Comments: Free Lunch goes east

what should they resist at all costs

The better bureaucrat fallacy. i.e. Bureaucrats can spend money you earn't on things you want better than you can.

Posted by Rob Read at January 3, 2005 05:08 PM

What have China and Russia got to learn from standard Western economics, and what should they resist at all costs?

Government is about policing, keeping the peace, and protecting the "commons" of environment, community and other missing markets. Hence a low overall but progressive tax burden, to encourage innovation in the best laissez-faire fashion. And not high taxes to support governmental investment that almost always over-displaces (excessively crowds out) the private sector.

Belief that the central planner knows best, for example in meddling with currency valuation of open currencies. (e.g. Britain's 1925 reversion to the gold standard, or the exchange-rate pegging and subsequent exit in 1992 from the ERM that handed millions to Soros.)

These are of course things that are not welcome China and Russia where for the last century (at least) central planning of everything has been de riguer. Indeed for China it seems implausible that a people so blinkered from political or economic choice would be able to cope with anything but a very slow modernisation.

Posted by jonathan at January 3, 2005 06:48 PM

They both need to be taught Ricardoís theory of trade; the Chinese need to learn that thereís no point making things for export unless you use the money to import things as well. The Russian need to learn that first of all you need to be able to make things that other people want to buy before this problem arises.

Neither of them should be taught any theory that concludes that more inputs leads to more output. It didnít work for Stalin it didnít work for Moa and right now they both want to be concentrating on efficiency.

Posted by giles at January 4, 2005 12:19 AM