Friday, January 9, 2009

Obama's Economists

Yesterday I read this news item about a new appointment to the Obama

The appointee is a co-author of a book that I have been meaning to
read for some time. The book, 'Nudge', is an important summary of
work that has been done in behavioral economics. I am interested in
this topic and what it can teach us, so I checked the out of the
library and read it last night. The book is excellent. I plan on
discussing the book sometime soon, but the details are not important
for the purposes if this post.

Sunstein is exactly the person that I would put in charge of that
office if I was president. He has a very good understanding of how
choices and incentives work and how they are affected by environmental
conditions and regulation. More importantly, he is a libertarian
thinker who understands the value of free choice and the peril of bad
regulation. The only potential problem with him is that he is an
academic, not a politician or administrator, and may have trouble
making the changes that are needed. But he is reportedly a good
friend of Obama, and should get the support he needs.

There is, however, the potential for a larger problem. Sunstein, like
many of the economists that Obama has appointed, should be very good
at reducing the unintended consequences of government regulation by
applying economic knowledge. Obama has recruited an excellent
collection of high-quality economists who support the free market. (
The New York Times recently ran an editorial complaining about this
fact.) These people will reduce the costs associated with regulation
and government activity. This would be great, if the amount of
government action remained the same.

But it is a fact of economics that if something is less costly to
produce, you will get more of it. My fear is that Obama will feel
more confident in expanding government, because he knows he has people
like Sunstein who can make the expansion less painful.

Still, my gut feeling is that the Obama administration will be more
libertarian than the Bush administration. The last eight years have
brought massive increases in government power, budgets, and
bureaucracy, and a lot of it was mismanaged. I expect that the next
eight years will also bring large expansions in government. But,
assuming that people like Sunstein hang around and have real power, we
could easily lose less liberty under Obama than we did under Bush.

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