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Source link: http://archive.mises.org/5760/any-takers/

Any Takers?

October 16, 2006 by

Says Scientific American: Von Hayek was wrong. In strong and vibrant democracies, a generous social-welfare state is not a road to serfdom but rather to fairness, economic equality and international competitiveness.

{ 28 comments }

MLS October 16, 2006 at 9:07 pm

I guess they have just proved that they are not “scientific” nor “American.”

A name change to Communist Econometrician is perhaps in order.

James October 16, 2006 at 11:21 pm

Communist, maybe, but econometrician is hardly the word. If Jeff Sachs had access to even a principles level stats text, he’d know the difference between descriptive statistics and inferential statistics, and would desist from trying to invoke a comparison of averages as evidence for his claims.

I suppose he could be deliberately engaging in deceptive misuses of statistics, but far be it from me to toss around such accusations.

averros October 16, 2006 at 11:21 pm

The quality of SciAm has been steadily declining for years – it all started when the editors decided to shift from natural sciences reporting to social “science” drivel. Nowadays I’m not surprised to see entire issues of this once esteemed magazine devoid of any hard science.

Alas, the other general scientific magazines are in decline as well; New Scientist became a rumor mill and forum for fringe science. Science and Nature are sliding into publication of arcane trivia (not many people care about 3D structures of specific transmembrane proteins and such, there’s nothing exciting in doing stuff other people did for other proteins many times already).

Could anyone recommend a good general science magazine which does not treat his readers as morons but also doesn’t publish stuff which is only interesting to the specialists in their narrow fields?

David C October 17, 2006 at 12:36 am

After reading their crap on global warming, I should have known it was only a matter of time. Am I the only one who decided that it wasn’t even worth it to try and pick apart the arguments?

How could a person make a quote like, “Friedrich Von Hayek was wrong” with this type of global economy, at this time in history? Is he living in my same universe?

Raymond Keller October 17, 2006 at 12:37 am

I always felt that Hayek was something of an optimist when he wrote that interventionism leads to serfdom. It sometimes leads to mass murder, e.g., Mao’s China and Stalin’s Russia.

Björn Lundahl October 17, 2006 at 1:03 am

The real unemployment rate in Sweden is about 15%.

Go to;
http://www.ft.com/cms/s/c18430e6-fc0b-11da-b1a1-0000779e2340.html

Björn Lundahl
Göteborg, Sweden

Björn Lundahl October 17, 2006 at 6:03 am

This has nothing to do with science, it is only popular journalism. Governments do not know how to run an economy, they lack the essential tools; the free market. The more Governments intervene in the economy, the more chaotic will the economy be. Governments decision making is relied upon whims by the electorate, markets, on the other hand, are relied upon prices of supply and demand; recourses are allocated to those ends which are valued most highly by consumers. When mentioned destructive actions bloom, like in the former Soviet Union, the “destructiveness is revealed”.

Björn Lundahl
Göteborg, Sweden

Chris Wuestefeld October 17, 2006 at 8:22 am

> fairness, economic equality and international competitiveness

So we’ve got one ill-defined term (fairness, which means something different to everyone). We’ve got something — economic equality — that I don’t see as a goal, certainly not one articulated by us as a society before the New Deal. And a final item that’s a complete red herring, “international competitiveness”, perpetuating the zero-sum myth.

> Could anyone recommend a good general science magazine

I stopped subscribing years ago. Try American Scientist at http://www.americanscientist.org/

Stefan Karlsson October 17, 2006 at 8:23 am

I have posted an in-depth reply to Jeffrey Sachs on my blog.

Keith October 17, 2006 at 9:02 am

If it isn’t global warming, its socialism. Scientific American has become a political mouth piece.

Matt October 17, 2006 at 9:24 am

I should put Mr. Sachs in touch with the young Swedes I met in China who told me point blank they planned on working overseas for about a decade to avoid the taxes.

RogerM October 17, 2006 at 9:27 am

A few years ago, some Swedes compared the standard of living of their countrymen with those of the US and found that the average Swede was as well off as the average African-American. They made that comparison because Europeans consider African-Americans to be severely oppressed.

If the Northern European model is so great, why is Sweden backpeddling on it as I write?

Why does Sachs select just Denmark, Finland, Norway and Sweden? Why doesn’t he include France and Germany? He doesn’t because it would ruin his statistics. Sachs exemplifies the economist who treats statistics as a cafeteria, picking just what suit his tastes. Comparing those four tiny countries with the US is just dishonest. Why not let us pick the states that we want to include in the US stats?

As for poverty, Denmark, Finland, Norway and Sweden are highly isolated countries with little immigration from pour countries. According to the US Census Bureau, the majority of our poor are recent immigrants. When you add Germany and France to the equation, both of which have larger immigrant populations, the equations balance.

