I might cavil with some of the presuppositions in this article. Is the presidency, or any other role in a political system constructed of checks and balances, really very much like Tolkien's "One Ring to rule them all"? Does not the free market tend to generate its own loci of unchecked power? What is the author's position on the ultimate expression of "government social engineering," namely warfare? Still, this is a compelling summary of an important argument that cannot be simply waved away. And in a moment when it is very possible that one political party will command a supermajority beginning in January, it may be all too timely.

economics, f a hayek, government, politics, power

Andy

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It is no longer shameful to lust after power so long as one lusts for the good of the people. In the words of Boromir, speaking of the One Ring, “For you seem to think of its power only in the hands of the enemy: of its evil uses not of its good.” The only rejoinder, in Frodo’s words to Boromir, is that “we cannot use it, and what is done with it turns to evil.” Yes, it’s that simple. And as you ascend the levels of authority, from city to state to nation, it only becomes more true.

There are several reasons. One, already alluded to, is the corruption of power. No matter for what noble ends power may be sought, at some point it always becomes an end in itself, and then the jig is up . . . but the power and its abuses live on. This is why even the most flagrantly failed government programs are nearly impossible to kill.

Another reason that centralized government social engineering simply doesn’t work is what F.A. Hayek called “the knowledge problem.” Hayek was the only Austrian economist ever to win a Nobel Prize. He won it partly for a brief essay called “The Use of Knowledge in Society,” in which he explained that government is intrinsically helpless before most social and economic problems because the knowledge needed to solve them is too widely dispersed among the members of society. It cannot ever be made known in a timely fashion to a central authority, and even if it could, that authority would lack the godlike coordinating ability needed to use that knowledge effectively. Adding to the difficulty, much of this knowledge is tacit knowledge, not consciously known or articulated by the individuals who have it.

What can make effective use of the knowledge distributed locally among the members of society? Only the free market system and its accompanying structure of voluntary trades and changing prices. Freely determined market prices are what send signals to individuals telling them how to best use their unique knowledge to their own, and ultimately society’s, advantage. Without a free market, the only way to allocate resources is by government fiat–a few, far-removed individuals making choices for us all, perhaps with the best of intentions but in near-total ignorance.

The most penetrating idea in this column by former Treasury Secretary Lawrence Summers is stated obliquely, but it's crucial. "Finance-led growth is problematic." Economies grow when real innovations—Summers mentions my favorite example of a complex cultural good, the interstate highway system—help human beings cultivate and create the real world. They become frothy and unstable when finance becomes the primary arena where wealth is made and talent is invested. One of the most promising side effects of the current crisis is the likelihood that a generation of Ivy League students will shy away from investment banking and put their skills to work elsewhere. Unless, of course, they all become lawyers. :)

economics, energy, finance, infrastructure, money

Andy

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Economists do not understand what drives productivity growth very well. However, we know these facts: productivity grew rapidly after the second world war and then sometime between the late 1960s and mid-1970s it slowed dramatically only to re-accelerate to record levels in the mid-1990s. Unfortunately, even before the downturn, underlying productivity growth appeared to be slowing.

The most plausible explanation is that an array of transforming investments and technologies – the interstate highway system, widespread air travel and the expansion of electronics – were spurs to growth during the postwar period. Eventually their impact dissipated and, as energy costs rose, growth slowed until the information technology revolution kicked in during the 1990s. Unfortunately, the IT supply shock that powered the economy in the 1990s and early part of this decade appears to be diminishing.

So there is a need to ensure that the pressure to increase spending is directed at areas where it will have the most transformational impact. We need to identify those investments that stimulate demand in the short run and have a positive impact on productivity. These include renewable energy technologies and the infrastructure to support them, the broader application of biotechnologies and expanding broadband connectivity, an area where the US has fallen behind.

The crisis has also reminded us of the lessons of the technology bubble, Japan’s experience in the 1990s and of the US Great Depression – that finance-led growth is problematic. The wealth and income gains from the easy availability of credit were highly concentrated in the hands of a fortunate few. The benefits also proved temporary. In retrospect, the fact that 40 per cent of American corporate profits in 2006 went to the financial sector, and the closely related outcome – a doubling of the share of income going to the top 1 per cent of the population – should have been signs something was amiss.

Simply coming when you're asked to seems, at first glance, a bit removed (perhaps even antithetical) to the idea of cultural creativity and cultivation. Though this memorable anecdote from the Desert Fathers recasts obedience as an astonishing, and I'd say creative act—a creative discipline, at least.

4th century, alphabets, desert fathers, discipline, egypt, obedience, writing

Nate

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They told of the abbot Silvanus that he had a disciple in Scete named Marcus, and that he was of great obedience, and also a writer of the ancient script: and the old man loved him because of his obedience. He had also another eleven disciples, who were aggrieved that he loved him more than them. And when the old men in the neighborhood heard that the abbot loved him more than the rest, they took it ill. So one day the came to him: and the abbot Silvanus took them with him and went out of his cell, and began to knock at the cells of his disciples, one by one, saying, “Brother, come, I have need of thee.” And not one of them obeyed him. He came to Marcus’ cell and knocked saying, “Marcus.” And when he heard the old man’s voice he came straight outside, and the old man sent him on some errand. Then the abbot Silvanus said to the old men, “Where are the other brethren?” And he went into Marcus’ cell, and found a quaternion of manuscript which he had that moment begun, and was making thereon the letter O. And on hearing the old man’s voice, he had not stayed to sweep the pen full circle so as to finish and close the letter that was under his hand. And the old men said, “Truly, abbot, him whom thou lovest we love also, for God loveth him.”