Re: Leftists knocking Friedman ?

On Feb 16, 10:30 am, stuff_st...@[EMAIL PROTECTED]
 wrote:
> On Sat, 16 Feb 2008 08:00:06 -0600, "John Galt"
>
> <whoisjohng...@[EMAIL PROTECTED]
> wrote:
> >I would personally say that the goverment has a role in mitigating the
> >negative effects on certain members of society whilst such "lurching"
is
> >taking place, to the extent that they are reasonably able (thinking
about
> >the avoidance of moral hazard, here, but there are other
considerations);
> >but if the goverment intervenes in the process itself, they tend to
distort
> >the market and ultimately accentuate the negative effects that one was
> >hoping to mitigate.
>
> Government also has the ability to dampen the swings of the pendulum
> in this process, resulting in more stability.

Can they do it in a timely fa****on Lord Keynes? Friedman easily shows
the evidence is against the dampening of the swings coming at the
right time. More often than not the Fed has made recessions worse and
inflations worse. Congresses record is even worse. You are taking nice
1960's theory and ignoring the lags of data. We often do not know a
recession has started until we are in one. Hence, monetary tightening
and inflation fighting policies are making the recession worse.  By
the time we realize a recession is here, act, and the action takes
full effect, the recesssion is often over. This makes inflation
worse.

 >Stability is a good
> thing, under valued by too many laissez faire types.

You have not read Friedman. He argues that doing nothing is more
stable than CONSTANTLY doing the wrong thing. Friedman and the so
called "Laissez-Faire" types are all about stability. However, the
monetarist argue the economy is more stable when policy is stable and
the money supply is stable. Friedman rightfully argues the most
unstable component of the economy is not investment as Keynes argues
or even consumption but the money supply. Congress changes spending
and taxes irrelevant of the business cycle. It is solely due to the
beliefs of what these should be by the party in power. The money
supply is much more unstable than anything else. Friedman clearly
advocated stable simple taxes, ie. Reagan '86. NB: Friedman may have
sup****ted lower taxes but I see no evidence he sup****ted raising the
lowest bracket taxes or cutting to 28%. However, the elimination of
capital gains, the decreasing of the amount of deductions and fewer
tax brackets were all Friedman. Stability in taxes and Stability in
the money supply gives us stable expectations which helps to keep the
economy stable.

Unpredictable willy nilly government policy gives instability.
Systematic policy to "fix" the economy that comes too late is worse
than no policy. At best it has no effect because it was expected and
people's expectations change to offset it. At worst the policy is all
wrong and makes things worse. Keynes was wrong. Government policy is
inherently unstable. Much more so than investment.

>They focus on the
> boom and ignore the crash or right it off as an economic
> inevitability, a culling of the herd if you would. But stability
> allows planning and more accurate planning. And that results in more
> investment and more productive investment.
>

.. Stability starts with tying government's hands and keeping
government policy stable. We can not have the swings between Democrats
and Republicans and alternate between low and lower taxes every 4 to 8
years when a new president takes over. Thank God, the core of the
Reagan tax reform is in place and we still have a more simple tax
system even if the rates have changed the number of brackets have not
and deductions have not got out of hand. The deductions for
speculation are still gone. We can not have the swings caused by new
Fed reserve chairman who can not remember what happened in the 1970's
despite writing academic papers about it. We can not have drastic
divergence in policy from one Federal Chairman to the next.

Stability requires rules not discretionary. That goes for taxes,
spending, and monetary policy. I am not sure Friedman would agree but
I believe this is achieved by a flat tax rate with no deductions. NB:
A flat tax can have more than one bracket. We need fewer brackets and
elimination of social engineering through confusing deductions. In
addition balancing the budgets while keeping taxes constant, rates
that is, is necessary. Couple that with fixed monetary growth and the
economy will be much more stable. There will still be recessions and
expansions but the government can not make the ill effects of either
worse.

> (This stability is one of the reason markets and the economy perform
> better under Democratic administrations that push regulatory policies
> that increase stability. )

Please. What prices were regulated under Clinton? It was the price
caps in CA that caused rolling black outs. Price caps never worked and
never will. I suppose you think waiting in line for hours to get gas
in the 1970's was a good idea.

>While the very richest don't get to make
> the massive profits we see under GOP de-regualtory and nonenforcement
> policies,

Only the rich are benefited? How many new jobs are created to get
these profits? A lot.

>overall the stability allows most of the rest of the herd to
> move forward to greater growth.

On the contrary regulating prices and wages keeping profits low give
less incentive to invest, lower returns, The economy grows more slowly
than it should and we stagnate due to lower incentives to invest.

>Thus airline deregulation may allow a
> surge of profitable small airlines for a time, in the long run we get
> numerous failures, bankruptcies, and abandoned obligations.

Southwest seems to be doing fine. Some of the budget airlines are
consolidated. However, a lot of this has to do with Kerosene costs.