US voters have now repudiated those who sought to impose democracy by force abroad. In spite of the gerrymandering of districts, the advantages of incumbency and renewed recourse to the politics of fear, common sense prevailed. George W. Bush is still president. But he is damaged political goods. That is good, because change is desperately needed. The signal feature of this administration has not been merely its incompetence, but its rejection of the principles on which US foreign policy was built after the second world war. The administration’s strategy has been based, instead, upon four ideas: the primacy of force; the preservation of a unipolar order; the unbridled exercise of US power; and the right to initiate preventive war in the absence of immediate threats. The response to the terrorist outrage of September 11 2001 reinforced the hold of all these principles. The notion of an indefinite and unlimited “war on terror” became the fulcrum of US foreign policy. It led to the idea of an “axis of evil” connecting Saddam Hussein’s Iraq to theocratic Iran and Kim Jong-il’s North Korea. It brought about the justified invasion of Afghanistan, but also the diversion into Iraq. Not least, the idea of the war on terror led to the indefinite imprisonment of alleged enemy combatants without judicial oversight, toleration of torture, “extraordinary rendition” of suspects, the extra-territorial prison at Guantánamo Bay and, by indirect means, the abuses at Abu Ghraib. The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free - click ‘Comments’ below.

By Martin Wolf John Maynard Keynes, who died in 1946, and Milton Friedman, who died last week, were the most influential economists of the 20th century. Since Friedman spent much of his intellectual energy attacking the legacy of Keynes, it is natural to consider them opposites. Their differences were, indeed, profound. But so was what they shared. More interesting, neither won and neither lost: today’s policy orthodoxies are a synthesis of their two approaches. Keynes concluded from the great depression that the free market had failed; Friedman decided, instead, that the Federal Reserve had failed. Keynes trusted in discretion for sophisticated mandarins like himself; Friedman believed the only safe government was one bound by tight rules. Keynes thought that capitalism needed to be in fetters; Friedman thought it would behave if left alone. These differences are self-evident. Yet no less so are the similarities. Both were brilliant journalists, debaters and promoters of their own ideas; both saw the great depression as, at bottom, a crisis of inadequate aggregate demand; both wrote in favour of floating exchange rates and so of fiat (or government-made) money; and both were on the side of freedom in the great ideological struggle of the 20th century. The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free - click ‘Comments’ below.

By Samuel Brittan Milton Friedman, who has died aged 94, was the last of the great economists to combine possession of a household name with the highest professional credentials. In this respect he was often compared to John Maynard Keynes, whose work he always respected, even though he to some extent supplanted it. Moreover, in contrast to many leading economists, Friedman maintained a continuity between his Nobel-Prize winning academic contributions and his current journalism. The columns he contributed to Newsweek every third week between 1966 and 1984 were a model of how to use economic analysis to illuminate events. Both his admirers and his detractors have pointed out that his world view was essentially simple: a passionate belief in personal freedom combined with a conviction that free markets were the best way of co-ordinating the activities of dispersed individuals to their mutual enrichment. Where he shone was in his ability to derive interesting and unexpected consequences from simple ideas. As I knew from my postbag, part of his appeal lay in his willingness to come out with home truths which had occurred to many other people who had not dared to utter them. Friedman would then go on, however, to defend these maxims against the massed forces of economic correctness; and in the course of those defences he, almost unintentionally, added to knowledge. (more…)

Those who believe in the free market are highly resistant to the idea of man-made climate change, let alone to arguments for government action to halt emissions of greenhouse gases. Is this resistance rational? Or is it another case of the human desire to believe true what is merely convenient? On one point these sceptics are correct: the man-made climate change hypothesis appeals to believers in environmental limits to growth, the evils of capitalism and the need for government regulation. Lord Lawson, the former British chancellor of the exchequer, makes that point well in a recent assault on the activists.* But what should matter is not the emotions that drive the people on either side of the debate, but rather whether the arguments advanced are persuasive. Sceptics start by arguing that the science behind the man-made warming hypothesis is flawed. Some even argue that it is a fraud, in which case it would be the biggest and potentially the costliest ever. Scientific knowledge is indeed provisional. The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free.

By Lawrence Summers Tuesday’s mid-term elections, with its victory for the Democrats in the House and the Senate, was a striking but not historically extraordinary event. Of the 16 mid-term elections since the second world war, Tuesday’s was the seventh that could be classified as a “repudiation election”, in which voting revealed widespread dissatisfaction with the policies of the president and his party. The varied aftermaths of past repudiation, elections show the difficulty of forecasting what will follow the Democrats’ victory. After the 1946 election, Harry Truman worked with the Republican Congress on big measures such as the Marshall Plan and won the 1948 election. The Eisenhower administration limped to its conclusion after the 1958 poll and the Democratic congressional victory that year paved the way for John F. Kennedy’s election in 1960. Lyndon Johnson’s big legislative accomplishments occurred before the election of 1966; Democrats lost the White House to Richard Nixon two years later. The post-Watergate election of 1974 was followed by the recession of 1975 and the election of Jimmy Carter in 1976. Ronald Reagan recovered from his 1986 loss of the Senate and the Iran-Contra scandals, and his vice-president George H.W. Bush won the presidency in 1988. (more…)

What is the chance of effective action to curb climate change? “Not much” is the answer. This is not because the costs of action would be prohibitive, at least according to the report on climate change by Sir Nicholas Stern published last week.* It is because the obstacles to achieving the necessary global co-operation are so steep. Sceptics worry that costly action is likely. But believers in climate change have far better reason to be worried.

The report produced by Sir Nicholas last week called for efforts to stabilise greenhouse gas concentrations at between 450 and 550 parts per million by 2050. By then, global emissions would have to be at least 25 per cent below current levels, even though the world economy may be between three and four times bigger.

Yet, according to the report, stabilising concentrations at 550ppm might cost only about 1 per cent of gross domestic product, with a range between minus 1 per cent (a benefit) and plus 3.5 per cent (a cost). Thus, the report says comfortingly, we can tackle climate change at minimal cost to living standards. So why, given the growing consensus on the threat, is it so hard to forestall it? It is because this is an extraordinarily difficult challenge for humans to deal with.

The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free - click ‘Comments’ below.

Repent, for the end of the world is nigh. That is a warning one would expect to come from an evangelical preacher or an environmental doomsayer, not from a sober economist. Yet that is, in essence, what Sir Nicholas Stern, author of the British government’s new report on climate change, is saying. The tone may be sober, but the conclusion – act now before it is too late – is not.

Hitherto many economists, business-people and politicians, particularly in the US, have argued that, given both the uncertainties and the high costs of taking possibly unnecessary action, the best policy is to wait, see and, if necessary, adapt. The contribution of this report is to reverse that logic. It argues that, given these very same uncertainties and the relatively low costs of acting now, the best policy is action.

How and how convincingly does the review make this case? The answer, I suggest, is: “Sufficiently so.”

The remainder of Martin Wolf’s column can be read here (FT.com subscribers only). Discussion from our guest economists is free - click ‘Comments’ below.