Unleash the Mind is a new essay by George Gilder that is a must-read for anyone who supports capitalism and markets. Gilder does a magnificent job of describing capitalism as a system that creates wealth through benevolent creativity. It is a fantastic defense of capitalism and free markets from both practical and moral principles.
Even if you’re on the left, you would do well to read this essay, for no other reason than to understand how the other side thinks. I found it to be a very accurate depiction of my own mental model of how capitalism works and why it’s preferable to state intrusion in the economy.
Some choice quotes from the piece:
I’m not sure what there is to debate here, so I’ll call this ‘witnessing’. I just wanted to expose this brilliant essay to as many people as possible.
I think that’s an good defense of why a market-based economy is better than a command economy, but doesn’t do such a good job explaining why the less regulated market economy modern right wing parties prefer is superior to the more regulated market economy the modern left prefers. Most modern leftists (myself included) would agree with about 85% of that essay.
The only part that’s really relevant to the modern political discourse is the idea that taxation necessarily uncouples wealth from “entrepreneurial knowledge.” The evidence for this is the old claim that economic activity is directly and inversely related to taxes, which the author claims is a settled point. I would say it is most definitely not.
The part that is quoted by Sam, I have no argument with. Supply-side economics, I do.
This, however, is also facile.
The Fed lowers interest rates to spur the economy. Regardless of whether you lower taxes on investments or lower interest rates on loans, the end result (and goal) is that you are spurring the market to try to grow. Basically, if you believe that the Fed’s big economic-lever is real, then you should believe that lowering taxes on the wealthy is as well. (Though I’ll grant that the amount of money which can be brought in from the wealthy’s income tax is effectively pointless both as a tax and as a spur for economic stimulus.)
But in both the case of the Fed and “invigorating the market” in general, I think that the general wisdom will eventually come around to the idea that some investments are stupid and others are wise. If you make investing too easy then you’re just growing an economic bubble and if you make it too difficult then you’re stifling the economy. Ratcheting a lever back and forth makes no sense. Find a good medium point and leave it there. Anything else and regardless of whether you’re doing some good, you’re probably doing an equal or greater evil as well.
In either case, market bubbles will still happen and some will be big enough to cause a recession (or even a depression). Encouraging people to just go out and jump on ANY investment opportunities that happen to be present at that moment in time isn’t going to help that.
On the other side of things, Keynes solution of lending yourself a bunch of money and paying people to go around breaking and fixing windows until the market comes back on its own, then taxing everyone to hell to get rid of the fake money you created is also rather stupid and has yet to show itself to work.
Where Keynes may have been right, however, is that the fundamental issue with a recession is that as demand drops and workers become useless - since there is no demand - people are laid off and that only makes the economy worse, which in turn lowers demand even further. This is then compounded by the fact that those who stay employed, stay on at their old salary and all those who are unemployed would rather come back on at their old salary and are resisting it to be significantly lower - especially when there’s still people making the old salary.
In the ideal Keynesian world (despite that I don’t believe that Keynes ever stated it or thought of it), salaries would lower with demand so that the total number of unemployed would not change. In the real world, however, even if you had a way to make all salaries drop proportionately to the national average of demand, the market in which the bubble occurred will have lower demand than the national average and markets which were wholly unrelated will likely have higher demand. So we would expect that unemployment would still rise - but mostly coming out of the bad market - but this would be met by a demand for new workers appearing in more healthy markets which now have disproportionately high demand.
Realistically, with lowered demand, keeping everyone employed would amount to paying people to sit around and do nothing. I would also expect that employers would end up performing layoffs simply because there’s still no point in paying a wage - even a proportionately lowered one - to someone when there’s no demand to be met. However, it would probably be less significant than if employees were working at their full wage.
The problem is that you can’t simply lower everyone’s wage. Between mortgages, school loans, etc. most people are locked in by contractual obligations to the wage that they are making. They would be strongly opposed to taking a reduced wage, since if they were to do so, they might have to sell their house or otherwise change their lifestyle to match. That is, unless you make it not just wages but all contracted values, salary, loans, mortgages, etc. become proportionate to demand.
If you do that, you effectively bring macroeconomics back to Adam Smith’s idealized version of economics - a world where everyone is constantly bartering and re-bartering their wares, minus any sticky numbers. Granted, we are assuming that the sticky numbers would change to the values that we are assuming they would change to if everyone had the opportunity to renegotiate, which is probably less effective than simply having everyone really go back and renegotiate their numbers, but I suspect that it would be close enough approximation to classical economics that the classical economic belief that a recession will undo itself as things become cheaper can actually become true, with a lot less hassle on the part of all of the actors.
