“Human beings are born with different capacities. If they are free, they are not equal. And if they are equal, they are not free.”
― Aleksandr Solzhenitsyn

Monday, October 31, 2016

What has government done to you lately?

...would be a better headline.

What’s Government Done For You Lately?
Here is the core error of the 20th century: the belief that government can accomplish anything with enough intelligence, resources, and power. It afflicted regimes all over the world from Lenin’s 100 years ago to Obama’s today (and this will also be true of any probable successor). This theory built massive bureaucracies, justified vast wars, and drove the creation a legal and regulatory apparatus of unprecedented imperial reach.

The faith survives today, though with ever less conviction. Failure after failure has even sown doubts among ruling-class intellectuals and mainstream politicians. But because so much of the state apparatus – and the strategies that collect money from the public to fund it – are based on this model, a shift away from the paradigm will not come easily.
This, of course, is the central problem with David Rotman's MIT Technology Review article promoting a small tweak to traditional top down economic planning as if it were a wholesale change instead of an exercise in relabeling:
[Dani] Rodrik [an economist at Harvard’s John F. Kennedy School of Government] said in an interview that while “unfortunately” we’re stuck with the label “industrial policy,” today’s versions are very different from ones conceived decades ago. Rather than singling out a specific sector—say, aerospace or steel manufacturing—for support with large investments and tax incentives, new thinking suggests working across sectors to achieve a desired goal such as addressing climate change, using tools such as carbon pricing...

Take, for example, the failure of the solar company Solyndra. It is often held up as the kind of thing that occurs when government picks winners. But, writes Rodrik, Solyndra failed largely because competing technologies got much cheaper. Such outcomes are not necessarily an indictment of industrial policies. The real problem, Rodrik argues: the U.S. Department of Energy loan guarantee program that supported the solar company had a mixed set of goals, from creating jobs to competing with China to helping fund new energy technologies. What’s more, it did not properly define procedures for evaluating the progress of potential loan recipients and, importantly, terminating support to those companies when appropriate. Instead, according to Rodrik, in the absence of such rules, money was lent to Solyndra for political reasons...
The problem with Solyndra, then, was a mixed set of explicitly political goals applied to a specific sector subject to intense competition. The solution to such bad industrial policy is to apply explicitly political impediments to all economic activity. The competition will then be for government favors, like suspending the Obamacare cadillac tax.

No more picking winners and losers, no siree, we’ll just apply general taxes on carbon the government will conjure a 'market' in carbon. Do you believe it will be politically neutral, remain focused on the single problem, and with properly defined procedures for evaluating the continuing necessity for the market? I.e., that the bureaucrats running the scheme will ever even look for reasons to suspend it? If so, you must believe that Obamacare has fulfilled its promises.

It’s so simple, just find a big 'social problem' with dozens, or hundreds, of different causes and impose a single 2,000 page solution. I don’t know why we didn’t think of this approach to solve the obesity epidemic. We’ll just put nutrition labels on candy machines, ban soft drinks over 16 ounces and move toward taxing calories.

That this is still picking winners and losers, such as Warren Buffet’s wind farms versus Peabody Coal’s entire business, seems not to occur to these capos of industry.

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