He next turns his sights on to a prize system for innovation. His proposed policies are well-intentioned but naïve. He proposes that the government fund sizeable prizes (to the tune of millions or billions of dollars per prize) with specific goals—not methods—in mind. This should work in theory, but the fundamental problem with this method is that it fails to discern how the government would go about setting the most economic goals and prizes. This process could become highly politicized, as anything involving billions of federal dollars tends to. However, venture capitalists and innovation firms should take note of this recommendation and implement it.

Tabarrok closes his short book by looking briefly at education—both public and post-secondary. Regarding the former, he recommends reform. Why this is preferable to privatization is unstated, but perhaps that is beyond the scope of the book. One curious thing about is argument is how he claims that there is a correlation between high school graduation rates and GDP growth. While statistical analysis bears this out, it is worth noting that there is no proven causal relationship between the two. It could be that GDP growth causes increases in the rate of High School graduation as families become wealthier, and better able to secure leisure time for their children, thus reducing teenagers’ need to work.

“Our research also shows that greater weakness in the economy raises the estimated multiplier: It increases by around 0.1 for each two percentage points by which the unemployment rate exceeds its long-run median of 5.6%. Thus the estimated multiplier reaches 1.0 when the unemployment rate gets to about 12% … For data that start in 1950, we estimate that a one-percentage-point cut in the average marginal tax rate raises the following year’s GDP growth rate by around 0.6% per year. However, this effect is harder to pin down over longer periods that include the world wars and the Great Depression.”

Rok Spruk is a supply-side economist and a libertarian.
He (currently) lives in Slovenia where he studies economics
and business. His fields of research are economic growth,
macroeconomics, international economy, global competitiveness,
and tax reforms. His views, observations and ideas are posted
on his blog.

Speaking in the past tense, Ode Magazine says this of distributism: “The distributists saw private property as the salvation of society, and its concentration in too few hands as the greatest scourge.” But far from being an extinct school of thought, distributism is on the rise in the marketplace of ideas.

What is Distributism?

Distributism—also known as distributivism and distributionism—is an economic philosophy formulated by Roman Catholic thinkers in accordance with the principles of Catholic Social Teaching. It holds that the “means of production and distribution” should not be owned collectively (as with socialism), nor allotted haphazardly by the free market (as with capitalism), but dispersed widely among the general populace. In this way, it is like socialism in that it attempts to keep capital out of the hands of “capitalists,” but like capitalism in that it affirms the desirability of private ownership. Distributism is equally scornful of Wal-Mart and the welfare state, and thus has appeal to middle-America populists.

Distributists also support a guild system for the regulation of business, and are opposed to for-profit banking. The philosophy emphasizes radical decentralism to the extent that it holds that nothing that can be done by a smaller unit should be done by a larger unit. If a town can produce its own bread, for example, then it should not trade for bread produced elsewhere. In this way, it rejects the basic tenets of Adam Smith’s capitalism.

Distributism: From Left to Right

Distributism has its roots in the nineteenth century but reached its greatest heights in the mid-to-late twentieth century as the economic philosophy propelling the Catholic Worker Movement. Then, distributism was considered a “left-wing” phenomenon, but now its strongest constituency is on the far right of the American political sphere. Indeed, full page ads for distributist books have been featured on the back cover of the last two issues of The American Conservative.

The American Conservative (TAC) is a paleoconservative publication, and paleoconservatism differs from neoconservatism in that the former is staunchly antiwar: you will not find praise for Dick Cheney within TAC’s pages. But unlike libertarianism, the other antiwar philosophy of the right, paleoconservatism is ambivalent (at best) towards free-market capitalism. Paleocons are traditionally opposed to free trade and strongly support immigration quotas. More shockingly, they tend to support limited nationalization of industry: this month’s issue of TAC features an editorial in favor of “bailing out” the U.S. auto industry.

Generally, however, paleoconservatives are unconcerned with economics. Their chief causes are non-intervention in foreign policy (which, when combined with their anti-free trade views is correctly considered “isolationism”) and the promotion of “traditional values.” These concerns dovetail nicely with distributism, which supports the Christian Just War doctrine (under which virtually no wars are justified) and the primacy of the “Trinitarian” family consisting of one man, one woman, and their children. Thus, paleocons—which are far from being insignificant in number—who are exposed to distributism are likely to find the philosophy tailor made for the preexisting prejudices.

So What’s Wrong with Distributism?

So what’s wrong with distributism? Well, as theological ethicist Dr. Todd R. Flanders told the audience of an Austrian economics scholars conference in 2000, distributism isn’t really an economic theory at all, but an ethical one. Distributists have no coherent or practical plan for implementing their vision of a society of widely diffused property ownership; they only hold that it is morally just.

But is it really? Distributists refer to capitalism as “neo-feudalism,” but in reality, what they propose is a return to pre-capitalistic, medieval life. Their antipathy for the division of labor—that basic Smithian principle that has brought so much prosperity to the world—is grounded in a Marxist understanding of “worker alienation.” Indeed, distributism could be considered a kinder, gentler Communism, and we all know how well that worked.

A Preemptive Defense

The danger presented by distributism may be minimal, but that is not to say it’s non-existent. Big ideas have a way of sweeping over the world quickly, particularly in times of economic and political turmoil—times we are likely to be facing in the very near future. The economic ignorance fostered by a century of public schooling plays right into the reactionary creed of distributism. Its appeal to the Left, which thinks capitalism has failed; and to the Right, which blames the welfare state; makes it a potentially unifying force for anti-capitalists.

As a preemptive defense, capitalists must educate themselves on distributism and refute arguments made in favor of its core tenets: protectionism, socialized banking, occupational licensure (the guild system), glorification of smallness for smallness’s sake, etc. Free-market capitalists must articulate their arguments in a way that convince would-be distributists that their goals are best served by a truly free-market economy in which unhampered property rights are the foundation of ethics and prosperity.

