Thursday, February 17, 2011

Libertarian, Hayekian Economists on the Stimulus

There's a Hayekian blog called Taking Hayek Seriously, and my usual flippant response to whatever is on there is: I might take it more seriously if you stopped writing all your headlines in CAPITALS.  Better to get my attention by being interesting and coherent rather than trying to shout louder to be heard.  I imagine he's one of the less prominent GMU bloggers out there...

There's been a Stimulus "hearing" taking place in the US which has given libertarians their latest attempt to fire off their generally cynical views about all things public sector.  Their talk about how only the free market without government can possibly provide liberty I just cannot ever bring myself to agree with.  I believe in the value of free markets, but I am also painfully aware (often from personal experience) that they fall short in places.  Economists have talked and theorised about how imperfect and asymmetric information can adversely impact market outcomes, and externalities while difficult to measure provide a reason to expect markets to under- or over-provide goods.  But because we can't measure these things perfectly, libertarians simply dismiss them out of hand, and instead allow firms to exploit market positions entirely outside the sphere of government influence because evil people are evil people regardless of whether they are in the public or private sector. Libertarians seem to think that once somebody steps inside a public institution they become corrupt and evil, whilst inside a private institution the wonderful profit motive makes them shining beacons of integrity. Get real.

I always dislike their railings, particularly when they drag up Hayek and talk about scientism, usually applied in completely the wrong place, as per usual.  They tend not to understand statistics, and that econometric models have these things called errors, or residuals once we estimate them.  There's no false pretension of accuracy going on if econometrics and hence economics is applied appropriately.  We have our standard errors and our variances.

Yet these guys seemingly would just abandon all this just because it's a bit hard.  They criticise any attempt to understand more about the economy using data with an air of saying "well we already knew it all anyway", and stick to supposedly self-evident axioms that some Austrian wrote down six or seven decades ago.  Then they additionally claim any good idea that's ever been in economics as one of Hayek's.  I guess one day I'll substantial most of these claims, just not now.  I have some econometrics to do, to try and help fill some more of those gaps in the knowledge we currently have about the economy.  As any self-respecting economist would do.


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