In a nice Diary currently on the rec list a repost from Bonddad poses three questions that are supposedly insoluble by the liberal world view. I agree that his questions for conservatives are insoluble, because they are pointing out that conservatism is based on falsehoods. The questions for liberals, however, seems to me like it would be only insoluble to a strawman version of Liberalism.
My answers below the Orange Hairball.
1.) According to the CBO, expenditures for entitlements have increased from a little over 35% of federal expenditures to a little over 60%. Please explain why this does not mean entitlement reform is mandatory.
A) Why is 60% a more problematic number than 35%? Before the first entitlement program was launched we had 0% of federal expenditures on these programs. Why didn't we need entitlement reform at 35%?
B) The #1 driver of that increase is medical expenses. America's "free market" system spends roughly twice as much per capita on health care than single-payer systems, with much worse outcomes. Moving to a single-payer system that heavily favors cost effective treatments (like prevention) instead of favoring treatments because they are profitable will solve this problem.
C) Economics was founded in a world where goods were scarce. Now, thanks to technological improvements to efficiency, we have lots of goods, and now we have global scarcity of work. Efficiency will only continue to increase, and the inevitable outcomes are either (1) the government must act to redistribute wealth, or (2) we wind up with a tiny oligarchy that owns and controls the robots — and crushing, grinding, desperate poverty for everyone else. Liberals favor the first outcome, conservatives favor the second.
D) Entitlements that provide money and services to people who need it are not only stimulative, they provide a vastly better economic stimulus than tax cuts on the rich. Our economy would be much better off by raising taxes on the rich to 90% and using that money to create jobs via large increases in funding to education, science, public works, infrastructure -- and yes, entitlements.
2.) In 2010. the world experienced a series of weather events that severely limited global good supplies. In addition as countries such as India and China have increased their standard of living, demand has increased. However, by 2012, world output of agricultural goods has increased thereby lowering cost pressures. Please explain why this example does not indicate that a market based system is the most efficient way to allocate resources...
I don't think that there is any question (especially this long after the cold war) that an ideal free market based system is the most efficient way we know of to allocate resources. But there are still lots of reasons for Liberals to oppose laissez-faire economic policies.
A) "Efficiency" for its own sake should not, itself, be a goal. In fact, inefficiency can have many benefits -- an example: electric heaters work because the inefficiency of current flowing through the coils converts electricity to heat. If we have a worthwhile goal, then doing it efficiently is good, but we should not automatically trade away beneficial things just for the sake of efficiency.
B) There is absolutely nothing profound about saying that a free market is efficient. It's exactly analogous to saying water flows downhill -- the simple action of gravity will move water on its own to naturally follow the path of least resistance. Rather than gravity, the individual self interests of many entities in a free market will lead to efficiency.
However, it would be ridiculous to argue that this natural tendency means we must never try and stop water from going where it will, like into your basement. Yet that's exactly what laissez-faire economists propose. A right and proper role of government in the economy is to direct the flow of free market tendencies in beneficial directions.
C) The key word there is IDEAL. An ideal free market has a number of conditions that it has to meet: there have to be a large number of buyers, there have to be a large number of sellers, both buyers and sellers have to have complete information about the market, goods and services have to have other goods or services that can substitute for them, and there has to be no barriers to entry for new players to enter the market.
However, there are many cases where these conditions are NOT met. For instance, when there is only one seller for a good that cannot be substituted, and they rig the pricing to maximize their own profit and prevent other sellers from entering the market, we call that condition a monopoly. A non-ideal market can be very inefficient, but when government intervention (aka Regulation) stops the monopolist from abusing their pricing power, it will move the real market closer to the ideal market. A regulated real market can therefore be more efficient, and closer to the free market ideal, than an unregulated one.
...nor the fact that demand and not speculation was the primary driver of prices.
Just because demand led to increased supply does not mean that speculators do not drive prices. That is a false dichotomy.
While a financial sector is necessary to allow the easy flow of capital in an economy, and to raise funds for new ventures, once you get beyond those lubricative and capitalization functions nearly all activity of the financial sector is simply gambling. It does not add real wealth to the economy, it simply moves virtual money from one pile to another while keeping a slice for itself. Speculation, in particular, is simply the transfer of profits away from the original seller or the eventual buyer and into the hands of the speculator. While these activities carry risks, and therefore deserve some measure of reward, the virtual nature of these transactions can be leveraged (gambling on gambling) and the potential rate of returns can vastly outstrip the returns on real economic activity that adds real wealth to the economy. Like with the government channeling the flow of activity to beneficial ends, one way to do that is by levying taxes on extremely short-term transactions (discouraging volatility) and profits that were derived from purely financial-sector activity.
Banking serves the economy best when it serves the economy, instead of its own self interest. Banking should be boring, with bankers making loans to people and businesses in exchange for interest income. A Liberal tax structure incentivizes the banking sector to behave this way. A right and proper role of government is to prevent the financial sector from sucking up all available capital into its own casino and preventing the boom/bust cycle that results in.
3.) Please explain why the removal of corporate personhood would not lead to a complete shutdown of the US economy.
If you are saying that corporations are entities that need legal rights to be able function, then I completely agree. Liberals simply do not think those legal rights should include being able to lie with impunity (Fox News), to be able to spend unlimited sums of money to corrupt our politics (Citizend United), of that corporate boards should be allowed to act against the interests of their corporation to favor the interests of their class (GM opposed universal health care when it would have saved them billions).
On the other hand, if you are saying that the threat of repealing these corporate rights would cause corporations like Goldman-Sachs to sabotage the economy, then the U.S. government is already under economic siege. The government is therefore acting in self defense by moving to destroy these economic terrorists. Break up their corporations, and indict, arrest, try, convict and imprison those reckless enough to try and hold our economy hostage to their ransom demands.
And finally....
So, if you're a political blogger and you write about economics, please realize that you have absolutely no idea what you're talking about. Really. You don't -- not one clue. Please -- in the name of all that is holy -- please stop.
I'm a biologist, and plenty of non-biologists posit ridiculous falsehoods like evolution being false. The correct response is to point out how and why they are wrong (also, mocking them ruthlessly if you are PZ Myers), and try and teach them the correct answer. Just telling them to "leave darwin alooooooooone" doesn't get you anywhere.
Just whining "leave economics aloooooone" isn't going to get you anywhere. If you think my understanding of economics here is wrong, show me why.