Not sure where it is the facile part, most of what you say makes sense as there are nuances there, but writers of the quoted piece I posted do explain that there is indeed a more complex answer, but most economists agree with what the writer said there, they even mention specific exceptions like a corporate tax cuts that can be shown to be good overall for future tax revenue elsewhere, but even countries that are pointed by supporters of the tax cuts as evidence that this voodoo should work like Ireland (the piece is from 2008) are not doing so nicely.
Sure, saying just that tax cuts do not spark enough growth to pay for themselves is not a good answer for a complex topic, but it is what the vast majority of economists see is the overall case.
Meh. We already redistribute some of America’s wealth (and have redistributed much higher percentages of it in the past), and we haven’t killed it.
If we were facing the imposition of a Soviet-style centralized command economy with no market forces allowed to operate, then Mr. Gilder’s patriotic bloviations would be, if not particularly informative, at least relevant and on-target. Or if Mr. Gilder had a specific argument for or against a specific quantitative amount of redistributive taxation, that could be interesting to read.
What he’s written in this essay, though, is nothing but a pompously melodramatic general panegyric on the wealthy, with undertones of “AAAGH WATCH OUT THE POOR PEOPLE ARE GETTING RESTLESS WE MUST STOP THEM!!”
It is intriguing to what extent proponents of right-wing capitalism base their faith on the eloquence of certain preachers. The popular pundit David Brooks writes that he was a liberal as undergraduate but had an epiphany when he heard Milton Friedman speak in person. Paul Ryan, intellectual leader of the present-day GOP, names Ayn Rand as his main inspiration: her writings are required reading for Rand’s staff and interns. This all calls to mind a worth-reading article describing similarities between religious faith and post-rational faith in markets.
Rational centrists are not ignorant of the theoretical advantages of capitalism, even in its dog-eat-dog form. There is much truth, or at least half-truth, in the article linked by OP. On the other hand, anyone with a clear perspective on modern America would agree the article’s position is, to put it charitably, exaggerated. And it’s a shame the article had to “poison the well” in its very first paragraph with
This blanket condemnation of “socialism” will come as a disappointment to employees of NASA … and GM.
Rationalists are aware of imperfections of capitalism, e.g the paradox that an entrepreneur can build a profitable toll-bridge while causing travel times to worsen! In my experience, proponents of dog-eat-dog capitalism are more often allured by the dog-eat-dog than by the capitalism. For example, carbon tax is a straightforward market-based solution if we agree that the true costs of carbon use are not reflected in its market price. The present-day government of China may be at least as rational as the U.S.'s so it is hardly far-fetched to envision a world-wide treaty enforcing a carbon tax. Yet it is those on the left who seek that market-based solution!
Well, I read it. Apparently, “the other side” thinks that vague simplistic generalizations, and unsupported sweeping assertions about very complicated economic and historical issues, are preferable to careful scrutiny and analysis of quantitative detail.
Generally, I’m not a fan of what could be considered an ad hominem. But since this is witnessing, I think it’s OK. And, I make an exception to the ad hominem rule when it comes to Creationism. I really don’t think it’s worth wasting my time reading what a Creationist has to say about any topic that requires analytical skills.
Of course I knew that the people on the left on this board would disapprove of the essay - it’s not you I’m trying to reach.
But I do have to say that in no way do I support intelligent design or any of the religious hoo-haw Gilder may believe. I’d never heard of the Discovery Institute, but intelligent design is complete hogwash. However, it has nothing to do with this essay.
John Mace: Really? The belief in creationism completely invalidates anything a person has to say, even on non-religious subjects? Do you extend that to all religious people? Or is it okay to believe that a jealous God sent his only son to Earth to ‘save’ mankind by exhorting them to love their God lest they be smited and burned in hell by a fallen angel, so long as you don’t also believe in intelligent design? Just where is the John Mace limit that renders a person’s thoughts on any subject completely invalid?
That’s not what I said. You linked to a very long article by someone who actively promotes Creationism over science. What I said is I wouldn’t waste my time reading something that person wrote. I wouldn’t trust him to have done an objective analysis of something as complex as economics.
But let me clarify further: the guy could be right. I just don’t want to spend the time it would take to verify if he is or not. He has already proven himself to place religion over science.
But you don’t extend the same prejudice to a Catholic who believes in transubstantiation, exorcism, the infallibility of the pope, and the existence of miracles? Do you extend it to Newton, who believed in alchemy at a time when it was already thought to be quackery?
People are capable of believing idiotic things in one realm, while being brilliant thinkers in another. Dismissing everything a person has to say because they hold a strange belief in an unrelated area is just prejudice.
Heck, if you wanna “unchain the mind”, then improve education, dispense with all that creationist crap, and among the millions of children going through school, you’ll improve the percentage that will turn into scientists and engineers, and those will be the ones that allow the entrepreneurs to do their thing.
