Ep. 113 Oren Cass and the Conservative Critique of Pure Laissez-Faire
Oren Cass is the executive director of American Compass, a conservative think tank that stresses the importance of family and domestic industry, in opposition to a singleminded devotion to economic efficiency. Cass was previously a senior fellow at the Manhattan Institute for Policy Research, and was the domestic policy director for Mitt Romney’s 2012 presidential campaign. Bob and Oren have a friendly discussion about their disagreements on economic policy.
Mentioned in the Episode and Other Links of Interest:
- Oren Cass’ bio. The website for American Compass.
- An article summarizing the “broken windows” approach to policing.
- Two of Oren’s essays critiquing the libertarian case for free trade, at Law & Liberty and at American Mind.
- The National Review article on “The Return of Conservative Economics.”
- Oren’s appearance on Contra Krugman ep. 76, in which he explained the problems with claims that repealing ObamaCare would kill huge numbers.
- Bob’s 3-part series at IER summarizing Oren’s House testimony on estimates of climate change damages. Bob’s 2-part series at IER article summarizing Oren’s critique of a carbon tax.
- Help support the Bob Murphy Show.
The audio production for this episode was provided by Podsworth Media.
About the author, Robert
Christian and economist, Chief Economist at infineo, and Senior Fellow with the Mises Institute.
Very interesting episode! Been following Cass for a bit. It’s great to see the exact philosophical differences between libertarians and conservatives spelled out. The two are often conflated. Also just LOL’d when Oren asks Bob if he supports public education or some such, and Bob just flat out says “No!”, almost as if offended 🙂
I had two thoughts that I’d be interested to talk about more.
1. Subsidized industry argument akin to “cornering the market” argument?
Cass argues that if some foreign country subsidizes their industry X, they’ll become really good at X, creating a competitive advantage. Therefore we should “retaliate” by doing the same.
This strikes me as the same argument for keeping companies from capturing too big a share of any one market. Isn’t the argument that the company can subsidize w/ loss leaders until their competitors go out of business, then raise prices when nobody else is around to compete? This seems like the exact same argument just with countries.
In my opinion this is nonsense. If China subsidizes their semiconductor industry, their semiconductor industry will not really be competitive. It will be really good at making semiconductors WHILE BEING SUBSIDIZED. As soon as that subsidy goes away, they’ll find out that “being good as an industry” is not just about having good engineers or factories or education, but possessing all those in the right relations and at the right prices.
I’ve actually read about this exact case with Chinese software firms. There is an idea that came from China about “super-apps”. That is, instead of having Uber, Amazon, AirBnB, your bank app, and Facebook, they have it all in one. For a while several international and even US companies tried to copy this amazing new model, because the Chinese apps have 1 Billion users, so it must be great, right?
It usually went nowhere. I’ve personally used some of the knock-off super apps and they were bad at everything. Clunky. Buggy. Turns out if you do a lot of things, you probably won’t do any of them right. (I have not tried the actual Chinese super apps, so cannot speak to their quality.) Then I read an article by a Singaporean VC who argued that the only reason China has super apps is that the Chinese government literally directs which company what industry to be in. So they appointed a handful of software apps, and those made all the software. Competition not allowed.
Imagine the situation in the US if only Amazon and Microsoft were allowed to produce software. You’d end up with UberZonFaceGoogle and MicroWorkBnB. But this is not an example of creating a competitive advantage, it’s an example of putting an artificial subsidy on your industry that prevents it from actually improving.
I think non-Austrians are at a real disadvantage in seeing this stuff, because they don’t believe in structure of capital. If it’s all just a big number to you, how could it possibly make a difference? China’s competitive advantage in semiconductors is over 9000, and that’s more than ours, so we’re out of luck.
2. Is the free market the end? Austrian vs. Chicago school
Cass brought this up in what he believes the difference between libertarians and conservatives is. I’ve thought about this a while too.
I think that, in a sense, the free market seems like the end goal for Austrians way more than others.
Example. Bob and Joe could at any given time decide to make a trade or refrain from doing so. If they decide to trade, it must have been both their impression that there would be benefit, i.e. win-win. If we introduce regulation forbidding them from making that deal, there now exist situations where they would’ve made the deal but are now forbidden – this is a worse outcome, since they wanted to do it. QED.
All government (or non-voluntary, technically) action is therefore of negative consequence. There is little need to argue about it, the mere fact that the deal would otherwise have been made proves it.
This strikes others as very dogmatic, ideological, or unscientific. But I don’t find it unscientific.
