Archive for May, 2011
A Race against Time or a Race to Civil War?
The drawdown of U.S. forces from Afghanistan will start this July, with a complete withdrawal of “combat troops” by the end of 2014. The newly emerging conventional wisdom, however, is that Afghan security forces are not ready to take over responsibility, since serious efforts to strengthen those forces only really began in 2009. But rather than validate an open-ended mission to build national institutions in Afghanistan, looming problems in the hand-off from foreign to indigenous forces epitomize the flawed process of state building.
The 285,000-strong Afghan army and police, under the authority of the Ministries of Defense and Interior, respectively, are expected to increase to a total of 305,000 by this October. However, numbers tell only part of the story.
In a new report entitled “No Time to Lose,” British charity Oxfam and three other NGOs warn that the army and police, collectively known as the Afghan National Security Forces (ANSF), account for a substantial portion of harm inflicted on Afghan civilians. “At least 10 percent of Afghan civilians killed in the conflict in 2010 were killed by their own security forces,” according to the report. Aside from casualties, violations of human rights, including sexual abuse of children, mistreatment of detainees, and cruelty inflicted on villagers by local police, who many Afghans consider criminal gangs, illustrate the full extent of the problem.
Even worse, while the justice systems function swimmingly for those with “political connections,” the vast majority of Afghans have little recourse to stop such abuses because, “There is no satisfactory mechanism by which an individual can lodge a complaint against the ANSF.”
As the saying goes, “no justice, no peace.” And, as I learned during a trip to Afghanistan last year, many Afghans, especially those living in rural subsistence areas, seek redress for communal disputes by turning to their local district mullah. He provides basic security and rudimentary justice and, more often than not, doubles as a Taliban operative. Because the national government is either profoundly incompetent or entirely absent in many areas, those classified as “insurgents” by U.S. forces pick up the slack and provide for the practical needs of local people.
Obama’s GM Quagmire
Media are reporting this morning that the Treasury has decided to hold off on selling any of its remaining 500 million shares of General Motors stock until at least July. The Obama administration had hoped to divest as soon as possible after May 22, but GM’s stock price hasn’t been cooperating.
As much as the president doesn’t want the odor of nationalization following him on the campaign trail, the administration is equally concerned about having to explain why it took a $10 billion to $20 billion direct loss by divesting when it did. By deferring sales until July, the administration presumably is hoping for a stock price boost from second quarter earnings. But that is unlikely for several reasons, which I explained in the Daily Caller yesterday. Here’s the gist in a few passages from that op-ed:
The soonest the U.S. Treasury can sell the remaining 500 million shares (according to terms of the initial public offering) is May 22, but the administration would also like to “make the taxpayers whole.” The problem for the president on that score is that the stock price — even in the wake of this week’s earnings report — isn’t cooperating. As of this morning’s opening bell, GM stock was valued at $31.07 per share. If all of the 500 million remaining publicly-owned shares could be sold at that price, the Treasury would net less than $16 billion. Add that to the $23 billion raised from the initial public offering last November, and the “direct” public loss on GM is about $11 billion — calculated as a $50 billion outlay minus a $39 billion return.
To net $50 billion, those 500 million public shares must be sold at an average price of just over $53 — a virtual impossibility anytime soon. Why? The most significant factor suppressing the stock value is the market’s knowledge that the largest single holder of GM stock wants to unload about 500 million shares in the short term. That fact will continue to trump any positive news about GM and its profit potential, not that such news should be expected.
Projections about gasoline prices vary, but as long as prices at the pump remain in the $4 range, GM is going to suffer. Among major automakers, GM is most exposed to the downside of high gasoline prices. Despite all of the subsidies and all of the hoopla over the Chevy Volt (only 1,700 units have been sold through April 2011) and the Chevy Cruse (now subject to a steering column recall that won’t help repair negative quality perceptions), GM does not have much of a competitive presence in the small car market. Though GM held the largest overall U.S. market share in 2010, it had the smallest share (8.4%) of the small car market, which is where the demand will be if high gas prices persist. GM will certainly have to do better in that segment once the federally mandated average fleet fuel efficiency standards rise to 35.5 miles per gallon in 2016.
