Lynne Kiesling
Detroit News columnist Thomas Bray argued so on Sunday. In fact, his argument is more along the lines of his being more Smithian than Keynesian (as is Doug Allen’s at Catallarchy, from whom I got the link):
President Bush responded to the bursting of the economic bubble of the late 1990s in quite a different fashion than Nixon responded to the collapse of the 1960s boom. He cut tax rates and has generally supported Federal Reserve Board Chairman Alan Greenspan’s efforts to keep prices on an even keel. And he has — so far — resisted the temptation to clamp price controls on oil.
As a result, the economy has responded with two years of uninterrupted, low-inflation growth, despite the phenomenal spike in oil prices. Bush might say we are all Adam Smithians now, referring to the British economist who argued for the market system and against unbridled government intervention.
Perhaps. But he’s no unbridled Smithian, so to speak. Trade policy? Steel tariffs? “People of the same trade seldom meet …”? Tax policy and economic regulation, yes. Trade policy, domestic policy, processes that encourage the persistence of rent seeking? Not Smithian. Then again, neither was Smith, in the stereotyped understanding of his thought. Smith believed markets exist within a construct of formal and informal rules, with many of the formal rules being the proper role of government.
Bray ends with
Nonetheless, intellectuals and politicians forgot about Smith. They rushed to embrace Keynesian theory, whose near-mystical complexities allowed them to believe government could stimulate the economy to even higher performance. Alas, most of their imagined improvements turned out to have counterproductive long-term effects. As a result, Smith is getting a fresh hearing, as the Greenspan lecture suggests.
There will always be those, including many Republicans, who argue that markets will fail. But this reckons without government’s tendency to fail.
This observation resonates with Hayek’s The Intellectuals and Socialism, and with a post from Masden Pirie about a recent speech from Vaclav Klaus to the Mont Pelerin Society:
He quoted Hayek’s observation that intellectuals are drawn to visions and ideas, as well as to systems which accord them a greater share of influence and power. Intellectuals feel ‘under-valued’ by the market, in that it puts a value on them less than they think appropriate. …
The threat these days, Klaus said, came from the spread of illiberal ideas OUTSIDE of socialism. He instanced ambitious social engineering, radical human rightsism, the enforcement of the perceived good, environmentalism, what he called ‘NGO-ism,’ and Europeanism (meaning moves to an integrated European over-government). All, he said, were substitute idelogies for socialism, and all provided niches for interference by intellectuals in the spontaneous activities of human societies.
These two articles suggest that the power of ideas shapes the future course of human events, but that we (intellectuals especially) have a tendency to be “men of system”.
UPDATE: This is what happens when html and I meet too early in the morning, and then I get on the bike to ride to work. Link fixed. Post more coherent.