The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of the Pioneers, by Sherryl Davis Kasper. Cheltenham, U.K., and Northampton, Mass.: Edward Elgar. 2002. Cloth, ISBN 1840646063, $80.00. 177 pages.
This is a nicely written, succinct overview of libertarian views on American macroeconomic theory by institutional economist Sherryl Davis Kasper of Maryville College in Appalachia. It focuses on most of the leading advocates of laissez-faire including Frank Knight, Henry Simons, Friedrick von Hayek, Milton Friedman, James Buchanan, and Robert E. Lucas, Jr. Most of the time the author's political and ideological biases are kept well in the background (1)--indeed, they are perhaps too submerged, although more explicit articulation of them might divert attention from the main theme(s) of the book.
Knight, closer to the political center and as much a Burkean Whig as a libertarian, favored government measures to preserve competition and promote it as well: Free trade, the selective provision of collective goods, penalties on those who generate negative externalities, and incentives to low income groups to encourage thrift and industry pretty well exhausted his policy repertoire, although he was more open to collectivist policy recommendations than his more radical libertarian students.
Simons, the most egalitarian of the libertarians, favored graduated income taxation, rigorous enforcement of the antitrust laws to break up monopolies, government ownership of existing monopolies, and heavy death duties to discourage the build-up of large family fortunes. Otherwise, he was perhaps an even stronger advocate of laissez-faire than the other libertarians.
Von Hayek, author of The Road to Serfdom (1944), may be regarded as the philosophic godfather to many libertarians, especially those of the Austrian persuasion a la Carl Menger and his disciples. His focus on the "spontaneous" emission of signals by "unregulated markets" and their uncoerced creativity probably overshadows his earlier theoretical work on monetary policy and business cycles. But as Kasper points out, there are links between this earlier work and his later espousal of laissez-faire.
Arthur Schlesinger, Jr. recently commented to an audience that included Margaret Thatcher that because "Stalin has been proved wrong does not make Milton Friedman right." But no analysis of macroeconomic policy would be complete without the latter. His views on welfare and regulatory...