Deservedly reaping what it sowed, the administration finds itself in an unenviable position. It can entirely divest of GM in the short term at what would likely be a $10-to-$15 billion taxpayer loss (the stock price will drop if 500 million shares are put up for sale in a short period) and face the ire of an increasingly cost- and budget-conscious electorate. Or the administration can hold onto the stock, hoping against hope that GM experiences economic fortunes good enough to more than compensate for the stock price-suppressing effect of the market’s knowledge of an imminent massive sale, while contending with accusations of market meddling and industrial policy.
Or, the administration can do what it is going to do: First, lower expectations that the taxpayer will ever recover $50 billion. Here’s a recent statement by Tim Geithner: “We’re going to lose money in the auto industry… We didn’t do these things to maximize return. We did them to save jobs. The biggest impact of these programs was in the millions of jobs saved.” That’s a safe counterfactual, since it can never be tested or proved. (There are 225,000 fewer jobs in the auto industry as of March 2011 than there were in November 2008, when the bailout process began.)
Second, the administration will argue that the Obama administration is only on the hook for $40 billion (the first $10 billion having come from Bush). In a post-IPO, November 2010 statement revealing of a man less concerned with the nation’s finances than his own political prospects, President Obama asserted: “American taxpayers are now positioned to recover more than my administration invested in GM, and that’s a good thing.” (My emphasis).
The administration should divest as soon as possible, without regard to the stock price. Keeping the government’s tentacles around a large firm in an important industry will keep the door open wider to industrial policy and will deter market-driven decision-making throughout the industry, possibly keeping the brakes on the recovery. Yes, there will be a significant loss to taxpayers. But the right lesson to learn from this chapter in history is that government interventions carry real economic costs.
By ‘No Federal Control’ We Mean ‘Yes, Federal Control’
People are starting to fight back against the sneaky push for nationalized curricula, and folks at the Thomas B. Fordham Institute are revealing their true colors in response.
Yesterday, Fordham President Chester Finn and Executive VP Michael Petrilli responded to the national standards “counter-manifesto” released on Monday, and they were none too happy with its signatories, accusing them of peddling “half truths, mischaracterizations, and straw men.” What seemed to aggravate them most of all was the assertion that “common” standards would lead to de facto federal curricula, something they say neither they nor their national-standards loving friends — including the Obama administration — want.
At this point, who’s buying this? True, it’s possible that Fordham and friends might really not want a federal curriculum — I can’t read minds – but the federal government through Race to the Top has already bribed states into adopting the Common Core standards; Washington is paying for the development of national tests; and the Obama administration’s “blueprint” for reauthorizing No Child Left Behind would make national standards the law’s accountability backbone. So even if you don’t want this to lead to a federal curriculum, that is exactly what you are going to get. If the feds use money taken from taxpayers to force states to adopt national standards and tests, and if Washington rewards or punishes states based on those tests, then you have a federal curriculum. I mean, if it walks like a duck…
The good news in Fordham’s response, perhaps, is that they appear to have responded to my challenge to loudly renounce any federal funding for national standards and related material if they really want this to be voluntary. Unfortunately, they’ve responded with a resounding “no”: Finn and Petrilli write that “we have no particular concern with the federal government…helping to pay” for the creation of curricular guides and other material and activities to go with national standards.
This happiness to keep the feds paying pretty much puts the final rip in the tissue-thin “voluntarism” ruse. But if you’re not satisfied with my analysis, try this post over at Jay Greene’s blog, in which Jay reproduces a terrific fill-in-the-blanks analysis of Fordham’s tricky prose by Charles Miller, former chair of the Board of Regents of the University of Texas and a very astute observer of education politics. Let’s just say, he writes what I suspect everyone who is familiar with the federal government — and Fordham – is thinking.
