About January 2018
What are the factors that hold our economy back? For much of the twentieth century, the U.S. economy grew thanks to technological improvements, rising educational levels, and women entering the workforce. Those gains are not likely to be seen again; technological productivity gains appear to have slowed, while education faces decreasing marginal returns, and nearly all women who want to be in the workforce already there. If we aim to boost economic growth, we will have to look elsewhere.
One place that suggests itself is the regulatory state. Brink Lindsey of the Niskanen Center and Steven M. Teles of the New America Foundation are the authors of The Captured Economy, a book that examines how regulation tilts the economy toward slower growth - and toward greater inequality. In this month’s lead essay they offer a sample of their vision, in which government has to be sure a significant role to play, and one that libertarians will not necessarily accept. But they do draw on key libertarian insights about how incentives affect government behavior, and how the frictions caused by regulation can indeed harm society at large. They cast their intervention as part of the larger “liberaltarian” project that has been underway in recent years, and that borrows freely from orthodox libertarianism even as it does not accept everything in the libertarian program as it is usually understood.
Joining us to comment this month we have Richard V. Reeves of the Brookings Institution, Professor Ilya Somin of George Mason University, and Professor Henry Farrell of George Washington University. We also welcome readers’ comments and letters to the editor, and we look forward to a vigorous yet civil discussion of what may be a contentious topic.
Brink Lindsey and Steven M. Teles have largely made their peace with “big government.” They insist, though, that not all big government is good, and they draw on libertarian insights to criticize government action that tends to concentrate wealth and power in the hands of a few. The political mainstream can learn much about doing even big government better, and ironically, some of that insight comes from those who have been most skeptical about big government itself - libertarians.
Ilya Somin argues that in our attempts to free the economy and deliver prosperity to more people, there is no substitute for limited government. Government has not only captured the economy; it holds people where they are by making it more difficult to live and work in new places. This reduces economy dynamism as well as limiting individuals’ choices. Human mobility is a key part of the puzzle, he argues.
Henry Farrell urges libertarians to give up on the idea of rent seeking. There is no such thing as an unregulated market, so “rent seeking” ends up meaning something like “state action I happen to disfavor.” This will not do, he says, and he urges decisive interventions, particularly in financial markets, to save the neoliberal state. This he characterizes as a mix of market institutions and democracy. Democracy is the part in peril, he argues, not markets.
liberal. Though it is out of fashion and more often found a term of abuse today, liberal politics works to ensure that citizens share power broadly, and that no one can wield arbitrary power over another. Reeves suggests that we need even more of this kind of liberalism.
Conversation through the end of the month.
Related at Cato
Cato White Paper: Low-Hanging Fruit Guarded by Dragons: Reforming Regressive Regulation to Boost U.S. Economic Growth, June 22, 2015.
Online Forum: Reviving Economic Growth, December 4, 2014
Cato Unbound: Libertarianism: Past and Prospects, March 2007
Cato Unbound: Should Libertarians Vote Democrat? October 2006