From Kevin Drum:

The Republican Party has long been pro-business, not pro-free-market, and the same is largely true for the Democratic Party these days. And while liberals are unlikely to ever team up with conservatives on a pro-business agenda, which generally just means handing out goodies to favored patrons, I think a pretty sizeable number would be willing to team up on some aspects of a pro-market agenda if that were actually on the table. There would still be plenty of areas of disagreement (we liberals remain sort of attached to the idea of helping the poor and the middle class), but some areas of constructive correspondence as well. So if there are some non-wild-eyed pro-market conservatives still left alive out there, let’s hear your agenda. It might be interesting.

First of all, I’d like to say that the dichotomy between markets and “helping the poor and middle class” is a false one. Highly-functioning markets are almost assuredly welfare-enhancing to the poor and middle class. Indeed, without the wealth generated by the market selection mechanism, it’s hard to see how you would go about helping those people in the first place…but that’s a tiny nit to pick, on to the meat!

Recently, a few leftist-liberals have come out in support of a progressive consumption tax taking the place of the current income tax regime. Of course, I’m fully behind this idea, and I think that this is certainly a pro-market. Combine this with a progressive payroll tax, and some special taxes that address certain externalities (no, smoking and being fat are not externalities), and you could raise just as much, if not more revenue from relatively low tax levels. This is a huge boost to supply-side incentives. This means removing capital gains taxes, as well…

After the tax structure, the other big elephant in the room is social security. Leftists get very bent out of shape when conservatives start talking about social security, and probably rightfully so — pure privatization is obviously against their feeling of “social good” — but it is also a red herring. The current setup of social security is a head-scratcher…but it doesn’t need to be this way. The government could easily subsidize (forced) private retirement accounts up to a certain level of income yearly, indexed to inflation. Beyond that, have the default selection be risk-free TIPS or bonds, and let people dial up the risk in their accounts as they see fit. 99.99% of people would stick with the default option, and the government shouldn’t subsidize the losses of the .01% that decide to gamble.

Here is a piece that I have written on health care policy. As a preview: I don’t buy the “moral hazard/adverse selection” chants. If health insurance operated as insurance, it wouldn’t be an issue that companies couldn’t deal with actuarially. The government could then lightly subsidize whatever it saw fit, and we could get a higher level of equity and efficiency.

On general regulation, to start out with a radical proposal that is right at home with market-friendly libertarians, the FCC would have to go carte blanc. I’d, of course, enjoy seeing other agencies suffer the same fate, but I mentioned the FCC because I don’t think it’s very controversial with leftist-liberals that understand the issue. Otherwise, just generally adopting a stance of regulation as structuring incentives instead of commanding a market…which I think would be a radical change from the current regulatory landscape — especially in health and education policy.

What we need to understand is that markets serve as a selection and amplification mechanism, and nothing more. The role of the government is to shape fitness function. We should distinguish between two types of government action:

  • Policies that get the government involved in differentiating, selecting, and amplifying business plans.
  • Policies that shape the fitness environment, while leaving business plan differentiation to entrepreneurs, and selection and amplification to market mechanisms.

Our current incarnation of government is blithely obsessed with the first class of action, when (in my opinion) the optimal role of the state is in the second class. The economic role of the state is to create an institutional framework that fosters the evolution of the marketplace, strikes a balance between cooperation and competition, and shapes fitness function in a way that fosters “societal good”. Of course, the notion of “societal good” is vague and diffuse, but just because the meaning changes, doesn’t mean that the mechanisms by which government promotes them should change — they should still stick with the second class of action.

Do those things sound like something my leftist-liberal friends could sign onto?

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