Economics

Libertarian Crisis Management

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Harvard economist Jeffrey Miron over at CNN offers some libertarian-leaning ideas for crisis management that go beyond the cliche of "doing nothing."

Among his recommendations:

Moderate the Growth of Entitlements: The elephant in the room amidst the stimulus debate is the impending imbalance in Social Security and Medicare as the baby boom generation moves into retirement. Without reductions in benefits, taxes will have to increase substantially, generating a major drag on the U.S. economy…….

Eliminate Wasteful Spending: Most discussion of the stimulus focuses on areas where, according to proponents, government spending should be higher. Much current expenditure, however, is wasteful.

Examples include agricultural subsidies, bloated transportation projects like the Big Dig in Boston, misguided infrastructure projects like the New Orleans levees (why encourage people to live below sea level?), ineffective weapons systems, pork barrel spending, and subsidies for Amtrak and the Post Office (buses are more efficient than railways, and Fedex is more efficient than the Post Office)…..

Withdraw from Iraq and Afghanistan: President Obama plans to withdraw U.S. forces from Iraq over the next eighteen months, while expanding U.S. involvement in Afghanistan. It is hard to see, however, that any good arises from dragging out our Iraq exit or from staying in Afghanistan. The government should move toward faster withdrawal, and from both countries….

Renew the U.S. Commitment to Free Trade: One crucial danger in the current environment is that the U.S. and other countries will embrace protectionist policies…..The Obama fiscal stimulus risks reviving this insanity, since both the House and Senate bills require that certain stimulus-funded projects use U.S. equipment and goods. The administration should oppose these provisions……

Stop Bailing out Businesses that Took on Too Much Risk: Popular opinion blames deregulation and private sector greed for the financial meltdown, but the reality is more subtle.

Existing regulation was ineffective at preventing excessive risk-taking, and the private sector did its best to profit from the incentives that were in place. The extreme increase in risk-taking, however, would not have occurred absent policies that encouraged such risk (e.g., Fannie Mae or the Fed's reassurances about housing bubbles) or past bailouts that cushioned the losses from private risk-taking.

Miron's conclusion isn't particularly optimistic, but almost certainly true:

It is tempting to believe that every problem has a solution, but the reality is not so nice. It is possible, even likely, that the best we can do is fix things we know how to fix, and then get out of the way. This may not ameliorate the current situation, but it avoids making things worse. In economics as in medicine—first, do no harm.

Back in October, Miron explained right here at Reason Online why the current crisis is not a failure of libertarianism.

Hat tip to reader Dave Wolcott for the link.

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NEXT: What Are the "Failed Theories That Helped Lead Us Into This Crisis"?

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  1. Very good article which I’m actually surprised to see on a site like CNN.

    Now, I don’t expect that anyone will listen, but at least it makes a great point.

  2. The greatest damage done by government because of the hoi polloi’s faith that government just might be helpful, is the Alphonse and Gastone routine of who will hold the door open for whom.
    Progress is always frozen at its own doorway by Alphonse’s faith or politeness or whatever that causes him to wait and wait for Gastone to hold the door open.
    Peaceful anarchists want to open the door themselves and get on through the damn thing.

  3. Speaking of the Social Security imbalance, did I hear correctly that our enlightened lords are going to suspend/ refund the Ponzi Tax?

    That will help.

  4. Why are we allowing boomers to retire, rather than killing them for their meat and glue products?

  5. Did I miss the part where he added, “Legalize marijuana to save on enforcement costs and gain tax revenue”?

  6. Look at the whiny babies on the CNN comments.

  7. Unfortunately, the government is determined to compound the harm it’s already done with ever more wildly harmful actions.

    We are so screwed.

  8. “Renew the U.S. Commitment to Free Trade: ”

    “Stop Bailing out Businesses that Took on Too Much Risk:”

    You would not have to limit Free Trade if you stop bailing out businesses that took on too much risk. If the big international banks failed then international trade would take a huge hit. They are the ones who fund much of the international trade and without them that trade would be much smaller.

    International trade would still exist but at a significantly lower rate and this would remain for a while because few would want to take another hit on trusting the banking system. The international trade system has been a bubble just like the real estate business.

  9. 2/3 of economists agree, that raising the minimum wage cures cancer. Actually I was confused. It was a poll done by the economist (not of economists): http://www.economist.com/displayStory.cfm?Story_ID=E1_RDJDQGG

  10. An excellent column by Dr Miron, which would have been improved by incorporationg Tingy Wah’s suggestion re Marijuana laws.

  11. I love people like this who use the magic pixie dust theory of government to explain what they would do. You want 1000 mpg cars just use your magic pixie dust and mandate it. There, done.

    On little problems like spending and taxes there is nothing to see, nothing to be done, and it really is all too complicated for the peons to understand.

    Just legalize the drugs.

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