Analyses that I have done indicate that our poor are as well off as Europe’s poor when Germany and France are included. I don’t trust Sach’s figures on income, either. Are they pre-tax, post-tax, adjusted for the cost of living, full compensation or just wages? Most studies I have seen show that the standard of living for those Northern European countries is below that of the US on average, primarily due to the high cost of living in them.

Finally, Sachs gives too much credit to R&D spending. Studies have shown that the amount matters litte; what you spend it on matters the most.

Sachs, being from Harvard, has always been a socialist and like most socialists, will always climb a tree to lie when he could stand on the ground and tell the truth.

Francisco Torres October 17, 2006 at 10:14 am

These countries [low tax, high income] include Australia, Canada, Ireland, New Zealand, the U.K. and the U.S. The high-tax, high-income states are the Nordic social democracies, notably Denmark, Finland, Norway and Sweden, which have been governed by left-of-center social democratic parties for much or all of the post–World War II era.

The dishonesty started here. He lumped together countries with very diverse economies and rates of interventionism (not to mention expenditures) with countries that are more or less uniform, i.e. the Nordic countries.

Actually, by shunning public spending on health, the U.S. gets much less than it pays for, because its dependence on private health care has led to a ramshackle system that yields mediocre results at very high costs.

Interesting point – what if we extrapolate from this assertion and say that ANY reliance on private ANYTHING leads to mediocre results? Because health is just a service like any other, there should be no difference between it and other services or goods, thus reaching the conclusion that we should receive only mediocre results when buying privately-created toaster ovens and motorcycles, or plumming or electric services. Of course he is being inconsistent, but being the marxoid he obviously shows, his logic is different from ours.

Timothy October 17, 2006 at 11:13 am

Among the several errors in Sachs article:
Why attack Hayek by name, but then give no rebuttal of Hayek’s actual reasoning? I am always suspicious of those who claim to use evidence to argue against the conclusions of a certain theory or conjecture, without explaining why the reasoning used to reach those conclusions is wrong. Could it be that most readers of a scientific magazine will not know enough about Hayek’s work to refute Sachs, so they must take his word for it that he has refuted Hayek?

Why no discussion of differences in income within chosen regions? Sachs should have asked why the US has a far higher per capita income than the UK, NZ, Oz and Canada, and also has lower taxes and a smaller welfare state than those countries. But then he might have been forced to conclude that, among countries with a similar culture and heritage, less government did lead to greater wealth.

GDP per figures do not measure the usefulness of the spending. So, in Sachs’ model, a dollar spent by the government has the same value as a dollar of their own income spent by a private citizen. Yet the government has no way of knowing what goods to produce to best satisfy the desires of consumers; people could place no value at all on what the government gives them in return for their taxes, but the spending will still contribute the same amount to the GDP figures. The government could take $10,000 per person and spend it on maintaining, for example, a completely unnecessary military, or an education system which doesn’t educate, it still counts as $10,000 towards per person GDP.

Daniel October 17, 2006 at 1:10 pm

I thought it especially funny that he specifically pointed out his “good” countries were leftists after WWII but neglected to mention they were also NON participants, while the “bad” countries included two of the countries that footed most of the bill for the war.

He also neglected to mention how the countries he selected BECAME high income countries (by free trade and low taxes) or the overall pace of improvement (or lack thereof) of the countries post WWII (when his favorites became leftist).

RogerM October 17, 2006 at 1:26 pm

Odd, too, that he left out Switzerland, which would fall into our camp and has the highest standard of living in the world. Plus, why the emphasis on income rather than wealth?

Björn Lundahl October 17, 2006 at 1:40 pm

Through the decades, Hong Kong has adopted an economic policy that is extremely more close to the ideas propagated by the Austrian School of Economics, than the economic policies practised in Sweden have been. Hong Kong has accomplished in a much shorter time a higher GNP per capita and also a higher life expectancy than Sweden. The Swedish economic growth rate was also higher relatively to other countries when the economy was more free market oriented in the period before 1970. Sweden has also avoided two world wars.

For some information about Hong Kong, go to;
http://www.answers.com/hong+kong?gwp=11&ver=2.0.1.458&method=3

And for some information about Sweden, go to;
http://www.answers.com/sweden?gwp=11&ver=2.0.1.458&method=3

Assar Lindbeck, a Swedish Keynesian economist reveals “some” economic truths about Sweden. This despite of the fact that he is a Keynesian economist! Go to;
http://www.iies.su.se/~assar/Links/Sw_Ec_Growth_SEPR.pdf

Björn Lundahl
Göteborg, Sweden

happylee October 17, 2006 at 2:05 pm

Notice Mr. Sachs heads the Earth Institute at Columbia. I bet he has a big budget. And with this budget I am sure he helps advance the careers of those who believe in centralizing power. With some luck, his efforts will be rewarded in his lifetime. Just as the efforts of so many Chinese proles were rewarded in their lifetime when Mao took the helm. See Bonner’s book review in weekend lewrockwell.com.
Toodles, Mr. Sachs, may you live to see your dreams come true, truly.

