American Gridlock: Why the Right and Left Are Both Wrong - Commonsense 101 Solutions to the Economic Crises - Hardcover

Brock, H. Woody

Hardcover

ISBN 10: 0470638923 ISBN 13: 9780470638927

Publisher: Wiley, 2012

Synopsis

A sensible solution to getting our economy back on track

Pessimism is ubiquitous throughout the Western World as the pressing issues of massive debt, high unemployment, and anemic economic growth divide the populace into warring political camps. Right-and Left-wing ideologues talk past each other, with neither side admitting the other has any good ideas. In American Gridlock, leading economist and political theorist H. Woody Brock bridges the Left/Right divide, illuminating a clear path out of our economic quagmire.

Arguing from first principles and with rigorous logic, Brock demonstrates that the choice before us is not between free market capitalism and a government-driven economy. Rather, the solution to our problems will require enactment of constructive policies that allow "true" capitalism to flourish even as they incorporate social policies that help those who truly need it.

Brock demonstrates how deductive logic (as opposed to ideologically driven data analysis) can transform the way we think about these problems and lead us to new and different solutions that cross the ideological divide. Drawing on new theories such as game theory and the economics of uncertainty that are based upon deductive logic, Brock reveals fresh ideas for tackling issues central to the 2012 U.S, Presidential election and to the nation’s long-run future:

• Demonstrating that the concept of a government “deficit” is highly problematic since it blinds us to the distinction between a good deficit and a bad deficit – where a deficit is good if it results from borrowing dedicated to productive investment rather than to unproductive spending.
• Deriving the need for a U.S. Marshall Plan dedicated to very high levels of profitable infrastructure spending as the solution to today’s Lost Decade of high unemployment
• Drawing upon a logical extension of the Law of Supply and Demand to demonstrate how the health-care spending crisis can be completely resolved by letting supply increase at a faster rate than demand
• Utilizing the theory of bargaining inaugurated by the “Beautiful Mind” mathematician John F. Nash, Jr., to help us avoid being repeatedly duped in our negotiations with China
• Making use of a completely new theory of market risk recently developed at Stanford University to demonstrate why dramatically limiting leverage is the key reform to preventing future Perfect Storms, whereas hoping to banish “greed” amounts to whistling Dixie
• Deducting from first principles a solution to the contentious issue of fair shares of the economic pie, a solution that integrates the two fundamental norms of “to each according to his contribution” and “to each according to his need.”

Profound, timely and important, American Gridlock cuts through the stale biases of the Right and Left, advances new ways of thinking, and provides creative solutions to the problems that threaten American society.

About this title

Review

Q&A with the Author

Why are both the Right and Left wrong in their analysis and proposed solutions to our economic problems?
Left or Right wing policy prejudices make meaningful compromises between the two camps all but impossible. Take, for example, the red-hot issue of "fair shares of the pie," or Distributive Justice as philosophers call it. Leftists have become so indoctrinated into interpreting this issue as one of taking from the rich and giving to the poor that they cannot accept a theory of justice which respects both "to each according to his needs" as well as "to each according to his contribution." And vice versa for rightist conservatives who assume the primacy of "to each according to his contribution." A more fundamental analysis of the kind provided in Chapter 6 of the book starts off in a less prejudiced manner, demonstrating the relevance of both dimensions of "fairness" from first principles, it then arrives at a theory that incorporates both needs-justice and contribution-justice in their relevant domains. As a result, the new theory is neither Left wing nor Right wing in nature. It is balanced, and obviates a Dialogue of the Deaf on the subject of fair shares.

Can you elaborate on your definition of a "good" and "bad" government spending deficit?
Because of decades of deficit accumulation, total debt has grown to a dangerous level causing bond markets to look askance at further debt growth. Suppose that a government with a heavy debt load proposes to borrow additional funds. Deficit hawks will cry "Foul," due to the fear of further displeasing the bond market, and laying even more debt upon the shoulders of the children and grandchildren who will have to service this debt.

But such hawks may be wrong in their diagnosis. Suppose that the funds are being borrowed for productive infrastructure investment — projects like the interstate highway system that more than pay for themselves over time. Not just infrastructure investment ("roads to both somewhere and nowhere"), but productive investment ("roads to somewhere" only). In this case, the high return on such projects will end up lowering the debt burden on the children in the long run. On the other hand, increased borrowing to fund transfer programs will not generate healthy as there is, in effect, no investment to earn returns. This form of borrowing will increase the burden on the children, and the fears of deficit hawks are well justified. In short, there are good and bad deficits — the distinction depending upon whether the borrowed funds are spent productively or unproductively.

