Saturday, March 31, 2012

Three Cheers for Good Government: Not Small Government

All the Republican Candidates rail against BIG government.  Obama and company blast away at Big business.  There is a grain of truth in both arguments. However, the claim of neither side is credible in part because neither party admits any merit to the other's charge.  Furthermore, neither party has a record of following up on its promises.

Is big government the problem or is it inefficient government? Government that has been captured by interest groups, lobbyists and big business?  The founding fathers were alert to the dangers of tyranny and invented the system of checks and balances at the heart of the Constitution.  But they could not have imagined the huge limited liability corporations that arose in the 19th century and have continued to expand their global reach.  Although they do not have the power to imprison or tax, these companies have the potential to cause suffering as surely as despotic governments.  If Republicans are so concerned about abuse of power by big government, why aren't they also concerned about abuses by the business sector?  Instead they propose to massively roll back regulation.  They, with help from their masters in the finance industry, have successfully fought implementation of Public Law 111-203 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Of course, the biggest threat to the social order comes when government acts in collusion with big business to promote crony capitalism rather than free market capitalism.  On January 17, 1961 in his Farewell Address to the Nation President Eisenhower warned of the threat to liberty from the "military industrial complex."  Today he might opt for the "financial, prison, military industrial, legislative complex."

Tuesday, March 27, 2012

Writers' Week


In the last week I have had three different and interesting encounters with writers.

On Tuesday March 20 Hong Kong International School, a K-12 institution where my wife is an administrator, hosted the novelist Chang-Rae Lee for a day or two as a visiting artist.  I was lucky to be able to attend a talk he gave to a group of parents, faculty and high school students.  Lee came to the USA from Korea in 1968 at age 3.  He has published four award-winning novels and directs the creative writing program at Princeton.

As one might expect from such a thoroughbred author, he spoke from a finely prepared script talking about his family life, his education, his decision to abandon a nascent career in finance for his real love, writing.  His talk included a recitation of a long, vivid and moving passage from his first novel Native Speaker.  Lee acquitted himself well in a long Q&A session but it is clear that he is most comfortable with the well polished written form rather than improv.  He had lots of helpful remarks for the aspiring writers in the audience, but is was clear that by writer he mean one composing fiction.  His response to my question about whether he had anything to offer writers of non-fiction was superficial.  You can learn more about Chang-Rae Lee here and here.

The day after meeting Lee I caught up with the ghost of John Updike in the form of a rebroadcast of two interviews by Terry Gross on her NPR Fresh Air program.  Updike died in 2009.  The program was to mark his 80th birthday on March 18.  Listening to this grandmaster in the last years of his life reflect on such a long career was a bright counterpoint to the rising star.  You can listen to the Fresh Air interviews here

Finally, on Sunday the New York Times Magazine carried "Why Talk Therapy Is on the Wane and Writing Workshops Are on the Rise". I have had a few friends who worked through their mid-life crises by taking sabbaticals from mainstream careers to enroll in creative writing programs. So far all who have taken this cure have eventually returned to the dark side. However, one of them is still undergoing treatment. I'm rooting for him to stay the course.

(ps-For readers who think I was either an engineering or accounting major: Nope--English and my second choice was physics.)

Monday, March 12, 2012

Sunday (Tuesday) in the Park (at Home) with George (Russ)



Every Tuesday for the last fours years or so I have downloaded Russ Roberts's EconTalk podcast and spent an entertaining hour or more listening to his interview of an interesting character--often, but not always, a fellow economist. Last week (March 6) was typical: an 87 minute talk with Columbia University Professor Charles Calomiris about banks' capital structures, the effect of leverage on risk and the role of financial regulation. While the audio was downloading I made a quick detour to Cafe Hayek, the blog that Roberts shares with his colleague Don Boudreaux. There I stumbled across a video of Russ giving a talk at Southern Methodist University's (SMU) Cox School of Business in Dallas. Since I was the executive-in-residence at Cox 2005-2007 I couldn't resist watching his performance. Between the SMU video and the EconTalk podcast I spent a good part of Tuesday with Roberts.

The video was enlightening as it was the first time I had seen the professor in action and the first time I had encountered him as a soloist rather than in a duet. Roberts teaches economics with stories rather than using arcane mathematics and charts. That makes him much more engaging than the average econ prof. As I watched him pace the stage I thought how much his approach was similar to the ministers that preach in the churches surrounding the SMU campus. Roberts's sermon was about the superiority of the emergent order of a free market economy compared to one where decisions are made by committees or regulatory agencies. He ridiculed the 40 members of L'Académie française who are charged with protecting the purity of the French language. But his real target was politicians. In his talk he derided politicos from both parties although on the podcasts he leans more heavily on Democrats. It was all very entertaining.

But worrisome, too. There was absolutely no hint that emergent free market economies might fail to efficiently deliver certain kinds of goods and services (e.g. public goods, natural monopolies, externalities). There was no consideration that free people might intentionally trade off some of the efficiency of a free market in favor of other values. Although there was brief mention of regulatory capture, there was really no worry about the power that huge global corporations now exercise both directly and through business associations and front organizations. There was prolonged derision for politicians but no serious suggestions as to how the nation's governance could be reformed.

In other forums Roberts has admitted that he does not consider economics a social science. For him libertarian economics is an ideology--one that he promotes with the skill and enthusiasm of an accomplished preacher-man.  Like most good preachers he has some large blind spots and he is very selective about the evidence he brings to his arguments.  Knowing that, I continue to listen to him because one can learn from great preachers even if not subscribing to their creed. But I worry about our college freshman and sophomores who get their first taste of economics from such a smooth talker.  And I worry about the mostly gray heads in the SMU audience who left with all of their preexisting assumptions confirmed.