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Aliterative Noahpinion: Raghuram Rajan's Wrongness Rankles

Noahpinion:

Noahpinion: Raghuram Rajan's wrongness rankles: Since future generations cannot vote, democratic governments have an incentive to overweight the present. But Rajan's statement is also misleading, because it implies that non-democratic governments do better. The evidence says that they do not....

Rajan seems to believe the common fallacy that autocratic governments answer to no one, and thus have a free hand to make far-sighted investments, as long as the despot happens to be an enlightened one.... [But] there is always a selectorate, and they always have to get paid off. And in an autocracy, those payments can get really expensive, since the selectorate has the autocrat over a barrel - if he loses his job, he doesn't go off to fish at his ranch, he gets filled with lead and hung from a gas station roof.

This is why democracy, as Churchill said, remains the best of a menu of imperfect options.

I'm also a bit annoyed at what Rajan imagines an enlightened despot might do for America.... I wish our government spent more on infrastructure, research, and education (far-sighted stuff), and less on short-sighted tax cuts. But somehow I doubt that this is what Rajan is talking about. He seems to be supporting a kind of Austrian model of the business cycle, where recessions are a necessary, even refreshing, structural adjustment. That would put him in what DeLong and Krugman call the "pain caucus."... [But] structural adjustment happens more quickly and easily when there are not legions of discouraged workers sitting at home for years letting their skills deteriorate...

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