John has been writing from a position that strongly supports the market over government control vs. most of the folks on the list. I've tended to be more on John's side than not in this discussion, but I'm a proponent of a mixed economy, and will argue that produces the greatest wealth in the long run. The US has had a mixed economy since the '30s, and has had it's greatest prosperity when the party that is less free market oriented in power (still seen with a 2 year time delay for actions to take place) than when the party that is more free market oriented. The US has had the strongest economy in the world, and had been the engine of world economic growth from '92 to about '07. It is the least socialistic of the major economies, so that gives a second boundary for me. Anyone (especially John because he's new here) can ask me questions about my views, but now I want to ask questions of John. Virtually every economist has agreed that there has to be some government interference in a totally free market. Free market purists think this is anathema; but your posts give the feeling of a free market realist, not a purist. But, I've been wrong when working from the "feel" of email, so I'll ask some questions to improve my understanding. For example, the Federal Reserve Banking System was one of the first examples of the US government interfering with the free market. Before that, banks issued their own money, and big downturns resulted from bank runs. The natural tendency of a businessman during a downturn is to ensure that they minimize their own exposure, thus tightening the money supply during downturns. The macro-effect of this had often resulted in panics as the supply of money dried up. Monetarists have argued that this is the primary, if not singular cause of the Great Depression. I've read persuasive arguments that the Feds actually loosened the money supply slightly from '29 to '32, but that the drastic slowing of the velocity of money ended up with a net, large reduction in the availability of money. Do you agree that having a FDIC and a Federal Reserve System is an acceptable intervention in the free market? Second, you asked for an example where free markets != best productivity. The answer to that, especially from fiscally oriented economists, is that the concentration of wealth in a small fraction of companies in the late 1920s was harmful to the economy and contributed significantly to both the market bubble and the devastating economic contraction between 29 to 32. I'll try to dig up the sources I used to research this for a brin-l debate I had about 5 years ago, but the concentration of wealth was in relatively few hands (both in corporate and personal terms) during the late 1920s. This was one contributing factor to the strength of the Great Depression, there was not money available for new businesses; factories stood idle. FDR responded with a more Keynesian policy after 1932. Economic growth from '32 to '37 was significant, about 7% per year. Then, FDR significantly reduced the Federal deficit in '37-'38, and there was a downturn of about 4%. This is consistent with Keynesian theory. Looking a bit later than that, the period of '39-'45 saw the Federal government come to dominate the economy with WWII. If you look at it from an economic perspective, it was the Feds going into debt to build things that would get blown up. The economy grew 12% per year from '40 to '45, and had a downturn after the war that existed, but (at 6% per year for 2 years before turning back up) it was small enough for the net effect to be very positive. Indeed, the period from 32 to 50 saw GDP growth that we would love today. So, I'd argue that historical data applies bounds on both sides of the pure free market/socialist debate. Clearly, full socialism doesn't work. It was tried by countries for decades, forced on the people by a barrel of a gun, and we thus have decades of data on it. The pure free market extreme doesn't have decades of data behind it because, almost by definition, it is not forced on the people by the government. So, we have to look at shorter periods and the effects of different mixtures to determine that line. For me, somewhere around the Clinton economic line looks pretty good, especially in comparison to the more free market theories that have been practiced in the last 8 years. So, I've asked questions and given a bit of data supporting my position that a mixed economy works best. The real question is what mixture. Please feel free to ask questions to better understand what mixtures I'm thinking of. Dan M.
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