Tabarrok v. Rodrik

by Henry on August 10, 2007

Alex Tabarrok and Dani Rodrik have moved from arguing about industrial policy into arguing about the blinkers (or otherwise) of libertarianism.


It is in that spirit that I have been mulling about the derision and incredulity with which my recent post on industrial policy was met among some libertarian bloggers. … 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. I look at the world and see some government programs that work and others that fail. I want to understand what determines these outcomes, and to know how we can improve the ratio of the first to the second. When libertarians look at the same programs, they see one wreck after another.


Dani Rodrik responds here to my pointed remarks on his argument for industrial policy. Rodrik’s response, however, is along the same lines of his earlier – “I’m sophisticated, your simplistic” – post on why economists disagree. In this case, it’s ‘libertarians are ideologues who are immune to evidence.’ Rodrik, however, has painted himself into a corner because he cannot at the same time say that the “systematic empirical evidence” for market imperfections in education, health, social insurance and Keynesian stabilization policy is “sketchy, to say the least” (also “difficult to pin down” and ‘unsystematic’) and also claim that libertarians are ideologues who are immune to evidence. Say rather that libertarian economists are immune to sketchy, unsystematic, difficult to pin down evidence. Rodrik is thus right that he is “not as unconventional as I sometimes think I am. The real revolutionaries here are the libertarians.” The libertarian economists are revolutionaries, however, not because they are immune to evidence but because they respect evidence so much that they are unwilling to accept “conventional wisdom” simply because it is conventional.

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