Fight on the Right

Grab your popcorn: there's nothing better than a fight on the Right.  In one corner, there is Arthur Brooks, head of AEI and author of the recently published "The Battle: How the Fight between Free Enterprise and Big Government Will Shape America's Future." In the other corner is Brink Lindsey, a long-time CATO scholar and author of The Age of Abundance: How Prosperity Transformed America’s Politics and Culture. 

Normally, you would expect these two allies to be allied on the issue of a call for free markets in the USA, but in what I'll call the "Brink vs Brooks battle," Brooks is getting what must be unexpected friendly fire from Brink. Here's an excerpt from Lindsey's essay in American Prospect:

First, free markets. Is Brooks' distinction between all-American freedom and European-style statism a valid one? And here at home, do elites really support the state while everyone else supports the market? No and no. When it comes to establishing and maintaining open and competitive markets, the U.S. institutional and policy environment isn't really that exceptional at all. Meanwhile, elites are actually more likely to support free-market policies than is the American demos.

At heart, what Lindsey is really disturbed by is veiled racism.  So am I.  But I think Lindsey is off base here:

But Brooks doesn't want to use economic arguments. He counsels against "getting stuck in the old arguments over money." Instead, he wants to defend America's track record of more modest social spending on cultural grounds. And that is a really bad idea. Our tragic history of race relations may have inhibited spending, but we should be ashamed of that cultural heritage. We certainly shouldn't embrace it and brag about it. Brooks apparently doesn't realize what he's doing; he thinks he's touting good old Yankee self-reliance. But his argument is offensive even if he's oblivious to how offensive he's being.

Let's back up and consider the two substantive arguments: (a) that America doesn't have a distinct culture of economic freedom vis-a-vis the Europeans and (b) the American public isn't really more free market than elites (a point which Lindsey relies on Bryan Caplan's book, The Myth of the Rational Voter). 

On the first point, Lindsey's own words make a weak case: "Plenty of European countries have markets about as free as those in the land of the free."  Plenty?  He then cites the same countries Paul Krugman cites when comparing American capitalism to European socialism: the Nordics. And yes, on balance, these economies perform much better than Southern, Eastern, and Central European economies.  But they are still less free than the U.S. (at least according to the Heritage/WSJ Index), and their Euro siblings are downright tragedies.  Lindsey does make a valid distinction between regulatory freedom and fiscal freedom (tax burdens and redistributive spending), but there's no denying the size of the state is about more than the homogeneity of the populace. France, Denmark, Italy ... these are nations where government expenditure is more than half of the economy.  For any entrepreneur who instinctively feels there should be a limit to the state's claim on his profit, 50 percent is bright line symbolizing a kind of serfdom on the other side.

The second argument, however, seems very effective.  Caplan documents a number of irrational economic beliefs of the public, such as the hostility to free trade and a hostility to labor efficiency.  He also shows that educated people think more correctly (that is "rationally") like economists on these and other issues. But Lindsey muddies the waters when he conflates Caplan's educated group with Brooks' 30 percent group, and especially with media elites (shown elsewhere to have biases of various kinds).  More properly, and I've challenged Caplan on this, voter irrationality should not be overinterpreted.  It simply means that busy people don't bother with complex policy designs, a kind of policy agnosticism.  It does not mean they lack core policy convictions (e.g. for lower taxes and smaller government).  Nor does it mean they are agnostic about outcomes, which explains the strong relationship between unemployment rates and results at the ballot box. I've written a more complex assessment of Caplan's book here (for all you rational voters). 

What Brooks is ultimately arguing is that the fundamental direction of the country will be determined by a clash of values, not mathematical models. Lindsey wants to amend that argument to include front and center our newish values about racial equality, not just traditional values about freedom and federalism. Three cheers for that. Still, I think Brooks is ultimately correct. The statist argument has always been an emotional one, laden with appeals to sympathy, empathy, justice, and equality. For the anti-statist argument to rest on mathematical proofs and cold-hearted logic favoring efficiency is a loser. It's not enough to win the intellectual case for smaller government and entrepreneurial economies. The cause of entrepreneurial freedom needs to be made at an emotional level in the public arena.

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