Righting the Balance
In 1913, the Seventeenth Amendment cut an important tie in the Constitution between state legislatures and the Congress. In the original Constitution, states were empowered to choose the senators who would represent them in Congress. The result? Senators had an allegiance to the state government as much as the people of the state they represented.
Why does this matter? Well, today—with direct, popular election of senators—there isn’t much of anyone looking after state legislatures in Congress. Accordingly, the federal government continually tries to turn states into administrative outposts of the federal government rather than respecting them as the independent political powers they’re supposed to be.
In program after program, remote federal officials set policy and raise taxes, then require states to administer the programs. When things go a-mess, people don’t know whether it’s the federal government or the state government they need to talk to. Political accountability suffers, contributing to the big morass of government in the United States today.
Now, it wasn’t all sweetness and light before the Seventeenth Amendment rejiggered our governmental system, but it isn’t sweetness and light now either.
So yesterday, constitutional amendments were introduced in both the House and Senate to right the balance. House Joint Resolution 62 and Senate Joint Resolution 12 would propose an amendment to the Constitution giving states the right to repeal federal laws and regulations. Under the amendments, when two-thirds of the states ratify repeal of a federal mandate, it would come off the books.
The idea is to again right the balance between the states and the federal government. Most of its effect would be upstream: the Congress would be a lot more circumspect, knowing that the states could reject its laws if they went too far. But occasionally states would get a head of steam and lop out a federal law that they find disagreeable. The federal legislature would have to be a little more humble.
The federal government and its officials are pretty remote from the people compared to state legislators. Some way to right the balance would be good, whether it’s this specific idea, repeal of the Seventeeth Amendment, or some other. The “Madison Amendment” would work toward the same end by empowering states to propose constitutional amendments the way the Congress now does.
In this modern era of national transportation, high-speed communications, and global markets, many people believe that it’s natural for regulation to gravitate to the national level (often not considering that the logical end is global regulation). But technological change has not altered the rule that government closer to the people—or self-rule by the people themselves—is best. We pay a high price every day in this country for having cut a tendon in the constitutional structure with the Seventeenth Amendment and direct election of senators. It’s good to see efforts out there to right this balance.
The Defense Authorization Bill Is Awful
If you like bloated nuclear arsenals, executive discretion to wage endless war, large checks to countries that aid our enemies, and institutionalizing hostility toward gays in the military, you will love the defense authorization bill passed yesterday by the House Armed Services Committee. Below are the lowlights. For slightly better news from the Appropriations Committee on homeland security spending, skip to the end.
- The bill contains a provision replacing the 2001 Authorization for Use of Military Force against the perpetrators of the 9/11 attacks and their hosts. The Committee evidently found that legislation, which the last two administrations have used to justify all manner of power grabs, insufficiently open-ended. They add groups “affiliated” with al Qaeda and the Taliban to the list of certified enemies. Though disinterested in authorizing the war in Libya, the Congress may now give the President new authority to start new ones. Somewhere John Yoo is ruefully imagining all the creative ways he could have affiliated bombing targets with al Qaeda and Taliban. Certainly Pakistan would qualify, given its barely hidden support for elements of the Taliban and the suspicion that some of its intelligence agents have a “don’t ask, don’t tell” policy on the whereabouts of al Qaeda leaders.
- Nonetheless, the bill authorizes all $1.1 billion in military aid requested for Pakistan. An amendment intended to trim it failed.
- Speaking of Don’t Ask Don’t Tell, the Committee’s Republicans are determined to prevent its repeal from letting homosexuals feel comfortable in uniform. The bill outlaws gay marriage on military facilities. It also defines “marriage” in military regulations as the union of a man and a woman. The aim is to deny marriage benefits to gay couples. The bill also includes a provision sponsored by San Diego Republican Duncan Hunter that would keep Don’t Ask Don’t Tell in place until all four service chiefs agree that it will not impair combat effectiveness. That last provision will not become law, but it sends unfortunate messages. Beyond its implication that gays undermine military effectiveness, it reflects a tendency to defer to the wishes of the force on issues of its composition and use, at least rhetorically. That tendency erodes the traditional U.S. view of civil-military relations, driving a wedge between the military and the society it serves.
