Ian
>
> >he thinks that way and it is the result of economist in-breeding.
> I'm serious.
> >his mother and father are both economists and his uncles are on one side Paul
> >Samuelson and on the other Ken Arrow. I have spent a little time with
> >economists, including Summers-types. even the liberal ones believe
> >in the basic
> >neoclassical logic. Brad DeLong appears that way--no offense, Brad, really.
>
> Look. Somewhere I have Ceci Rouse's notes from when she was a section
> leader the last time Larry Summers taught at Harvard, undergraduate
> public finance, Economics 1410. IIRC, one section of them goes
> something like this: "Divergence between maximizing real GDP and
> maximizing social welfare... monopoly... externalities... income
> distribution... the market maximizes *a* social welfare function, but
> unless the distribution of wealth is exactly right there is no reason
> to believe that it maximizes *the* social welfare function..."
>
> I know--Lant knows--Larry knows--Joe knows that even if government
> policy is carefully tweaked to preserve competitition and neutralize
> all externalities by providing the right incentives to producers and
> consumers, there is still a big gap between the market's equilibrium
> and the social welfare maximum. I know--Larry knows--Lant knows--Joe
> knows that Bengal's market economy in 1942 was in a Pareto-optimal
> equilibrium, only because two million people had no wealth and no
> income and thus a zero weight in the market's calculus, they were
> about to die. If everyone has the same indirect utility function that
> is (say) logarithmic in real income, then the market's calculus
> maximizes a weighted sum of individuals' utilities, with each
> individual's weight being proportional to his or her income. That's
> what the market does. If you don't like the distribution of wealth,
> you *cannot* like the market equilibrium.
>
> And all of this does not even consider the power dimension (which I
> know Larry thinks about, but have never talked to Lant or Joe about).
> Until there was a flourishing transatlantic shipping capability and a
> demand in Europe for sugar and tobacco, there was little demand in
> the Caribbean for slaves. Until there was a flourishing demand in the
> Caribbean for slaves, the rewards to coastal African kings from
> undertaking slave raids into the interior were low, so few slaves
> were taken. But once there was both a transatlantic shipping trade
> and strong European demand for sugar, the west African slave trade
> took off...
>
> Similarly, if there were no oil in Ogoniland it would not be
> worthwhile for generals in Lagos to kill, torture, and terrorize:
> after all, if you go into the bundu you might get hurt. But once
> there is oil--and companies to buy it--all of a sudden the level of
> violence goes *way* up, because now there is something to kill,
> torture, and terrorize for.
>
> You can talk about--I do talk about--the opportunities for
> Pareto-preferred exchange and universal increases in wealth and
> welfare produced by increased globalization. But you must also
> recognize that most governments are made up of thugs with spears, and
> when there is more wealth to be extracted by being more thuggish you
> will find a lot more governments behaving more thuggishly--whether
> Polish nobles enserfing peasants so they can increase grain shipments
> down the Vistula, or the African slave trade, or the expulsion of the
> Dakota from the Black Hills, or UNITA's funding of its continued
> campaign in Angola via diamond sales.
>
> It's no secret which way I come down--I am a card-carrying
> neoliberal, after all. Let free trade and investment rip, watch
> wealth accumulate, hope that sweet commerce creates softer forms of
> rule, and get ready for the next turn of the political wheel which
> will make movement toward social democracy possible in a generation
> or so. That seems much better to me than, say, telling Malaysians
> that they cannot have steelworker jobs because that would raise
> pollution levels in their rivers, or telling Ecuadorians they cannot
> have electricity because coal-burning power plants raise SO2 levels,
> or telling Mexicans they cannot build automobiles because autoworker
> jobs belong in Michigan.
>
> But I am aware that the neoliberal bet is a *bet*, and that it may
> come out very badly. Lots of bets have come out very badly in this
> century: look at Lenin, or Nehru, or Mugabe.
>
> >Stiglitz defended Suharto, saying of him, "He wasn't
> >really that bad...He was no Moi." Lots of polite embarrassed smiles
> around the
> >head table.
>
> Suharto killed 700,000 people. Suharto also poured money into rural
> education like there was no tomorrow. And under Suharto rural
> material standards of living appear to have doubled, and nationwide
> GDP per capita quadrupled.
>
> If Indonesia continues to spiral downward I will wind up viewing
> Suharto much like I view Marshall Tito: someone with very bloody
> hands who was (unless you were one of the dead) a relatively good
> dictator--and under Suharto Indonesia's economy appears to have grown
> much faster than Yugoslavia's under Tito.
>