James Surowiecki Makes Libertarianism Impossible
By Arnold Kling
among the biggest supporters of both [the bailout and the stimulus] have been the world’s investors, at least insofar as their collective judgment is reflected in market prices. As I showed yesterday, investors overwhelmingly supported the Paulson plan: it was only when it was killed, that stock prices really started their downward spiral. And it was only after Obama unveiled his economic team and made clear how big his stimulus plans were that the market began its sharp recovery (the S. & P. 500 is now up twenty-five per cent since Nov. 20th).
…And it seems peculiar for a supposed believer in the efficiency and intelligence of markets–which, as a libertarian economist, I assume Kling is–to simply disregard what the market is saying in this case. In effect, libertarian economists are saying that they have a better sense of what’s good for the economy than the aggregated wisdom of investors does. And that makes them sound peculiarly like the Platonic economic planners that they typically decry.
If Surowiecki is correct, then it is impossible to be a libertarian. He is saying that libertarians must follow the guidance of stock market investors. Stock market investors want massive government intervention. Therefore, a libertarian must favor massive government intervention.
On September 26th, I wrote,
The stock market seems to want a bailout. While I hope for higher stock prices, I think that public policy needs to take into account more than just daily fluctuations in the Dow. In 1971, the market gave a huge thumbs-up to wage and price controls, which turned out to have damaging economic effects that persisted for years.
Don’t confuse me with someone who believes in the wisdom of crowds. I absolutely don’t.