New at Cato Unbound: Scott Sumner on the Monetary Flubs that Caused the Crash

This month’s edition of Cato Unbound on “The Monetary Lessons of the Not-So-Great Depression” kicks off with a probing, provocative essay by headliner Scott Sumner, “The Real Problem Was Nominal.” He says things like this:

We cannot hope to understand what happened late last year without first recognizing that the proximate cause of the crash was not a financial crisis, but rather a steep decline in nominal spending. Like any other fall in aggregate demand, this represented a failure of monetary policy. Severe demand-side recessions are almost never the result of special interest politics — the losses are too great and too widespread — but instead represent an intellectual failure by well-meaning public servants and the academic economists who advise them.

And this:

The real problem was not a “real” problem at all. It was a nominal problem, and the severe intensification of the debt crisis was a symptom of an ordinary Humean nominal shock. Furthermore, monetary policy was not “easy” but rather was highly contractionary in the only sense that matters, that is, relative to the stance expected to hit the Fed’s implicit nominal targets.

On deck we’ve got James Hamilton, George Selgin, and Jeff Hummel.

New at Cato Unbound: Clay Shirky on Journalism after Newspapers

Newspapers, as we know them, are doomed. Should we worry? What’s next for journalism? Will there be journalism? That’s what we’re talking about in this month edition of Cato Unbound, “How We Will (or Won’t) Survive Without Newspapers,” which kicks off today with a smart lead essay from Here Comes Everybody author Clay Shirky, “Not an Upgrade — An Upheaval“. A taste:

Like driving, journalism is not a profession — no degree or certification is required to practice it, and training often comes after hiring — and it is increasingly being transformed into an activity, open to all, sometimes done well, sometimes badly, but at a volume that simply cannot be supported by a small group of full-time workers. The journalistic models that will excel in the next few years will rely on new forms of creation, some of which will be done by professionals, some by amateurs, some by crowds, and some by machines.

This will not replace the older forms journalism, but then nothing else will either; both preservation and simple replacement are off the table. The change we’re living through isn’t an upgrade, it’s a upheaval, and it will be decades before anyone can really sort out the value of what’s been lost versus what’s been gained.

Doherty Defends "Folk Activism"

In today’s installment of Cato Unbound, Reason senior editor Brian Doherty defends “folk activism” (that’s we do here at Cato, in case you’re wondering) against Patri Friedman’s complaints of ineffectuality

Doherty argues, in effect, that Friedman’s effort to simply go out and float a boat on which one can do whatever floats one’s boat is parasitic on earlier “folk activist” aimed at persuasion. It is hard to find 20,000 people who will commit to moving to New Hampshire for the cause of liberty and, as Brian points out, it’s even harder to find people who will now commit to moving to a man-made island. The viability of projects like Seasteading seems to depend on the success of prior evangelism. 

That said, one of the merits of Friedman’s “dynamic geography” is that it is not really a “libertarian” project at all. As he writes in his Unbound lead essay:

Because we have no a priori knowledge of the best form of government, the search for good societies requires experimentation as well as theory — trying many new institutions to see how they work in practice.

I think there’s good reason to expect competing sea-top jurisdictions to settle on a scheme of governance more libertarian than what the world’s current nation states have to offer. But I also think there’s little reason to expect a seastead to embody the system of most libertarians’ dreams unless a lot of libertarians coordinate and settle there. In that case, it’s really clear that creating a libertarian society from whole cloth depends on the prior existence of libertarians, which depends on the success of the folk activism that produces them.

For more on seasteading, check out yesterday’s Cato Policy forum with Patri Friedman.

[Cross-posted at Cato@Liberty]

New at Cato Unbound: Lott Replies to Loury

John Lott is unimpressed with Loury’s argument. The gist:

Charges of racism flow freely in Professor Loury’s recent book and this essay.  He makes it seem that we lock up blacks because whites are afraid of them or that we simply dislike them and want to keep them locked up and away from the rest of society.  But Loury forgets an important fact: for violent and property crime there is always an individual victim who gets hurt — for black criminals that victim is overwhelmingly black.  Nor does he recognize how extremely progressive criminal penalties are. He also neglects acknowledging that we can’t determine if the number of people in prison is “too high” without discussing the benefit from prison — without discussing how many crimes were deterred.

