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It is becoming increasingly clear that Obama's proposed policies go well beyond what we might need just to respond to the economic crisis; he's making a bid for great changes in national policy. The Democrats do now control the U.S. presidency and both houses of Congress, but usually that wouldn't be enough to think they could get away with this; they would fear a public backlash at the next election. So they must think the public is now more receptive to Democrat-style large policy changes. I don't know that they are wrong, but this does raise the question: if so, what does the public think has changed?
Economists don't think this crisis has added that much to our total dataset; Obama's economists may think his new proposals are good ideas, but they almost all thought so a year ago as well. So is it that the public learned something that experts already knew? Or does the public just want to affiliate with the impressive unusually high-status elites pushing these proposals?
Bryan Caplan asks:
If the government had followed a laissez-faire policy for the last six months, and output, employment, housing, and financial markets stood exactly where they stand today, what fraction of people would conclude that "Events decisively prove that laissez-faire is a disaster"? Can you honestly give any answer less than 90%?
My best guess is that we are seeing the "ratchet effect"; voters expect more government to be a better response to most any big crisis than less government. Let me pose the question differently: can you imagine any crisis where voters would expect a substantial reduction in government to be the best response? If you can't, that says there is almost no prospect for a crisis-induced libertarian revolution.
What Changed?
historical reductions or limitations in government, crisis or not:
fall of the USSRwelfare reform (maybe)term limitsend of Prohibitionshrunk militariesCalifornia's Prop 13bills of rights
Assurance contracts are interest; I swung from libertarian/semi-anarcho-capitalist to social democrat largely on the problems of externalities and public goods. Though also on concentration of wealth, and the fact that modern Westerners seem unwilling to just let people die at the point of need of food or health care, and that reluctance undermines exclusionary social insurance in those goods. Still, demonstrating assurance contracts working at large scales would help reduce the scope of government action.
I can think of one striking example - after Hurricane Katrina the New Orleans education system was rebuilt with a strong reliance on charter schools, as well as a smaller scale voucher program. In this instance, a terribly corrupt and underperforming govenmental institution (Orleans Parish School Board) was dismantaled in the wake of a crisis.
Take care,
Cormac