A SPECIAL MEETING THE MONT PELERIN SOCIETY · 2020-03-10 · 1 1 the mont pelerin society hoover institution • stanford university from the past to the future: ideas and actions

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THE MONT PELERIN SOCIETY

H O O V E R I N S T I T U T I O N • S T A N F O R D U N I V E R S I T Y

FROM THE PAST TO THE FUTURE: IDEAS AND ACTIONS FOR A FREE SOCIETY

A S P E C I A L M E E T I N G

J A N U A R Y 1 5 – 1 7 , 2 0 2 0

TAKING IDEAS TO ACTION IN CENTRAL GOVERNMENTS—THE US CASE

TYLER GOODSPEED

C H A P T E R T H I R T Y - S I X

332

Tyler B. Goodspeed, Council of Economic Advisers *Mont Pelerin Society, Hoover Institution

January 2020

Taking Ideas to Action in Central Governments

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Tyler B. Goodspeed, Council of Economic Advisers *Mont Pelerin Society, Hoover Institution

January 2020

Taking Ideas to Action in Central Governments

Investment and capital stock have risen.

4.2 4.2

2.5

0.8

0

1

2

3

4

5

2014:Q2-2016:Q4 Average 2009:Q3-2016:Q4 Trend

2017:Q1-2019:Q3 Actual Projection

Growth in Real Nonresidential Fixed Investment, 2017:Q1–2019:Q3

Compound annual growth rate (percent)

Sources: Bureau of Economic Analysis; Council of Economic Advisers, Author’s calculations.Note: The pre-2017 trend is estimated over a sample from 2009:Q3 through 2016:Q4 and projected into 2017-2019.

4.0

2.6

3.3

0

1

2

3

4

5

Long-Run Average 2009:Q3-2016:Q4Average

Post-TCJA Average

Growth In Capital Services, 1966–2019Average annual growth (percent)

Source: IHS Markit, Council of Economic Advisers.

554

Labor productivity has accelerated.

1.2

0.90.7

1.0

0.2

0.7 0.8 0.8

-0.2

0.1 0.2

-0.5-0.6 -0.7

0.2

1.0

-1.0

-0.5

0.0

0.5

1.0

1.5

Australia Canada France Germany Italy Japan UnitedKingdom

UnitedStates

2010:Q1-2016:Q4 2018:Q1-2019:Q3

Growth in Real Output per Employed Person Among Advanced Economies, 2010–19

Compound annual growth (percent)

Sources: Various national statistics offices; Bureau of Economic Analysis; Bureau of Labor Statistics; HaverAnalytics; Council of Economic Advisers, Author’s calculations.Note: Values represent a compound annual growth rate calculated over the given quarters. Growth rates are based off of real GDP divided by seasonally adjusted employment. Employment includes government employees.

1.1

0.9

1.4

0.0 0.5 1.0 1.5

2009:Q3 - 2016:Q4

2013:Q1 - 2016:Q4

2017:Q1 - 2019:Q3

Nonfarm Business Sector Labor Productivity Growth, 2009–2019

Compound annual growth (percent)Sources: Bureau of Labor Statistics; Council of Economic Advisers, Author’s calculations.Note: Annual growth rate is calculated for real output per hour of all persons in the nonfarm business sector.

55 5

Wage gains concentrated among recently more marginal workers.

3.0

2.4

3.53.1

4.9

3.5

2.72.52.4

2.5

1.3 1.51.9

2.4

1.82.1

0

2

4

6

Workers Managers NoBachelor's

Bachelor'sor More

Bottom 10% Top 10% AfricanAmerican

White

2017:Q1-2019:Q3 2009:Q3-2016:Q4Growth in Earnings, 2009–19Compound annual growth rate (percent)

Sources: Bureau of Labor Statistics; Council of Economic Advisers, Author’s calculations.Note: Data represent a compound annual growth rate for 2009:Q3–2016:Q4 or July 2009–December 2016 and 2017:Q1–2019:Q3 or January 2017–November 2019. For workers and managers, earnings are defined as average weekly earnings. For all other categories, earnings are defined as median usual weekly earnings.

776

Recent wealth gains higher at lower end of the distribution.

1.2

0.0

-0.5

0.4

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7

0.9

1.1

1.3

Top 1% Bottom 50%

2009:Q3-2016:Q4 2018:Q1-2019:Q3

Change in Share of Net Worth, 2009–19

Percentage points

Sources: Federal Reserve, Bureau of Economic Analysis, Council of Economic Advisers, Author’s calculations.

-70

-50

-30

-10

10

30

50

70

Top 1% Bottom 50%

2009:Q1-2011:Q3 2017:Q1-2019:Q3

Change in Real Net Worth in the First 11 Quarters

Percent

Sources: Federal Reserve, Bureau of Economic Analysis, Council of Economic Advisers, Author’s calculations.

