Six differences between liberals and libertarians [op/ed]

[Illuminatus Primus]

"Libertarians" are actually good mirror-images of doctrinaire Marxists. They fell in love with some pseudoscientific system based on axioms and assertions they like or which were handed down from on High, and then they claim that they themselves are the scientists and engineers, while the rest of us are confused backward superstitious masses. I'm convinced the same scientistic layers are what causes both of them to abhor democratic values and discard them at a moment's notice for their own self-appointed, self-asserted expertise.

[Vastatosaurus Rex]

Seriously? How is such idiocy accepted in any kind of academic environment? It must be radical artsies at work here.

Hayek is on record as saying in his Individualism and Economic Order that economic theories can "never be verified or falsified by reference to facts. All that we can and must verify is the presence of our assumptions in the particular case." If that isn't anti-scientific method, I don't know what is.

To be fair to economists in general, the Austrian school is considered to be fringe rather than a respectable mainstream school. That has not stopped libertarians from subscribing to it.

[K. A. Pital]

frankly, I consider it a junk science compared to the real sciences anyway, since it seems to be chock full of made-up axioms posing as empirical observations

The Austrian school of economics, the school to which libertarian idols like Ludwig von Mises and Friedrich von Hayek subscribed, actually rejects the scientific method.

Seriously? How is such idiocy accepted in any kind of academic environment? It must be radical artsies at work here.

Austrian economists reject empirical, statistical methods and artificially constructed experiments as tools applicable to economics, saying that while it is appropriate in the natural sciences where factors can be isolated in laboratory conditions, the actions of human beings are too complex for this treatment. Instead one should isolate the logical processes of human action. Von Mises called this discipline "praxeology" – a term he adapted from Alfred Espinas (but which had been in use by others).

The Austrian praxeological method is based on the heavy use of logical deduction from what they assert to be self-evident axioms or undeniable facts about human existence.

In short, that's about as much "science" as Creationism. "Self-evident axioms", woohoo. That's really awesome. Any Keynesian, Neoclassic, even a monetarist or a Marxist would employ empirical and statistical analysis, but that's "too complex" for the Austrians. What can one say? Little knowledge is a dangerous thing.

[Vastatosaurus Rex]

If human behavior was really too fucking complex to be understood using the scientific method, psychology would not exist.

[K. A. Pital]

Actually, second to traditional economics, you can make a market equilibrium follow a welfare maximization function. You just need to give the right allocation of endowments at the start of the model, then the market equilibrium reached will satisfy the properties of the welfare maximization function. That's the second theorem of welfare economics: Any pareto optimal allocation that you chose (like one where every individual has the same weight in the aggregate utility function) can be reached by the market from some set of initial distributions of endowments.

There is no consensus in ET even on the question of IF a general equilibrium exists, on the nature, duration of equilibrium, and, like you said, the process which moves the economy to equilibrium (and/or from one state of equilibrium to another, if we are talking about the swinging-equilibrium model).

The first welfare theorem is pretty much the usual mainstream argument for free markets. There are some developments of it with can be applied to explain most, if not all, economic phenomena. So if you like, you can analyze the market as always perfect. Some Chicago school economists to that. I personally think that the main problem with economic theory today is the lack of adequate theory to explain the movement towards equilibrium. But that's a very complex matter, however I think it will have a great deal of importance in determining the role of state.

Most if not all economic phenomena? Well, of course they do. But how does explanation of a phenomena show whether it's good or bad? I'm pretty sure the mechanisms can be explained - for example, the phenomena of extreme capital flight or brain drain. The question is how to prevent it. The question is to devise a rational economic policy preventing it.

The fact is that the market tends to generate tendencies were the factors if production tend to reflect underlying consumer preferences.

So? How is this relevant to my question? What if the distribution of income disallows me to express my true (desired) preferences, what if I am economically coerced into a situation where I have little economic choice? What if the entire market acts as a system of economic coercion - perfectly rational in action, but producing a negative effect?