Reformed Republican October 17, 2006 at 2:37 pm

If he is trying to refute the idea that high taxation is a road to serfdom, he should address what freedoms people have in those countries. Even if his economic analysis is correct, that does not address whether or not the people in the high tax countries are free or slaves.

JIMB October 17, 2006 at 4:07 pm

“Most important, they spend lavishly on research and development and higher education”…

Which is soon followed by “The results for the households at the bottom of the income distribution are astoundingly good, especially in contrast to the mean-spirited neglect that now passes for American social policy.”

Apparently, if only we would pay the priesthood more, we will be blessed! Of course, no logic is offered whatsoever. Not to mention a completely unrealistic (and unscientific) view of man and his corruptible nature.

As far as SciAm, which is independent of the criticism of Mr. Sachs – Besides going into rampant unscientific theoretical mysticism, unfounded speculation, and wild theoretics while still calling itself “science” (thus doing all the things it accuses others of doing, but even worse – doing so dishonestly), SciAm now has priests commenting on “scientific” views on economics and government, all while being paid in great numbers BY the government.

Here’s some perspective on Jeffery Sachs

http://www.earth.columbia.edu/endofpoverty/

the earth institute: http://www.earth.columbia.edu/

Not all bad, but really corrupted by stolen goods.

Robert October 18, 2006 at 2:38 am

Ad hominems from people who apparently have never heard of Sachs before are amusing. Sachs is quite prominent among those who study transition economies, globalization, and development. Bono regularly consults Sachs.

I see Hayek’s most famous arguments as compatible with a high tax economy with a well developed welfare state. See chapter 9 of The Road to Serfdom.

Mark October 18, 2006 at 7:49 am

Perhaps, Mr Sachs hasn’t noticed something obvious about Danes, Sweeds, Norwegians, and Finns.

They live in certain areas called Denmark, Sweeden, Norway and Finnland. Their ancestors also lived in Denmark, Sweeden, Norway and Finnland.

M E Hoffer October 18, 2006 at 8:25 am

This: “Bono regularly consults Sachs.” is supposed to be an endorsement of some sort?

And, if this: “Sachs is quite prominent among those who study transition economies, globalization, and development.” isn’t the raging tip-off that Sachs is a Keynesian, I can’t know what is.

Pray tell, which Economy Isn’t in “transition”?

RogerM October 18, 2006 at 9:04 am

Robert:”Ad hominems from people who apparently have never heard of Sachs before are amusing. Sachs is quite prominent among those who study transition economies, globalization, and development.”

What makes you think we no nothing about Sachs? I’ve followed him for years. Do you know what he should be most famous for? His disastrous advice to Russia immediately after the fall of the USSR. He advised Poland, Russia and Columbia in the late 80′s and early 90′s. His one success is Poland, but that may have more to do with them ignoring his advice. Sachs is prominent because he is a lefty from Harvard. He looks like an idiot next to someone who really knew developmental economics–Peter Bauer.

Dennis Sperduto October 18, 2006 at 2:57 pm

M E Hoffer stated: “Pray tell, which Economy Isn’t in “transition”?”

This is an excellent, more importantly, accurate observation.

In fact, Mises emphasized that incessant change characterizes the world in which we live and act. Unfortunately, many economists and others who offer comments regarding economic matters fail to realize this fact and understand its implications.

Sione Vatu October 18, 2006 at 3:04 pm

Ah yes, Scientific American. I remember well the days when this was a magazine that was full of hard science. It was a demanding read. Worth buing and worth reading to think about. These days it is known around here as the “Unscientific Non-American” or “UN” for short. Un as in UNable to find anything in the content worth shelling out the cash to buy it. Even the local library does not subscribe any longer. The librarian having given up on it some time ago. She also gave up on New Scientist (known as Non Scientist by those in the know).

These days if you want to get science literature you need to chase down specialist publications or seek papers individually. It’s a shame but there you have it.

It’s not a surprise that ScAm (yes, it’s a scam indeed that anyone should publish what they do and call it “science”) promotes big govt intervention. They’ve been doing that for some time. List out the editorial staff and the contributors and check out the pedigree. It’s all about welfare. These guys want it to continue into the future. Free money.