10% 13%

47%

-64%

-64%

0

4

8

12

16

Top 1% Bottom 50%

Prior 3 Administrations 2017-2019

Growth in Real Net Worth of the Bottom 50 Percent

Percent

Sources: Federal Reserve Board; Bureau of Economic Analysis; Council of Economic Advisers, Author’s calculations. Note: The blue bar represents the average annual growth across previous administrations' expansion periods. The red bar represents annual growth from 2017:Q1 to 2019:Q3.

1%

15%

4%

8%

1%

77 7

Observed labor market strength exceeds expectations.

2009-2016

2017-2019

-1

0

1

2

3

4

Contraction vs. Expansion of Working Age Labor Force, 2009:Q3–19:Q4 Persons (millions)

Sources: Bureau of Labor Statistics, Council of Economic Advisers, Author’s calculations.

1.9

7.1

0

2

4

6

8

CBO Prediction Actual Jobs Created

Predicted vs. Actual New Jobs, 2016:Q4–2019:Q4Jobs (millions)

Sources: Congressional Budget Office, Bureau of Labor Statistics, Council of Economic Advisers,Author’s calculations.Note: CBO projection represents the final pre-election forecast made in August 2016.

998

Between 1990 and 2016, the Federal government added an average of 50 economically significant regulations each year.

34

55

66

45

61

3439 37 38 35

72

36 39

47 4541

33

44

73

51

70

5449

54 5761

94

22

37

0

20

40

60

80

100

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Economically Significant Regulations by Presidential Year, 1990–2018Number of Rules

Sources: reginfo.gov; George Washington University Regulatory Studies Center.Note: Presidential years begin in February and end in January of the following year. The 2018 final rule count is to date as of September 11, 2019. Rule counts for 2017 and 2018 exclude rules considered deregulatory actions. Prior to 2017, we estimate approximately one deregulatory action per year.

2018

99 9

New regulations added regulatory costs each year from 2000-2016.

2019

-4

1

6

11

16

21

26

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Real Annual Costs of Major Rules, Fiscal Year 2000–19Dollars (billions, 2017)

Sources: OIRA Reports to Congress; Council of Economic Advisers.Note: Calculations based on the cost estimates for years 2000 through 2016 from the most recent OIRA Report to Congress with an estimate for that year, combined with the reported annualized regulatory cost savings for 2017-2019. Negative costs indicate cost savings. Annual cost estimates include all major rules for which both benefits and costs have been estimated.

1 11 110

Progressive deregulation.

2.4

1.3

0.9

0.6

0.3

0

1

2

3

Lowest 20 percent Second 20 percent Third 20 percent Fourth 20 percent Highest 20 percent

Consumer Savings on Prescription Drugs and Internet Access by Household Income QuintileShare of income (percent)

Sources: Bureau of Labor Statistics; Bureau of Economic Analysis; Council of Economic Advisers, Author’s calculations. Note: Values represent CEA's estimates of consumer savings as a share of their income which applied Consumer Expenditure Survey's quintile and expenditure data to national income data.

1 11 1 11

Progressive deregulation.

2.4

1.3

0.9

0.6

0.3

0

1

2

3

Lowest 20 percent Second 20 percent Third 20 percent Fourth 20 percent Highest 20 percent

Consumer Savings on Prescription Drugs and Internet Access by Household Income QuintileShare of income (percent)

Sources: Bureau of Labor Statistics; Bureau of Economic Analysis; Council of Economic Advisers, Author’s calculations. Note: Values represent CEA's estimates of consumer savings as a share of their income which applied Consumer Expenditure Survey's quintile and expenditure data to national income data.

* Tyler Beck Goodspeed, Council of Economic Advisers. Contact: [email protected]. Theviews expressed in these remarks and slides are the author’s own and do not reflect the views of the Councilof Economic Advisers or the Executive Office of the President of the United States.

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TYLER GOODSPEEDCOUNCIL OF ECONOMIC ADVISERSTyler Goodspeed currently serves as a member of the Council of Economic Advisers. He was formerly a junior fellow in Economics at the University of Oxford, and a lecturer in Economics at King’s College London. His primary research and teaching fields are economic and financial history, with secondary interests in political economy.

Prior to earning his PhD from Harvard University in 2014, he received his AB from Harvard summa cum laude in 2008 and from 2008 to 2009 was a Gates Scholar at the University of Cambridge. His second book, Legislating Instability,

examines the effects of unlimited liability and regulatory capture on financial stability in “free banking” Scotland. He also has a recent book, Famine and Finance, on the market for small loans during the Great Famine of Ireland, as well as companion articles in the Journal of Development Economics and World Bank Economic Review.

Goodspeed’s current research focuses on eighteenth- and nineteenth-century British and North American economic history, with particular attention to informal banking and the political economy of financial regulation, as well as long-run economic development. In his first book, Rethinking the Keynesian Revolution, he analyzed the debates between John Maynard Keynes and Friedrich Hayek, considering the relevance of those debates to contemporary monetary economics.

