Boudreaux v. Rodrik

I have no idea how both you and Delong
arrived at such a verdict.

A ‘knockout’? give me a break.

Of course, DeLong is using an argument not made by Boudreaux, so maybe we shouldn’t credit him with the KO.

I had to stop reading the comments to deLong’s blog after about a dozen posts. They simply made no sense and made me want to cry.

I’m very much in favor of free trade, but I can make a case for industrial policy in some countries.

Imagine a broker cold calling potential clients from a wealthy zip code. He gets one on the line and finds out he has all his savings invested in bank CD’s of short duration, laddered.

The broker then has a choice. He can try to persuade his risk averse potential client to take his advice in buying and selling stocks, making him lots of comissions. He can try to persuade his risk averse potential client to put his money in a S&P 500 index fund. A third choice is to presuade his risk averse potential client to lengthen his maturities and to buy AAA corporate bonds and hold them to maturity, letting the broker pick the issues.

The second method is likely to be the most lucrative for the client and least lucrative for the broker. It also has the problem (broker’s point of view) of not being likely to close the deal with a seriously risk averse client.

The first method may well be the second best choice for the client assuming the broker doesn’t overtrade and is reasonably astute instead of plugging issues his company underwrites. It is surely the most lucrative for the broker. But it is even less likely he would get the potential client to sign up with the broker.

The third method is arguably the worst return for the client, with minimal, albeit regular, commissions for the broker. But it is most definitely the most likely to get accepted and make commissions more than $0.

Finally, and this is important, if the potential client hangs up, he (the non-client) would be worse off than under any of the three methods the broker might pitch at him.

Thus a theoretically so-so idea turns out to be the best idea. A country’s leader may well have an easier time persuading his countrymen, and the rich rentseekers in it, to go from a stupid tax and regulate the crap out of everything approach to a policy of wealth creation directed by a few “wise” (i.e. the technocrat head of state and rich rent seekers) men under the guise of industrial policy. They can use this dubious policy to keep labor unions at bay, direct credit to the rent seekers, and enforce high savings levels to fund this cheap credit, and sell it to the people under the theory that “it worked for Korea and Singapore”.

The industrial policy is surely worse off than letting everyone direct their own capital to what they see as underexploited opportunities. But it is also surely much better than economic suicide. If the head of state is unwilling (no bribes!) to go for a Hong Kong or Estonia type of approach, and if the rich mandarins would also be unwilling to let that happen, and if selling it to the people is too hard (see, we are letting WalMart come in and destroy thousands of mom and pop shops for your own good), then industrial policy may well be the best public choice option.

The real thing that makes poor countries rich is actually simply trying to do so. In other words, to create high levels of GDP this year, which is shorthand for all the wealth created in that country that year, the best way to go about it is to try to create wealth. A virtually tautology, but one often missed by those who forget what GDP is. You need to actually try to create wealth in order to actually create it.

The countries that all left poverty and made it into prosperity all dumped wealth creation restrictions (taxes and regulations) to one degree or another and freed up (to one degree or another) potential weath creators to actually create new wealth.

Freer trade and freer market policies work better than industrial policy and trade restrictions, but they both work better than anti-wealth policies.

Didnt you all know that fustercluck is a noble prize winning biologist?
Who thinks energy is converted to matter in photosynthesis.

“I find the difference in quality between the blogger and the commentators to be interesting. Why is it that a person such as DeLong attracts droves of posters that more libertarian minded blogs concerned with economics seem to have been saved from (I add “concerned about economics”, because you can surely find libertarian minded sites in general that are not of such high quality and intellectual honesty).”

I’ve been thinking about the quality of Delong’s posters. I don’t think it has to do with libertarian vs. non-libertarian though. I see the problem as coming from Delong’s “impeach Bush” posts. Whether or not you agree with Delong’s views on Bush, I think Delong’s style of Bush posts attracts a lot readers that have an instinctive dislike of Bush and other knee-jerk reactions on other Democratic issues. So, these same readers also seem to stick around and criticize Delong when disagrees with the standard Democratic issues.

I also like the idea of multiplicity of equilibria in comment quality. Consistently high comment quality prevents low quality posters from entering the fray (they get mocked, their arguments get picked apart). High comment quality also attracts other high high quality posters (for discussion, etc.)

Similarly, I see low quality posters attract other low quality posters (for simplistic analysis, stupid name calling, etc.). Low quality posters also drive out high quality posters (what’s the point of posting on Delong’s blog if 20 people respond to your post with inane commentary?).

So, if Delong’s impeach posts are bringing low quality posters, then Delong’s post quality could have shifted to a low quality equilibrium.

Wow, those comments made my head hurt. There is definitely a large contingent for whom Earth is obviously not their first planet.

fuster: The purpose of regional governments is to protect people’s property rights (I note that everyone owns themselves). The purpose of a central government is to do ONLY the protection that regional governments cannot do. Everything else, including international trade, can be arranged through voluntary, non-coercive means.