Monthly Archives: March 2006

Kinsley Gets It!

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Kinsley is just a short step logical step away from endorsing the Will Wilkinson dualistic market rationing system.

Krugman and Wells note repeatedly that 20 percent of the population is responsible for 80 percent of health-care costs. But that doesn’t explain why health insurance should be different from other kinds. The small fraction of people involved in auto accidents in any year is responsible for almost all the cost of auto insurance. You insure against the risk of being in that group.

What’s different about health insurance is the opposite: Much of it isn’t insurance at all but a subsidy. The value of the subsidy is the difference between what the individual pays and what the insurance would cost in the free market. If people were buying health care or insurance with their own money, they might or might not spend too much—whatever “too much” is—but no one else would need to care if they did.

Good show!

If you can afford real insurance on a real market, go ahead and overinsure. It’s your money! If we had a real market in insurance, we’d also know who was uninsurable. Probably the 20% responsible for 80% of the costs! And if he had a real market, the absolute cash value of that 80% would be smaller, and the quality of the services the 20% falling under the care of the Federal Health Rationing Serive would be higher. (The percentage of total health expenditure due to that 20% would probably shrink, as they are pushed into less expensive services by the HRS. Indeed, in my plan, the percentage of total health expenditures due to those covered by the HRS will be the HRS budget over total annual expenditure. In my plan, legislators have to choose each year what amount is going to be, and the Rationing Service has to stretch it out to make it work the best they can.)

It is incredible to me how often this idea occurs to me, and how seldom it seems to occur to others: If there is a transfer from class A to class B, make it explicit. When you propose making an hidden transfer explicit, people often climb the wall with annoyance. Why? Because the whole point of many hidden transfers is that they are politically viable only because they are hidden. If you like the transfer, you’ll want to keep hiding it.

Hey! Maybe that’s my new favorite Constitutional amendment idea. The Explicit Transfer Amendment! Under the ETA, raising the minimum wage is unconstitutional. Levying extra taxes on business owners or consumers and transferring the money to low-income workers is not. The point is just that the transfer is obvious. If there is a political constituency that is hurt by it, they’ll be able to see that, and speak up for themselves in the political process. I think this falls out of Rawlsian principles of public justification, for what that’s worth. The Health Rationing Service is fine because the transfer from taxpayers to the poor “insurance exempt” is explicit. Our current insurance regs, on the other hand, hide the transfer. And that’s bad!

Speaking of favorite constitutional amendments, from Samwick’s commentary on the grisly miscarriage of legislative responsibility that is pension reform:

On top of those changes, companies also persuaded lawmakers to add dozens of specific measures, including a multibillion-dollar escape clause for the nation’s airlines and a special exemption for the makers of Smithfield Farms hams.

Tell me again what’s wrong with Buchanan’s generality amendment? The generality amendment plus the explicit transfer amendment would eliminate almost everything that is terrible about politics.

Health Care Fantasia

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Megan McCardle has some sane thoughts about health care. This isn’t my area, but I’ve given it some thoughts. They are not necessarily sane or feasible. But I think it is interesting to compare your inuition of what would work well in a better world with the menu of policies that actually get offered. So here’s my crazy (not Cato-approved!) plan.

  • Decartelization.

This is bigger than people understand. Without recourse to any actual data, I believe that the state’s grant of monopoly privelege to certain official certifying agencies has a lot do do with the high cost of health care. Besides creating artificial scarcity (and therefore huge rents for M.D.s), the certification cartel violates our natural liberty to cooperate. The more I think about this, the more it ticks me off. You don’t need a Ph.D. in mechanical engineering to change a muffler any more than you need a M.D. to set a broken arm. You just need to know how to change a muffler or how to set a broken arm. Here comes an arumentum ad maternum… My mom was a nurse for twenty-odd years. And my mom knew what she was doing. There is no reason she should not have been able to diagnose basic illnesses, prescribe drugs, set bones, etc. etc. No reason. At all. My sister is just starting her M.S. in nursing courses (she’s a BSN). And, of course, the AMA is trying to strictly limit what services nurse practioners can offer under the law. So, the AMA is evil! And I would think so even if it was no skin off my sister’s back. There ought to be a guy, Manny, say, who does stitches. You cut your arm and you go to Manny’s stitches joint, which flourishes because Manny is the best at stitches. Manny leaves no scar! Ever! Moreover, he’s cheaper that some guy who spend years learning about the biochemistry of the human body. What does that have to do with stitches!? Why isn’t there a Manny’s Stitches Joint! You should be able to get a degree from the University of Phoenix in knee replacements. Just knee replacements! Why can’t you?! Because the AMA is evil. M.D.s are monopolists and welfare queens, and preventing a huge infusion of high-quality low-cost health care providers from coming to market. SHAME! If anyone attempts to say that our current system resembles a “free market,” point out that in a free market you wouldn’t have to buy a massively expensive indulgence from the Church of Medicine in order to sell health services.