- The bill contains several measures that will prevent future cost savings. It would block the executive branch from reducing nuclear weapons force levels in various ways unless the secretaries of defense and energy certify that the White House makes good on its offer of increased nuclear weapons modernization funding. Incidentally, the administration promised those funds in exchange for New START treaty votes that Senator Jon Kyl (R-Arizona) did not deliver, including his own. The bill would buy the Army more Abrams tanks than it wants, to keep the production line open. It requires the government to remain prepared to build the Joint Strike Fighter’s second engine and would reopen competition between the two engines should the administration request more funds for the first (Pratt & Whitney) engine, which seems likely.
- The Committee made a modest effort to control government health care costs by mildly increasing annual premiums for retired military of working age. That’s progress. Premiums have not increased in 15 years. They are low enough that many retirees keep Tricare, the Military Health System coverage, rather than getting private health care via their new employer, thus shifting costs onto the taxpayer. But the Committee rejected the administration’s effort to peg future premium increases to medical costs rather than general inflation.
The full House or Senate will likely eliminate most of the damage. The taxpayer will get no relief from the House Appropriations Committee, however, which just released its planned spending levels for FY2012. Defense will grow by about $17 billion from FY 2011, not including the wars, Department of Energy nuclear weapons spending, and military construction. No surprise there.
House appropriators deserve credit, however, for keeping the bloated Department of Homeland Security budget on the cutting board. The National Journal reports that appropriators would give the department $40.6 billion—$1.1 billion less than last year and $2.7 less than it requested. The bulk of the cuts come by providing less than half ($1.7 billion) of the requested spending for local security grants. The grants would now be distributed at the department’s discretion rather than requiring them to go to certain subcategories (e.g., ports) and using a formula to insure that every state get a taste.
Hopefully this is a step toward eliminating federal homeland security grants, which have grown into a seemingly permanent subsidy even for regions where the terrorism threat is wildly remote. If states think it worth sacrificing something to buy local counterterrorism capabilities, they ought to pay for it with their own budgets. Federalization of the spending takes those decisions from those in the best position to weigh local priorities and encourages states and cities to chase federal dollars by exaggerating their peril.
Boehner’s Price for Increasing the Federal Debt Limit
House Speaker John Boehner, in his speech to the Economic Club of New York on Monday night, was very clear about the conditions for which he would support an increase in the federal debt limit:
… Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase. And the cuts should be greater than the accompanying increase in debt authority the president is given.
We should be talking about cuts of trillions, not just billions.
They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future.
And with the exception of tax hikes — which will destroy jobs — everything is on the table.
Congress is institutionally incapable of formulating and approving a large responsible package of spending cuts in the next month or two, even if there were the basis for an agreement in the longer run. The most likely outcome of this condition is that Congress would approve an increase in the debt limit for the next year or two with no significant amendments. John Boehner would be the major loser from this outcome, for having talked tough and promised too much, without delivering anything to his party base.
Another possible outcome of this condition is that an increase in the debt limit would be deferred indefinitely. This would lead to a period of fiscal anarchy in which total federal spending would have to be reduced to federal revenues on a month-by-month basis, and non-interest spending would have to be reduced about 40 percent with no political guidance on what activities are paid how much.
The House Republicans are better advised to sort out their priority budget changes in the longer run. I suggest that it is desirable to maintain a commitment against any increase in tax rates but to consider major reductions in what is now roughly one trillion dollars of off-budget tax preferences; such reductions would increase both revenue and economic growth. Finally, I suggest that reductions in the defense budget should also be considered. In a world in which the United States now faces no major power military threat, total real (inflation-adjusted) annual national security spending is now over twice that during the Ford and Carter administrations and over 40 percent of the total national security spending by all governments.
