As some of you have gratefully noted, I’ve temporarily given social security blogging a rest. However, my colleague Tim Lee is on the ball. Tim points out that Yglesias is either being shady or doesn’t know what he talking about in his article on transition costs to personal accounts. And, looking at the debate between Kevin Drum and Will Saletan over the retirement age, Tim wisely wonders why we got ourselves into the sort of system where extremely personal issues, like the age at which people choose to retire, becomes a matter government policy.
Monthly Archives: February 2005
Empiricism, Normativity, and the Burdens of Judgment
Here’s another little point I want to make about the idea of empiricism in politics and social science. The “empirical” results in the social sciences are often not gained through direct observation, but through often quite loose measurement techniques involving all sorts of proxies and approximations. So, when I hear somebody say “Real wages have declined since 1970″ or something like that, and I snort with absolute incredulity, and they point me to some BLS chart, and I demand to know how we calculate real wages, and then I’m told about the CPI, and I assert that the methodology of the CPI must be flawed because it is obvious by casual observation that real wages have increased a great deal, who’s the empiricist? Were economic liberals being good empiricists when they bitched about the Boskin report?
Alex Tabarrok (like his co-blogger, also at least as good an economist as Michael Kinsley) makes this sort of measurement method contesting move this morning on the WSJ Econoblog:
Is America on a consumption binge? In 2003 the savings rate was a paltry 1.2% — the lowest rate since the Great Depression, when savings briefly went negative. But before we tighten our belts we need to know that the standard measure of personal savings (from the National Income and Product Accounts) is highly flawed.[empasis added]
Savings in the NIPA are defined as income minus consumption. But what is consumption? The NIPA defines education expenditures as consumption, but try as I might to keep my students’ attention with the occasional joke, I think few would report that they are paying me for entertainment value alone. Education expenditures ought to be defined as investment financed from savings.
The NIPA also measures savings on an annual basis. But suppose that you are asked what your savings are. You probably don’t add up this year’s income and subtract this year’s consumption, instead you add up your stock of savings; the value of all of your assets including equities, bonds, net housing value, cash and so forth. The latter measure is the right one if we want to measure provision for the future.
The flow and stock measures of savings can easily move in different directions. Indeed, a major reason that the yearly savings rate has declined is precisely because the value of assets has increased.
A declining savings rate, therefore, can easily signal positive things about people’s net asset position. Similarly, we have in recent years experienced a boom in productivity. If individuals expect the boom to continue, it may be quite rational to reduce current savings.
If I insist that the CPI is screwy, or Alex insists that NIPA is screwy, it’s probably because we think it fails to adequately measure observed economic phenomena, or fails to take into account what our best theory says a measurement device ought to be taking into account. Imagine that the motivation for our complaints about measurement comes from our ideological commitments. So be it. Empricism care not about our motivation, as long as we are doing our best to save the phenomena.
My broader point is that the social sciences have a normative upshot. We care about how we measure and reason about the social world because we want to make the social world better. Our normative commitments will inevitably guide the way we generate hypotheses and affect our choice of methodological tools for testing those hypotheses. But this is not counter to empiricism. These are the mechanisms through which empiricism in the social sciences operate. Chait’s hackish claims of virtuous wertfreiheit empiricism betray a kind of self-satisfied naivete that actually threatens the kind of epistemic virtue necessary for empiricsm in social sciencces by encouraging a lack of reflection about the scientific producer’s and consumer’s necessary engagement with and commitment to norms in the social domain.
The empirical, descriptive task in the social sciences is not separable from the normative task. I believe that empirical investigation in the social sciences ought to be as neutral among values as possible. But the question of what constitutes a neutral investigative stance is not itself a question of social science, is essentially contestable, and the argument for wertfreiheit is itself a contestable normative argument. Science in general works because scientific practices and scientific communities embody certain norms and epistemic virtues. Science does not proceed through the application of a Baconian algorithm. Social science studies human action and human coordination, phenomena that cannot even be adequately described without mentioning the normative, goal-seeking nature of practical reasoning or normative features of coordination. (The idea of a market failure, for example, which Chait makes use of, is a normative notion about coordination.) And it seems neither plausible nor desirable for the social scientific community to to pretend indifference to the norm-ladeness of their domain.