  • Abolish the FDA

Of course!

  • Real insurance markets!

I don’t understand what passes as “insurance.” I complained last year that social security isn’t really insurance. Well, by and large, health insurance isn’t insurance, either. I want a real, very very lightly regulated market, that charges each person based on their real expected cost of coverage. Family history, ethnicity, weight, job, what you eat, whether you smoke, whether you live in a city or in the country, excercise, etc. all goes into the actuarial hopper. Mormons should pay less for insurance. They should! Deregulate. Yes, it sucks to be an overweight black male smoking underwater welder!

  • Health Care Ideas Future Markets

A source of free, highly reliable information about the most effective treatements. If you want to know if a treatment A, which costs half as much, works as well as treatment B, check the ideas markets.

  • Google (or whomever) Diagnostic Services

“Statistical prediction rules” [pdf] generally do a better job than real doctors at diagnosis (just by curve-fitting). Enter your symptoms, and the computer will ask you a few more questions, and then will tell you what you have with greater accuracy than some jackass with a God complex who spent $200,000 to get a blessing from Johns Hopkins. A quick search of the ideas markets and open insurance company databases will provide a menu of drugs and treatments by price, probability of curing or ameliorating your symptoms, alongside a map showing where in your area these are offered with user satisfaction scores of all these establishments (“Gash on your arm? You need disinfection and stiches. Try Manny’s! Avg. 4 3/4 stars from 26,734 users”) If we had a real market in health services, it would be possible to make huge amounts of money providing people with this kind of service. Which is a good reason to have a real market in health services.

  • Big HSA

Allow people to save lots of tax exempt money that they can spend on health care, which will be a lot cheaper in a competitive market for services. If you are poor, a percentage of your negative income tax payment is automatically deposited in your HSA.

  • Force people to have a catastrophic insurance plan.

I don’t love it, but in general I think systems that make people internalize costs are better than ones that allow them to foist them off on other people. Our choice seems to be forced internalization vs. forced externalization of responsibility. So I choose the former.

OK. Now here we go into the fun stuff. If we have real, risk-sensitive insurance markets, and we’re forcing people to buy catastrophic health, like we force drivers to have collision, we’re going to end up in the following situation: a non-trivial portion of the population will not be able to afford insurance, and a non-trivial portion of the population will be uninsurable.

So, you can’t afford insurance. What then? There are two reasons you can’t: (1) You’re plain poor; (2) Your policy is super-expensive. I haven’t thought this through yet. But the rough idea is:

  • If you’re poor, the government buys you a policy in the normal cost range. If you’re not necessarily poor, but you can’t afford your policy, because you’re risky to insure, you become, from the point of view of the state, uninsurable. Or you pay the premium for the most expensive policy you can afford, and the state tops you off. It depends.

The uninsurable people are the most interesting problem. The premium for a burning house is the cost of the house. When the price of your premium equals your actual medical bills, there’s no point in having insurance. Now, remember, we’re imagining a beautiful world in which medical services are decartelized and the costs are lower, and insurance premiums reflect the real expected cost of medical services on a competive, non-monopolistic market. Our prices convey real information, which is what prices are for. Inability to qualify for insurance puts you in a new legal category: insurance exempt. If you are insurance exempt, you have two choices for financing your health care. One, pay for it yourself. Lots of people who are uninsurable will be wealthy enough to simply pay for health care out of their own pocket. Two:

  • The Federal Medical Rationing Service

You’re insurance exempt, and you can’t afford to pay for health care out of pocket. Sorry! But don’t worry, we’re the government and we’re here to help. Unfortunately, we’re the safety net, and the safety net simply is not as good as things get. Here at the rationing service, we’re clear about what it is that we do: rationing. The Rationing service is funded by annual appropriations in the general budget from Congress. Since the 2009 Balanced Budget Amendment passed, Congress can’t appropriate more than next year’s projected revenues (except with a 2/3 plurality in both houses, and an OK from more than half the state legislatures.) So what the Rationing Service has to work with is a function of (1) our budget, which is a function of political trade-offs sensitive to the size of next years projected revenues (is it more important to subsidize ethanol or give more to the Rationing Service? Choose!), and (2) the number of people falling under the aegis of the Rationing Service.