What is your solution to the health care spending crisis?
The solution to the health care spending crisis is quite simple, at heart. Suppose you know that there is going to be a large increase in demand for apricots. What do you do to make sure that people do not have to spend too much on apricots in the future? You naturally increase the supply of apricots by planting a lot more trees. This will drive the price of apricots down, so total expenditure on apricots will increase less than if you did not increase supply. In the case of health care services, suppose that you wish to increase the supply and demand of services delivered, and also wish to drive total expenditure on healthcare down as a share of GDP — not simply to slow down its growth rate as was the more modest goal of Obamacare. The nation must strive for this outcome given the huge expenditures the nation confronts as its population ages during the next four decades.

Can this idealized outcome be achieved? The answer is yes: What is required is that the so-called "supply curve" of health care services shifts out to the right faster than the demand curve does over time.

Can we preserve capitalistic incentives, while avoiding massive income disparities and providing assistance to those who are truly in need?
Chapter 6 in the book clarifies the meaning of true capitalism as Adam Smith and others conceived it, and contrasts this with the "crony capitalism" which we observe today. It turns out that there is nothing incompatible between true capitalism on the one hand, and a fairer distribution of wealth and income on the other. Some of the reasons this is true stem from the capitalistic norm of “market efficiency,” a point that is seldom acknowledged. Indeed, it is universally supposed that true capitalism and its norm of economic efficiency are silent upon the concept of Distributive Justice, the latter falling under the rubric of moral philosophy. This is not the case at all, for three reasons set forth in the chapter. As a result, self-styled capitalists must confront the need to redress rampant inequalities on purely capitalistic grounds! Moral theory for its part plays an ancillary role, and proposes additional reasons for a more just distribution of wealth and income. Thus, the subject of fair shares is not peripheral to capitalist economics, but rather central to it.

From the Inside Flap

Pessimism is ubiquitous throughout the Western world as the pressing issues of massive debt, high unemployment, and anemic economic growth divide the populace into warring political camps. Right- and Left-wing ideologues talk past each other, with neither side admitting the other has any good ideas. In American Gridlock, leading economist and political theorist H. Woody Brock bridges the Left/Right divide, illuminating a clear path out of our economic quagmire.

Arguing from first principles and with rigorous logic, Brock demonstrates that the choice before us is not between free market capitalism and a government-driven economy. Rather, the solution to our problems requires enactment of constructive policies that allow "true" capitalism to flourish even as they incorporate social policies that help those who truly need it.

In this far-reaching and important book, Brock identifies five challenges critical to the nation's future: preventing a Lost Decade with permanently high levels of unemployment, sparing the nation long-run bankruptcy from exploding healthcare costs, preventing future Perfect Financial Storms, standing up to thugocracies that take unfair advantage of us (China and its trade policies), and addressing the vital issue of distributive justice, or fair shares of wealth and income.

Most importantly, Brock demonstrates how deductive logic (as opposed to ideologically driven data-analysis) can transform the way we think about these problems and lead us to new and different solutions that cross the ideological divide. Even better, these solutions are win-win in nature and transcend today's Left/Right divide. Drawing on new theories such as game theory and the economics of uncertainty, which are based upon deductive logic, Brock reveals fresh ideas for tackling issues central to the 2012 U.S. Presidential election and to the nation's long-term future:

• Demonstrating that the concept of a government "deficit" is highly problematic since it blinds us to the distinction between a good deficit and a bad deficit—where a deficit is good if it results from borrowing dedicated to productive investment rather than to unproductive spending

• Deriving the need for a U.S. Marshall Plan dedicated to very high levels of profitable infrastructure spending as the solution to today's Lost Decade of high unemployment

• Drawing upon a logical extension of the Law of Supply and Demand to demonstrate how the healthcare spending crisis can be completely resolved by letting supply increase at a faster rate than demand

• Utilizing the theory of bargaining inaugurated by the Beautiful Mind mathematician John F. Nash Jr. to help us avoid being repeatedly duped in our negotiations with China

• Making use of a completely new theory of market risk recently developed at Stanford University to demonstrate why dramatically limiting leverage is the key reform to preventing future Perfect Financial Storms, whereas hoping to banish "greed" amounts to whistling Dixie

• Deducting from first principles a solution to the contentious issue of fair shares of the economic pie, a solution that integrates the two fundamental norms of "to each according to his contribution" and "to each according to his need"

Profound, timely, and important, American Gridlock cuts through the stale biases of the Right and Left, advances new ways of thinking, and provides creative solutions to the problems that threaten American society.

Edition details

• Publisher: Wiley
• Publication date: 2012
• ISBN 10: 0470638923
• ISBN 13: 9780470638927
• Binding: Hardcover
• Language: English
• Edition number: 1
• Number of pages: 304