Just how and to what extent the social scientist should engage with or be guided by normative conceptions in the conduct of empirical inquiry are very hard questions. Discuss at will.
Jonathan Chait: Confirmation Bias in One Satirical Lesson
Jonathan Chait’s article, “Fact Finders,” in the new TNR is one of the most obnoxiously blinkered pieces of self-serving political magazine writing in recent memory. I’m just flabbergasted by the stupidity of this thing. Chait’s claim is that liberals by and large are empiricists, willing to go where the evidence takes them, while conservatives (loosely and irresponsibly identified with free-market types) are dogmatists who will unaccountably but doggedly cling to principle even after being brought low by data. The claim is almost self-refuting. It should be impossible for an intelligent and observant person, such as Chait imagines himself to be, to fail to see the ravages of dogmatic narrowness on all sides. To claim the mantle of empiricism exclusively for liberalism (or any -ism) in the teeth of overwhelming evidence that that empiricism is water in ideology’s oil is a signal failure of empiricism.
An empiricist about the alignments of empiricists will surely comes to this (my) conclusion:
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Is the Pundit's Fallacy a Fallacy?
Since Matt accused me of committing the pundit’s fallacy(and although I claimed in his comments that I didn’t, I sort of did,) I got to wondering what makes it a fallacy, exactly. The pundit’s fallacy putatively occurs when a pundit sets forth his own preferences as the solution to some kind of strategic political problem. So if Kerry is trying to become president, and I want federal money to save the narwals, I’d argue: “Kerry has thus far failed to recognize the vast but quiet pro-narwal constituency. A firm commitment to use federal resources to save the narwals could be the difference between victory and defeat on election day. Blah. Blah. Narwals.”
Clearly, this is ridiculous. But this kind of thing is a fallacy only if one misconstrues the intended illocutionary force of the pundit’s punditry. If the point of the pundit’s utterances are merely assertive, well, then the conditions of satisfaction are correspondence truth. If there is no vast narwal constituency, and it could not tip the election, then our pundit’s speech act goes unsatisfied. However, the illocutionary point of acts of punditry are very often directive, trying to get somebody to do something, so that the state of the world changes, rather than simply report on the state of the world. The pundit is trying to get enough people to believe that there is a narwal constituency so that (1) the Kerry people feel enough pressure to make promises about doing something about narwals, and/or (2) more people join the constituency, on the belief that many people are already on board, in order to increase the likelihood of (1).
Now, the narwal cause might be dead in the water (not sorry!), but it seems likely to me that this kind of thing often works. You can create a consensus by claiming a consensus, or by claiming the uniquely effective means to a widely shared end. If you can get enough people to share your preferences, then your preferences come to have actual political heft, and one way to get people to share your preferences is by persuading them that satisfying your preference would satisfy some other preference that they already have.
I have no doubt that acts of punditry with this kind of illocutionary point can and do meet their conditions of satisfaction. We are not surprised to learn that “It’s a little drafty in here,” can be intended to communicate a request to close the window rather than comment on the draft conditions in the room. We should not be surprised to learn that a claim of strategic necessity for one’s own preferences can be used to alter other people’s commitment to one’s preferences rather than make a comment on what’s really stategically necessary for what. So there is no good reason to think of this as a generally fallacious form of utterance. If a pundit out of myopic enthusiam asserts that their pet idea REALLY WILL make all the difference, that’s one thing. But if the pundit is trying to recruit allegiance to their pet idea by, in effect, asking people to imagine how their pet idea COULD make a difference, to try it on, to consider it, then it’s all good.
Minding the Philosophy Gap
Michael Tomasky worries out loud that contemporary liberals don’t make any sense. Liberals strategize and strategize, but means require ends, and those are . . . what? Conservatives do better:
I’ve long had the sense, and it’s only grown since I’ve moved to Washington, that conservatives talk more about philosophy, while liberals talk more about strategy; also, that liberals generally, and young liberals in particular, are somewhat less conversant in their creed’s history and urtexts than their conservative counterparts are . . .