What we do here is examine your case, examine the treatment options available to you on the roiling competitive market for healthcare services, or at your nearestl HRS facility, and offer you a voucher for an amount that will buy you the best treatment you can get relative to the Rationing Service’s budget constraints and principles of prioritization. With the voucher you will be given a menu of qualified treatments. We will include on the menu some qualified treatments that cost more than the voucher. If you are able raise funds from other sources (family, church bake sale, jar at the local McDonald’s), then you should feel free add those funds to your voucher to by a pricier approved treatment. You will not get a voucher for the most expensive treatment. But because there is a real market, you also will not have to wait in line (unless you choose to use a HRS facility). And you can use Google Diagnostic Services yourself (which, to tell you the truth, is mostly what we do), and you will often be able to find excellent qualified treatment for less than your voucher. You are free to put the savings in your HSA.

Rationing is less of a burden in the context of a real market. Our limited funds go a lot further. And you will not feel as bad not getting the very latest, most expensive treatments because the market will generate information that will make it quite clear just how little additional value you would get for the extra cost. You don’t feel like a second class citizen driving a ten year old Honda when it still looks pretty good and can get you from A to B just as well, and in almost as much comfort, as this year’s Mercedes. We give you vouchers for the health equivalent of ten year old Hondas. But they work. The crazy thing about the old system is that you couldn’t buy the health equivalent of a ten year old honda even if you wanted to! New Mercedes or nothing! How foolish we were then. There would simply be no way we would have a big enough budget to help all the insurance exempt in a world of nothing but new Mercedes. Either people would die waiting in line, or the debt would detroy us! Here at the HRS, we’re proud to part of a system that is both high-quality and sustainable.

And that’s pretty much it! For most of the population, this system gives them all the blessings of genuine market: high quality at low prices, an insurance market with prices that convey real information about risk (providing a real incentive to become healthier in order to decrease your risk and premiums), plentiful cheap drugs (your insurance company will require you to tell them when you start taking a drug, since drugs could make you sick, and the way they adjust your premium will tell you whether it is safe to take it), cheap, extremely accurate diagnostic and treatment information. And for the rest of the population, the market makes a rationing system in which the uninsurable receive quality care possible. Our problem with health care is, at one level, the same as our problem with education. We don’t have enough imagination to see that a system that unleashes the power of imagination would have a huge payoff. It is “too important” to be “left to the market.” So important that we leave it to a system sure to fail instead. Oh well. May the enlightenment one day arrive.

Equality of Opportunity is the Central Principle of Distributive Justice

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I understand that I am supposed to be arguing the opposite from Will’s position. This is in some sense impossible, because Will is a sophist who refuses to acknowledge his sophistry, and who therefore claims to embrace propositions that he in fact rejects. In the present case, Will might say that he agrees with the proposition if only you grant him his favored interpretation of “equal,” “opportunity,” “distribution,” and “justice.” And then we shall be astonished to see the Sun rising in the West.

That said, we do need to interpret these terms. What does it mean for opportunities to be equal?

Our interest in equality of opportunity rests on a shared moral intuition of general opportunities that must be open to us in order to have the prospects of a good and meaningul life. We don’t mean equality of opportunity to join in ecstatic union with Jessica Alba. But we might mean equality of opportunity to join in ecstatic union with someone or other. In my way of thinking, the opportunities with moral weight are opportunities to realize basic human capacities, potentialities, or “capabilities.” This is an approach associated with Amartya Sen and Martha Nussbaum.

