DeLong responds to a post about the age of Milton Friedman with a statement of his own principles for our age.
Friedman's and his acolytes ascribed, perhaps unwittingly, wisdom and justice to the market itself. The religious right mixed this strange meme with their own traditions, creating a new golden calf that was one part Yahwism, one part Rand, one part Market, one part Calvin, one odd part Darwin, and one small part Christ.
DeLong's perspective is quite different, but it's very important to begin by recognizing that DeLong understands why the Market isn't the worst possible deity: (emphases mine)
...My principles would start from the observation that market economies and free and democratic societies are built on a very old foundation of human sociability, communication and interdependence. That foundation had a hard enough time functioning when human societies had 60 members -- eight orders of magnitude less than today's 6 billion.
So my principles would then be developed from Karl Polanyi's old observation that the logic of market exchange puts considerable pressure on that underlying foundation. The market for labor compels people to move to where they earn the most, at the price of potentially creating strangers in strange lands. The market for consumer goods makes human status rankings the result of market forces rather than social norms and views about justice.
This critique of the market is, of course, one-sided. After all, other arrangements for allocating labor appear to involve more domination and alienation than the labor market, which offers opportunities, not constraints.
Similarly, "social norms" and "views about distributive justice" usually turn out to favor whomever has the biggest spear or can convince others that obedience to the powerful is obedience to God. Market arrangements have a larger meritocratic component than the alternatives, and they encourage positive-sum entrepreneurship, making it easier to do well by doing good.
Nevertheless, the distribution of economic welfare produced by the market economy does not fit anyone's conception of the just or the best. Rightly or wrongly, we have more confidence in the correctness and appropriateness of political decisions made by democratically elected representatives than of decisions implicitly made as the unanticipated consequences of market processes.
We also believe that government should play a powerful role in managing the market to avoid large depressions, redistributing income to produce higher social welfare, and preventing pointless industrial structuring produced by the fads and fashions that sweep the minds of financiers.
Indeed, there is a conservative argument for social-democratic principles. Post-World War II social democracy produced the wealthiest and most just societies the world has ever seen. You can complain that redistribution and industrial policy were economically inefficient, but not that they were unpopular. It seems a safe bet that the stable politics of the post-war era owe a great deal to the coexistence of rapidly growing, dynamic market economies and social-democratic policies.
Friedman would say that, given the the world in 1975, a move in the direction of his principles was a big improvement. When I think of former US president Jimmy Carter's energy policy, Arthur Scargill at the head of the British mineworkers' union and Mao's Cultural Revolution, I have a hard time disagreeing with Friedman about the world in the mid-1970s.
But there I would draw the line: While movement in Friedman's direction was by and large positive over the past generation, the gains to be had from further movement in that direction are far less certain.
This is also what I believe. The Market is the best possible system we know of for "finding local minima" -- but it is not a Deity. Democracy is likewise imperfect. We seek a balance, something closer to Denmark and Canada than to old Hong Kong. Something that recognizes the problem of the weak, while admitting the limitations of human culture in 2008. This we can achieve, and this we must achieve.
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