Chicago types would argue against the same government regulation by saying that some number would be lowered, and high numbers are good. Austrians don’t need to go there, because even the best number would just be a proxy for what we knew the whole time – the deal wasn’t getting made even though both parties would have benefited from it.
When you talk about this with people, they typically end up switching between arguments from morality and efficacy. When I argue that I wouldn’t favor sacrificing virgins to Satan even if it raised the GDP, they roll their eyes. When I argue that something libertarian would be more effective or economical, they switch back to claiming I don’t care about morality (but the virgins!).
1. I think you’re missing Cass’s point. If I understand your reflections correctly, you are saying “If China subsidizes their industries, they might get a monopoly and then raise prices, but if they did that, they would end up never making back what they lost in the subsidies because as soon as the prices went back up, their competitors would reappear, since China never had a real ‘advantage’ in production.”
I think that sort of talks past the point he’s trying to make. Let’s say the Chinese are subsidizing their steel industry for example. You are correct that they cannot, by doing this, corner the market in steel and then raise the prices. But I don’t think anyone believes that is their purpose or intention. You’re right that it wouldn’t work, but you might not be understanding the goal.
A Chinese subsidy could also be understood as “China paying us to employ their workers instead of ours.” It unarguably means that our workers are at a disadvantage and the playing field is not fair. This is no different than the US government subsidizing Walmart instead of Target and suddenly Target going out of business. It is not a fair practice and it should be disincentivized.
But why would the Chinese do this? Well for one, it’s a jobs program. Like any other government, they can essentially print whatever money they need to. They print the money, but instead of giving it to their people directly, they filter it through our economy so that their people are employed but receiving wages they could not compete for directly. Secondly, it has the effect of perpetual foreign aid to the US. They are sending us relief packages every day, which has the perverse outcome of disincentivizing us to develop our own economy (or more accurately, incentivizing us to allow our industrial economy to decay). The capital is lost entirely over the course of a few decades so that even if they suddenly stop, we cannot immediately start back up. It puts us in a position of dependence on them.
This has the obvious effect of putting the Chinese in an increasing position of power over the United States.
Another missing piece from your analysis is that it assumes a gold standard of money (implicitly). The “real” economy’s output is not how much money in paper currency it generates, as that is manipulated by currency policy and the Fed, but how much “stuff” it produces.
Now who is producing more stuff? The Chinese or America?
Tom Woods once made a thought experiment in which we lived on a planet where Chinese steel just grew on trees. (or something similar). We wouldn’t make the harvesting of these trees illegal just to keep a steel industry alive. But that assumes that there are no pernicious motives at stake. We cannot treat the Communist Chinese government as having no motivations in subsidizing our consumption other than passive benevolence. There are obviously massively negative effects on our populace. The suicide rates and drug addiction rates are enough to prove that. And I defy anyone to drive through Northern Ohio and honestly say these people are better off because their shirts are cheaper. When you then add the political instability that has come about, it’s pretty clear that while the immediate result of Chinese subsidies is just cheap stuff for us, the long term effects might be in realms other than the purely economic.
If you accept my description of the potential motivations and effects of Chinese subsidies, (and you are not simply ideologically opposed to all government intervention regardless of effects, which is a whole different discussion) then it makes sense to at least consider whether tariffs or subsidies of our own might be worthwhile to combat some of the pernicious incentive distortions.
As for your note about people switching from morality to efficacy, I actually read that and was confused whether you are arguing the libertarian or the conservative case. From my perspective discussing with Libertarians, I feel like I get the same response. If I say “This might work” they explain why they wouldn’t support it because Liberty. If I say, here’s another moral consideration other than maximum liberty, they say “well it won’t work.”
Hey Jason, thanks for your detailed answer.
On the morality/switcheroo side, maybe we all do it.
Regarding the analogy between cornering the steel market and cornering the production of industrial goods, I think the analogy still works pretty well.
So the Chinese are sending us “foreign aid” in the form of subsidized products. Our industry scales down. It might even disappear completely in some cases. Does that put the Chinese in a position of power? Maybe in the sense that we lost our capital to make X if they ever decided to stop subsidizing it, or stop selling it to us altogether. But capital isn’t lost forever – we could build up capital again. Would it be instant? No. But neither would competing with the steel monopoly after they’ve cornered the steel market. I think the analogy holds.
And the goal of an industry isn’t to keep people occupied, is it? I guess you could argue that it partly is, because having a job and feeling valued provides value to workers. On the other hand, the actually-producing-something-of-value part of jobs is also important.
