Types of Interventions

     

In his original essay Sandy made an important distinction between different types of “interventionist dynamics.” He focused on two broad categories of dynamics—Regulatory Dynamics and Transfer Dynamics. I hope that we can return to discussing the relevance of the dynamics of interventionism framework for understanding different types of interventions. To begin, let me provide a brief overview of the evolution of the dynamics of interventionism, which included a recognition of the need to consider different types of government interventions.

Mises originally focused on the dynamics of interventionism in the context of price controls, first in the Theory of Money and Credit (1912), and later in his article “The Theory of Price Controls” (1923).[42] In a subsequent essay, “Interventionism” (1926), [43] Mises expanded his notion of interventionism slightly and discussed restrictions on production and interventions which distort the structure of prices. He further broadened his analysis of interventionism in Human Action (1949) to include taxation and macroeconomic issues. As Mises’s writings on the topic make clear, the notion of interventionism has a variety of applications, given the many ways that government meddles with markets.

In Power and Market (1977), Murray Rothbard expanded on Mises by providing a taxonomy of interventions. Specifically, Rothbard differentiated three types of interventions. An “autistic intervention” is one which restricts a person’s autonomous actions, while a “binary intervention” occurs when the government uses its coercive power to force a person to engage in an exchange. Finally, “triangular intervention” refers to situations where government interferes with a voluntary exchange between two people. While Rothbard’s taxonomy was an advancement in the dynamics of interventionism, there is much work to be done.  As Don Lavoie (1982) wrote:

The opening identified by Lavoie was filled, at least partially, by Sandy’s book, Dynamics of the Mixed Economy (1997). Sandy’s book provides the most complete and developed theory of Misesian interventionism to date. This includes a discussion of the Regulatory Dynamics and Transfer Dynamics that he mentions in his lead essay.

I believe that Lavoie’s central point remains relevant today. Government intervention is everywhere, both domestic and international. This presents both an opportunity and a challenge to analysts concerned with the dynamics of interventionism. It is an opportunity because there is a “natural experiment” at every turn. It is a challenge because the broad theory of interventionism must be applied in a way that appreciates the context-specific nuances of government intrusion into the market process.

One promising avenue for thinking about some of these issues is provided by Robert L. Bradley Jr., who, building on Sandy’s work, offers his own typology of interventionist dynamics in a working paper, “Typology of Interventionist Dynamics” and the version in Humane Economics: Essays in Honor of Don Lavoie, edited by Jack High.[45] I cannot do his framework justice in my short comment, and I urge the interested reader to review Bradley’s work on this topic in its entirety. That said, his typology offers some examples of key categories for considering different types of regulatory interventions, which I will mention briefly.

One is the distinction between “dormant interventions” and “causal interventions.”  The former refers to interventions that are irrelevant either because the market already does what the regulation states, or because conditions have changed. The latter refers to situations where the regulation actually influences the actions of market participants. Another important distinction is between “non-initiating interventions” and “initiating interventions.” The former, in contrast to the latter, refers to interventions that do not initiate subsequent government interventions. Bradley also emphasizes the process aspect of the dynamics of interventionism. The full effects of interventions unfold over time and can have expansionary or contractionary—deregulation—elements. In addition, regulations can be revised over time, which will influence their effect on economic activity.

Taken together, I believe that the existing work on the dynamics of interventionism shows how fruitful it is as an avenue for continued research, both theoretically and empirically. In his response to my initial essay, Sandy highlighted one such avenue for further exploration. Specifically, in response to my claim that we cannot, ex ante, determine the relative disruptions caused by Regulatory Dynamics versus Transfer Dynamics, Sandy writes: “The theoretical question, I suggest, would probably be: which has greater disruptive potential -- a central bank or a legislature’s redistributive policies?”  What exactly this potential entails and how one goes about determining it, both conceptually and empirically, is an open question worthy of exploration. Among other things, it requires an appreciation for the scope of government action, which refers to the type and range of activities under the control of state actors.

Another interesting, and related, line of inquiry would be to look at the relationship between the dynamics of interventionism and research on “political capitalism,” which focuses on the interactions between the political and economic elite. See, for example Randall G. Holcombe's “Political Capitalism” (2015) and “Crony Capitalism: Product of Big Government," (2103) ..[46] This work is important, among other reasons, because it highlights that some interventions are intended to reward specific vested interests. These interventions are fundamentally different from other, system-wide interventions—e.g., interventions by a central bank—which have broader economic effects.

The issues and tensions identified in previous comments are an indication that the dynamics of interventionism is an open and lively research program.  Much work remains to be done in developing and applying the dynamics of interventionism, and that work is crucial for understanding how government intervention affects the market.

[42.] Ludwig von Mises, “The Theory of Price Controls” (1923). "Preistaxen: I. Theorie" (Price Controls: I. Theory) Handwörterbuch der Staatswissenschaften, 4th ed. (Jena: Gustv Fischer, 1923), vol. 6, pp. 1055-62. Reprinted in A Critique of Interventionism (1977).

[43.] Ludwig von Mises, “Interventionismus" (Interventionism), Archiv für Sozialwissenschaft und Sozialpolitik, 56, (1926), pp. 610-53. Translated in A Critique of Interventionism (1977) by Hans F. Sennholz.

[44.] Don Lavoie, “The Development of the Misesian Theory of Interventionism” (with comment by Murray N. Rothbard), in Method, Process, and Austrian Economics: Essays in Honor of Ludwig von Mises, ed. Israel M. Kirzner (Lexington, MA: Lexington Books, 1982), p. 180.

[45.] Robert L. Bradley Jr., “Typology of Interventionist Dynamics” and the version in Humane Economics: Essays in Honor of Don Lavoie, edited by Jack High (Edward Elgar, 2006).

[46.] Randall G. Holcombe, “Political Capitalism,” Cato Journal, Winter 2015, pp. 41-66 and Randall G. Holcombe, “Crony Capitalism: Product of Big Government,” Independent Review, Spring 2013, pp. 541-99.