For the most part, I suggest, the Republican fiscal priorities are correct, but it will take better preparation and a longer time to implement these priorities.
Support for the Eternal Federal Welfare State Is Bipartisan
George Will makes a good point in his latest column: Democrats maintain a peculiar “conviction that whatever government programs exist should forever exist because they always have existed.” Will’s observation centers around the shameless Democratic attacks on Rep. Paul Ryan’s (R-WI) proposal to reform Medicare and Medicaid.
According to Will, “Ryan’s plan would alter Medicare. But Medicare has existed in its current configuration for only 46 of the nation’s 235 years.” Actually, “current configuration” isn’t quite accurate. For example, Medicare’s prescription drug component added by Republicans, which Ryan voted for, went into effect only five years ago.
Regardless, I agree with Will that so-called “progressives” have a “constricted notion of the possibilities of progress”:
The hysteria and hyperbole about Ryan’s plan arise, in part, from a poverty of today’s liberal imagination, an inability to think beyond the straight-line continuation of programs from the second and third quarters of the last century. It is odd that “progressives,” as liberals now wish to be called, have such a constricted notion of the possibilities of progress.
Yes, Ryan’s plan displays “imagination” and I would add that it took political guts to suggest the reforms knowing that the left would nail him to the cross. However, let’s not forget that Ryan’s plan would also further cement these twin pillars of the federal welfare state. For all the silly accusations that Ryan is proposing to “privatize” Medicare, his plan repeatedly states that his aim is to “save” it:
Letting government break its promises to current seniors and to future generations is unacceptable. The reforms outlined in this budget protect and preserve Medicare for those in and near retirement, while saving and strengthening this critical program so that future generations can count on it to be there when they retire.
I wasn’t born yesterday, so I understand Ryan’s assurance to “those in and near retirement” that Medicare as they know it won’t be touched. However, I can’t square Ryan’s reference at the outset of his plan to the “timeless principles of American government enshrined in the U.S. Constitution – liberty, limited government, and equality under the rule of law” with his intention to strengthen “this critical program so that future generations can count on it be there when they retire.”
Now that Ryan’s plan has taken its inevitable beating from demagoguing Democrats, the GOP appears to be upping the “save Medicare for future generations” rhetoric.
Here’s tea party favorite Sen. Marco Rubio (R-FL) as reported by Politico:
‘I understand the benefits that Medicare brings to America. It should be a part of our country,’ Rubio added. ‘I want Medicare to exist in a way that is unchanged for people that are in Medicare now. I want Medicare to exist when I retire. I want Medicare to exist when my children retire. And I don’t want Medicare to bankrupt itself for our country. And Medicare, as it’s currently structured, will go bankrupt.’
If that’s what Rubio, Ryan, and the rest of the congressional Republicans desire, then thank you for being honest. But please stop wrapping the intention to maintain for eternity a gigantic federal welfare state in the mantle of individual liberty, limited government, and the Constitution.
Romney: Individual Mandate = ‘What I Believe Is Right’
In his much-heralded health care address in Michigan today, former Massachusetts governor (and Republican presidential hopeful) Mitt Romney made news by offering… absolutely nothing new.
Rather than admit that RomneyCare was a mistake, Romney once again defended the individual mandate he imposed in Massachusetts, calling it “what I believe is right for Massachusetts.” Why? Because Massachusetts had a free-rider problem. Never mind that all states have a free-rider problem. (So why is it not the solution for other states, too?) Never mind the indications that Massachusetts’s free-rider problem is getting worse, not better, under RomneyCare. His defense of his individual mandate was indistinguishable from those delivered by countless ObamaCare zombies.
It’s almost as if Mandate Mitt is keeping the hypocrisy alive because he’s afraid no one will pay attention to him once it’s gone.
