The New Yorker has recently published a piece that I circulated among PhD students. John Cassidy went to the Chicago School of Economics and tried to interview people like Eugene Fama (“Bubbles? What bubbles?”). Most have won the Nobel in economics, and the way they respond is between outright denial and resignation. Paul Krugman picked it up in his blog with links to other commentators.
Here’s what the Milton Friedman Institute is about:
Researchers at the MFI seek to further our understanding of the extent to which markets are successful in allocating resources and how markets and policies can function in complementary ways.
That might sound nice, but the fact is: non-market solutions are obviously out. So, financial markets should work better when there is more market, and global warming will be stopped if there is more market, and so on. Whatever the problem, the free market is the answer. This to me is not science but dogma.
Of course these are just words, but then it is exactly with these words in mind that many of our institutions are built. We have to think harder than that. More government is sometimes a good solution (like in health care), sometimes not (like telecommunications in the 1980s). However, in the future, less government might be feasible in health care and more in telecommunications. Who knows? Technological progress changes the rules, and so does cultural change. Society should play government off against the private sector and decide from case to case which solution is better. Otherwise we take alternatives away for no good reason.