In a dictatorship the State doesn't have any incentive to correct economic inefficiencies, in this world the State only uses the population under it to satisfy it's own ends.

However, economic development under dictatorship can still occur. It can be in the form of a market, or state planned economy. It can also outpace other economies. How is that relevant to my question? The dictatorship is a mode of political power. The market is the state of economy.

While in a democracy voters don't have much information: That's because it doesn't makes sense to know much about who they are voting too, because his vote doesn't really matter (1). Hence, the State doesn't have systematic tendencies to allocate resources into their best uses, unlike the market.

The market does not have a "systematic tendency" to allocate the resources to their "best" uses, unless you simply define "best" as the current market allocation. The allocation of resources to luxury industries while people are starving is a simple example - it's a market-rational allocation (luxury consumers have more buying power than starving people), however why should that be "the best" allocation? It's certainly Pareto-optimal, but why is it "best"?

But the government is not omniscient nor benevolent.

It does not need to be. It needs to be rational enough and efficient enough. That is all.

Well, second to Economic Freedom of the World 2009 Annual Report (2), there is some very hard evidence that free market policies tend to generate better IDH. See pages 19 onwards of the report.

How would you explain the higher HDI of the Soviet Union versus comparable per-capita development level market economies? How would you explain the higher HDI of Cuba versus some other Latin American nations? How would you explain the higher HDI of Sweden and the North European nations versus other First World nations with less taxation and regulation?

Your explanation to all these phenomena would be...?

I meant that in the last 60 years many of the development of economic theory tends to gradually support less government intervention. So, this is a movement of ideas in the direction of libertarianism in the economic side. I don't know if the other aspects of libertarianism are moving in their direction.

Really? How then would you explain the neo-Keynesians of the 1960s, the current strain of neo-Keynesianism? How would you explain the success of Dirigisme in France (both as a theory and practice), the success (and theoretical development) of such concepts as indicative planning, etc.?

How would you explain that in the last 60 years, there has been a colossal amount of research on state intervention and now Universities even have separate disciplines (mine had) teaching a course in State Economic Intervention and Indicative Planning? Needless to remind you, 60 years ago neither concept was much fleshed out, and I doubt there were whole theory courses devoted to that. Maybe I am wrong, if so, one can correct me.

[Surlethe]

Seriously? How is such idiocy accepted in any kind of academic environment? It must be radical artsies at work here.

Austrian economists reject empirical, statistical methods and artificially constructed experiments as tools applicable to economics, saying that while it is appropriate in the natural sciences where factors can be isolated in laboratory conditions, the actions of human beings are too complex for this treatment. Instead one should isolate the logical processes of human action. Von Mises called this discipline "praxeology" – a term he adapted from Alfred Espinas (but which had been in use by others).

The Austrian praxeological method is based on the heavy use of logical deduction from what they assert to be self-evident axioms or undeniable facts about human existence.

In short, that's about as much "science" as Creationism. "Self-evident axioms", woohoo. That's really awesome. Any Keynesian, Neoclassic, even a monetarist or a Marxist would employ empirical and statistical analysis, but that's "too complex" for the Austrians. What can one say? Little knowledge is a dangerous thing.

That's pretty much what I was talking about earlier when I said that some libertarians think the economy is entirely too complex to understand. Although to be fair, even if the Austrians talk the talk, they don't walk the walk - there's a model of growth the Austrians propose which is certainly falsifiable; it proposes an in-principle falsifiable model of growth (higher savings and investment lead to higher growth in future periods and the interest rate is reflected in the nature of the time horizon of new capital projects - you can test this). I believe it was Hayek who actually introduced the model.

Also -- anecdotally -- the academic libertarians I've run into have been quite critical of the economic profession's lack of empirical grounding. Let me see if I can find the paper they published.

[Surlethe]

If anyone's interested, here are three papers criticizing the lack of empiricism in economics.