The only novelty I saw was when he admitted that RomneyCare has become a political liability. Not enough of one, evidently. So here we go again:
Activity vs. Inactivity
The challenge to the constitutionality of the individual mandate — Obamacare’s central feature, without which the whole regulatory scheme collapses (practically speaking, though I agree with Judge Vinson that it also can’t be severed as a matter of law) – boils down to whether, under modern constitutional doctrine regarding what Congress can do under the guise of regulating interstate commerce, the government can force “inactive” people into a particular action, namely buying health insurance.
That is, while cases like Wickard (Congress can force farmer to meet quota and bring crops to market) and Raich (Congress can stop wholly intrastate growth and consumption of marijuana) — moving from wheat to weed — are disconcerting for those of us who see limits on federal power, there is a qualitative difference between regulating or prohibiting existing economic activity and mandating that someone engage in such activity. When Randy Barnett (who argued Raich) first articulated that distinction and labeled the new assertion of federal power “unprecedented,” that’s what he meant: Congress has never forced people to engage in economic activity. Not during the New Deal – nobody had to become a farmer or buy wheat — nor during the Civil Rights Era — if you didn’t want to serve blacks, you could shut down your restaurant or hotel.
The “activity/inactivity” distinction thus becomes the last straw holding back a general federal police power that would allow Congress to require anything of the citizenry so long as it was part of a national regulatory scheme. No enumerated power to require people to buy Chevys? No problem, we’ll have a full-scale auto bailout that only works if people have to buy Chevys. No enumerated power to require people to take out Fannie Mae mortgages? No problem, we’ll have a “National Housing Market Recovery Act” that only works if people have to do just that. You don’t have to invoke broccoli or asparagus to make the point; the “broccoli mandate” is used so often only because, if anything, requirements to buy healthy foods and join gyms would be more closely connected to the goal of reducing taxpayer spending on health care than the individual health insurance mandate.
In any case, I won’t go on about activity vs. inactivity because you can read all about it in our latest brief and also in a fascinating Volokh Conspiracy debate among Orin Kerr, Jon Adler — both of whom will be contributing to this year’s Cato Supreme Court Review — and Randy Barnett:
- Orin notes that the Fourth Circuit judges were “baffled” by the activity/inactivity distinction;
- Jon replies that he’s baffled that anybody could be baffled by that;
- Randy offers a different take on the judges’ concerns;
- Orin discusses a possible analogy of the definition of “activity” to its common-law equivalent, the “actus reus”;
- Randy issues a rejoinder to Orin’s analysis;
- Orin clarifies the issue.
Fascinating stuff, and a discussion that will continue — and not just on the VC.
Thursday Links
- Is saving 1,315 people 12 minutes a day worth $196.5 million?
- You don’t need a PLAN when you have Twitter.
- The EPA, the price of copper, and the car you drive.
- GM has had a few profitable quarters. The federal government still needs to divest from the auto industry, even if taxpayers take an immediate hit.
Say It, Joel, Say It!
By almost all indications, former New York City schools chancellor Joel Klein knows first-hand the pernicious power of concentrated benefits and diffuse costs in government schooling. He knows how political control of schools is skewed mightily to the side of teachers’ unions, administrators’ associations, and all of the other power brokers representing the adults whose livelihoods come from the schools, to the huge detriment of the students, parents, and taxpayers the schools are supposed to serve. As he bleakly describes public schooling reality in a new Atlantic piece:
To comprehend the depth of the problem, consider one episode that still shocks me. Starting in 2006, under federal law, the State of New York was required to test students in grades three through eight annually in math and English. The results of those tests would enable us, for the first time, to analyze year-to-year student progress and tie it to individual teacher performance—a metric known in the field as “teacher value-added.” In essence, you hold constant other factors—where the students start from the prior year, demographics, class size, teacher length of service, and so on—and, based on test results, seek to isolate the individual teacher’s contribution to a student’s progress. Some teachers, for example, move their class forward on average a quarter-year more than expected; others, a quarter-year less. Value-added isn’t a perfect metric, but it’s surely worth considering as part of an overall teacher evaluation.
