Why Are Free Market Economists Skeptical About Stagnation?
By Bryan Caplan
I do not hold the view that relative stagnation will last forever, only
that it has lasted for thirty-seven years and that it will not end
immediately. Oddly, it is the so-called “economic right” — which
complains bitterly about decades of increasing taxes and regulation and
litigation and government privilege — which finds such a claim hardest
In a follow-up, he challenged me personally:
[I]t is more than strange for Bryan to think that the earlier era, with
the federal government at less than five percent of gdp, and open
borders, did not have much higher growth for the typical family! You
are the one caught in a contradiction, not I.
There are two separate questions here. The first is psychological: Why does Tyler’s thesis upset free-market types? I think my post on the “Stages of Libertarian Denial” offers a good explanation. Most people imagine that governments are here to solve problems. Libertarians’ psychologically easiest response is stage #1: to deny the problems’ existence. Only if this initial denial fails do libertarians gravitate to stage #2: to blame the problems on government.
I’m the first to admit that there’s something fishy going on here. As I wrote a while back:
[P]essimistic bias undermines whatever people perceive as the status quo.
In the U.S., people (bizarrely) perceive laissez-faire to be the status
quo, so pessimism helps government grow. But in places where government
is the status quo, pessimism can and often does push in the opposite
When I was in Sweden, locals told me that even in this beacon of the Third Way, pessimism and support for more government go hand-in-hand. Why? Because Swedes have the chutzpah to frame their status quo as “laissez-faire, more or less.” I bet that many free-market types resist Tyler’s stagnation thesis simply because they reverse the Swedes’ error. Score one for Tyler.
Ultimately, though, free-market types are right to scoff at pessimism. Why? Because pessimism is just factually in error. Is growth a little slower than it used to be? Maybe. But it’s amazing nonetheless. I’ll never forget one of the greatest books ever written on this topic, Cox and Alm’s Myths of Rich and Poor. It’s deeply convincing – and I have no doubt that if they updated it to include the last decade, their story of long-run progress would remain the same. Once you know about evidence like this, painting bleak pictures and trying to blame the government loses all intellectual appeal.
I suppose that if I cared only about advancing liberty, I might want to
engage in – or at least remain silent in the face of – food pessimism.
But I don’t just want to advance liberty; I want to advance it
honestly. And in all honestly, I’d bet against food pessimism in a
In Tyler’s case, unfortunately, it’s hard to get a bet on the table. Not only does he deny his duty to bet on his beliefs. There’s also a major disconnect between his big picture rhetoric about the Great Stagnation – where I know we disagree – and his specific claims about the facts – where I’d need to spend a month crunching the numbers to weigh in. Until I get a spare month, all I can say is that even if Tyler’s right, he’s wrong.