Some advice for the new president from economist John Cochrane in the Wall Street Journal, Don’t Believe the Economic Pessimists [1]:
- Health. Replace ObamaCare with a simple health-insurance voucher. Deregulate insurance and entry into health care dramatically.
- Finance. Replace strangling regulation of financial companies with a simple rule: If you issue enough equity that stockholders bear the risks, you can do what you want. Rep. Jeb Hensarling has proposed such legislation. Hearty competition is the best consumer protection.
- Labor. The best worker protection is a worker’s ability to swiftly change jobs. This is more likely if employers do not face a mountain of red tape, complex rules and legal liability.
So why is there so little talk of serious growth-oriented policy? Regulated and protected industries and unions, and the politicians who extract support from them in return for favors, will lose enormously. The global policy elite, steeped in Keynesian demand management for the economy as a whole, and microregulation of individual businesses, are intellectually unprepared for the hard project of “structural reform”—fixing the entire economy by cleaning up the thousands of little messes. Even economists fight to protect outdated skills.
HKO
Real structural reforms is arduous and involves eliminating the thousands of messes accumulated over decades. Each little mess has a constituency that will fight for its continuation, hiding behind a thin veil of moral outrage to mask its own greedy self- interest. It is much easier to promise great systemic overhauls and unrealistic promises.
America’s weakness is also its asset: impatience. It makes us all suckers for the quick fix and the false promise.