This is interesting largely because conservatives of late have been manifestly superior at strategy, too. Tomasky’s rumination raises the obvious question: to what extent is a coherent governing philosophy a strategic necessity? Answer: To a very large extent.
My diagnosis of the malaise of American statist liberalism is that it has failed to accept that many of the ideals of FDR and LBJ are best realized by decentralized means. Clinton represented the best in the possibilities of liberalism in welfare reform and his advocacy of free trade.
Tomasky implores liberals to revisit the Dewey/Lippmann debate. History and thought has moved on so much from the time of Dewey
and Lippmann that although their debate about democracy versus expertise still has some limited relevance, their politics simply do not. But I do encourage a review of the debate. If you can understand why Lippman was right about public ignorance & democracy, and wrong about bureaucratic expertise, then you’re on the road to a sensible liberalism.
However, American liberalism has a phobia of what’s down the road to a sensible liberalism and so remain The American Society for the Preservation of Historic Welfare Programs. This is both comical and dangerous. Comical because it’s hilarious to witness sophisticated adults confuse contortionist apologetics for ill-functioning, haphazardly structured, historically accidental government programs as an intellectually serious enterprise. Dangerous because the intellectual vacuity of the left allows the conservative juggernaut to pick up speed unimpeded.
I find the Tomasky article through Matt, who I would love to hear attempt to articulate a philosophy. I know what Matt is for, but I can never really make out why. I know Matt is some kind of utilitarian. That’s silly, but, well, utilitarians will always be among us, so what can you do? What I clamor for is the story of how Yglesian liberalism maximizes net utility? Come on Matt! Your people need you!
Institutions are Capital
Arnold Kling also discusses the Daley/Hooks microfinance piece. But the valedictory Kling question poses a false alternative:
For Discussion. Which is an easier problem to solve–a shortage of capital, or institutional deficiencies?
I think it’s increasingly apparent that institutions are a form of capital. Money and machines are more or less useless, aren’t really capital at all, in the absence of a system of formal and informal rules that enables extended, stable mutually beneficial coordination. That was my largely point in this TCS article on the prospects of success in Iraq, and I’m sticking to it.
Microfinance and Institutions
Steve Daley and Brian Hooks, my former colleagues at the Mercatus Global Prosperity Initiative, have put out a nice op-ed explaining why microfinance doesn’t get you far in the absence of a well-integrated set of political, legal, and economic institutions.
Personal bias aside, I don’t think anyone is making the case for the importance of institutions for development and growth with more force and clarity than GPI. Blather about institutions is ubiquituous in development circles, but the Mercatus guys actually know what they’re talking about. Speaking of which, check out Frederic Sautet’s new policy primer on “The Role of Institutions in Entrepreneurship“(pdf) for a good overview of the Mercatus position. And take a look at Steve Daley’s new policy comment on “Microfinance in Action: The Philippine Experience” for further detail on the problem of getting microfinance over the hump into the extended order.
Capitalism and Human Nature
The new Cato Policy Report is out, and the lead article is something I’ve written on what evolutionary psychology can tell us about capitalism. Check it out.
[If you're a print & read sort of person, here's the .pdf of the official printed version.]
Questioning Layard
In my notebook I see my notes for the question that I asked Layard at the Brookings talk last week, and which I meant to blog. Here’s more or less what I said/asked.
Well, context first. . . Layard had promoted abandoning the theory of revealed preference as the basis of economic inquiry and policy analysis and recommended substituting his brand of normative hedonism/eudaimonism.
I said:
You said we should give up on the idea of theory of revealed preferences. I want to defend it, and hear your response.
Perhaps the fact that people behave in ways that don’t maximize their happiness is evidence that people don’t always demand happiness. This raises two points, one scientific and one political.
The scientific point: Social science based on taking a side in hotly contested arguments about the metaphysics of value doesn’t count as science.
The political point: In a pluralistic society where people have fundamental disagreements about the nature of value, taking a side and basing policy on one philsophical conception of value is inappropriate.
Layard’s answer? He seemed to me to avoid the question. He reiterated a point he had made earlier to the effect that we can’t tell what makes people happy by observing their revealed preferences, or that individual behavior when scaled up to the macro-level can have results that fail to maximize happiness, or some such thing. (If someone who was there can remember just what he said, please do correct me, or elaborate.) Whatever it was, he didn’t even approach the scientific and political points, which I think deserve to be taken seriously.
