JAMES KWAK KEEPS ON COMING UP WITH INTERESTING THINGS—INCLUDING DIGGING OUT HAYEK’S VIEW OF A GUARANTEED MINIMUM INCOME
AND HAYEK IS LARGELY SEEN AS A RIGHT WING ECONOMIST
Ideology really is a menace—and pervasive into the bargain. Virtually regardless of the issue, it blocks intelligent people weighing the evidence—and coming up with a solution. Dogma defeats data.
I certainly don’t believe that all problems are solvable. Wicked problems (what a lovely term) certainly do exist—the Middle East being a case in point right now—but I do believe that a great many are—and fairly easily at that—particularly where economic issues are concerned.
Economists are lousy at forecasting—because there are so many variables, humans are so flaky, and they like to try and forecast with unrealistic precision—but that doesn’t mean they don’t know a great deal about how different economic systems work. However, they tend to fail to make best use of the data available because—once again—of ideology.
Sadly, if you want to make a living as an economist, you are best off behaving in a partisan manner (whatever you may think privately). All too many research institutes and think-tanks—which are supposed to come up with innovative solutions stemming from the strengths of their multi-disciplinary structures—have largely become propaganda fronts for lobbyists.
Damnably frustrating to see all that talent go to waste. There are some very bright people in these organizations—but they know which side their bread is buttered. Careerism strikes again. It is not confined to the military.
My underlying point here is that if you judge solely by the performance of various economies—linked closely to the economic wellbeing of the populations concerned—we already know what systems work best, and, in many cases, what policies are effective. And, where we don’t know with precision, we know enough to experiment. Conveniently, the state system could allow the U.S. to experiment extensively, in a fairly controlled manner—and we could learn an extraordinary amount from such activities.
In fact, we already have a considerable amount of invaluable economic data based upon sustained practical experience. Much of it has been analyzed by academics so that it is in clear and usable form. But do we act on such evidence? Largely, we do not—particularly in the U.S. On the one hand we have this treasure-trove of information—yet, by and large, if the issue is remotely touched by ideological beliefs, we disregard it.
America suffers badly, both from conflicting ideologies, and NIH (Not Invented Here) syndrome. That’s a killer combination which can flatten fact-based logic in a heartbeat—and does. We truly cannot handle the truth—a devastating indictment of our national psyche.
What I like about the truly great economists—virtually all of them, Adam Smith, Karl Marx, Keynes, Stiglitz, and Krugman (for example)—is that their prognostications are refreshingly nuanced, and they are, by and large, evidence-driven.
But the ideologues strip out the subtleties, and so we fail to realize that the great economists agree much more than is generally understood. There is much common ground there.
But, you have to read what these people actually wrote to know that. Not many people do that—particularly the kind of journalists who are supposed to ferret out such truths. Some of these economists are hard to read. That makes James Kwak, quoted below, whom I admire greatly, an exception. The man is not afraid of work (and has a great sense of humor).
Economics is not a science—as many like to pretend—but it is a powerful and immensely useful discipline, which, for ideological reasons, we largely fail to employ and exploit to best advantage.
What matters is what works. Correction—what should matter is what works.
Typically, you find out what works through trial and error—better known as experimentation. You can do it yourself—or you can learn from others. Either way, there is no real substitute to real-world experimentation.
Personally, I have no idea whether a Guaranteed Minimum Income would work or not—I suspect it might—but I would like to see it tried.
What is absolutely clear is that fostering a large and growing underclass—as the U.S. is doing right now—cannot, by definition, lead to the prosperity of the population as a whole. Combine that with a Middle Class which is being squeezed out of existence, and one might be mildly concerned about where growth in domestic demand is going to come from in the future (which is a practical rather than ideological consideration).
Given that realization, it would seem not unreasonable to try something different.
Who knows! It might work.
Friedrich Hayek Supported a Guaranteed Minimum Income
Not only that, he assumed it would exist
“We shall again take for granted the availability of a system of public relief which provides a uniform minimum for all instances of proved need, so that no member of the community need be in want of food or shelter.”
That’s from The Constitution of Liberty, “definitive edition,” p. 424. Yes, it comes as part of Hayek’s argument against mandatory state unemployment insurance. But it reflects a fundamental understanding that no one should go without food or shelter, and that it is the duty of the government to ensure this minimum level of existence. “The necessity of some such arrangement in an industrial society is unquestioned,” he wrote (p. 405).
The standard that Hayek simply assumed would exist goes beyond merely keeping poor people alive. In a wealthy society, he thought it inevitable that it would become “the recognized duty of the public to provide for the extreme needs of old age, unemployment, sickness, etc.” (p. 406). On this basis, he even endorsed the idea of compulsory insurance, such as the individual mandate of the Affordable Care Act.
I’m not claiming that Hayek would have supported Obamacare — he almost certainly would have favored less government involvement than the system of state-level exchanges. But on the questions of welfare and government intervention in insurance markets, he was to the left of the entire Republican Party today.
James Kwak is an associate professor at the University of Connecticut School of Law, a co-author of 13 Bankers and White House Burning, and a founder of Guidewire Software. Find more at Twitter, Medium, The Baseline Scenario, The Atlantic, or jameskwak.net.