Steve Horwitz

October 25, 2013 at 12:20 pm· Reply

Wow. This is what is called “critical thinking” and “reasoned discourse?” You guys sure this post was supposed to go on this site?

It may be hard for some to handle this but the private and public sector are no different in fundamental ways. They can both be inadequate, ineffective, competent, provide an important service to the consumer. The can both put Shinola on shit. It is up to the employees and shareholders to either make the organization better or preside over their own ruin.

This is the worst sort of uncritical thinking about markets and politics. The comparison is NOT between what individual corporations/firms and individual government departments (or gov’t as a whole) do, but the systems within which they operate.

The argument for the superiority of markets is not that corporations are “better” or by themselves less likely to be bad in all of these ways. It’s that they operate in an institutional environment that provides them with knowledge and incentives to both KNOW when they’ve made errors and give them guidance and incentives to correct them in the right way. This is what market prices/profits/losses do and there is no comparably powerful analogue in politics. Voting doesn’t do the trick as numerous scholars have shown the ways in which that process has built-in bias that do not assure the same sort of corrective processes.

I don’t give a gosh dilly darn about how wise/good corporate leaders and government employees are, nor about how they try to spin their mistakes etc.. What I care about are the epistemological and incentive properties of the institutions within which they operate, and on that score the theory and evidence favors markets.

Rather than treating those of us who think markets are better as ignoramouses (do you really think the tone of this piece enhances civil discourse?) why don’t you do what critical thinkers are supposed to do and read the BEST arguments on the other side, not the strawmen you so clumsily knock down here?

• Mark

  October 26, 2013 at 12:29 pm· Reply

   

  Wow, too. I didn’t know anyone was reading this blog. It has been quite some time since I have seen any comments at all. I do not really write for others. I write these days more as a personal diary as I have found few that are really willing to hang with a detailed and prolonged argument come what may. Most of the posts here are simply copied from my personal blog. I am elated that you actually took the time to respond. I was not aware that there were any requirements for the ‘regulation’ of this site; the free market place of ideas if you will. If I were to classify this piece I would think of it more as a provocative op-ed. I guess in that sense it worked. It really came out of my frustration with the Yahoo email engine, the current propaganda about technology and Obama-Care and the highly simplistic ways these topics get tossed around. I was not trying to write a ‘critical thinking’ piece nor do I think that is a requirement for everything that gets posted here. I am not the only one that has posted these types of articles here. I have seen thinly veiled anti-Semitic, anti-Islamic, anti-liberal, anti-religious, pro-gay, civil morality lessons posts here by the other authors. I do not think or advocate that these kinds of topics should not be posted here. In many cases, they certainly are not reading and dissecting the “other side” nor do I think they necessarily should. I can comment and disagree if I choose or say nothing at all. Unlike academia I have no career to make, position to take until death do us part, economic incentive to publish or impress. As far as I am concerned all is fair here but always subject to scrutiny, objection and argument.

   

  I certainly love to engage in detailed and critical argument as the vast majority of my posts have been concerned with studies from reports by the GAO, CBO, OBM, FCIC, AEI, Congressional reports, legislative bills, Supreme Court decisions, Pew and Gallop polls, Simpson-Bowles, the Ryan Plan, historical surveys (i.e., Adam Smith, Carl Marx, etc.) and the detailed and highly referenced and footnoted series on philosophy. I believe I footnote and reference more than anyone else on this site. I have worked with statistical correlations as yet, unpublished and the problems of causality. The references below this post barely scratch the surface of the more ‘critical thinking’ posts I have published here. I also have read and dealt with articles by yourself, Jonathan Catalan, Mises, Rothbard, Rand and other publications on the Mises site. I have read much more than I have ever published from that site. I have read and commented on critiques both pro and con of empirical evidence related to microeconomics and the business cycle, regulation, inflation, boom/bust, capitalization and the Fed . The only person that ever really took the time to respond on this blog was Jeff. I really appreciate him taking the time to comment even if we disagree. I seriously doubt that you have ever read many of my posts here even the ones concerning yourself so I am a bit amazed that this post elicited a response from you.

   

  I disagree with Jeff on his notions of civility. I have no ‘ought-to’s or moral compulsions about civil argument. I do not attack individuals personally with profanity because I think that is an admonition of defeat in an argument not from some moral compulsion. As a blogger for many years I have regularly been attacked personally. I actually like it when that happens because I use it to illustrate the failure of an argument. In general, I have no problem attacking ideologies, philosophies, dogmas, etc. as they are not people but positions which can be dissected, subjected to empirical evidence, critiqued for logical inconsistencies and parodied. Provocation is one tool among others to elicit comments as you have demonstrated and possibly spur further, more critical examinations. Certainly, professors are not strangers to these tactics. I see the market place of ideas as an unfettered, type of ‘social contract’ which replaces war and violence with a cathartic sport and linguistic sparring and most important offers me the possibility of learning something, being persuaded to change my position, research and articulate issues more clearly. I would think you would not be unfamiliar with these notions.