Sione

Robert October 19, 2006 at 4:21 am

One can only greet with undisguised laughter RogerM’s cunning in inserting his comment between M. E. Hoffer’s and Dennis Sperduto’s comments. The ad hominems in RogerM’s post are good too.

jeffrey November 15, 2006 at 3:09 pm

WSJ

Dismal Science
By WILLIAM EASTERLY
November 15, 2006; Page A18

Scientific American, in its November 2006 issue, reaches a “scientific judgment” that the great Nobel Prize-winning economist Friedrich Hayek “was wrong” about free markets and prosperity in his classic, “The Road to Serfdom.” The natural scientists’ favorite economist — Prof. Jeffrey Sachs of Columbia University — announces this new scientific breakthrough in a column, saying “the evidence is now in.” To dispel any remaining doubts, Mr. Sachs clarifies that anyone who disagrees with him “is clouded by vested interests and by ideology.”

This sounds like one of those moments in which the zeitgeist of mass confusion about national poverty, world poverty and prosperity comes together in one mad tragicomic brew.

Hayek: Sachs appeal
First, Mr. Sachs disses the great Hayek by repeating the old canard that Hayek thought any attempt at taxpayer-funded social insurance would put us all on the “Road to Serfdom.” This is an especially strange charge, since Hayek (while certainly opposed to the social engineering that proponents of a full-blown welfare state usually have in mind) himself calls for some form of taxpayer-funded social insurance against severe physical deprivation on pages 133-134 of “The Road to Serfdom.” Mr. Sachs, who is currently best known for his star-driven campaign to end world poverty, has apparently spent more time studying the economic thinking of Salma Hayek than that of Friedrich.

Second, if he had studied (Friedrich) Hayek, Mr. Sachs would realize what “The Road to Serfdom” is really about, and how it is of great relevance to Mr. Sachs’s own current work, which has ironically little to do with what he wrote about in Scientific American. Hayek’s great book is all about the dangers of large-scale state economic planning, courageously written in 1944 when Soviet central planning, technocratic socialism and administrative control of the wartime economy appealed as a peacetime model to many New Dealers, celebrity economists and policy wonks of all stripes.

The countries that are now rich subsequently listened enough to Hayek and to common sense to avoid the road to serfdom. Yet today, Mr. Sachs (in his book “The End of Poverty”) is peddling his own administrative central plan — 449 steps in all — to end world poverty. In his plan, the U.N. secretary-general (to whom he is an adviser) would supervise and coordinate thousands of international civil servants and technocratic experts to solve the problems of every poor village and city slum everywhere. Mr. Sachs is not in favor of central planning as an economic system, but he offers it as a solution, anyway, to the multifold problems of the world’s poorest people. If you want the best analysis of why the approach of Mr. Sachs and his confreres in Hollywood and the U.N. will fail to end world poverty this time (as similar efforts failed over the past six decades), you can find it in Hayek.

Third, Mr. Sachs’s attempt to make the case for his best possible society, the Scandinavian welfare state, is a little shaky. If this is what passes for the scientific method in Scientific American, American science is in even worse shape than we thought. Economics is usually about the incentives that cause people to solve their own or other peoples’ problems, but to Mr. Sachs, problem-solving seems always to be about raising more public money for whatever cause he is concerned with at the moment. (To give the celebrity economist his due, he does successfully raise the profile of genuinely tragic problems which compassionate people everywhere would like to see alleviated.)

Mr. Sachs’s empirical analysis purports to show that Nordic welfare states are outperforming those states that follow the “English-speaking” tradition of laissez-faire, like the U.K. or the U.S. Poverty rates are indeed lower in the Nordic countries, although the skeptical reader (probably an ideologue) might wonder if the poverty outcome in, say, the U.S., with its tortured history of a black underclass and its de facto openness to impoverished but upwardly mobile immigrants, is really comparable to that of Nordic countries.

Then there is the big picture, where those laissez-faire Anglophones in, first, the U.K. and, then, the U.S., just happened to have been the leaders of the ongoing global industrial revolution that abolished far more poverty over the past two centuries than a few modest Scandinavian redistribution schemes. Mr. Sachs apparently thinks the industrial revolution was led by IKEA. Lastly, let’s hear from the Nordics themselves, who have been busily moving away from the social welfare state back toward laissez-faire. According to the English-speaking ideologues that composed the Heritage Foundation/Wall Street Journal Index of Economic Freedom, Denmark, Finland and Sweden were all included in the 20 countries classified as “free” in 2006 (with Denmark actually ranked ahead of the U.S.). Only Norway missed the cut — barely.

Mr. Sachs is wrong that Hayek was wrong. In his own global antipoverty work, he is unintentionally demonstrating why more scientists, Hollywood actors and the rest of us should go back and read “The Road to Serfdom” if we want to know what will not work to achieve “The End of Poverty.” Hayek gave the best exposition ever of the unpopular ideas of economic freedom that somehow triumph anyway, alleviating far more national and global poverty than more fashionable Scandinavia-envy and grandiose plans to “make poverty history.”

Mr. Easterly, professor of economics at New York University, is the author of “The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good” (Penguin, 2006).

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