I’m still torn on the conservative idea that “work provides dignity”, or “meaning”, or whatever the saying is. I think feeling you’re part of a community, and being valued, provides meaning. I’ve had plenty of jobs that didn’t feel dignified or meaningful at all.
I think we as a society should become better at finding meaning or dignity decoupled from work. If you find meaning in your work, that’s great. But do we really want to rely on giant make work projects, letting people dig ditches and fill them up again, just so they get “meaning”?
Seems to me that this perspective doesn’t give credit to the opioid victims or people in Northern Ohio. Surely they’d realize that they’d merely be doing make work, if we implemented enough tariffs for them to make steel again or whatever it is they were doing? I agree that these deaths of despair are tragic. But they are better off from cheaper shirts, too. I don’t think free trade can be solely blamed here. What about shitty policy that doesn’t allow people to adapt to the new economic circumstances rung in by free trade?
Regarding the motivation of the Chinese Communist Party I’m under no illusion – they’re Stalinists. Their behavior in the current crisis proves it. But I don’t see how that plays into it. I don’t care about the motivation of the steel cornering company either. If they corner the market on industrial production out of pure altruism or malevolence, isn’t the effect and our optimal reaction the same?
Do you really believe the Chinese would be able to play this game if we had a free market in money? No, of course they wouldn’t. So the answer is not “amp up the regulations and play their game,” the answer is “get rid of the government monopoly on money.”
In regards to defining “the ends”, I think any reasonable person would have to say something like “the flourishing of the human race (or other intelligent species) over a long time period”. Nobody is 100% “conservative” or 100% “liberal” but we used these labels the same way all labels are used – to broadly and quickly portray a core set of features that differentiate ourselves. So libertarians value freedom more than liberals or conservatives not just in an end-to-itself, but because we believe freedom leads to more flourishing of humankind.
Am I being cynical in pointing out that by setting his think tank’s goals to include ‘… the importance of domestic industry …’, Mr Cass has just created a vehicle for pulling in lobbying funds from big US corporations? If he is so concerned about providing jobs for Americans, why doesn’t he create an actual business?
So he’s basically an economic xenophobe. He does not take into account the whole world, just the national economy. Like, he would say people should produce things themselves in their own family, because “otherwise people outside the family would end up doing basically everything”.
Try to see things from a different point of view. I was surprised that Oren did not understand Bobs liberty focused point of view, and that’s why he was somewhat caught off guard when Bob said he didn’t support taxes to public education. Don’t be like that.I would venture to say that Oren sees things like community as not only important, but consequential. So he would say that your reduction of his argument to a single family doesn’t make sense, because families exist inside of communities, and that communities should focus on building their economic stability and strength for the good of everyone in the community.
I have a question for anyone who considers themselves essentially an anarcho-libertarian, in the mould of Bob. It is in the form of a thought experiment.
Imagine we as America managed to create a perfect anarcho-capitalist utopia, (imagine this however you wish, but as a society with perfect property rights), and you were suddenly thrust forward in time 200 years.
You awaken and it’s a science-fiction style world, but when you look into the kinds of “government” that exist, you find that there are many things similar to today. There are lots of taxes, various welfare programs, public education, a CDC and the like.
You rightly wonder what happened, so you ask around. You discover that because of the Paredo principle, very soon after the property-rights utopia was launched, real estate started getting very concentrated in a very few hands, very quickly. Eventually the entire country was owned by a conglomerate of land owners, who ceded their property rights to a trust. That trust decided to adopt the 2020 American Constitution as its operating agreement and voila, everything became about as you’d expect. The taxes are essentially just charges that the property owners (the trust) charge the residents for doing business and the services are just services that the property owners choose to provide from their own funds. (Raised by the rents on property leases, etc)
Would this scenario negate all of the moral arguments for libertarianism, and leave only the practical arguments? (ie: it’s not effective to do things this way)
I think there are too many assumptions in this to give a clear answer.
IMO without stipulating a culture that respects property rights, it would be no surprise that someone usurps them. If you changed all laws on the books right now to only enforce the NAP in a perfect ancap legal structure, but left the culture as is, then an authoritarian regime would almost immediately pop up, rinse and repeat.
If there was a culture that truly valued liberty, and this was pervasive throughout society, then “That trust decided to adopt the 2020 American Constitution as its operating agreement” would be seen as a outright violation of rights and if they acted on it they would be treated as criminals. They would have no legitimacy.
And THIS is why political decentralization is so important as a means to achieve liberty. Get all those that value liberty socially interacting, pollinating liberty in the community. The internet has helped a lot with that, but because the state is currently a geographic monopoly, I think this has to happen IRL too. All the libertarians move to the most libertarian state or region, making it more libertarian and voila.
