Alan Kirman on Laissez-Faire Economics

http://evonomics.com/everything-you-need-to-know-about-laissez-faire-economics/

by bpolania • 11 years ago

10 3 11 years ago

What a shallow discussion there. Very poor history of economic ideas and lots of straw men and intellectually dishonest arguments. I have come to expect it from journalists and non-academics in general, but it's sad to see them in academics too.

yummyfajitas• 11 years ago

This article is very poor quality.

... GM of course is one of those corporations that Hayek didn’t see were centrally planned institutions

Hayek is not stupid; for example, in "The Use of Knowledge in Society" he explicitly discusses the role of such institutions. He also notes that such institutions are not truly "centrally planned":

"Even the large and highly mechanized plant keeps going largely because of an environment upon which it can draw for all sorts of unexpected needs; tiles for its roof, stationery for its forms, and all the thousand and one kinds of equipment in which it cannot be self-contained and which the plans for the operation of the plant require to be readily available in the market."

http://www.econlib.org/library/Essays/hykKnw1.html

Key point - the central planner is only a central planner in a very narrow sense and heavily depends on markets providing information. Also, competition between GM and Toyota provides an escape hatch for when GM performs horribly.

But again, he never specified closely what the mechanism [of price adjustment] was.

Perhaps Hayek didn't (I haven't read enough of him to be sure) but generally econ says that speculators provide the mechanism.

The remainder is just a bunch of whoo, life is so complex that we can't understand it, yay regulation. Because, um, if a situation is complex you can be assured that your attempts to control it won't cause unexpected side effects? Huh?

xlm1717• 11 years ago

Alan Kirman seems to have a contemptful view of Hayek in general, judging from this article:

he wasn’t very consistent in his views
actually he was a horrid man
but he was extremely bigoted, he was racist

Was he trying to imply if you advocate for free markets you are bigoted and racist? It sure looks that way...

It seems that he is trying to appeal to emotions throughout most of the interview in his criticisms of laissez-faire.

The remainder also seems to be a bunch of whoo. To give an example, he talks about people calling for reform of European labor markets, says the results will be more temporary workers and less investment in workers. He then gives the example of Toyota. Toyota doesn't invest in their workers because laws make it difficult to fire someone. The work culture in Japan contributes more to this than some government law making it harder to fire people. There is a social taboo against firing people, so they end up giving incompetent employees menial work. In fact, the prime minister of Japan is looking to break up this taboo to make the Japanese economy more flexible. Companies will invest in promising employees, but don't want to invest in employees who will not provide a return. There does not need to be government intervention for a company to invest in an employee.

Another example, he says this in the article:

The last remark I would make is that to say “you’ve got to get rid of all those rules and regulations you have”—in general, those rules and regulations are there for a reason. Again, to use an evolutionary argument, they didn’t just appear, they got selected for.

They didn't get selected for. They got put in place. The difference is, to give an example, people didn't just stop buying less cigarettes because they thought it was bad for their health. Aversion to tobacco didn't just "evolve" in the market, it didn't get selected for. People stopped buying cigarettes because an onerous tax was imposed on it and suddenly people were forced to decide between buying cigarettes and making rent. If you say we have those regulations for health reasons, you'll get a lot of cigarette smokers saying they don't care about the health implications, they just want to make the choice for themselves. If the argument then is that their bad health costs society in medical expenses, you can argue that this is so because of still more regulations. This is an example of something that even Kirman admits in the article:

It’s absolutely clear that as these regulations accumulate, they weren’t developed in harmony with each other, so you often get even contradictory regulations.

Alan Kirman on Laissez-Faire Economics

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