• Theory vs. Application: Does Theory Crowd Out Evidence? Southern Economics Journal 3(71) 553-565
• Decline in Critical Commentary: 1963-2005 Econ Journal Watch 2(2) 355-361
• The Market for Lemmas: Evidence that Complex Models Rarely Operate in Our World Econ Journal Watch 5(1) 78-90.

[TheKwas]

At my university, most libertarians are economic students, graduate and undergraduate, and professors. And they usually give more thought to economic theory than their average mixed economy types.

Excuse me if I don't take your word for it, considering my experiance is the exact opposite.

Also, what you and TheKwas saw in undergraduate economics courses represents theory that is about 50-60 years old. In those dark times the mainstream views of the economy were pretty much the closest to socialism that economics ever was.

Uh, I'm 21. I'm not in the 'dark times' of economic theory, whatever the hell that means.

What trend towards libertarianism are you seeing? The two biggest general schools of thought in macroeconomics are New-Keynesians and New-Classicalists. Both of them are generally in favour of a mixed economy.

Nor a true mixed economy, in the scientific sense.

Huh? What's a mixed economy in the 'scientific sense'?

Seriously? How is such idiocy accepted in any kind of academic environment? It must be radical artsies at work here.

The Austrian school simply isn't taken seriously now days in most academic environments.

Thankfully.

[Darth Wong]

Iosef Cross reeks of bluffing to me. Especially the bit about "a true mixed economy, in the scientific sense". That doesn't have any damned meaning, but it does carry the strong stench of someone trying to sound authoritative.

[Surlethe]

A word on equilibria and economic modeling.

In static modeling, economists tend to assume the economy is in some sort of equilibrium and ask what happens if it is moved from that equilibrium by an 'exogenous shock'. For example, what happens if you're chugging along and OPEC decides to dry up their wells in protest of US support of Israel? The reason economists assume the economy is in equilibrium is it permits the isolation of the effects of one variable on the model. So, using the oil example, it permits the prediction, "All else equal, the economy will contract and and unemployment will both rise.

On the other hand, as I understand it, general equilibrium modeling is concerned with creating a long-run or dynamic model of the economy based on certain assumptions (for example, income is proportional to available capital and labor) and asking if an equilibrium exists in the model. Since there's strong evidence of long-run macroeconomic equilibria (chaotic oscillations do not generally occur in GDP on timescales of decades or longer), the prediction of a stable equilibrium is taken as a test of the model. Predicting and modeling the business cycle is a different beast entirely, but economists tend to regard the business cycle as oscillation around a long-run equilibrium.

Of course, take what I'm saying with some salt; I'm certainly no expert, although I have more exposure to these ideas than the average person.

[J]

I picture it this way; economics models the system as a set of lab scales which has a balance point it wants to return to, this is the medium to long run trendline. In reality it's a lot more like balancing a broom on your fingertip, the system is inherently unstable and the broom (or economy) stays upright only with constant intervention. Stop moving your finger and the broom falls over and hits your head, allow the economy to do what it wants and it leads to severe boom & bust cycles, it doesn't automatically find a balance point and return to an optimum path when you leave it alone the way a lab scale does.

[TheKwas]

When the broom falls, it stays down. With boom and bust cycles there's a point that economy tries to return to (oscillates around the equilibrium). The trick is instead to minimize the oscillations than perfectly balance the economy from collapsing, as surlethe implied.

[Surlethe]

Right - that sort of equilibrium modeling says, when the economy is away from equilibrium, there are general downward pressures on wages and prices which should push employment back up. (This predicts that, all else equal, prices and wages will tend to drop during a recession.) The real question is predicting the busts and the booms, which I don't know that anybody has done. I don't even know if it's even possible in principle more than several years (months? weeks?) in advance, any more than it's possible to predict the weather more than several days ahead: both the weather and the short-term economy are chaotic systems, so over an extended time horizon (which depends on the precision of your initial measurements) you lose all predictive power.

[Darth Wong]

These people should study engineering control system theory, then. An overdriven or under-damped control system can easily run wild and oscillate to limits around a set-point. Overly strong negative feedback could do the same thing. Positive feedback (eg- analogous to deliberately heating up a boom period) is almost guaranteed to do it.

