A Boston Review forum on Government's Place in the Market, with an essay by Eliot Spitzer and replies by Dean Baker and Robert Johnson, has been released by MIT Press in its pocket-sized Boston review series. I love this format. It's exactly the kind of book that would be on sale in the airport bookstore of my dreams (that would be the airport where the security and immigration queues are short, the staff polite to everyone rather than just first class passengers, information about delays is plentifully available and the ground transportation functions….)
I reviewed Spitzer's essay when it was published in the magazine. He says the important tasks for government are ensuring the integrity of markets (including competition), addressing externalities and supporting core values. The two responses are less optimistic about the prospect of a benign relationship between government and markets. Dean Baker has written his own book in this series, Taking Economics Seriously, pointing out the co-option of the structures of government by business in some important sectors of the economy – not least banking, where bankers flaunt their influence (see for example the lead story in today's Financial Times (registration required), 'Push for Truce over banks probe', describing the banks' lobbying effort to influence via government pressure Sir John Vickers' supposedly independent review of banking.)
Spitzer's reply essentially says that anybody who believes in a positive role for government in the economy, in the ways he sets out, can't afford to give up hope of limiting the lobbying and political influence – because the alternative is a return to the illusory idea of 'free' markets. And as all applied economists know, a 'free' market is a meaningless abstraction.
He also says thinking about the core values of our societies is vital: “Oddly, that area of public debate has been largely neglected. We have had too much chatter about mechanics and not enough about objectives, too much about credit default swaps and not enough about basic decency.”
I couldn't agree more.
It's the debate for our times, and it's well worth devoting a flight or train ride to this discussion of it.