I always use the example of standing backwards in an elevator vs. a rolling stop at a stop sign. The intense desire we have to conform to our culture vastly outweighs our desire to follow some edict.
I suppose one major difference would be that these property owners had a more legitimate claim to the land than current governments do. In that sense, the morality argument is negated, yes.
Just like me eating my apple is not the same (morally) as me stealing and eating your apple.
That said, most arachno-capitalists probably don’t believe this would happen in a truly free market. A common belief among us is that optimal firm size is propped up by government regulation, in a sort of defense or “circling the wagon” of firms against the encroachment of government. We can’t hire lawyers and lobbyists as individuals, but if we get together in a large company, we can share resources and afford it.
A freer market would put less pressure on firms, and therefore reduce the optimal size of the firm, I believe. Therefore there would be less concentration of property. I believe Coase and Peter Klein (Austrian economist) have written on this extensively.
Imagine thinking public education is somehow conducive to a conservative society lol
My conclusion from this time travel experiment would be that people got lazy and started giving up freedom for (perceived) security, and therefore ended up with none. The only major problem with ancap as I see it is that it does in fact require persistent and dedicated vigilance from *everyone* in society. As long as there are lazy people who would rather have handouts, there will be no ancap society. And if ancap society somehow comes about, it will degrade exactly as you describe if people should happen to get lazy again.
But I don’t see how that is a problem with ancap philosophy itself.
Assuming this thought experiment premise (and that taxation in its current state is allowed via the American Constitution), I think anarcho-capitalists would largely be okay with it. The key difference between the current system and your proposed (dys?)topian future is property rights. In this theoretical future I would be allowed to purchase land from an existing land-owner, and would then not be bound by the previous owners’ rules. (At least most of them, if we are using Lockean homesteading as our principles of land ownership). I could define my own rules which, if they were preferable to some, would encourage others to leave and join my “country”. This is simple competition.
How this differs from present day citizenship and immigration rights is that there would be no force/aggression involved. The minute Bezosland imprisons people trying to leave their country to join mine they cease to be something anarcho-capitalists are advocating.
This is obviously very simplified (there are issues with children when you introduce multi-generations, and people being bound my contracts they didn’t sign – see Lynsander Spooner’s arguments against the Constitution) but I think my basic point holds.
To anticipate your reply that arguing for liberty may result in a world without 100% liberty – yes this is often a stumbling block with people as they are struggling with libertarian ideas, but this is true with any idea or ideal. The world is never perfect, but you have to continually strive towards an ideal that will never be reached. This is part of the human condition and shouldn’t be used as an argument against action or you will end up in nihilism and moral bankruptcy.
What struck me is how someone as well read as Cass still thinks that Cato represents the whole of intellectually pure libertarians
Love to hear about his thoughts of Nisbet’s “Quest for Community” I bet that would really highlight the differences between libertarians and Cass’ conservatives.
I just loved hearing the guest’s head explode. Liberty? That seems radical!
Great episode. Mr. Cass should have done more research on Bob before coming on. I sincerely doubt he started the interviewing expecting to defend socialism.
This may be the most reasonable discussion I have ever heard between a conservative and a libertarian.
thanks for the kind words!
My heart goes out to you Mr Cass as you are trying to hold down some weird middle ground from within the Republican Party between the left on the outside and on the inside, the dynamic duo of Populism (Led by Trump) and the worst of all, the Neo-Conservatives. And your group is dwindling simply because you have nothing to sell but slightly less tyranny than the left, slightly less onerous restrictions on trade than the populists and slightly less foreign intervention than the Neo-Cons. And the loss is not to the left on the outside, but to the groups on the inside. The younger generations seem to be more left oriented, but they have always seemed to be that way. But the populists and Neo-Cons from within your own ranks keep teaming up with the left to make the world a worse place to live.
My advice to you is to come home to the libertarian side when we have the more difficult sale of freedom and its partners personal responsibility an charity. I know that leaving people alone in the USA and outside of it is difficult but it is the only way to defeat the left.
I really liked this interview. I felt Cass did a good job of explaining his flavor of conservatism and the conversation made me realize some of the differences in thought between libertarianism and this type of conservatism. The most striking thing to me was how Cass repeatedly used “we” when describing actions hypothetically made by the U.S. government. Libertarians (thin at least) wouldn’t be necessarily against any of the programs or results argued by him, but we would use different language to describe them and would pursue them as individuals instead of via the billy club.
Thanks Bob!