08/28/2012 04:10 pm ET Updated Oct 28, 2012

With Hands-Off Economic Philosophy, No Mitt, No Glove, No Experience Required

Something's not quite right with this year's presidential contest. Former Massachusetts Governor Mitt Romney has been doing so much violence to traditional conservative ideology and to textbook economic theory that I'm not sure what to tell my students anymore.

Romney contends that if he were to head our federal government, he would be well-placed to fix our economy thanks to his business experience. That's a pretty odd claim from someone calling himself a conservative, since both philosophical conservatism and traditional economics textbooks hold that in a market economy, the government's only roles are to provide a stable currency, assure the rule of law, and raise tax revenues to pay for public goods like defense, sanitation, and policing. Apart from those limited roles, "that government which governs least governs best."

It's liberals and Keynesians, not conservative Republicans, who argue that government needs to be an active player in the economy to obtain good results. Keynesians in particular contend that, contrary to free market ideology, the economy does not regulate itself, so the government often has to step in to fix problems of excessive or inadequate aggregate demand. Liberals also recognize the plethora of problems economists call "market failures," which call for a government role in protecting the environment, assuring the safety of our food supply, workplaces, and pharmaceuticals, and much more. It makes sense for liberals, not conservatives, to judge a president's performance by the performance of the economy. To conservatives, the market is self-regulating and the government's only job is to "get out of the way." For a Republican to depict the role of president as a sort of CEO of the economy seems intellectually incoherent, if not dishonest.

Consider, too, the awkward public relations dance around what Romney did or didn't do as CEO of Bain Capital. (Yes, Bain is a company, so it has a CEO -- in its early years, Romney.) The intellectually honest position would be the one taken by Milton Friedman, the Nobel Prize-winning economist and proponent of free markets, who argued that a business has no social responsibility apart from generating as much financial return as possible for its shareholders.

On countless occasions, markets have rewarded companies for laying-off workers because investors judged this to be what was needed to raise profits and share value. So companies were fulfilling their social responsibilities by laying-off the workers in question, Friedman would have said. If Romney, as head of Bain Capital, oversaw episodes of corporate downsizing or outsourcing, that wouldn't in any way call into question his claim of having been a talented manager and a good agent of his shareholders.

But just as it would be silly for us to hold Romney responsible for creating jobs during his years as a venture capitalist, it would be equally silly to imagine that his business experience will help him to bring millions of new jobs into being if we were to put him at the helm of our government.

As things turn out, Romney's economic proposals themselves are as non-activist as one would expect from a conservative. He proposes to return to the same government-shrinking agenda that's been pursued by Republican presidents since Ronald Reagan. Never mind that those policies brought slower economic growth than in pre-Reagan decades, never mind that they're associated with more than a generation of stagnating living standards for the majority of Americans perhaps for the first time in U.S. history, and never mind that the return to their "deregulation first" agenda not only offers no guarantees that the financial meltdown of 2008 will not be repeated, but (say many) increases the likelihood of its repetition. At least we can take comfort in the familiarity of his economic proposals and the fact that it's only the advertisements that are out of whack.

So, despite Romney's claim that one needs business experience and acumen to preside over the kind of 'hands off' government he favors, conservatives can feel comforted by the knowledge that an empty suit is indeed all that's needed to preside over a hands-off government practicing non-intervention in the marketplace. If I were a conservative, I'd be lining up right now to vote for Romney.

Consider, in contrast, those who, like F.D.R., John Maynard Keynes, Paul Samuelson, Paul Krugman and a substantial share of the contemporary economics profession, believe that an active government actually can improve the functioning of the economy. It's members of this group, not economic and philosophical conservatives, that have reason to look for the right qualities and understanding of the economic role of government in those whom they elect to public office. Unfortunately for the liberals, it's not clear that the present incumbent is up to the task.

As Krugman argues in his 2012 book End This Depression Now, the Obama administration's failure to fight for an adequate stimulus package when it still had a congressional majority made the job of liberal economists far harder by seemingly discrediting stimulus itself, much as conservatives hoped. The administration's refusal to put real conditions on the bailouts of giant banks and insurance companies, its failure to push for more serious reform of the financial sector, and its surrender to deficit hawks when the economy remained in its worst slump since the Great Depression, rightly gives liberals pause.

The upshot is that economic conservatives do in fact have a reliable candidate in Romney, despite his abuse of the 'president runs the economy' idea to pander to the ill-informed. Liberals, in contrast, have much less reason for confidence in the available alternative.

If Obama and his team really do believe that government isn't always the problem but must be part of the solution, then they need to explain this clearly and forcefully, admit their past miscalculations, and lay the appropriate share of the blame on opponents who set political warfare ahead of national well-being. They must insist that what's needed is not just four more years of holding the line on the further dismantling of the mixed economy, but a chance to address the economy's current doldrums forcefully. Unfortunately, and still more dauntingly, that would also require electing a Congress that isn't hell-bent on returning to the 1920s.