Tuesday, September 10, 2013
A learning left
In this article, Severin Borenstein denounces the dogmatism of right-wing commentators who try to manipulate the ideas of Roland Coase to promote their anti-government ideology. In the case of the use of market mechanisms to correct negative externalities, for example climate change, Borenstein argues that the left has made in the last decades a learning exercise that the right is far from doing. In his classical article "The Problem of Social Cost", Coase argued that under two strong conditions (complete property rights and zero transaction costs) the parties to an interaction with external effects could bargain to achieve an efficient solution, with no need for government intervention. That has been used by the right to promote the ideas of privatization and of laissez-faire in general in case of market failures, forgetting that Coase did not claim that the two conditions were a description of the real world. Of course, the Coase theorem expanded the potential for market solutions to social problems, but in many cases governments are needed to make markets possible, as Borenstein argues. More generally, the left has learned that markets and governments are mostly complements and not substitutes: and many more examples could be provided of the fact that when the left becomes a learning left (open minded and evidence based) societies can reach the highest possible standards of living. A learning left is a hope for humanity, an ignorant right one of its main threats.