Thursday, January 13, 2011

Niskanen and Cato, with some Taylor on the side

The little advertisement at right showed up alongside the Cato Niskanen article that I touched on in the previous post. I was particularly struck by the wording of the advertisement:

For many people, owning a business is the American dream, but attaining that dream has grown increasingly difficult due to laws and regulations that interfere with an individual's right to earn a living.

See, I would change it there, right after the words "due to."

Here, let me excerpt a few highlights from Niskanen's 10-year-old Cato post:

The U.S. economy is now in its 10th year of sustained growth. Moreover, the growth rate has been unusually high and the inflation rate unusually low...

What explains this long boom?

...a substantial part of the credit for the long boom is due to the long period of unusually effective monetary policy...

A second set of policies contributed to the long boom but with a less consistent record--the substantial reduction of domestic economic regulation and the barriers to international trade.

Niskanen goes on to point out that deregulation began in 1978 under "the Carter White House" and continued under Reagan and Clinton, but not Bush I.

So, where does the story come from, that "laws and regulations that interfere with an individual's right to earn a living" are the perennial problem? Did Bush II bring back regulation in his 8 years? Yeah I can see Cato would want to put that on Obama. But he's barely got two years in. As I see it, the book ad contradicts the Niskanen article.

Niskanen's right: We deregulated for near 30 years.

Recently, John Taylor was the invited speaker at the joint luncheon of the American Economic Association and the American Finance Association -- "a very large affair." Taylor spoke in favor of rule-based policy, as opposed to discretionary policy. He said in part:

I could list many more examples of deviations from rulesbased policy in recent years if I went beyond monetary and fiscal policy and considered regulatory policy. Most glaring was the failure to enforce rules about risks at certain large financial institutions, including commercial banks, the most highly regulated entities in the financial system, and to even encourage excessive risk taking by Fannie Mae and Freddie Mac.

We failed to enforce the rules: Regulations were abandoned. We deregulated.

It is the absurd and grotesque accumulation of private-sector debt, eating into profits and eating into income, that interferes with our success in business and undercuts our creature comforts at home. Debt, not regulation. Excessive private-sector debt.

And there is no economic policy designed to reduce that debt.

1 comment:

Greg said...

Is the right to earn a living the same as "A right to a job"?

If it is then I agree.