How would you respond?
Public Statement
I am not now, nor have I ever been, an acrobat.
[Update: The mysterious Fey Accompli vouches for my authenticity. Now, regarding the Libertarian Girl debacle, it may be that I know all of the extremely attractive libertarian women in existence, although I am very glad to doubt it, but there are a passel of ladies of my acquaintance who put the mail-order bride to shame. (Fey, by the way, is loveliest of them all.) Why all the fuss for a 7.5?]
DC Smoking Ban Poll
DC Ward One Councliman Jim Graham has a little poll on his website asking “Should the DC Council act to eliminate smoking in indoor workplaces?” (On the left column, a ways down.) Apparently the anti-freedom forces at Smoke-Free DC already got the word out and they’re way ahead in the poll. Will you help? Tell my councilman that DC should not violate the rights of business owners to run their establishments as they choose.
Misunderstanding Social Security
Elizabeth Anderson, of the University of Michigan and left2right, has heroically taken up the thankless task of very clearly illustrating the fact that mainstream contemporary academic American liberalism is, at its core, an essentially reactionary creed built around the conservation of the institutions of the “New Deal” and the “Great Society,” and the protection of the interests of the affiliated political rentier class. One would thus imagine that Anderson would at least understand the institutions she is trying to conserve against the forces of reform. But, no, not so much with the understanding.
Anderson argues that whatever the other faults of Social Security benefit calculators like Heritage’s, “It forgets that Social Security is a form of social insurance, not a simple retirement plan. So it’s comparing apples with oranges.”
Of course, readers of the Annals of Improbable Research understand that apples and oranges are eminently comparable. But more importantly, Social Security is emphatically not a form of social insurance — unless we arbitrarily stipulate that any redistributive transfer is ipso facto a form of insurance by providing people with resources that they could use to protect themselves from risk. Social Security is: a tax and a transfer. That’s it. It’s not insurance, not legally, not in structure, and not in fact.
The Roosevelt administration defended the constitutionality of the Social Security Act in part by arguing before the Supreme Court in Helvering v. Davis that it did not establish a social insurance program. The Court agreed, and reaffirmed this point 23 years late in Fleming v. Nestor where it determined that Social Security taxes are just taxes, and that individuals have no right to any benefit on the basis of having paid these taxes.
It is true that successive governments have maintained a deceptive program structure and system of admininstration intended to trick citizens into believing that there is a connection between their so-called “contributions” and their benefits, and that Social Security is a kind of insurance. Roosevelt fully intended for citizens to mistakenly believe that their payroll tax constituted a kind of insutance premium. He vehemently opposed paying benefits out of the general fund because that would impede the goal of deluding taxpayers. No one thinks they are entitled to some kind of cash transfer from the government simply because they have paid their taxes. And the SSA to this day continues to encourage the systematic deception of the citizens of the US.
You would imagine that a liberal would deplore a system of paternalistically motivated noble lies and would forcefully argue against this kind of deception as a transgression against democracy, which is what it is. We are angry when the government uses lies in order to circumvent the democratic process by causing citizens to misrepresent their options. Think of Bush and the WMD. We ought to be incensed when the government entrenches lies into the very structure of the welfare system.
Anderson has either been taken in by the lie, is trying to perpetuate it, or has a notion of insurance so broad that anything that cushions people against risk, such as exercising regularly, wearing a bicycle helmet, or cultivating a network of altruistic friends and family, counts as “insurance.” In any case, she ought to admit that Social Security is not an insurance program according to the law or according to ordinary usage, and she should stand up for transparency and democracy by condemning the purposefully deceptive structure and rhetoric of the American Social Security system.
Arms Races, Happiness, and other Goods
I strolled up Mass Ave to Brookings this afternoon to hear Richard Layard speak on his new book Happiness. Layard, an unreconstructed Benthamite, is worried by the fact that, once a certain threshold in absolute wealth had been crossed, people’s self-reported happiness is correlated with their perception of their place in the distribution of income, i.e., by their relative wealth. Layard’s worry is that there is an arms race. Each of us tries to improve our relative position. But since everyone else is trying simultaneously to improve their relative position, very few end up succeeding in moving up relative to the others.