[Surlethe]

"Will X change cause greater or lesser volatility?" was actually a theme in my intro macro class, albeit with significantly less sophistication than I presume control systems analysis treats its subject. The great problem with controlling the economy is that it is so difficult to actually get a grip on what's going on in it and predict the long-term effects of a particular change.

Nevertheless, over the last half-century policies have (presumably) had an observable effect on economic volatility:

The story of the graph is: before 1850, the US is almost entirely agrarian. After 1850, the US enters its Robber Baron stage and we see tremendous growth - and tremendous busts - for almost a century. After the Great Depression and WWII, the US is in its New Deal phase, and there is a noticeable contraction of the variance in GDP % change.

Whether it is policy alone that is responsible, and not some other factor like overall global stability, greater market liquidity, advancing technology, consistently high per-capita capital stock, or sectoral shift away from agriculture is difficult to analyze, but I've always seen this particular change chalked up to policy. The difficulty in decomposing changes is what makes the economy so hard to control.

Notes.
[1] This is real GDP, not nominal.
[2] Data from http://www.measuringworth.org/usgdp/ - time scale, 1790 - 2009.
[3] Someone with access to statistical software could run a regression on log(GDP), get the actual variance, and test for a structure change. As for me, I must now return to measure theory.

[TheKwas]

I guess it's actually a combination of the two. A severe recession is basically a strong negative feedback loop (something exogeneous happens that reduces production, people consume less in response, leading to less production and so forth) while a bubble is same but with positive feedback, but in economics it's basically assumed that the cycle can't continue forever. Consumer confidence will be regained at some point, or the bubble will have to burst at some point, and after that the economic forces will result in the economy returning to it's previous equilibrium that's dependent mostly on material factors.

That's basically what Keynes meant when he said: "The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again. "

[Iosef Cross]

It bears repeating that there is not a single case of "free market capitalism" extant in the world today, historically, or that any advanced industrial society industrialized and accumulated capital through anything like it. The major corporate capitalist societies today rely on significant state intervention, policy preference, and instruments in order to function, just as they did dramatically so throughout their expansion and modernization.

There never has been a true socialist economy either. Nor a true mixed economy, in the scientific sense.

Explain what a "true mixed economy, in the scientific sense" is. I can totally understand someone saying that there has never been a pure capitalist economy, or a pure socialist economy, but how the hell can there not be a true "mixed economy", when every real-world economy seems to be precisely that, with socialist and capitalist elements mixed together?

A mixed economy in the scientific sense would be a mixed economy where the State acts to correct market failures. That doesn't exists.

State intervention exists for 2 reasons:

1- To benefit interest groups at the expense of everybody else.

2- To satisfy popular ideas, like that people have the right to education.

State intervention currently is not explicitly designed to correct market failures. Even thought they say in many classes that it is, but it isn't.

For that matter, what the hell does "scientific" mean when you say it? Economic systems are not observed in the wild, nor are they theorized from observation of natural processes. All economic systems are essentially social engineering schemes (sorry for the people who think "social engineering" is a synonym for "fascism", but it's true).

No, economic systems aren't social engineering schemes.

They are spontaneous orders. Orders that emerged without conscious direction.

Economics studies how individual actions, made with the individual ends in mind can result in a social order. Adam Smith already recognized that.

[Iosef Cross]

At my university, most libertarians are economic students, graduate and undergraduate, and professors. And they usually give more thought to economic theory than their average mixed economy types.

Excuse me if I don't take your word for it, considering my experiance is the exact opposite.

Most libertarians come from where in your university? Engineering programs? Law school?

Also, what you and TheKwas saw in undergraduate economics courses represents theory that is about 50-60 years old. In those dark times the mainstream views of the economy were pretty much the closest to socialism that economics ever was.

Uh, I'm 21. I'm not in the 'dark times' of economic theory, whatever the hell that means.

