A couple of points:
1. negative externalities make necessary laws and regulations if you want an efficient market.
2. Keynesian economics (presumably what you referring to) has nothing to do with restricting free trade, but deals with the boom-bust cycle and how a government can manage it.
Yeah, I'm now reading Benjamin Constant (I've read guys like Jean-Baptiste Say and Jeremy Bentham before) and there was is close to no mention in their works about the government having the intrinsic need to "manage" anything.
Which brings me to my second question: who has empowered the Government to actively manage economic cycles? And assuming it has acquired these powers all by itself, based on which premises/presumptions does it accomplish its economics-related actions?
It's funny reading Constant and how he warns about the perils of moral hazard associated to the active involvement of Government in the economy. 200 years have passed and we still make the same mistakes.
> based on which premises/presumptions does it accomplish its economics-related actions?
Find causal relationships -> create causes for effects that you would like to see
> the perils of moral hazard associated to the active involvement of Government
Maybe the 18th century governments overstepped their boundaries when, dunno, they stopped slave labor of 8-year olds in coal mines. Today, the term applies almost exclusively to private industry. Mostly financial.
Why do we need a government at all? Why not live in anarchy?
Because we, as a country/people/nation who give our Government at least some sort of legitimacy, desire a large institution to protect us. Historically, the only kind of protection we desired was from external foes who would wage war and enjoy the spoils thereof, but there's general agreement that we also need a government to protect us from ourselves, whether that's from petty criminality or to enforce our contracts, along with establishing standards which make those contracts of generally mutually agreeable meaning and enforceability.
So why is it illegitimate for the government to protect us from the boom/bust cycle? Keeping in mind that whether this is possible to begin with is a different question from whether it is moral and ethical for a government, which we instituted to protect us, should also protect us from a downfall seemingly built into the Laws of Nature.
Are you a charismatic amoral-yet-benevolent despot with a knack for turning violent tuggs into loyal enforcers? Anarchy sounds so great, but keep in mind that other, less enlightened, despot wannabes are going to come after you and yours, so keep at all times enough resources for the defense of your turf.
Not really interested? I am not surprised.
But if you bear with me, you can stretch the "violence" argument a long way.
If you have a no government at all, you have this "Mad Max" scenario. The strong take from the weak until the only way to survive is to pledge allegancy to one Warband or another.
If you have a government that only concerns itself with protection against foreight invasion, you will have the semblance of order and institutional life, but underneth the organized crime will rule. They will not limit themselves to illegal business like drugs (though they will exploit it in a monopolistic way), but will quickly develop extensive protection rackets that will be a burden to the whole economy.
Then, if you have a government that only concerns itself with foreight defense and internal defense or property rights, you will have the robber barons scenario. The rich will do as they may, and anyone that opposes their interest will face a weaponized law enforcement at their doorsteps. That, or will be victim of paramilitary groups like the pinkertons, who enjoy the unofficial protection of law enforcement.
And so it goes...
I agree it comes to a point where giving more responsibilities to government causes more problems that it solves, but to despise every and all regulatory oversight in the name of liberalism and (idealized) anarchy is an oversimplified model.
Unfortunately this approach generally fails with anything more complex than a tiny village of 1-200 people at most. There's no particularly system with which hierarchical/authoritarian structures can easily be replaced (observe the tendency of most religions to end up concentrating temporal power even where said power is doctrinally discounted) and attempts to replace fallible human agency in the hierarchy with an incorruptible technical solution typically veer into absolutism and tyranny, whether by institutional capture or simple inertia.
The basic problem (it seems to me) is that we don't have a good theory of government by which we can measure institutional health and reliability. Anarchists and libertarians are excellent at pointing out the shortcomings of government, but as you point out their response to this is basically dismantle it, which seems to be about as sensible as saying the cells in your body will enjoy greater freedom if one would only commit suicide. Governments exist for the same reason that complex multicellular life exists.
The hyperinflation and political humiliation suffered by the Weimar republic led to it being assailed by both the extreme left and the extreme right, until you know who, in the febrile political climate, grabbed the reigns of power.
Human nature craves security and will turn desperately to anyone who looks like they can deliver it. Better the devil you know (a democratic functioning state), then a despotic one.
Because we know what that looks like. It's called a "failed state", and there are too many of those now. See Somalia. In practice, it usually means rule by local warlords, which sucks.
If government can protect us from big evils (warlords), why not small evils (insider trading).
The common good. Economic uncertainty, like political uncertainty, makes it hard for a society to plan, budget and invest.
A stable currency, low inflation, enforcement of property / contract law and political stability enable commercial activity.
Constant was a man of his time and the Reign of Terror - the despotic abuse of power - was a tragedy. How this is relavent to modern economic management and why Constant should be relevant today (he advocated a monarchical republic, a monarchy? today?) in such very different times would be interesting to hear.
The US has become a "de facto" monarchical republic: the powers of Congress have been much diminished compared to what the Founding Fathers presumably had in mind, the Supreme Court actually acts like a monarch's Privy council (it's a non-elected entity and its members depend on the good-will of the so-called "president" to reach its ranks).
