are Facebook friends and I find his work generally pretty good. I also find myself in agreement with most of what Colin writes on this forum and have been squarely in the Garth camp on at least two recent debates, even if I did not say it. So please continue - this is all great stuff, even when... no, especially when we disagree.

S.

Sent from an electronic device located somewhere on earth...

[Stephen vJ]

My speech at LibSem two years ago was about inequality and how we should take it more seriously, which can, nay should be done without letting go of libertarian principles. I was deeply disappointed, and still am, that many libertarians there (note not all) missed the point I was making entirely. Some libertarians are willing to debate the issues, but others are completely blind to issues like unemployment, equity and equality. Sadly so, because when you open your mind to it, you will find that freedom is entirely compatible with all of these concepts, despite the thick blanket of collectivist propaganda which they are wrapped in.

S.

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On 29 Apr 2013, at 16:11, Garth Zietsman <garth.z...@gmail.com> wrote:

[Garth Zietsman]

I agree that liberty can be compatible with concern for unemployment, equity and equality but as I understand it most libertarians either avoid them because they are collectivist favorites and therefore suspicious, or they regard them as irrelevant to liberty and so not interesting or important.

My approach might be something like "Ya ya social insurance or more available medical care are great ideas but how do we preserve liberty in those situations?  Let's try to think of ways."

[Stephen vJ]

That is my experience of attitudes as well. Solutions are easier than that. What gives you the lowest possible unemployment ? Economic freedom. What gives the greatest equality ? Smaller government. What is most equitable ? Letting people keep the fruits of their labour. Running away from traditionally collectivist arguments is a missed opportunity to promote freedom. Saying that growth is more important than equality also misses the point since that is a subjective value judgement, so that argument cannot have a winner. Knowing that economic freedom can give you the most of both growth and equality on the other hand, makes a strong argument which can be won by objective means and can be backed up by statistics. Provided people are willing to look at it.

S.

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[Colin Bower]

I readily defer to the views and suggestions of the professional economists and other well qualified commentators in this group, but I continue to believe that amateurs can sometimes see the wood that the professional tree scientists miss, and I remain unconvinced by Garth's argument, although I welcome the opportunity he provides to engage with contrary views. Surely the whole point is that Caplan's standing and credentials are irrelevant. It is the content of his article that matters. My view remains that his proposition is no different (for instance) from anything that a Trevor Manual or even a Rob Davies ("that well known communist" - Stephen Mulholland, ST) would place before us.  Regarding the choice between "low" inflation and "high" unemployment": it is a bogus choice. It is like asking an abolitionist which is better, judicial execution by hanging or judicial execution by lethal injection. Whilst there may be a real and qualitative choice to be made between hanging and lethal injection, it can only be an authentic choice for someone who supports judicial execution (which, for the record, I do).  So I don't want to make the choice between "low inflation" and "high unemployment", because it is not a real choice, and I am certain that we can live in societies with low to non-existent inflation and low to non-existent unemployment. But nevertheless  to enter into Garth's thought experiment for illustrative purposes, if I really had to make the choice, I would far  prefer to see 8-10% unemployment and 2% inflation than 8-10% inflation and 2% unemployment because inflation impoverishes everyone - every single member of the community, society or nation, in particular the weak and the vulnerable - including the unemployed!, whilst - in the first place - unemployment only affects a minority, and a very low inflation rate would at least protect the value of their cash, and secondly - I go with the proposition that a proportion of the unemployed are unemployed by choice.

I continue to take exception to the allegation that libertarians are callous and uncaring. That's a calumny.

Colin B.

[Jaco Strauss]

Colin, I am 100% with you here.

I read the Caplan article at the time and couldn't quite get his point. He moans about the leftwing "solutions" of minimum wages, etc yet doesn't attack its proponents, but rather its opponents and then apparently for showing a lack of compassion.

What on earth is that supposed to mean? And what are "free market economists" supposed to be doing? Pay lip service to lip service as Caplan did? Try to sound as "compassionate"as an Eherenreich while criticising his supposed solutions?

My brother opposes mandatory universal minimum wages, yet actually employs hundreds of people in the real. Less now after the havoc Ehrenreich and co visited upon the Western Cape farming communities last year. (My brother's storage facilities got burnt to the ground at the time, for e.g.)

This sounds like the old PC story of talk the talk while criticising those who walk the walk. And those who don't bother with empty meaningless soundbites. 

It is my belief that free market (or Libertarian) economic policies and principles would automatically lead to higher employment. For me that is enough and I don't care if it "sound" compassionate enough to the PC crowd

J    

2013/4/30 Colin Bower <colin...@gmail.com>

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Jaco Strauss
Kaapstad

[Garth Zietsman]

I do think Bryan Caplan's propositions (some from the blog post and almost all from his general writing) are different from Manual,Davies et al but where they aren't I am suggesting - horror or horrors - that these propositions may just be correct.

I understand that you think this is a bogus choice - this is by far the most common libertarian response.  All so far (when they enter my thought experiment for the sake of argument) have given the same answer as you.  My response to that is that this typical libertarian view of inflation is a) too simple and b) exaggerates the harm and c) sees only harm and discounts any possibility of benefit, and their view of unemployment misses a great deal of the harm.  I also think the relationship between inflation and employment is complicated - they are neither always opposed or independent in principle. I don't think government is always to blame for them - free markets can produce them.  

Our differences follow naturally from what we regard as convincing in macro or business cycle theory.  In my (admittedly amateur) opinion, the Austrian business cycle account is inadequate and probably faulty, and some form of aggregate demand account (Keynesian or Market Monetarist) is sometimes part of the story. 

[Garth Zietsman]

I read the Caplan article at the time and couldn't quite get his point. He moans about the leftwing "solutions" of minimum wages, etc yet doesn't attack its proponents, but rather its opponents and then apparently for showing a lack of compassion.

He is basically addressing libertarians - assuming the usual negative stuff about the left goes without saying.  See this in the context of all his writing. 

What on earth is that supposed to mean? And what are "free market economists" supposed to be doing? Pay lip service to lip service as Caplan did? Try to sound as "compassionate"as an Eherenreich while criticising his supposed solutions?

No.  What free market economists should be doing is a) admit unemployment is an important problem and b) develop market solutions.  I'm guessing he doesn't think "do nothing because a free market is the most effective solution" is good enough or correct.  I don't.  [I don't think that means he or I are not free marketeers but that is too complex for me to thrash out now.]

My brother opposes mandatory universal minimum wages, yet actually employs hundreds of people in the real. Less now after the havoc Ehrenreich and co visited upon the Western Cape farming communities last year. (My brother's storage facilities got burnt to the ground at the time, for e.g.)

This sounds like the old PC story of talk the talk while criticising those who walk the walk. And those who don't bother with empty meaningless soundbites.

That isn't fair to Caplan. 

 

It is my belief that free market (or Libertarian) economic policies and principles would automatically lead to higher employment. For me that is enough and I don't care if it "sound" compassionate enough to the PC crowd

That's fair enough.  I don't criticize the morality of that position.  I question the accuracy of the assumption.  Although I think employment would be higher in a free market for the most part there are also situations where a free market might employ fewer people.  I wasn't thinking of this as the reason but one of Keynes' points was that there are a variety of equilibria (natural rates of employment) and that the market can easily settle on a high one (and just as easily be nudged to a lower one).