How do you know? You don't appear to know much, not enough to make you a bit skeptic when some teacher tells you some model, with has dozens of refutations, to make you think twice before assuming that as truth.

What trend towards libertarianism are you seeing? The two biggest general schools of thought in macroeconomics are New-Keynesians and New-Classicalists. Both of them are generally in favour of a mixed economy.

Nor a true mixed economy, in the scientific sense.

Huh? What's a mixed economy in the 'scientific sense'?

A mixed economy where state intervention is designed to correct market failures.

Seriously? How is such idiocy accepted in any kind of academic environment? It must be radical artsies at work here.

The Austrian school simply isn't taken seriously now days in most academic environments.

The Austrian school doesn't exists anymore, It was a school of economic thought that existed between 1870 and WW1, in Vienna. Their contributions have been integrated into the neoclassical mainstream between 1870 and 1930. Their contributions are very important and much of modern economics comes from the research of these long death economists.

[Iosef Cross]

Nevertheless, over the last half-century policies have (presumably) had an observable effect on economic volatility:

The story of the graph is: before 1850, the US is almost entirely agrarian. After 1850, the US enters its Robber Baron stage and we see tremendous growth - and tremendous busts - for almost a century. After the Great Depression and WWII, the US is in its New Deal phase, and there is a noticeable contraction of the variance in GDP % change.

Do you know that they started to measure GDP in the US in 1929?

The figures from before that date are estimates based on indexes of industrial production. And industrial production always varies more than GDP during the business cycles.

[Samuel]

Do you know that they started to measure GDP in the US in 1929?

The figures from before that date are estimates based on indexes of industrial production. And industrial production always varies more than GDP during the business cycles.

Yes, but the majority of the population was involved in industry in those days and not services like now.

A mixed economy in the scientific sense would be a mixed economy where the State acts to correct market failures. That doesn't exists.

Yes it does. There is just a disagreement about "market failure".

2- To satisfy popular ideas, like that people have the right to education.

That would count as a market failure- the benefit you get from giving people an education is higher than the cost, but companies can't insure that the people they train won't work for other companies so it falls to the state to educate.

No, economic systems aren't social engineering schemes.

They are spontaneous orders. Orders that emerged without conscious direction.

They are social engineering- they attempt to change peoples behavior. Cigarette taxes are a blatant example, but all the governments efforts to alter the economy are to try to change behavior. The only exception I can immediately think of is tax collection in general which is to pay for the programs.

[J]

A mixed economy in the scientific sense would be a mixed economy where the State acts to correct market failures. That doesn't exists.

Before we go any further here, what definition of "correct market failures" are you working with?

[Surlethe]

Nevertheless, over the last half-century policies have (presumably) had an observable effect on economic volatility:

The story of the graph is: before 1850, the US is almost entirely agrarian. After 1850, the US enters its Robber Baron stage and we see tremendous growth - and tremendous busts - for almost a century. After the Great Depression and WWII, the US is in its New Deal phase, and there is a noticeable contraction of the variance in GDP % change.

Do you know that they started to measure GDP in the US in 1929?

The figures from before that date are estimates based on indexes of industrial production. And industrial production always varies more than GDP during the business cycles.

Yeah, because the professional statisticians and economists who calculated these numbers don't know how to correct for that. Do you think that the "heat island" effect invalidates temperature measurements, too?

[Iosef Cross]

There is no consensus in ET even on the question of IF a general equilibrium exists, on the nature, duration of equilibrium, and, like you said, the process which moves the economy to equilibrium (and/or from one state of equilibrium to another, if we are talking about the swinging-equilibrium model).

Those issues need to be addressed, before scientific treatments of market failure and government intervention can be made.

After all, the basis of modern economic theory are the theories of equilibrium. Be it general equilibrium or Nash equilibrium. To explain how this state is reached is of fundamental importance to economics as science.