After we developed data from this metric, we decided to factor them into the granting of tenure, an award that is made after three years and that provides virtual lifetime job security. Under state law at the time, we were free to use these data. But after the New York City teachers union, the United Federation of Teachers, objected, I proposed that the City use value-added numbers only for the top and bottom 20 percent of teachers: the top 20 percent would get positive credit; the bottom would lose credit. And even then, principals would take value-added data into account only as part of a much larger, comprehensive tenure review. Even with these limitations, the UFT said “No way,” and headed to Albany to set up a legislative roadblock.
Seemingly overnight, a budget amendment barring the use of test data in tenure decisions materialized in the heavily Democratic State Assembly. Joe Bruno, then the Republican majority leader in the State Senate, assured me that this amendment would not pass: he controlled the majority and would make sure that it remained united in opposition. Fast-forward a few weeks: the next call I got from Senator Bruno was to say, apologetically, that several of his Republican colleagues had caved to the teachers union, which had threatened reprisals in the next election if they didn’t get on board.
As a result, even when making a lifetime tenure commitment, under New York law you could not consider a teacher’s impact on student learning. That Kafkaesque outcome demonstrates precisely the way the system is run: for the adults. The school system doesn’t want to change, because it serves the needs of the adult stakeholders quite well, both politically and financially.
And this was no isolated incident for Klein. Indeed, in his Atlantic treatise he goes on to give many more miserable anecdotes of hopelessness from his tenure in the Big Apple, and eventually identifies the problem right at its core:
More Hayek Sightings
The long Hayek Week continues, a full two weeks after Cato’s all-star panel on The Constitution of Liberty. The Washington Post today features George Mason University professor Russell Roberts and his Hayek-Keynes rap videos.
And by reading the actual print edition of the New York Times Book Review, I discovered that the same issue that included Francis Fukuyama’s review of the The Constitution of Liberty last Sunday also included a letter from one David Beffert of Washington, D.C., coincidentally responding to a review of Fukuyama’s own new book. Beffert wrote:
I enjoyed Michael Lind’s April 17 review of Francis Fukuyama’s important new book, “The Origins of Political Order.” But even as someone who prefers John Maynard Keynes and Karl Polanyi to F. A. Hayek, I still feel compelled to defend Hayek from Lind’s mischaracterization. While I agree with Fukuyama’s argument that, as Lind puts it, “a strong and capable state has always been a precondition for a flourishing capitalist economy,” Hayek can hardly be accused of trying “to explain society in terms of Homo economicus.” A doctor of law and political science, Hayek afforded the state a central role in his philosophy — specifically, he saw the Rechtsstaat, constitutional government enforcing the rule of law, as a guarantor of liberty and a functioning capitalist order. In that sense he, like Fukuyama, is closer to the 19th-century sociological tradition than to neoclassical economists, who would appear to be Lind’s real target.
Speaking of misconceptions about Hayek, if you Google “soros hayek,” the first item that comes up is a page of letters in the Atlantic Monthly taking Soros to task for misunderstanding Hayek — in 1997. Tadd Wilson argues:
Soros cites Hayek as an advocate of laissez-faire and then goes on to reject laissez-faire economics on the grounds that it is a dogmatic system at once claiming and demanding perfect knowledge and equilibrium. Of course, Hayek’s major contribution to economics was his critique of scientific assumptions in equilibrium-based economics. In a nutshell, Hayek argues that the market process relies on contextual, personal knowledge to coordinate the activities of millions of individual participants – a vaguely Popperian notion. Soros misses Hayek’s crucial point.
This is much the same criticism that Bruce Caldwell made of Soros’s understanding of Hayek two weeks ago. Considering the many complaints that were raised about Fukuyama’s understanding of Hayek, we can only ask: Why can’t the Times get someone like, say, David Beffert or Tadd Wilson to review Hayek?
By the way, if you Google Hayek, you’ll discover that it’s a big week for Salma Hayek, too. They’re not related, but you can find a slightly dated comparison here.
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