Stuck on 1968

By Arnold Kling

"Worldviews are more a mental security blanket than a serious effort to understand the world."-- Bryan Caplan, The Logic of Collective Belief

Most people who were liberals in 1968 still are. Liberals. In 1968.

Recently, economist Jim Miller used the term moral free riding to describe adopting a precarious ideological position when it has little personal risk. George Mason University economics professor Bryan Caplan says that such free riding is the normal state of affairs. He argues that people are insulated from the consequences of their beliefs by the fact that the typical voter has a low probability of influencing the outcome of an election.

Caplan, in a book that eventually is to be published by Princeton University Press, argues that most people do not work very hard to arrive at worldviews that are logically consistent and factually supported, because the reward for rational beliefs is too small. He writes: "we should expect people to...believe whatever makes them feel best. After all, it's free. The fanatical protectionist who votes to close the borders risks virtually nothing, because the same policy wins no matter how he votes."

Of course, I may be as guilty as anyone of believing whatever makes me feel best. But I believe that I have put considerable effort into examining and correcting my worldview. I am no longer a liberal (in the contemporary sense of the term), because my calendar did not get stuck on 1968.

If 1968 were an influential thinker, it would have many disciples who share its folk beliefs. Those folk beliefs are the mental security blanket still being clutched by my liberal friends, even those who are not old enough to remember 1968.

I want to contrast the way the world might have appeared to a reasonable liberal in 1968 with the way events have unfolded since then. Afterwards, if you still prefer the folk beliefs of 1968 to my views today, so be it. But at least you have an opportunity to reconsider.

The Conventional Wisdom

The Conventional Wisdom among well-educated liberals in 1968 included the following:

        •         Anti-Communism was a greater menace than Communism.
        •         The planet could not possibly support the population increases that would take place by the end of the twentieth century.
        •         Conservatives stood in the way of progress for minorities.
        •         Government programs were the best way to lift people out of poverty.
        •         What underdeveloped countries needed were large capital investments, financed by foreign aid from the rich countries.
        •         Inflation was a cost-push phenomenon, requiring government intervention in wage and price setting.

The degree of confidence in these beliefs was so strong that liberals in 1968 came to the overriding conclusion that:

       • Anyone who is not a liberal must be incorrigibly stupid

Given the state of knowledge in 1968, I can understand why an intelligent person might have believed in the Conventional Wisdom at that time. However, since 1968, considerable evidence has accumulated that challenges the Conventional Wisdom. In some cases, the evidence turned out to be so overwhelming that beliefs were quietly discarded from the Conventional Wisdom.

A rational response to this record of powerful evidence against the Conventional Wisdom might be to reconsider one's views, as I have done. Instead, it seems to me that liberals have become more close-minded and more dogmatic.

In 1968, liberals thought that that Communism could work reasonably well for some countries. The Soviet Union was thought to be ahead of us in engineering. Many liberal intellectuals considered Communism a viable option for achieving development in the Third World. A reader of Noam Chomsky's article in the August 13, 1970 New York Review of Books would have thought that North Vietnam's regime, while not perfect, was closer to the ideal than any other existing government. Anti-Communism, on the other hand, was seen by the Conventional Wisdom as only a pretext for misbegotten wars and hysterical blacklists of Hollywood screenwriters.

Since 1968, we have seen:

        •         a mass exodus from Communist Vietnam (the boat people)
        •         a large exodus from Cuba (the Mariel boat lift)
        •         the collapse of Soviet Communism, revealing that the system did much broader and deeper damage than most people realized
        •         an unmistakably large gap between North Korea and South Korea in terms of material well-being and personal freedom

In 1968, the Conventional Wisdom was that we would see mass starvation in another decade or two. It was still the conventional wisdom a dozen years later, when Julian Simon wrote a contrarian book arguing that population was The Ultimate Resource. Among economists, Simon's views have gained adherents, and almost no economist believes that food scarcity is a material threat (although politically-induced famines are still possible).

In 1968, we were just a few years removed from the passage of Civil Rights legislation that ended Jim Crow segregation in the South. Conservatives had opposed the Civil Rights movement, and were caught on the wrong side of history.

