What is the Role of the State?
by ilene - September 8th, 2010 11:31 pm
What is the Role of the State?
Courtesy of Mark Thoma at Economist’s View
When I teach the History of Economic Thought, one thing we focus on is how views on the role of the state have changed over time. It has a natural cycle to it, with eras such as the highly interventionist Mercantilist years followed by Physiocratic and Classical views stressing minimal government intervention. This is followed by a rebound in the other direction, and so it goes with a Keynes followed by a Friedman in the 50s, a rebound back to Keynes in the 60s, to classical ideas following the experience of the 70s, and so on, and so on. We are involved in the same debate, and a smaller version of the grand historical lurches in each direction, yet again today:
What is the role of the state?, by Martin Wolf: It is … a good time to ask … the biggest question in political economy: what is the role of the state? This question has concerned western thinkers at least since Plato (5th-4th century BCE). It has also concerned thinkers in other cultural traditions… The perspective here is that of the contemporary democratic west.
The core purpose of the state is protection. This view would be shared by everybody, except anarchists… Contemporary Somalia shows the horrors that can befall a stateless society. Yet horrors can also befall a society with an over-mighty state. …
Mancur Olson argued that the state was a “stationary bandit”. A stationary bandit is better than a “roving bandit”, because the latter has no interest in developing the economy, while the former does. But it may not be much better, because those who control the state will seek to extract the surplus over subsistence generated by those under their control.
In the contemporary west, there are three protections against undue exploitation by the stationary bandit: exit, voice … and restraint. By “exit”, I mean the possibility of escaping from the control of a given jurisdiction, by emigration, capital flight or some form of market exchange. By “voice”, I mean a degree of control over, the state, most obviously by voting. By “restraint”, I mean independent courts, division of powers, federalism and entrenched rights.
This, then, is a brief background to … the problem, which is defining what a democratic state … is entitled to
…
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Wall Street’s Invisible Gorilla is killing America’s soul
by ilene - June 22nd, 2010 4:31 pm
Wall Street’s Invisible Gorilla is killing America’s soul
By Paul B. Farrell , MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) — On Lake Wobegon "all the women are strong, all the men are good-looking and all the children are above average" says the great American satirist Garrison Keillor in his "Prairie Home Companion" world.
But doesn’t that also describe all the too-greedy-to-fail fatheads running Wall Street? And, unfortunately, Main Street America’s 95 million irrational and self-sabotaging investors?
Yes, all of us! We’re Americans. Don’t confuse us with the facts, with reality. We’re the greatest in history, a legend in our own minds. And a rapidly mutating virus is spreading this lethal pandemic far beyond the shores of Lake Wobegon. Yes, folks, the "Lake Wobegon Effect" is hard-wired in America’s brain, an illusion of superiority, a smug arrogance where each knows we are the best, the chosen ones.
Warning: The Lake Wobegon Effect is the single best summary of today’s stock market psychology, high-frequency trading, behavioral economics theories and the new science of irrationality … and it’s sucking the life out of America’s soul. Here, listen to more of these arrogant musings surfacing everywhere from deep in our collective brains:
- All Wall Street bankers are worth 100 times any Main Street investor
- All Corporate American CEOs deserve to make 400 times their workers
- All children of all Forbes 400 billionaires deserve to inherit tax-free
- All lobbyists deserve millions when winning billions for special interests
- All taxpayers should pay for catastrophic mistakes of Wall Street Fat Cats
- All rich hedge fund managers deserve to be taxed at capital gains rates
- All senators deserve to become millionaire lobbyists when they retire
- And Goldman Sachs CEO Lloyd Blankfein deserves a $100 million bonus
[I disagree with the author on this point. Do most Americans agree with the listed statements? I think not, but rather those with power and those benefitting from the system either like that list or know something's wrong, but like Sam Antar during his 18-year crime spree, simply don't care. But keep reading, the article gets better. - Ilene]
[...]
The investor’s brain is a very bad computer
Years ago America’s leading behavioral economist, Richard Thaler warned: "Think of the human brain as a personal computer with a very slow processor and a memory system that is small and unreliable … the PC I carry between my…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site