Many blacks have their lives disrupted by the criminal justice system, but the lives and property of many blacks are also protected by that same system.  Looking at only the cost of imprisonment seems a very strange way to answer the question of whether we should change the current system.

I’m really lookin forward to the rest of the replies, and to the subsequent blog chat. I find myself fairly sympathetic both to Loury and Lott, which gives me the sense that many elements of their positions are not mutually exclusive.

New at Cato Unbound: Glenn Loury on American Prison Policy

This month’s Cato Unbound is devoted to the topic “Behind Bars in the Land of the Free.” Brown University’s Glenn Loury kicks off the discussion with his lead essay “A Nation of Jailers,” in which he argues that American prison policy is both a travesty of liberty and equality. 

I’ve often tangled with other libertarians about the effects of social norms on liberty. Glenn has made me think harder about the way the idea of individual responsibility is used selectively to reinforce barriers to opportunity. I wonder what others think about this passage of Glenn’s, which I think is correct, but which I admit makes me a bit uncomfortable:

What we Americans fail to recognize — not merely as individuals, I stress, but as a political community — is that these ghetto enclaves and marginal spaces of our cities, which are the source of most prison inmates, are products of our own making: Precisely because we do not want those people near us, we have structured the space in our urban environment so as to keep them away from us. Then, when they fester in their isolation and their marginality, we hypocritically point a finger, saying in effect: “Look at those people. They threaten to the civilized body. They must therefore be expelled, imprisoned, controlled.” It is not we who must take social responsibility to reform our institutions but, rather, it is they who need to take personal responsibility for their wrongful acts. It is not we who must set our collective affairs aright, but they who must get their individual acts together. This posture, I suggest, is inconsistent with the attainment of a just distribution of benefits and burdens in society.

What say you?

John R. Lott, Bruce Western, and James Q. Wilson are set to reply.


If the discussion of Harvard political theorist Nancy Rosenblum’s On the Side of Angels: An Appreciation of Parties and Partisanship at Jacob Levy’s digs isn’t enough for you, try this month’s Cato Unbound, where Rosenblum makes her case for partisanship in today’s lead essay. In the coming week and a half, we’ll have replies from Cato’s own Brink Lindsey, GW political scientist Henry Farrell, and Stanford’s James Fishkin.

My problem with partisanship in the U.S. is that, due to the structure of the electoral system, there’s really no place for more than two parties. My own disenchantment with active political participation is in part driven by the fact that there is next to no chance that any party I would be willing to join could be a real force in government. I suspect that in the possible world where the U.S. suddenly became a proportional parliamentary system, a party with roughly my politics could pick up a fair number of seats and would have a chance of sharing power in coalition governments. But in the actual world, the best I can do is be a Libertarian and totally irrelevant, or I can join the Democrats or the Republicans and be actively hated, for one reason or other, by my co-partisans. So, no thanks. 

I’m curious to see how my partisan sympathies shake out when I suddenly become Canadian.

Pre-Dawn Elephant Groping

This month’s Cato Unbound, “What Happened: Anatomies of the Financial Crisis,” is devoted to digging in and getting the real story. We tapped four economists with four very different perspectives. So far, we’ve heard from three of them, and the fact that each has said such radically different things is both frustrating and illuminating. Larry White says the trouble we’re in was caused by a profligate Fed and government policies that encouraged bad home loans.  Bill Black says a lack of regulation left executives with the incentive to maximize short-term profits and capture big bonuses, basically defrauding creditors and shareholders. Casey Mulligan wants to explain the housing boom and bust, and thinks it was based in consumer/investor expectations about future returns to homeownership, not in supply, demand, or subsidies during the boom. But so far, he says, we don’t know enough to say whether those expectations were rational — based in reasonable-but-innacurate predictions about changes in preferences or technologies — or were irrationally exuberant. So we don’t yet know what to do about it.

Brad Delong will have his say on Monday. At this point, I’m hoping he doesn’t agree with any of the previous essayists, so that we can go into the informal discussion part of the issue with total dissensus. But since these guys are all surely hyper-rational Bayesian updaters, we’re bound to have perfect convergence by the end of the blog chat. Surely! But, seriously folks, I’m personally left with the sense that White, Black, and Mulligan (who should be named Gray) are all on to deeply important aspects of the One True Explanation of the financial crisis. The sun will soon rise and we’ll see this thing in the light. And we’ll laugh. Because elephants are morose, yet humorous.

