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Dani Rodrik has painted himself into a corner
Dani Rodrik responds here to my pointed remarks on his argument for industrial policy. Rodrik's response, however, is along the same lines of his earlier - "I'm sophisticated, you're simplistic" - post on why economists disagree. In this case, it's 'libertarians are ideologues who are immune to evidence.'
Rodrik, however, has painted himself into a corner because he cannot at the same time say that the "systematic empirical evidence" for market imperfections in education, health, social insurance and Keynesian stabilization policy is "sketchy, to say the least" (also "difficult to pin down" and 'unsystematic') and also claim that libertarians are ideologues who are immune to evidence.
Say rather that libertarian economists are immune to sketchy, unsystematic, difficult to pin down evidence. Rodrik is thus right that he is "not as unconventional as I sometimes think I am. The real revolutionaries here are the libertarians." The libertarian economists are revolutionaries, however, not because they are immune to evidence but because they respect evidence so much that they are unwilling to accept "conventional wisdom" simply because it is conventional.
I will have more to say on this at a later date but that is enough for now.
Posted by Alex Tabarrok on August 10, 2007 at 01:35 PM in Economics | Permalink
Comments
I'd say it's unhelpful to generalize about which sorts of economists respect evidence more, as it presumably varies by the individual.
It is worth noting that libertarians and non-libertarians have different normative beliefs (specifically on the intrinsic value of free choice) that are each prone to color their respective interpretations of the evidence.
Posted by: Dan at Aug 10, 2007 2:01:59 PM
It is in that spirit that I have been mulling about the derision and incredulity with which my recent post on industrial policy was met among some libertarian bloggers.
Wow, arrogant much Mr Rodrik?
Most importantly, I believe government can be a force for good; they do not.
No, that is not true at all.
They shrug off the fact that there is more freedom and more wealth in those parts of the world where the government is stronger, not weaker.
He willfully miscategorizes what "strong" means here. This is like saying libertarians don't like NBA games where refs enforce the rules as they are really anarchists at heart.
I want to understand what determines these outcomes, and to know how we can improve the ratio of the first to the second.
And libertarians don't want to? Nice strawman he sets up there.
It is genuinely hard to see how we can carry out a fruitful discussion when we observe the world through such different glasses.
Ah, the old "ur a moran, lol" argument. I was waiting for it.
Posted by: BlogReader at Aug 10, 2007 2:15:43 PM
Amen!
I was sorely tempted to argue with Dani, but when I caught myself looking up the nomenclature I figured he would either catch me in an amateur error or claim I was simplistic.
So instead I finally stopped reading him.
It is pretty simple. If you keep reaching for state power as part of your "sophisticated" answer, then even an amateur will notice there is something wrong.
Posted by: August at Aug 10, 2007 2:18:28 PM
Consider part of his reply:
"But third, libertarians hold on to their priors so strongly that they seem impervious to evidence. They shrug off the fact that there is more freedom and more wealth in those parts of the world where the government is stronger, not weaker. With respect to industrial policy proper, they refuse to engage with the fact that every nation that has grown rapidly has made use of it."
First off I have no idea what "strong" government means? North Korea's got a strong state. So did the USSR. And just because Europe pursued ONE particular policy doesn't explain the multi-causal nature of economic development.
Any cursory view of public choice supports the "revolutionary" view Alex was promoting. Name dropping about a Princeton dissertation adviser doesn't make someone's views better than a ton of Nobel prizing winning research that's caused genuine skepticism about the role the state should play in development.
Finally, economists who have studied history of thought would not call the notion that unfettered markets are a good path to growth and prosperity "revolutionary." See for example, oh Adam Smith in a little book called Wealth of Nations.
Posted by: Pat Lynch at Aug 10, 2007 2:27:52 PM
Nice post!
Rodrik writes:
"I look at the world and see some government programs that work and others that fail."
What government interventions has Rodrik called failures?
Has Rodrik ever called for significant liberalization in the US?
Social democrats rarely do, because admitting that longstanding status quo policies are failures embarrasses the faith that democracy works.
Has Rodrik ever acknowledged terrible, long-standing error in status quo US policy?
Posted by: Daniel Klein at Aug 10, 2007 2:41:07 PM
"I look at the world and see some government programs that work and others that fail. I want to understand what determines these outcomes, and to know how we can improve the ratio of the first to the second."
Agreed.
Libertarians want to achieve this improved ratio by cutting the number of failed government programs. What's wrong with that?
Posted by: PJ at Aug 10, 2007 3:01:52 PM
Arent we the only industrialized nation that is trying to become MORE socialized, seems everyone that got there before us didnt like the view........
Posted by: jacob at Aug 10, 2007 3:07:55 PM
I do not know about Europe, but it is quite difficult to determine whether Asia is evidence for the success of industrial policy (Rodrik's 'strong government'?). Those countries which have become economically advanced had a lot of other economic and non-economic factors at work.
Singapore, for example, seems to be a model of industrial planning success, but only if you ignore the first 150 years of its history - where had raw capitalism, British common law, a great location for a trading port, entrepreneurial and hardworking immigrant labor - much like Hong Kong.
Posted by: PJ at Aug 10, 2007 3:34:29 PM
You should not engage in a battle of wits with an unarmed person.
Posted by: Tom at Aug 10, 2007 3:59:49 PM
>>"I'm sophisticated, your simplistic"
Was this an intentional and ironic error?
Posted by: nli at Aug 10, 2007 4:16:56 PM
nli - ha, you got me. Corrected.
Posted by: Alex Tabarrok at Aug 10, 2007 4:36:48 PM
It's like an undergrad intro to political philosophy course all over again.