We’ve all perhaps moved up in absolute wealth, but that doesn’t matter so much for our happiness once we’ve crossed the critical threshold. All we’ve done is made a futile rush for a higher relative position, and ended up no happier. But we could have been spending our time doing better things.
Layard suggested that higher taxes might be worth having because it would create a disincentive to work, and this might help create a truce in the relative position arms race, freeing everyone to pursue activities that would positively promote their happiness.
Blah. Blah.
First of all, maybe the lesson we should take from this is that people just value status, period, independent of its hedonic effects. That is, perhaps the value of status cannot be reduced to the value of happiness. Casual empiricism would seem to confirm that people behave in predictably hedonically non-maximizing ways in order to maximize status. And it seem to me that many people find it very difficult to release a privileged relative position, even if they recognize that maintaining the position is making them unhappy. (Source: VH1: Behind the Music).
Some people — pehaps many people — would, other things equal, prefer an additional unit of status over several additional units of happiness. And in arms races over relative position, some people do move up. As long as the arms race does not make you significantly less happy, then it can be worth the gamble to jump in and try to be one of the few folks who succeeds in pulling ahead.
(Suppose that you’re very likely to stay in the same spot if you get in the race. And that when people pull ahead, they pull way ahead, but when people fall behind, they fall only a little bit. So even if you’re more likely to fall behind than jump ahead, the upside can still look big.)
Additionally, it can very well be the case that people are generally less happy when they have a lower relative position, more happy when they have a higher position, but don’t value higher position because it will make them happier. They value higher position because it is higher position, and getting higher position tends to make us happy because we value it, and we are generally made happy by getting what we value.
OK, let’s shift gears. Suppose I have written a transcendently great poem. Yet it very complex, and not very accessible. That said, a fair number people take great pleasure in it. However, this pleasure is swamped by the disutility caused to people who, before reading my poem, had thought that they were potentially great poets, but now are made to despair by the realization that they will never attain the heights of my poetic accomplishment.
Have I done a good or bad thing by writing my poem? Obviously: a good thing. The poem is transcendently great! It’s aesthetic value has next to nothing to do with its effect on net utility. Why care if it makes some people feel bad in comparison? Well, there is no reason to care.
To change the example slightly, suppose my poem raises the bar on poem-quality, and all my competitors rush out to write poems that will be even better than transcendently great. However, the effect of this is sheer frustration. They can never do it; I’m just that good! And here they went and wasted all that time failing to write transcendently great poems when they could have been lying in the sunshine, getting massages, or freebasing Prozac. IS THIS A PROBLEM WE NEED TO BE WORRIED ABOUT?
If the greatness of my poem creates negative externalities, they need to be negative externalities we have reason to care about if we’re going to take them into account in policy making. Parfit or Scanlon, in an argument against the pure preference satisfaction theory, give the example of a person who prefers that Uranus has six moons over any other number of moons (or something like that). If it turns out that Uranus does have six moons, is that guy any better off in any sense that we have a reason to care about? Well Parfit/Scanlon don’t think so, and neither do I.
Similarly, if you are a small person, and my success makes you burn with pained resentment, do we have any reason to take your pained resentment into account when evaluating the value of my success. I think not. The problem here is your unreasonable reaction, not my success.
Back to the poetry arms race. Suppose all those lesser poets are made unhappy by their persistent failure to achieve at a trancendent level despite their years of mindbending labor. Should we conclude that the arms race was a bad thing? Obviously not if it led to the creation of a lot of poety which, if not transcendently great, is still great. Maybe the lesser poets can learn to take satisfaction in the value they’ve created, despite their subordinate position in the pantheon of poets. But if they can’t that’s their problem, not a social problem. Similarly, if folks fail to make any progress in the race for relative economic position, they will have still improved everyone’s absolute economic position, which is just good. They will also have produced many wonderful conveniences, objects of beauty, wonder, delight, and technical merit. They will have increased the sum of human knowledge. They will have opened up new avenues of possibility for human life.
