Wednesday, December 19, 2007

Mankiw Ignores the "Allocation" Evidence from the Current Subprime Mess

The right sees government as a terribly inefficient mechanism for allocating resources, subject to special-interest politics at best and rampant corruption at worst. The left sees government as the main institution that can counterbalance the effects of the all-too-powerful marketplace. - Greg Mankiw
humm....

This isn't nuanced enough.

The Right uses inefficiency as an excuse, as much as anything, arguably. One could give a long discourse on 'an excuse for what', perhaps, but that's best left to those willing to think about it themselves.

The Left ... has had numerous critiques of 'market mechanisms' that need correction, some of which do not have to do with "power" (especially monopoly or monopsony power).

Right now, major banks and brokerages are writing off billions - billions - of dollars. If the Government did that, the Right would be at arms, waving an "I told you so". Yet, somehow we are meant to accept that Government is inefficient versus ... how well resources have been allocated, just recently.

What's more, one seldom sees right-wing economists writing or talking about how efficiently or inefficiently the government manages the largest part by far of the taxes it collects, the spending on National Defense in America.

If taxes are "deadweight loss" - to whatever degree - and the government is inefficient, by definition, why do Right-wing economists seldom insist that the government minimize its National Defense budget, eh?

2 comments:

Malte said...

Totally Agree.

Thad said...

National Defense is the ultimate public good. It has to be managed by the government. At least right-wing economists are aware of that...
"Yet, somehow we are meant to accept that Government is inefficient versus ... how well resources have been allocated, just recently."
You must be purposefuly ignoring the government's (and FED's) role in the current misallocation of resources.
Some people choose to ingnore facts in the name of their ideology...