Before I say more, let me say that on most days I agree with Will that equality of opportunity to compete for the nth position in the income distribution is incoherent. It makes no more sense than does equality of opportunity to compete for a starting position on the US men’s Olympic team. We all begin with different potentialities which are a function of our genetic endowments. Simply in virtue of my lineage I never had an opportunity to be competitive in basketball at a high level. No matter how many resources had been devoted to the development of my basketball capacities, my relative position in the distribution of basketball skill would never rise much above average. The Olympic team is reserved for people at a certain exalted level in the distribution of skill. And that level is closed to me due to the constraints of my physical constitution. There are opportunities that we do not have in virtue of what we are, and they cannot be equalized.

Likewise, the nth position in the income distribution might be closed to me due to irremediable aspects of the physical order. It therefore makes no sense to worry about equal opportunity to achieve the nth position. What makes sense is equal opportunity to develop the capacities that in large part account for your position. If the best I could do, if my capacities are fully realized, is position n-1,000,000, then that’s the best I can do. This gets us close to our principle of equal opportunity.

To be precise and convincing, however, it is necessary to point out that it remains highly miseading to speak of competition for positions along various dimensions, especially the dimension of income. For our position in the income distribution is not much up to us. It is largely a function of demand in the labor market. (It is partly up to us insofar as our choices take the labor market into account. The choice between lawyer and professor is a choice, among other things, between different likely ranges of future income. Professors who complain that they do not make as much as lawyers are not complaining about their access to higher incomes–they could have been lawyers, but chose not to be. They are complaining about the tradeoffs defined by the interaction of their preferences and demand in the labor market.) In a society with our contingent history, in which Naismith happened to invent basketball, there exists a labor market which rewards some individuals who in every other possible labor market in which basketball did not exist would lack the capacity to reach the median position. That is to say, an individual’s top possible position relative to their capacities can vary by orders of magnitude based on a single other individual’s discoveries, inventions, or initiatives. This complicates matters a great deal. My relative position given ideally realized capacities may be a matter of whether others do or do not realize theirs, or a matter of the degree to which they do.

The interdepence of the utility of capacities pushes us to recognize the primacy of the most general and necessary capacities. I will not make a list here. But I have in mind those capacities the development of which is necessary to effectively pursue one’s good, whatever that may be. Call these primary capacities.

We edge closer. We must all have the equal opportunity to realize our primary capacities. But realize to what extent? I think that the differential realization of capacities is not something subject to institutional manipulation. I don’t think we can provide equal opportunity to maximally realize our capacities. The attempt to do so would hurt more than help, so we should be content with realization that is adequate. Adequate to what end? Adequate to enable each person to be a full participant in productive cooperation and to achieve their reasonable, meaningful ends.

So, here’s our principle:

A just society will distribute opportunities so that each person has an equal opportunity to adequately realize their primary capacities.

Our society manifestly fails this principle. Now, my problem was not to lay out a set of policies that I believe will rectify this failure. Let me just say something brief about how we would justify the reallocation of wealth in order to ensure that our society satisfies the principle of equal opportunity.

As I mentioned earlier, the utility of capacities is radically interdependent. The economic value of one person’s realized capacities may be a function of the realization of other person’s capacities. Now, in a generally cooperative context, the development of one person’s capacities enhances the asbolute value (but not necessarily the relative value) of other persons’ capacities. Which is just to say, a person’s realized capacities generally produces positive externalities. Whether they do in a specific case is a question of how a person’s capacities are are expressed through their agency. But in a cooperative context, the incentives will create a general tendency for people to choose to express their capacities in productive ways.

Now, people who either would be participants, or would be more productive participants, in the network of cooperation if only their capacities were adequately realized, represent lost value to the network of cooperation. The realization of this pool of capacities is a classic public good. We would each be better off if they were realized, but we will individually underinvest in them. If there is an amount that we could reallocate to the development of primary capacities that is smaller than the value that would thereby be created by the productive expression of those capacities in the cooperative network, then we should reallocate it. Because the value of these adequately realized capacities is likely very high, we should be willing to reallocate a very large amount to the task. A subsidy that will produce benefits greater than the cost of the subsidy is smart and just, especially if the subsidy is funded, and its benefits are distributed, in a fair way, such that each person can see herself as a winner in the overall transaction.

In order to establish that equality of opportunity as I have characterized it is the central principle of distributive justice, I would need to say more about why a number of other principles are not. But I think I have said enough to indicate why I might think that equality of actual material holdings, or equality of opportunity to positions in the wealth distribution, or mere formal equality as citizens with regard to the laws, are unattractive alternatives.