Posted by: Jay at Aug 10, 2007 4:41:05 PM
Alex,
You may have been overly kind in your characterization of Rodrik's comments. A person who paints himself into a corner has made a mistake sure, but he HAS demonstrated sufficient intellect to have opened a can of paint used a brush.
Posted by: indiana jim at Aug 10, 2007 4:50:35 PM
What Rodrik and maybe some libertarians miss is that countries that have successful industrial policy would also be successful without industrial policy. Culture and institutions matter far more.
Posted by: 8 at Aug 10, 2007 5:19:39 PM
tyler seems to be partially painted into this corner too (http://rodrik.typepad.com/dani_rodriks_weblog/2007/08/irreconcilable-.html#comments). how respondeth ye rabid libertarians?
Posted by: hmmm at Aug 10, 2007 6:08:51 PM
My experience is that most libertarians are close-minded, have knee-jerk reactions, are unsophisticated in their thought, uncharitable to contrary views, and are ideological in a bad way, though they are nice people.
However, this also is true of most people of every other political view I've encountered, certainly including social democrats and left liberals.
I'm a philosopher and am not familiar with Rodrik's work. He's at Harvard, so I assume he must be good. Unfortunately, looking at the few posts of his I've seen, I don't yet have reason to think he's not like most people.
Posted by: K. at Aug 10, 2007 7:11:16 PM
He seems to have missed the point entirely. How can he fully recognize the public choice dilemma in his policy advice, brush it aside, then call anyone who reminds him of it an ideologue?
Posted by: Swimmy at Aug 10, 2007 8:34:16 PM
I don't see the argument here, but only the vitriol-reinforcing what Rodrik has been saying.
Posted by: Joe at Aug 10, 2007 10:44:09 PM
The problem is that Rodrik has been spewing vitriol, and we're calling him on it. We're not arguing against him; we're expressing our disappointment.
Posted by: K. at Aug 10, 2007 11:21:35 PM
Anyone who favors the individual over the community will always be revolutionary simply because the tide will always be in favor of the populist.
Posted by: Ray G at Aug 10, 2007 11:40:00 PM
Free Exchange had, by far, the best take on this dispute.
Posted by: John at Aug 11, 2007 1:42:42 AM
"The problem is that Rodrik has been spewing vitriol"
Read Rodrik's first post, then read Tabarrok's reply and explain how you could possibly come to that conclusion.
I understand how Tabarrok read Rodrik's argument but it's not like he actually engaged with the issue. The point Rodrik was trying to make, as far as I understood it, was that even in the face of empirical evidence that markets do not work, libertarians have as their default position the assumption that government intervention is a bad idea. Anyone who reads this blog would say that this is a reasonable argument.
What Tabarrok assumed was that Rodrik goes the other way and assumes that in the absence of compelling empirical evidence on should always favour state intervention. I don't know anyone who would make that argument and it is the height of uncharitableness to assume Rodrik believes it, even if that's what he appeared to be saying.
Tabarrok might not like the idea but I have frequently been struck by the number of times on this blog, he and sometime Tyler have made arguments of the form "the arguments are complex and reasonably balanced on both sides...but however, we fall in favour of keeping the state out of it". Perhaps it is not their advocacy of free markets that it the defining characteristic of some libertarian bloggers but their general distrust of the state. This said, if I lived in the US and not in Finland I might well share that distrust.
Posted by: Finnsense at Aug 11, 2007 2:21:05 AM
It's not that markets do not work. It's that markets do not work perfectly -- and yet no adult proponent of markets believes that they do. My belief is simply that freedom is better than coercion. If you don't believe that too, then I'd be happy to coerce you into sharing my belief (since of course you must agree that coercion is better than freedom -- and that coercing you is better than leaving you to believe that coercion is better than freedom.)
Posted by: Russell Nelson at Aug 11, 2007 3:19:17 AM
In theory I'd be willing to entertain the notion that the US should have an industrial policy, i.e. a policy where wise government bureaucrats and honest politicians decide what the most efficient use of capital is.
In practice, our government is spending billions and billions on things like bridges to nowhere, and at the same time asserting it doesn't have enough money to repair bridges it has identified as being in need of repair.
Until our government shows both competence and honesty regarding capital spending, it is mindblowingly childish to suggest that we ought to give the government even more power over industrial investment.
Markets aren't perfect, but by design they are self correcting. Those with money that they destroy in foolish endeavors find themselves without money to reinvest. Those with money that they astutely invest and create more wealth, they get to keep it (or most of it anyway) and thus have the money to reinvest.
Government on the other hand is basically designed to consume wealth, and there is no such automatic self correction mechanism as I outlined int he last paragraph. On the contrary, when government fails, the impulse is to throw even more money at its incompetence (think urban public schools or government aid to kleptocracies), while if a government is succeeding at something the money is shut off. When was the last time you heard someone say we should give foreign aid to China? Note they still have tens of millions of people in World Bank definition poverty.
Dani Rodrik seems to think that if rich countries have growing governments it is because it is a choice the public has made and should be rewarded. GMU has some world class economists on its staff who have convincingly (economics Nobel Prize) demonstrated that the reason government grows and does the stupid things it does is not because of bad incentives. Alex Tabarrok seems more in tune with this empirically based reality, perhaps through face to face discussions, perhaps merely from reading about Public Choice Theory. Either way though it is either disingenuous or ignorant to claim that Tabarrok, and libertarians in general, are arguing as idealogues without regard to the evidence. On the contrary it is Rodrik who seem willfully blind.
Posted by: happyjuggler0 at Aug 11, 2007 11:42:33 AM
Damn. the reason government grows and does the stupid things it does is not because of bad incentives
should read
the reason government grows and does the stupid things it does is not because the general public desires it, but because of bad incentives
Posted by: happyjuggler0 at Aug 11, 2007 11:47:38 AM
