We interrupt today's edition of "As the Markets Fall" to savor a meditation on libertarianism by Harvard economist Dani Rodrik.
Since his debut as a blogger in April, Rodrik has established himself as one of true stars of the econoblogosphere: thoughtful, consistent and dogged in his determination to explain how he sees the world. But his belief that government can successfully intervene in an economy to assist development has made him a popular target for the libertarians who have long dominated Internet-mediated economic discourse.
So what are the deeper lessons? First, I am not as unconventional as I sometimes think I am. The real revolutionaries here are the libertarians. They envisage a real good world out there that looks like nothing we have now (or have ever had), and they want us to get there. Second, there are really deep philosophical differences here that have nothing to do with economics per se. Most importantly, I believe government can be a force for good; they do not. But third, libertarians hold on to their priors so strongly that they seem impervious to evidence. They shrug off the fact that there is more freedom and more wealth in those parts of the world where the government is stronger, not weaker. With respect to industrial policy proper, they refuse to engage with the fact that every nation that has grown rapidly has made use of it.
In this spirit, I would like to pose a question to any libertarians who are reading this. The big economic news so far this morning is that the Federal Reserve has announced it stands ready to inject as much "liquidity" into the banking system as necessary to keep markets from complete paralysis. The European Central Bank has been behaving similarly, as is Japan. What do libertarians think of central bank interventions of such a sort? The markets made their bed with risk. Shouldn't they pay the consequences?