The Economic Good
Downblog, apropos not of the post but of a conversation from last night, the actual Rod asks if I "seriously" think the American economy is "doing well." Well, a complete, but unedifying answer is that I don't pay nearly enough attention to economic news to have an informed opinion about whether or not this country's economy is "doing well" in Rod's (and most people's) idiom. My somewhat informed historical sense of general economic conditions (transmitted to me, if this clarifies things, by my summertime colleagues at Reason) is that the US's imperfect capitalism, in particular its relatively free market combined with endism/trendism-style acceleration of technological development, has lifted effectively every American situated above the poverty line to a condition of material prosperity wildly exceeding anything enjoyed by pre-capitalist aristocrats. [An innocent question: would you rather have the means to go falconing regularly, or an Ipod, novacaine, good-smelling bodywash, and refrigeration?--ed. The latter for me; the Seattle movement is against both--F.]
But let's put it even stronger. A middle class American in 2006 is significantly better off materially than a middle class American in 1996; and better off by orders of magnitude than a middle class American in 1976. [Give me an i-n-t-e-r-n-e-t-s--ed.]
In my younger and more Marxist days, I used to be very impressed, to the point of repeating them ad nauseam, with statistics according to which the wealth and income disparities between the uppermost socio-economic strata and all others have been expanding geometrically since the 70s at the latest. I can make that admission not because I don't find it severely embarrassing, but because the whole point of my blogging is self-embarrasment in the pursuit of truth. So here's the rub: If everybody's socio-economic position improves over time, that's pretty much all I need to hear. Does it matter if some people have a higher rate of improvement than others? It's not as if strictly egalitarian distributions of material wealth are compatible with a long-term net production of greater wealth --- we do, after all, have some handy examples of declarations that the twain shall meet, and the results aren't pretty.
None of this is to say that American capitalism, or any form that has ever been practiced, is ideal. But where does it go wrong? There are the two glaring instances we all know about: 40-however-many million people without health insurance, and non-trivial numbers of people living in poverty. The first point to make about either of them is that, contrary to the tripe you hear from unreflective liberals and leftists, solutions to them are extremely hard to come by. The fact, e.g., that ethnically homogeneous tiny countries like Sweden have done pretty well at combating them -- and even then, at costs that are arguably unacceptable -- doesn't tell us a goddamn thing about how to deal with health care and poverty in the US.
The most troubling flaw of all in American capitalism is one that embarrasses the policy positions of liberals and conservatives alike, and for parallel reasons. That is the extent to which James Burnham correctly diagnosed the American socio-economic system as not capitalistic, but managerial: the state and the economy one and the same entity, corporations and governmental departments indistinguishable from a God's-eye-view, the free market and democracy superseded by interlocking bureaucracies of technicians, planners, regulators, and freelance experts. (Burnham actually looked forward to such developments.)
To be sure, we don't have full-blown managerialism, but we do have some kind of compromise between it and capitalism, and the supremely worrying trend in globalization is not the expansion of free trade and international economy to previously isolated and undeveloped lands (that's a good thing), nor dislocations of labor and outsourcing (that's a net good too), but a slowly tipping balance towards managerialism. (That's if you care about democratic rights; if not, no need to refuse champagne or weed.)
This is my long-winded way of getting to the actual Rod's question. An economy "doing well" in my idiom has effectively nothing to do with wealth production, stability, resource equity, or any traditional metric in economics. An economy is "doing well," so say I, just in case it is generally free and unregulated, and the state and society with which it is coincident rigorously enforce the economic rights of those who are party to it. (My anti-utilitarianism is strong, but not absolute; an economic arrangement that respected libertarian constraints but was significantly likely to cause some kind of complete depressional collapse would be a limiting case.) So on those grounds, I think I'm right to say that the US economy is indeed doing pretty well, and its well-being isn't endangered by negative economic indicators -- they're going to turn positive soon enough, right? -- but by paternalistic regulation, laws against gambling, prostitution, and drug-use that create black markets, cartels, and violent crime, and by know-nothing protectionism from Seattle to Dubai.
So the executive summary: I don't advocate any economic theory, only a meta-theory, which is encapsulated pretty nicely by this joke:
Three guys are in a jail cell. They start to talking and find out that they're all gas station owners.I wish economists all the best, but I don't see the justified epistemic or axiological basis for me to care about on-the-ground economic conditions, outside of my own rational self-interest (and in practice, my irrational interest concerning friends and family).
The first one says, "I set my prices at a couple of cents higher than my competitors. I'm in here for price-gouging."
The second one says "I set my prices at a couple of cents lower than my competitors. I'm in here for predatory practices."
The third one says "I set my prices at the same price as my competitors. I'm in here for collusion!"