The first welfare theorem is pretty much the usual mainstream argument for free markets. There are some developments of it with can be applied to explain most, if not all, economic phenomena. So if you like, you can analyze the market as always perfect. Some Chicago school economists to that. I personally think that the main problem with economic theory today is the lack of adequate theory to explain the movement towards equilibrium. But that's a very complex matter, however I think it will have a great deal of importance in determining the role of state.

Most if not all economic phenomena? Well, of course they do. But how does explanation of a phenomena show whether it's good or bad? I'm pretty sure the mechanisms can be explained - for example, the phenomena of extreme capital flight or brain drain. The question is how to prevent it. The question is to devise a rational economic policy preventing it.

You can explain economic phenomena with a variety of models. Some models conclude that markets are perfect, other models doesn't. If you like markets, you can use the perfect market model, if you don't, you can use the imperfect market model.

Both types of models have plenty of empirical evidence supporting them!!

The fact is that the market tends to generate tendencies were the factors if production tend to reflect underlying consumer preferences.

So? How is this relevant to my question? What if the distribution of income disallows me to express my true (desired) preferences, what if I am economically coerced into a situation where I have little economic choice? What if the entire market acts as a system of economic coercion - perfectly rational in action, but producing a negative effect?

It means that the resources existing in the economic system tend to be allocated to satisfy consumer needs. Who is the consumer? Anybody that has something to trade for.

And you always have something to sell, like you time. That's what wage earners do. I wouldn't call that "economic coercion".

In a dictatorship the State doesn't have any incentive to correct economic inefficiencies, in this world the State only uses the population under it to satisfy it's own ends.

However, economic development under dictatorship can still occur. It can be in the form of a market, or state planned economy. It can also outpace other economies. How is that relevant to my question? The dictatorship is a mode of political power. The market is the state of economy.

State intervention under dictatorships doesn't tend to correct market failures, because the State doesn't have incentives to do that.

While in a democracy voters don't have much information: That's because it doesn't makes sense to know much about who they are voting too, because his vote doesn't really matter (1). Hence, the State doesn't have systematic tendencies to allocate resources into their best uses, unlike the market.

The market does not have a "systematic tendency" to allocate the resources to their "best" uses, unless you simply define "best" as the current market allocation.

No. You can define best as the allocation where the marginal unit of the resource has it's maximum possible valuation. In other words, that people are willing to pay more for this resource than in any of it's alternative uses.

The allocation of resources to luxury industries while people are starving is a simple example - it's a market-rational allocation (luxury consumers have more buying power than starving people), however why should that be "the best" allocation? It's certainly Pareto-optimal, but why is it "best"?

Well, the existence of people that are starving (involuntarily) is not pareto optimal: Because they are labor that is not being used.

That means that these people would want to work for wages that are enough for them to not starve, but are lower than the marginal productivity of their labor, hence possible profit opportunity. Entrepreneurs will tend to employ them, since they would profit from it. Other entrepreneur would compete for this source of profit, offering higher wages.

These starving people would emerge as a consuming market, and resources would be allocated to satisfy their needs.

That's what the market does: It exploits possibilities of progress.

But the government is not omniscient nor benevolent.

It does not need to be. It needs to be rational enough and efficient enough. That is all.

No. The government needs to be omniscient and benevolent to do what the market failure economists ask for it to do: To correct any market imperfection.

The concept that the State must intervene to correct any market failure is based (implicitly) on the assumption that the State is perfect.

Because if the market is perfect, that means that even a perfect government would be incapable of correcting it. But if the
market is imperfect, that means that a perfect government would be capable of correcting it.

The truth is that neither the market nor the government are perfect. So, to find out market imperfection doesn't imply in finding out a justification of government intervention. We need to look at relative levels of imperfection.

And looking at it, we can notice that the market tends to correct it's imperfections, while the State doesn't have strong tendencies of inefficiency correction, even thought they have some (democracy at least). So I think that the market is preferable to the State.

Well, second to Economic Freedom of the World 2009 Annual Report (2), there is some very hard evidence that free market policies tend to generate better IDH. See pages 19 onwards of the report.