I have gone on too long. I’m not comfortable in this format. However, I may be willing to address questions in the comments if they are well-framed, and politely addressed. And, since I’ve framed an argument that is designed to be appealing to Will, I wonder what he thinks is wrong with it, if anything. Perhaps some readers will wish to conjecture.

The Rawls Letter

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Via Chris Bertram, I find this striking passage in a letter from John Rawls to Phillipe van Parijs:

It seems to me that much would be lost if the European union became a federal union like the United States. Here there is a common language of political discourse and a ready willingness to move from one state to another. Isn’t there a conflict between a large free and open market comprising all of Europe and the individual nation-states, each with its separate political and social institutions, historical memories, and forms and traditions of social policy. Surely these are great value to the citizens of these countries and give meaning to their life. The large open market including all of Europe is aim of the large banks and the capitalist business class whose main goal is simply larger profit. The idea of economic growth, onwards and upwards, with no specific end in sight, fits this class perfectly. If they speak about distribution, it is [al]most always in terms of trickle down. The long–term result of this — which we already have in the United States — is a civil society awash in a meaningless consumerism of some kind. I can’t believe that that is what you want.

I was aware that this was Rawls’s view, but it’s really something to see him say it. I agree with Rawls here about the meaningfulness of the separate cultural forms contained within the various European nation states. But it strikes me as woefully blinkered to see an open European market as primarly in the interests of, yes, bankers!

Although Rawls’s philosophy is at bottom based in the possiblity of cooperation, I don’t think he ever became reconciled to the idea that the political structure of the nation state never was, and never will be, the ultimate framework for cooperation. Free and equal people with diverse ends have reason to cooperate because cooperation advances each party’s ends. But the people with whom there are possible (morally good) gains from cooperation will never inhabit a single nation state with a single structure of institution. The ultimate institutions of cooperation are broader than states, and policies that decrease the barriers to cooperation set in place by states, such as policies creating a common market over a region of several states, strikes me as a straightforward moral advance. There simply is no liberal justification for prohbiting two people standing on opposite sides of a line from cooperating. Say that liberalism is impossible. Or say, trying not to sound too surreal, that only nationalist social democracy can achieve the goals of liberalism. But don’t say that liberalism says that two free and equal people standing on opposite sides of a line are not free to make each other’s lives better.

The source of so much of Rawls’s trouble is that he insists on putting his second principle of justice first, even though he knows that it is second for a reason. When you fetishize the second principle, it become hard to see how justice is possible without a single basic structure that contains all the parties to cooperation, and which ensures that the surplus of cooperation is distributed according the criterion of the second principle. But once you acknowledge that cooperation across state borders is just a fact of the world, generated by our moral nature, akin to the fact of pluralism, you have to accept that a minimally adequate theory of justice requires us to understand the interaction of state institutions, and the ways in which they facilitate and hamper cooperation across their borders are subjects of justice. Well-ordered cooperative endeavors for mutual advantage do not stop at political lines.

And this is annoying to the second principle-firsters, for there is no common jurisdiction, or common set of political institutions, in cases of international cooperative that can determine the distribution of the surplus in a principled way. But the fact of international cooperation is a fact—a morally good fact—and if your ostensibly liberal theory of justice has a hard time accomodating it—if your theory really requires a closed society assumption in order to work—then it is not really a liberal theory at all. Is it?
Rawls’s last point about “meaningless consumerism” is fascinating, in a puzzling way. What is the point? Americans are interested in distribution only in a trickle down way, and so Americans have, what? too much stuff?

Of course, I’ve never understood the beef against “trickle down” other than that it is sort of a bad metaphor. The idea is that people who most boost productivity, or reduce the costs of cooperation, can rarely internalize even a small fraction of the benefits they have generated, and so they make everyone else wealthier as a side-effect, whether or not they intended to (or intended not to). A basic structure that contains the incentives for people to undertake activities that produce huge positive external effects is, well, likely to be pretty much mandatory from the perspective of the second principle. You’d think.