Dean Baker on Libertarians and the Fight Against Corporatism

In yesterday’s Cato Unbound lefty economist Dean Baker sees the possibility for common ground between libertarians and progressive in fighting corporatism, but doesn’t yet see libertarians making good on their part of the deal. While making largely sensible case against the status quo system of patents and copyrights, Baker writes:

The extraordinary abuses that we see every day as a result of patent protection for prescription drugs and copyright protection should be sending libertarians through the roof, and perhaps it does. But, where are the libertarians’ research programs on alternatives to patents for financing drug research or alternatives to copyrights for financing creative and artistic work? (I couldn’t find either program on Cato’s website.)

I’m not raising these issues as debating points. I absolutely believe that copyrights and patent monopolies for prescription drugs are extremely pernicious forms of government intervention into the market. I can’t understand why any serious libertarian would not be as bothered as I am.

Well, I am as bothered as Baker is. And over at Cato@Liberty, Tim Lee brings Baker up to date on some of his and Cato’s work on IP. Tim has a few disagreements with Baker about the best government framework for encouraging innovation, but the extent of overall agreement really is pretty impressive, and promising.

Yglesias on Libertarians and Corporate Power

Today at Cato Unbound, Matthew Yglesias replies to Roderick Long’s plea for distinguishing devotion to genuinely free markets from corporatism. Matt agrees with the general point, but thinks that it is absurdly utopian to think we can somehow keep the economy untainted by political power. So libertarians don’t really do anything to help by pointing out that it would be better to keep politics out of the economy. Here’s what I take to be the core of Matt’s argument:

… the larger problem is that libertarianism, even at its very best, tends to suffer from an impoverished set of ideas about how corporate domination of the public policy space might be prevented. The political left has, by contrast, the tradition of community organizing, a set of public interest advocacy organizations, allies in the trade union movement, efforts to improve the quality and independence of the civil service, and various notions about changing the methods by which campaigns are financed in the United States. This is hardly a perfect toolkit, and it can be enhanced in some ways by drawing on libertarian insights, but it’s something. And libertarians tend to be either indifferent or hostile to it, campaigning against public financing, strong labor unions, and the civil service.

In practice, libertarianism seems to have little to say about how to bring about political change except to work hand-in-hand with business lobbies when the interests of business and free markets are aligned, or else when business interests are masquerading as libertarianism.

I think this is an interesting challenge. My own view, which I take from Hayek and Buchanan, is that we need constitutional reform that requires redistributive policy to meet certain conditions of generality or non-discrimination. I don’t think this would will work perfectly, and I’m sure that any paper barrier to special-interest payoffs would be interpretatively eroded over time. But I think it would be a barrier to corporate abuse of political power.

I agree with Matt when he says:

Much of the world labors under hopelessly corrupt governments, wherein the police and security services are little more than shakedown operations or enforcers for local bigwigs. But elsewhere, justice is administered with a modicum of efficacy. Similarly, there are real alternatives to run-amok corporate dominance of the policy environment. There are better and worse civil services in the world, and even within individual countries some agencies work better than others.

Government in the U.S. is in fact relatively limited by constitution and custom. We have our free speech and our guns and cops still can’t come into our houses uninvited, etc. And it could be even more limited. I don’t think Matt takes seriously enough the degree to which progressives and New Dealers opened the way for today’s government-saturated corporatist markets. His position seems to be that we should keep all that regulatory and redistributive discretion for the government, I guess on the off-chance that his favorite political coalition might use it for something other than the benefit of corporations and other narrow interests. But, since we all know that’s not going to happen, we should promote “countervailing forces” within government and without. Yet if Matt is right, and justice can be administered with a modicum of efficiency and government can work relatively well, then why not simplify matters a lot and put stricter limits on the government’s power to rig the economic system?  We may not be able to get politics out of the economy altogether, but Matt seems to agree in principle that we could do a lot better, so I wonder why is he making such a big deal out of campaign finance reform, community organizing, and labor unions, as if there is simply no hope of more directly reining in the use of government power for private advantage.