Left//Right Economics

Why Left and Right Economics Can’t Just AgreeBy Jonathan Chait 0 21

Don't hold your breath.

Adam Davidson writes a joint profile of Democratic economist Lawrence Summers and Republican economist Glenn Hubbard for The New York Times Magazine. The profile seems to be a lengthy attempt to find common ground between the two, which ultimately ends in the author throwing up his hands in befuddlement:



Before I met Summers and Hubbard, I had this little fantasy that I would get the two of them to agree, in my presence, to some sort of grand compromise that both parties might at least consider. Especially these two, trained around the same time, in the same place, to use the same analytical tools. Surely they could get their pencils out and come up with a tax-and-entitlement-reform plan that neither would find perfect but that would still be a huge improvement over what we have now. Yet both men took evident satisfaction in sticking to their guns, leaving me feeling the frustration that many do these days: Why can’t these two sides just work something out?



The premise of the story is that the two men are parallel, center-left and center-right, and both driven by data, which ought to suggest they can agree on the data. Davidson has no explanation for the failure of this agreement, which ought to signal that he’s looking at it the wrong way.



Let me supply my own theory, which might explain why the facts that Davidson observes but can’t fit together actually make perfect sense. One of my hobbyhorse ideas, which I wrote about at more length a while back, is that economic liberalism and economic conservatism are not mirror images of each other. Both have an interest in increasing human welfare, but economic conservatism is driven by deeper philosophical beliefs about the size of government in a way that liberalism is not. Liberals believe in bigger government as a means to the end of increasing human welfare — which is to say, how liberals interpret evidence about the effect of government on human welfare determines their stance. Conservatives believe in smaller government as a means but also as an end in and of itself. They consider bigger government a threat to freedom. There is no analogous philosophical liberal objection to smaller government (though of course liberals do have practical objections).



Davidson’s portrait of Hubbard, which generally accepts his self-definition as a data-driven economist, actually shows the opposite. Hubbard tells Davidson he came to his interest in economics by reading Hayek’s Road to Serfdom. That book warned that centrally planned economies would lead to tyranny. In fact, western governments abandoned central planning after World War II, but conservatives, including Hayek himself, simply transposed the generalized fear of government from central planning onto other forms of government intervention. According to Davidson, Hubbard’s current fear centers around rising federal debt:



Hubbard quickly zeroed in on the issue that has defined his career. In regard to the size of the government, Hubbard said the real challenge is the steady rise in so-called entitlement spending. Going forward, he said, government debt will rise partly on account of the increase in the cost of Social Security, Medicare and Medicaid. …



In the end, it became clear that Hubbard sees many of our economic challenges — rising entitlements, inequality and even the financial crisis — as different manifestations of the same basic problem: unsustainable debt.



But this is self-evidently absurd, given Hubbard’s role in crafting Bush administration policies that transformed a budget that ran a surplus of 2.4 percent of GDP at its peak to one that ran a deficit of 1.2 percent of GDP at its peak. Debt is simply the current way Hubbard expresses his philosophical preference for smaller government. He argues that low taxes are vital for fast economic growth, but twenty years of recent experiences strongly suggest otherwise. (Higher marginal tax rates starting in 1993 coincided with rapid growth; lower tax rates from 2001–2012 coincided with much slower growth.)



My argument about the asymmetry of the liberal-conservative divide is often taken as a claim that conservatism is simply wrong. It’s not. I do obviously support the liberal side. But if you happen to share the conservative belief that big government impinges on economic freedom, then the conservative position makes perfect sense. That belief system is neither right nor wrong — it’s merely a value preference that you either share, or do not. But you have to understand that it exists if you want to understand why the two sides can’t simply agree.