If Hillary had been elected the US would have continued the hereditary tradition which had started with the Bushes (or with Bob Kennedy, had he not been shot). There are lots of people on the Democratic-side of things who have lately suggested for Michelle Obama to run for presidency in 4 years' time. So I'd say Constant is still spot-on on lots of things (I've read a collection of Hannah Arendt's essays this summer and on lots of things she has just copied Constant's discourse. I'd say Hannah Arendt is pretty much part of today's conversation). So is Bentham, so is Burke, so is Thomas Paine.
And the Supreme Court was always an appointed position, even in the time of the Founding Fathers. Having judges be elected is a terrible, terrible idea.
The President's entire executive branch has been sent home without pay (yes, they got back pay eventually but contractors often didn't) a few years back by Congress. His appointee to the Supreme Court was blocked very effectively by that same body. His trade deal (TPP) is likely not going to be approved thanks again to Congress.
Also, while the justices need the President's help to get onto the bench, they do not need it in order to stay there. This is an important distinction.
Only thanks to the US's Electoral College system, otherwise she would have been President. The matter of fact is that more Americans have voted for Hillary than for Trump.
And going back to the US President's powers, as far as I know the last few wars in which the US has been involved happened without the preliminary Congress approval. Starting a war without the Congress's/Parliament's approval is a royal prerogative since at least the Middle Ages.
> Russia is a de facto monarchy,
Russia is a light-ish dictatorship (people are not sent to the Gulag, yet) which might turn into a tyrant regime (assuming Putin keeps his power and goes crazier), I wouldn't call it a traditional monarchy.
> the United States is a Republic in every way that matters
The Roman Senate survived until at least 400CE (or around that time), meaning 4 and a half centuries after the "de facto" disappearance of the Roman Republic (even more if you go back to Sulla). Thus means that the fact that the US Congress is still around and from time to time likes to play contrarian games doesn't actually mean that the US Republic hasn't lost its original "status" (not an English native speaker, maybe I'm wrong on this word).
Otherwise I can't understand how Obamacare has stood up against the Republican Congress's will.
> His trade deal (TPP) is likely not going to be approved thanks again to Congress.
Had Trump been pro-TPP (or pro-foreign trade in general) I'm 99% sure TPP would have been voted in.
The popular vote is frankly irrelevant because no one was campaigning for it. It would be a totally different game, from the primaries through the general election, if the presidency was decided by popular vote. Republicans would campaign heavily in California and New York. Democrats would campaign heavily in Texas. Drawing any conclusions from the popular vote when it doesn't matter is futile.
Google the word "filibuster" and you'll have your answer. The Republican Congress didn't have the votes to change policy, so they weren't able to. Whether they do now is actually a matter of some debate.
> Had Trump been pro-TPP (or pro-foreign trade in general) I'm 99% sure TPP would have been voted in.
I disagree, but that's beside the point. It would only get voted in if the Congress decided to do so. That's the crux of my argument; policy gets made by Congress and enforced by the President. Trade deals get negotiated by the President and then approved by the Congress. That's the design, and also how it actually functions.
For the federal government, a mix of the authors and later amenders of the Constitution, by way of a variety of Constitutional powers by which that function is effected, and the voters of nearly every election in the history of the US who have elected members of Congress and Presidents largely based on their stated intent to actively manage the economy in various ways.
The same is generally true for state governments, though with reference to the crafters of the respective State constitutions rather than the federal one.
The people who alternately vote on and/or protest existing economic conditions and demand representation for their views. It sounds very much as if you are limiting tyour reading to authors who will reinforc the views you already hold. It must have required considerable effort on your part to filter out any awareness of labor movements through history and related demands for economic security, regardless of whether individual policies were well- or ill-founded.
Market forces can be massively disruptive to people's lives and when people's lives are disrupted by forces beyond their control (whether by natural or economic disasters) people generally petition their government to Do Something About It. I'm having a hard time believing that you're ignorant of really basic historical trends like governments losing legitimacy and being overthrown due to famine or similar adverse economic conditions.
Trust me, I've read more Marx than 95% of the Marxists out there: I've read his "Capital I" (Capital II+III are on a bookshelf which right now stands behind me), his German Ideology and other works from his younger years. I genuinely think of him as one of the most brilliant minds of the 19th century and one of history's best when it comes to human sciences, it's just that when it came to economics he was so very wrong. You don't have to trust me on this, you don't have to trust your logic or anything else of that matter (which would suffice were you to read a writer like Say in parallel with Marx, let's say) you just have to look at the economic history of the last 150 years or so. Marx's view on economics proved to be utterly wrong.
> Market forces can be massively disruptive to people's lives and when people's lives are disrupted by forces beyond their control (whether by natural or economic disasters) people generally petition their government to Do Something About It. I'm having a hard time believing that you're ignorant of really basic historical trends like governments losing legitimacy and being overthrown due to famine or similar adverse economic conditions.
And suppose a famine is around, what should a Government do? Invent food out of thin air, like in Star Trek? No, it can't do that, because we live in real life not in science fiction. The matter of fact is that looking back at history the most effective ways of dealing against famine involved less Government meddling, meaning less taxes on transport, less taxes on sales/purchases of food. That's one of the first signs telling you when a Government has started losing the grip on its constituents, i.e. when it starts lowering taxes on food because of its own volition (for a recent example look at Sisi's Egypt).
Right. When everyone from Marxists to Keynesians to neo liberals agree that there is such a thing as a business cycle (even if they may not agree on the causes or how to manage the cycle), then I guess you may be using a definition that is different to everyone elses.