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I admitted to Jim that people had sometimes referred to me as an economic rationalist. Jim then asked me if I thought John Smith (name changed to protect Jim) would be an economic rationalist. I don’t know that I have ever met Smith but he has the reputation of being a good economist, having held senior positions in the Treasury as well as other government departments at a time when major economic reforms were being undertaken. I told Jim that I thought that Smith could be relied on to provide good public policy advice.

Jim then seemed to change the topic of conversation. He asked: “Do you think economic considerations should be taken into account in quarantine policy?” I replied that economic considerations were obviously relevant. For example, it doesn’t make economic sense to implement policies that will raise consumer prices by a huge amount in order to protect a tiny domestic industry, even if scientific evidence suggests a high probability that diseased imports will damage this industry.

Jim said: “So, are you suggesting that quarantine decisions should all be subject to a full blown 100-page cost benefit analysis?” I acknowledged that a full-blown analysis would be too expensive to do every time and is not necessary in most cases because the answer that such a study would come up with was usually obvious. I suggested that the legislation should incorporate a national interest test and require that the economic advice used to apply that test should be made public when decisions are made.

Jim replied: “But wouldn’t that make it difficult for politicians to take account of things like impacts that are concentrated in particular electorates, their concerns that voters might attribute damage to industries from highly improbable events to their mismanagement – and other irrationality that people exhibit on risk.” I said: “So what! If you are designing public policy rules in the interests of the whole community then you want the rules to make life difficult for populist politicians who pander to such concerns”.

Jim said: “I thought you might say that. But John Smith tried to sell me a very different line when I spoke to him in Canberra recently. He said that it would be important for the analysis of quarantine matters by the advisory economist to place higher weights on extreme events and on things with concentrated impacts and to make other adjustments to account for the irrationality that people exhibit on risk.”

I was stunned. All I could say at the time was that I could now understand why Jim had asked me whether John Smith was an economic rationalist.

Jim’s story makes me wonder how many other Canberra people who once advocated economically rational policies have lost their marbles by getting too close to politicians.

In 2006, Democratic presidential candidate Barack Obama published The Audacity of Hope. I first encountered The Audacity of Hope as an audiobook read by Obama himself. I listened to it as I drove back and forth on errands, and, to be frank, I loved the experience. I also enjoyed many aspects of the book itself, which blends personal memoir with an account of Obama’s political development. It is at once a statement of who Obama is and how he became the political figure he is.

In retrospect, it is the personal details that stand out. Obama’s discussion of his courtship of his wife Michelle is rich with affection and respect. Even though they were second-hand and filtered through her husband, her will and independent judgment come through clearly. Should Obama be elected, this will be a First Lady to be reckoned with. The descriptions of his wife’s father (in Chapter 9, “Family”) are heartbreaking in their respectful precision. Michelle Obama’s father was diagnosed with multiple sclerosis when he was just 30 but fought the disease for decades. Obama’s discussion of his father-in-law show a great deal about both men’s character. His father-in-law embodies domestic duty; Obama clearly understands just how precious such duty is.

When Obama discusses politics, it is, again, the personal and interpersonal that sounds out. He manages to sound savvy, political and still genuine, whether he’s describing meeting George Bush or discussing his travels through Illinois as he campaigned. I can imagine the union workers or inhabitants of Cairo, Illinois, feeling like someone really listened to them after they’ve met with Obama, for there’s a definite sense of heightened attention to the book. Obama is listening to the people he meets. Likewise, whether you’re listening to the audio version or reading the book, a sense of broad compassion comes through. To be blunt, I found myself liking Obama the man as I listened to the book.

However, when I read the book, I found a curious thing happened. Policies that had been enhanced by his delivery in the audio format fell more than a little flat on the page. I found myself flipping from chapter to chapter, wondering if I had remembered the policy discussions as occurring different places in the text than they had. I had not. I had allowed myself to be lulled by my affection for Obama and by his skill as a speaker.

I like the man. I trust the man, at least his intentions. I recognize that the symbolic value he carries due to his race is immense and should not be discounted. However, his vision of America is…well, let me be kind. His character is superior to his vision.

To be specific, when he’s discussing economic history, his summation of the free market and the American economy are pretty standard. He positions himself smartly, indicating that neither the Republican version of the free market nor the Democratic defense of pre-Bush social programs is sufficient. However, when he calls for a pragmatic solution, saying, “We should be guided by what works” (159), it is not yet clear that he (or, to be fair, anyone else) knows what that is. Obama calls for fairly predictable solutions: for government and parents to improve education and for public money and personal responsibility to be used there. He calls for more basic scientific research, a lowered dependence on foreign oil and so on. All good, yes, but the visions come without much foundation.

When Obama moves on to addressing policies specific to the U.S. economy, he’s specific about the flaws with existing plans, like privatizing Social Security, and strong about the values and emotions that lead him to oppose it and accent the flaws in such a plan. However, simply labeling Social Security’s problems as “real but manageable” (182) does not make them so, and no concrete solutions to the funding crises that take America’s demographic bulge into account are provided. If I had to sum up the picture of the world that’s painted in this book, I’d say it is fairly realistic. Obama knows that globalization is sweeping through the economy, realigning every economy relationship. His discussions of American founding documents, the media and special interests show he knows that American politics are a mash of glorious ideals, distortion and positional obligations. However, his solutions are less practical than he (or I) might wish. They show a man whose heart and character are worthy but whose policies are comparatively mundane. There are worse things in a president, but it does take a certain audacity to hope for better results without providing a solid foundation for them.

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