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Keynes and hayek and cycles, oh my!


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Keynes and hayek and cycles, oh my!

  1. 1. Keynes and Hayek and Cycles, Oh My!Whether after a first glance or a penetrating analysis, the logic of both Keynes and Hayekoften will seem valid to me. But it has always been much more difficult to discern whetheror not their arguments are also sound because the factual bases of their premises remain soempirically elusive.In an economic environment at equilibrium, our default bias might rest with Hayek insofaras his approach resonates with our commitment to subsidiarity principles? In far fromequilibrium environments, whether boom or bust or war time, even if we stipulated thatboth Keynesian & Hayekian approaches would be equally efficacious in properly attenuatingdemand, what we do know, a priori, is that their costs would differ vis a vis both who wouldpay them and when they would be paid?It is precisely in nonequilibrium environments (the complexity of which does not yield tofacile analyses, economic much less political), then, that we might best resort to Keynes inredistributing these costs, both temporally, through monetary policy, and spatially(demographically), through fiscal policy? smoothing out the rough edges? And we muststrive to do so prudently, mitigating any inherent moral hazards and perverse incentives, alltoward the end of preserving a healthy social infrastructure, which is indispensable to apeaceful society?And I suggest this notwithstanding any virtue that may or may not lie in allowing Darwinianmarket forces versus government interventions to choose all the winners and losers,beyond any notion that genuine compassion can be coerced through revenue strategies. Isuggest this because, for example, hasnt there always been a broad consensus that aprogressive tax structure simply makes for good social hygiene? And cannot the same besaid for so-called entitlements, including social security and medicare? And certainly somemeaningful assistance, carefully targeted, is similarly prudent during our rough patches,which can vary in duration and intensity, harming both culprits and innocent victims, alike,dangerously fraying our social fabric?The fact that we need government at all reveals that we are not angels, for neither a trulycompassionate conservatism nor an enlightened social liberalism would need to first mail itslargesse to the IRS from Wall Street or Rodeo Drive, if all were already, instead, sending it tothe United Way or similar NGOs? It is an enlightened self-interest, rather, that affirms thegovernments role in providing such goods and services and relief, all toward the end ofmaintaining domestic tranquility. The governments maintenance of this vital socialinfrastructure is no less important to our national security than our financial, energy, utility 1
  2. 2. and transportation infrastructures or our military. Without them, we could fall into chaosand despair.Also important to our national security is the governments fiscal soundness. And the sadreality is that, as a government, we cannot always afford even what we need, so triage anddiscipline become essential. This is not the same as saying, however, that, as a people, wemight not be able to afford it. But there is only so much that can be coerced before apeople, rightly or wrongly, would revolt, before a goose would fly away with its golden eggs,before the capital markets would pitch their investment tents elsewhere.Before a classical liberalism or modern libertarianism engages a social liberalism in apolitical over against, it has first responded to an anarchist critique and opted for limitedgovernment versus no government, but it has done so, presumably, for pragmatic reasonsand not ideological principles? So, surely the libertarian critique must already be in touch,theoretically, with the pragmatic apologetics for both distributist and redistributiststrategies? as recommended - not only by a practical realism -but - by the socializationimpetus of subsidiarity principles, themselves, which state that, when all things are nototherwise equal, a rugged individualism must yield to a higher level of human organization?Its the "all things being equal" nuance that seems to escape todays libertarian impulse,radicalizing limited government into an ideological absolute rather than recognizing it,instead, for what it should be, merely a default strategic bias.Common ground already exists for maintaining a progressive tax structure. Explore itwithout charging one another with waging class warfare or protecting the rich.Common ground already exists for temporary Keynesian strategies. Explore it withoutcharging one another with "tax & spend" or "give aways to the rich" or accusing the FederalReserve of near-treason. Meet already-identified, real infrastructure needs earlier thanplanned in this exceptionally favorable labor cost and financing environment, but dontimagine that "make-work" initiatives and government employment, in and of themselves,are otherwise an effective use of idle human capital in the long run. Rescues should betargeted at institutions with a national security significance (financial infrastructure andcredit pipelines) while markets are best left to sort out other industries (automobile?).Common ground already exists for many of our already deeply-embedded Hayekianinsights, which advocate the efficacies of lightly-regulated free markets. Explore it withoutdisingenuously calling for government to "get out of the way" or demagogically blamingunavoidable business cycles all on deregulation. 2
  3. 3. Common ground exists for maintaining a social safety net. Explore it without frightening itsrecipients or substantively dismantling it.Common ground exists for tax reform, precisely because the code IS ALREADY choosingwinners and losers. Reform it and make it neutral for businesses (without national securitysignificance) while preserving its otherwise progressive attributes for individuals.Common ground already exists regarding the political parties and factions willingness toemploy BIG GOVERNMENT: whether the social cons with their moral statist tendencies, theTrotsky-cons with their neoconservative overseas ambitions and militarism, the tea partywith their loyalty to our Founders words - well, except for the document that they wrotewhich they imagine badly needs amending, the theo-cons with their desire to rewrite ourscience textbooks and the social liberals with their designs on micro-managing the economicorder. It may be that the libertarians are the most faithful to our classical liberal principles intheir reluctance to deploy BIG GOVERNMENT anywhere, whether in social, economic orforeign affairs, but they have also been our kooky-cons, because they treat limitedgovernment as an absolute value rather than a strategic bias.In closing: “Idealism is fine, but as it approaches reality, the costs become prohibitive.”William F. Buckley 3