How would you explain the higher HDI of the Soviet Union versus comparable per-capita development level market economies? How would you explain the higher HDI of Cuba versus some other Latin American nations? How would you explain the higher HDI of Sweden and the North European nations versus other First World nations with less taxation and regulation? Your explanation to all these phenomena would be...?

First: Read the Report.

Second: HDI is an imperfect measure of development, as all other measures. So, you need to use it with care. The high HDI of Cuba is a classic example of the defects of HDI: Their HDI is high because of high life expectancy and many years of schooling.

In Cuba people live longer because they are under low calorie rations, such increase in life expectancy occurred after the breakup of the USSR, they lost their source of money and the rations of the population were reduced. And they have many years of schooling because the state needs to do some very good brainwashing to maintain the stability of the regime.

But, that doesn't mean it is useless, since normally countries were people live longer and have more years of schooling are good countries. And also, on average these countries have more economic freedom.

Really? How then would you explain the neo-Keynesians of the 1960s, the current strain of neo-Keynesianism? How would you explain the success of Dirigisme in France (both as a theory and practice), the success (and theoretical development) of such concepts as indicative planning, etc.?

How would you explain that in the last 60 years, there has been a colossal amount of research on state intervention and now Universities even have separate disciplines (mine had) teaching a course in State Economic Intervention and Indicative Planning? Needless to remind you, 60 years ago neither concept was much fleshed out, and I doubt there were whole theory courses devoted to that. Maybe I am wrong, if so, one can correct me.

I didn't meant that economics is moving straight towards libertarian positions on economic policy, that all new developments point out to libertarian positions in policy. I meant that in the last 60 years economic theory has tended towards more libertarian positions on average. And yes, it has: 60 years ago many economists were advocating pure Socialism, interventionism was seem as the last hope of capitalism: The debate was between socialism and interventionism. Today the tide has turned, socialism is death, and the debate is between interventionism and the free market.

Also, the stuff that you learn in undergraduate economic courses is pretty much the economics of decades ago. There is an average 30-40 to years lag between undergraduate economics and the cutting edge.

[Iosef Cross]

Nevertheless, over the last half-century policies have (presumably) had an observable effect on economic volatility:

The story of the graph is: before 1850, the US is almost entirely agrarian. After 1850, the US enters its Robber Baron stage and we see tremendous growth - and tremendous busts - for almost a century. After the Great Depression and WWII, the US is in its New Deal phase, and there is a noticeable contraction of the variance in GDP % change.

Do you know that they started to measure GDP in the US in 1929?

The figures from before that date are estimates based on indexes of industrial production. And industrial production always varies more than GDP during the business cycles.

Yeah, because the professional statisticians and economists who calculated these numbers don't know how to correct for that. Do you think that the "heat island" effect invalidates temperature measurements, too?

The GDP estimates from before 1929 are not of the same quality as after, and also, there are many ways to calculate GDP, with yields different numbers.

"Read that:
http://www.econ.berkeley.edu/~webfac/ei ... itschl.pdf

Abstract
This paper presents insights on the American business cycle during the pre- and
interwar periods derived from disaggregate diffusion indices. We employ a Bayesian
approach to dynamic factor analysis, and obtain factors representing economic
activity in the U.S. economy across the divides of World War I and the Great
Depression. We find a remarkable increase in volatility across World War I, which is
even stronger than suggested by Romer (1987, 1989) from a re-examination of
Historical National Accounts. Extending our results across World War II, we find that
the post-war moderation in aggregate volatility occurred only relative to the interwar
period but not with regard to the rather mild fluctuations we find before World War I.
Our estimates also broadly confirm the NBER business cycle chronology for the
prewar and interwar period."

[Iosef Cross]

A mixed economy in the scientific sense would be a mixed economy where the State acts to correct market failures. That doesn't exists.

Before we go any further here, what definition of "correct market failures" are you working with?

It means to intervene to correct any type of situation were the outcome if not Pareto optimal.