Comment 24178

By Ryan (registered) - website | Posted May 28, 2008 at 15:05:53

I'm not sure why you accuse me of "name calling".

"Reaganomics" is a common term used by economists to refer to the economic hypothesis that reducing taxes pays for itself by increasing economic growth and tax revenue, on the argument that free markets have better allocative efficiency than governments. I'm not sure why you would regard my use of the term pejoratively.

If I had followed George H. W. Bush and called it "voodoo economics", you might have a point. As it is, Reaganomics is a generic term for the economic policy that helped define his presidency.

(Again, I think this is a distraction from the issue, since cities do not have the power to to tax income or corporate revenue, but I will point out in passing that the evidence in support of the Reaganomic hypothesis is controversial at best.

The US economic recovery after 1982 was not the result of tax cuts so much as it was to the Federal Reserve finally relaxing the prime rate after jacking it up over 20 percent in an attempt to kill inflation by driving the economy into a severe recession.

Job creation tracked population growth over Reagan's terms, while savings rates plummeted and the federal debt increased 2.5 times, or from 32.6% to 51.9% of GDP.)

Similarly, your arguments about the respective roles of government and free enterprise are straightforward libertarian philosophy. To take issue with my calling it that is essentially to take issue with the role of language, i.e. to give names to things, actions and concepts to people can discuss them.

"the King/Spadina, King/Parliament rebirth is entirely a result of smaller government. Prior to the city's decision to remove zoning restrictions, the area was doing nothing. The great idea the city panel came up with was to let nature take its own course, and allow the market decide what was to be built in the area. This is the complete antithesis of government planning. It is not a complement to planning, it is the complete opposite."

Go back and read the King-Spadina Secondary Plan. It mandates a particular built form, a particular connection to the street, a particular location for parking, and a particular relation of each building to its surroundings. It also hinges on higher order public transit to provide access in and out of the neighbourhood.

It is absolutely not the "antithesis of government planning." It's exactly what I wrote above: smart regulation that produces a desirable outcome simply and effectively.

"The market is the default system in the world, it does not require government, it exists in spite of government."

No. At a bare minimum, the market requires a legal framework including property law, contract law, tort liability law, and so on, including enforcement. Beyond that, markets self-evidently require public infrastructure to connect private enterprises. Markets also require cultural and social norms around responsibility, fairness and trust.

Beyond that, markets simply do some things very poorly, things our society has decided are essential. Markets are particularly ineffective at providing universal public goods like education, health care and so on; for the simple reason that markets balance supply and demand. For people too poor to pay for education or health care, they have no "demand" and the market ignores them.

Because markets tend to maximize allocative efficiency, they discriminate against people who have difficulty learning or tend to be sickly through risk selection and rationing by price.

Here's an example to illustrate my point: When Toyota opened a new manufacturing plant in Woodstock, Ontario rather than the southern US, they specifically pointed out that Ontarians are much better educated, healthier, easier and faster to train, and more productive. Even though several US states offered huge tax advantages, Toyota decided that Ontario provided better overall value despite higher taxes.

In summary, free markets cannot produce the necessary preconditions under which markets function most effectively. For that you need a liberal, democratic government with strong respect for the rule of law, high levels of transparency and accountability to the public, prudent public investments in essential social programs, and smart regulations that encourage productive investment and sustainable development.

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