Gentlemen, on your marks!
The "Grace of Congress" Problem
What’s wrong with people owning things? Well, if people own things, then the government doesn’t really control it. Apparently it is worrying if the benevolent members of the political class don’t have the discretion to spend your money. I think it is impossible to defend on moral grounds that other things being equal, if the choice is between individual ownership and state control, we should choose state control.
One of the arguments in favor of individual ownership is that property rights create a shield against political predation. Yglesias, who seems to think that other things equal it’s better for the political class to control resources, blithely says, “Why worry!?“:
One [remark on the issue of the relative security provided by legally binding property rights versus the discretion of the politicians] is that while I’ve heard much touching concern from certain privatizers about this “Grace of Congress” issue, the more typical conservatarian complaint about Social Security is that due to the ever-growing voting power of senior citizens it is, in practice, nearly impossible to cut Social Security benefits. So the whole issue strikes me as being of academic concern only.
Matt is pulling a kind of probably unconscious bait and switch here. This is all too common among conservative opponents of progress on social security. Unless there is structural reform of the social security system, such as the implementation of personal retirement accounts, either there will be VERY LARGE future tax increases or VERY LARGE future benefit cuts. The problem with Big Senior’s hegemony and reactionary impulse is not that it makes benefits cuts permanently impossible by constituting an indefeasible coalition, it just pushes the decision into the future while the problem continues to mount. The further into the future we push the problem, the bigger the benefit cuts or tax increases will need to be.
Now, politicians are indeed averse to cutting benefits, due in part to the electoral muscle of Big Senior. Yet they are also averse to raising taxes, due to the electoral muscle of taxpayers. Unless we do something quite soon, the tax increases will need to be quite large. This may not be politically easy, and it is quite realistic to imagine that voters may prefer to cut benefits rather severely in order to avoid giant tax increases, at which point, politicians will cut benefits. Matt’s bait and switch consists in having us imagine that voter demand over policy-bundles remains constant despite the fact that the demographic unsustainability of the system will force tough trade-offs that will alter voter demand.
Matt’s argument is that senior citizens will never allow benefit cuts and so the “Grace of Congress” point is simply academic. Congress will always grace us, so why worry? Well, if Matt is right about the intrasigence of Big Senior, we’re going to need a giant payroll tax increase. Indeed, those who wish to stall serious structural reform are arguing for huge tax increases by default. But the real prospect of a huge tax increase is precisely the sort of thing that will shift voter demand so as to make benefits cuts politically feasible. And so by stalling, Matt is helping to bring into being the conditions under which the Grace of Congress argument gets real teeth.
Unless there is serious structural reform, reduced benefits become increasingly likely. That’s why it’s simply dishonest and incoherent to confuse a politician’s promise with a credible guarantee. There is no guarantee. There are no guaranteed benefits. There are promised benefits — promised by people who honor their promises when it benefits them. And, credibility of politicians aside, given the structure of the system, the promise cannot be kept.
The “conservatarian” argument is clearly not that Big Senior obstructionism regarding reform locks in a sure benefit level, but that it threatens benefits by making the problem ever more acute. At some point, the problem is so acute that the Big Senior coalition will not be political decisve regarding the issue of benefit levels. One main point of reform is to avoid the need to choose between tax increases and benefit cuts, and the political uncertainty the necessity of such choices would create.
Just Savings and Dynamic Contractualism
I don’t understand the principal of just savings.
Rawls says that parties to the OP will pick a principle of savings that satisfies maximin, that maximizes the welfare of the least-well off group. But I cannot make intelligible to myself just who the least well-off group is here in the inter-generational context. It may turn out the best off person in generation 1 is much less well off than the least well off in generation 7.
So, OK, suppose I’m a party to the OP. I don’t know which generation I’m in. So, I’ve got to assume I’m in generation 1, on the assumption that later generations are better off because of the accumulation of capital. And I am suppose to ask how much I am willing to save, on the assumption that generation 0 has saved at the same rate, and that future generations will follow the same principle. I am assumed to have my children and grandchildren in my (primary goods maximizing) welfare function in order to ensure I don’t choose to save nothing. But it seems that there’s no firm place to stand.
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