   

  I understand your lack of concern with anecdotal comments. I enjoy theoria and praxis. Naturally, “systems” can and endlessly have been characterized and constrained to fit theoria so ‘critical thinking’ would be remiss without a healthy skepticism in this regard. I, apparently unlike some of the purported microeconomic theorists, put some stock in empirical studies and statistics. I also sympathize with Mises’ concern with underlying ideologies which has been discussed in terms of essentialism and with his distrust of positivism. However, when you argue from ‘the whole’, the somewhat editorialized “systems”, you indict and implicate the particular. Therefore, the particular is relevant and, depending on the degree to which you universalize your systemic dynamics, hold to your unique characterizations of ‘the whole’, particular divergent cases may indicate a systemic crisis with your organizational analysis, your theoria. Anecdotal evidence may be an indication of systemic inconsistencies but should not be construed as apodictive proof under any circumstances. I find theroia informs praxis and vice versa. Therefore, with regard to this,

   

  “The argument for the superiority of markets is not that corporations are “better” or by themselves less likely to be bad in all of these ways. It’s that they operate in an institutional environment that provides them with knowledge and incentives to both KNOW when they’ve made errors and give them guidance and incentives to correct them in the right way. This is what market prices/profits/losses do and there is no comparably powerful analogue in politics. Voting doesn’t do the trick as numerous scholars have shown the ways in which that process has built-in bias that do not assure the same sort of corrective processes.”

   

  I have a few comments. Your systemic assumptions here if I understand you correctly are:

   

  Private, by this I mean non-government, institutions are systemically built to retain knowledge and incentives. Is the logical contrary true that government is systemically inferior to the task of retaining knowledge and providing incentive? I assume this is implied by your reasoning.

   

  It appears as if you question the whole ideal of democracy as a self-correcting process, albeit bumpy and messy but a progressive form of self governance. If voting is irretrievably flawed with “built-in bias, under your systemic analysis wouldn’t that indict democracy in general? Isn’t voting the cornerstone of democracy? Are we to suppose that the unbridled governance of the market is sufficient to replace the flawed governance of democracy?

   

  The market is “self-correcting”. Is this in opposition to democracy’s fate fatale?

   

  Part of the problem in this undertaking has much in common with problems in Hegel. Your systemic analysis has run aground by virtue of its implied and assumed universality. The unicity which characterizes the superiority of the ‘free-market’ over the rabble of a democracy is highly over generalized. I would love to see the studies you alluded to as I am sure they and their opposing scholarly rebuttals do not paint such a clear and unobstructed path as you insinuate. In particular, you along with Ted Cruz seem to not take into account the ‘conglomerate’ organization of the Federal Government ; indeed, indeed, the possibility of any large and diversified (heterogeneous) systemic governmental organization. Do you think the GAO is micro managed from a ubiquitous hierarchy? Be careful, my wife retired as an auditor from the GAO and she loves to digest uninformed generalizations. Do you think that Federal employees are de-incentivized by a looming, homogenous bureaucracy? And would you have us believe that this does not occur in large corporations? Are all Federal agencies rendered systemically inadequate by the phallic obelisk, the evolutionary monolith, of your homogenized systemic analysis? Isn’t there some over simplification at work in such conveniences? I am not imputing a “better” or worse, a value judgment, on your analysis. I merely make the claim that the systemic underpinnings you are so eager to attribute to government and not-government (i.e., free market), henceforth G and not-G, may not be taken up (aufhebung) by what I see as the somewhat arbitrary boundaries of G and not-G, public and private, but alternatively and more appropriately by organization size, complexity, and coherency.

   

  It might be informative to take your statistical correlations and plug in dependent variables with regard to these organizational dynamics to see what you get. It seems somewhat intuitive that size (and the quality of size) matter in this regard. If you are looking at efficiency and knowledge retention you will probably find that sheer size, obstacles throw up by complexity and the degree to which management holds or does not hold multi-varied goals, dynamics, personal and collective goals together has much more to do with your outcomes than G or not-G. This is where you lose credibility in my opinion. You apparently cannot see the ways in which G and not-G share more organization dynamics in common than mere reduction to nouns. These dynamics are verbs not nouns. A conglomerate like GE can be run efficiently and with knowledge retention by making itself more heterogeneous, localized and departmentally self-contained. The government can and has done this as well. If you think the government is organized like over-hyped politicians would have you believe you really know nothing about how the Federal Government works. It is highly intuitive to think that to the degree that the G or not-G becomes a huge, vertically non-integrated, homogenous monolith, an obelisk to chaos is to the same degree that inefficiency and learning system feedback or loopback is inhibited AND that the difference between the nouns G and not-G is irrelevant and indistinguishable except only by virtue of your ideological underpinnings. Rather, system organizational dynamics do not come from the macro but from the micro as I assume you have some sympathy. Depending on how they are run G and not-G, massive organizations, can do well with your determining criteria or fail. The praxis, the truth is always somewhere in the middle. Some things they do well and others not so well. An oracular pronouncement based on ideological persuasion does not address systems and organizations as you suppose. I beg to differ, there is no decidable difference between G and not-G based on their formal noun derived and ideological infusions but on the successes and failures of size, complexity, and coherency. The ‘decidability’ of a dynamic, a systemic organization, a verb must itself be founded on a verb not on a self-evident, apriori, dogma that rests on a name, an arbitrary designation, a merely verbal bias (originating from subtle essentialisms as Mises might inform us) as G and not-G.