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PAST AS PROLOGUE TO THE FUTURE

An Opening Conversation

Chapter 1. Why Choose Economic Freedom?..................................................................................................................6 George P. Shultz and John B. Taylor

Free to Choose: 1980 to 2020 and the Network

Chapter 2. Introduction to Free to Choose 1980 to 2020 and the Network.........................................................14 Robert Chatfield

Chapter 3. Milton, Rose, me and Poetry.........................................................................................................................16 Robert Chitester

Removing Obstacles on the Road to Economic Freedom: 1947 to 1980

Chapter 4. Removing Obstacles on the Road to Economic Freedom.......................................................................24 Eamonn Butler

Chapter 5. Milton Friedman: The Early Years...............................................................................................................26 Jennifer Burns

Chapter 6. Mont Pelerin 1947........................................................................................................................................32 Bruce Caldwell

Chapter 7. The Road Not Taken of “Nuovo liberalismo”...........................................................................................85 Alberto Mingardi

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Spread of Free-Market Ideas in the 1980s

Chapter 8. The Reception of Free to Choose and the Problem of Tacit Presuppositions of Political Economy......................................................................................................................................................102 Peter Boettke

Chapter 9. The Spread of Free-Market Ideas in the 1980s (With a Nod to the Late 1970s)...............131 David Henderson

Chapter 10. Ideas of Freedom and Their Role in Active Policymaking.........................................................142 Condoleezza Rice

Lessons Learned from History for the Future of Freedom

Chapter 11. Assaults on Freedom and Citizenship............................................................................................147 Victor Davis Hanson

Chapter 12. Fed Chair Agonistes..........................................................................................................................152 Amity Shlaes

Chapter 13. Keynes v Hayek: The Four Buts......................................................................................................160 Robert Skidelsky

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IDEAS FOR A FREE SOCIETY

The Role of Law as Protector of Liberty

Chapter 14. Capitalism, Socialism and Nationalism: Lessons from History..................................................168 Niall Ferguson

Chapter 15. Magna Carta, the rule of law, and the limits on government..................................................200 Jesús Fernández-Villaverde

Chapter 16. The Commerce Clause, the Takings Clause, and Due Process..................................................208 Douglas Ginsburg

How to Deal with the Reemergence of Socialism

Chapter 17. The rise and fall of environmental socialism: Smashing the watermelon...............................221 Jeff Bennett

Chapter 18. Understanding the left....................................................................................................................226 John Cochrane

Chapter 19. Economic systems between socialism and liberalism and the new threats of neo-interventionism.................................................................................................................................................233 Lars Peder Nordbakken

Measures of Economic Freedom

Chapter 20. Economic Freedom Matters & Charts............................................................................................248 Anthony Kim

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Chapter 21. Economic Freedom: Objective, Transparent Measurement.......................................................279 Fred McMahon

Chapter 22. The World Bank’s Doing Business Indicators................................................................................310 Valeria Perotti

Restraining Expansions of Government

Chapter 23. Common Sense Approach to Addressing America’s Entitlement Challenge..........................318 John Cogan

Chapter 24. Key Milestones in Regulation..........................................................................................................339 Susan Dudley

Chapter 25. A Quest for Fiscal Rules...................................................................................................................343 Lars Feld

ACTIONS FOR A FREE SOCIETY

Taking Ideas to Action around the World

Chapter 26. Turning Freedom into Action: Some Reflections on Reforming Higher Education.................371 Ayaan Hirsi Ali

Chapter 27. Culture and the Free Society..........................................................................................................380 Samuel Gregg

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Chapter 28. Taking Ideas to Action Around the World....................................................................................394 Bridgett Wagner

What Happened in Chile?

Introduction...............................................................................................................................................................402

Chapter 29. Presentation I....................................................................................................................................403 Axel Kaiser

Chapter 30. Presentation II...................................................................................................................................406 Ernesto Silva

Chapter 31. Presentation III..................................................................................................................................409 Arnold Harberger

Taking Ideas to Action: Making the Case for Freedom

Chapter 32. Restoring Liberty for American Indians.........................................................................................411 Terry Anderson

Chapter 33. The Effect of Economic Freedom on Labor Market Efficiency and Performance.................434 Lee Ohanian

Chapter 34. Making the Case for Liberty...........................................................................................................466 Russell Roberts

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Taking Ideas to Action in the Private Sector

Chapter 35. Brexit: Taking a Good Idea into Action........................................................................................473 Jamie Borwick

Chapter 36. Taking Ideas to Action in Central Governments—The US Case..............................................476 Tyler Goodspeed

Chapter 37. Ideas and Actions for a Free Society............................................................................................487 Ruth Richardson

Taking Ideas to Action in the Private Sector

Chapter 38. Public Policy, Private Actor..............................................................................................................491 Dominique Lazanski

Chapter 39. Libertarianism is Dysfunctional but Liberty is Great..................................................................508 Joe Lonsdale

Chapter 40. The False Promise of Medicare for All........................................................................................514 Sally Pipes

A Closing Conversation

Chapter 41. China, Globalization, Capitalism, Silicon Valley, Political Correctness, and Exceptionalism.................................................................................................................................................527 Peter Thiel and Peter Robinson