Rather than declare victory, the Civil Rights movement declared perpetual war. Meanwhile, policies that might really help minorities, such as school vouchers to release them from the obligation to attend failed public schools, have become anathema to liberals.

Another perpetual war that began in the 1960's was the War on Poverty. The programs that were enacted in the name of this war had little effect. Nonetheless, poverty had been greatly reduced over the past forty years, thanks to economic growth and the escalation of income.

Arguably, government welfare programs served only to corrupt the poor. In the case of foreign aid, a consensus is in fact emerging that aid serves to entrench corrupt governments. Instead, the keys to prosperity are institutional more than material.

Friedman on the Fringe

In 1968, Milton Friedman was on the fringe of respectability. His Presidential Address to the American Economic Association in 1967 could not have been more defiant of the conventional wisdom. At that time, economists thought that the economy could be "fine tuned" by government to achieve any desirable unemployment rate, with a "trade-off" that allegedly involved accepting higher inflation. Inflation, in turn, could be curbed by government action to control, or at least influence, the price- and wage-setting decisions of private firms.

Friedman argued instead that there is a "natural rate" of unemployment to which the economy will tend, regardless of how government manipulates aggregate demand. He warned that attempts to use monetary and fiscal policy to drive the unemployment rate lower would only result in ever-accelerating rates of inflation. Moreover, he argued that the only cure for inflation was control over the rate of growth of the money supply.

In 1968, Friedman's views were far from the mainstream. When Paul Samuelson wrote an article for the Canadian Journal of Economics on "What Classical and Neoclassical Economic Theory Really Was," he sneered that for modern economists trying to understand monetarism was like being a farmer who had lost his jackass and having to ask, "If I were a jackass, where would I go?" In short, Samuelson considered Friedman a jackass.

About this time, "fine tuning" began to fail, and inflation started to rise, just as Friedman had predicted. In 1971, President Nixon tried the Conventional Wisdom and adopted wage and price controls. The results proved disastrous. Finally, in 1979, President Carter in desperation allowed a new Federal Reserve Chairman, Paul Volcker, to attempt the monetarist cure for inflation. The result was successful.

Today, it is Milton Friedman's views that are conventional wisdom, and the 1960's Keynesians who are the jackasses. For me, seeing this unfold (I was a freshman economics major when President Nixon tried wage-price controls in 1971, and I was a newly-minted Ph.D in economics working at the Fed in the early 1980's) was a major life experience. Somehow, many liberal economists of my generation managed to forget they ever believed in wage-price controls and hang on to the rest of their Conventional Wisdom security blanket. But I also noticed the other ways in which the Conventional Wisdom failed to match reality.

Do conservatives make mistakes? Yes. Do liberals always get things wrong? No. But if I were still a liberal, I would want to be aware of -- and correct for -- a number of biases in thinking.

One bias is what Caplan terms in his book "pessimistic bias." People (not just liberals) tend to underestimate recent economic progress and future prospects. Pessimistic bias can be seen in doomsday environmental scenarios, claims that middle-class incomes are stagnating, and other liberal tropes.

Another bias is what Caplan calls anti-market bias. Liberals are excessively distrustful of markets and overly confident about the use of government power. The assumption is that government power will always be administered with wisdom and benevolence. I would be the first to admit that markets are not perfect. And government programs are not always failures. But liberals exaggerate market failures and overstate government successes. Anti-market bias leads people to concede government too much power, with liberals actively cheering government expansion.

Another bias is the view that other people cannot be trusted to make their own decisions. Liberals who send their own children to private school believe that poor families should not be allowed to make the same choice. Liberals make their own choices regarding health care, but they believe that others should have their health care decisions made for them by government.

I admit to having the opposite inclination. I do not believe that government can be trusted to make better decisions for individuals than individuals can make for themselves. It seems to me that if liberals had paid attention since 1968 rather than remaining in an ideological deep freeze, they would have seen the evidence that took me along the path to libertarianism.

{Arnold Kling is author of Learning Economics.}