My guess about what is going on here is that Rawls ‘s idea of basic structure includes, in addition to some distribution by coercive state reallocation, things like regulations on marketing and advertising and heavy restrictions on political speech pertaining to campaigns, etc., and he thinks that these things, in addition to positively affecting the ultimate distribution of primary goods, would have a salutary effect on the preferences of citizens and the character civil society. I think much of this is just contemporary academic liberal faith, what passes for wisdom in places like Cambridge. However, it is exceedingly difficult to see how this kind of thing even passes the sniff-test of neutrality with regard to the variety of reasonable comprehensive conceptions. And there we have the ever-fertile Paradox of Rawls. He gives us a powerful set of intellectual instruments with which to test the worthiness of our institutions, and then offers up institutions that fail his own tests.

On the shoulders of giants…

Hello from Liam James

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Greetings. Thanks to Will for inviting me to comment on his blog. I believe this was an unwise choice on Will’s part, since open disputation is more often confusing than clarifying, and I can’t see his position looking better afterward. But that’s Will. A condition of my participation here is that I am assigned topics that I know will be of interest to readers. I cannot quite grasp the blogger’s motivation to assail strangers with their predilictions and stray thoughts, so I’ll stick to doing requests. Since Will is so often ridiculously wrong, demand should be high.

My assigned topic is:

Equality of opportunity is the central principle of distributive justice.

Did you think I was going explain why right now? Well, I won’t; sorry. I’m busy today arguing with Will offline about positional externalities, which he bullheadedly refuses to comprehend. But soon.

Putting More on the Table Brings People With More to the Table

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If you haven’t been following this month’s Cato Unbound discussion, then what are you waiting for?! You’ve got time to catch up now before the free-for-all blog discussion kicks off.

Jacob Hacker’s essay is very good, I thought. But it sharpened my longstanding bafflement about what exactly it is that (non-libertarian) egalitarians think they are up to. Hacker argues that one of the most troubling things about economic inequality is its effect on the political process. The democratic ideal is equality of voice—equal say in the political process that determines our common terms of association. But the wealthy have the means to buy a louder voice and a disproportionate say in process.

So what do we do? Hacker here does not say. But I assume that he would like to see higher taxes on people in the upper income brackets, for both equality of opportunity and equalization of voice reasons. Is this a good idea? This is where I become baffled. Consider Hacker’s reply here to a point of Schmidtz’s:

“When we insist on creating enough power to beat the best players in zero-sum games,” Schmidtz claims, “it is just a matter of time before the best players capture the very power we created in the hope of using it against them.” The best (or at least the richest) players do seem to have captured power in American politics, but it is rather perverse to suggest that this is the fault of egalitarianism. Instead, what we have here is a classic story of cumulative advantages—people who have more are being heard more by political leaders, and what government does reflects this imbalance.

Is it in fact perverse to suggest that this could be a fault of egalitarianism? I think it is in fact what anyone sensitive to the power of incentives would predict from an increase in the power of the government to redistribute wealth.

Imagine you are wealthy. Now, ask yourself: If I have more at stake in what the government chooses to do, will I be less motivated to influence that choice? Of course not.

I will be more motivated. Putting more power and money on the table for the government to dispose of is a surefire way to ensure that the people with the most money and power to lose will come to the table to make sure that they don’t lose it. Moving money around is a zero-sum game, zero-sum games are games of conflict, and the strongest players win games of conflict. The more motivated you are (I’m talking to you “progressives”) to make the strongest players weaker, the more motivated the strongest players will be to stop you. And they will win, because they are the strongest.

Suppose in round 1 the government is seen as having no power to redistribute income. So very few people devote resources to controlling the government, since government has so little to give. Suppose, though, that a bunch of altruistic social democrats who would like the government to do more downward redistribution take over (so little opposition!). In round 2 the social democrats increase taxes and redistribute the money downward. Social Justice! Yay! But in round 3, people who had their money confiscated will surely notice, and many will be motivated to populate the government with people who will give them their money back. So, suppose in round 4 the government is now populated by tax cutters, and they cut taxes, and cut the redistributive programs. Now, all the people who were benefitting from redistribution, who have come to depend upon it, will say, hey! But, lo and behold, the people with the most money find it easier to control the political process in each subsequent round. Any round that decreases the resources the wealthy have to spend on voice will only increase their motivation to spend their remaining resources on voice in the next round. They may, for a round or two, have a smaller relative advantage, but they will be more motivated to use it to full effect. The key point is: the social democrats’ egalitarian motivation kicked off the process that led to the consolidation of advantages by the powerful.

The straightforward implication is that you can’t reliably equalize wealth or voice by putting more money and power on the table. Putting money and power on the table further biases the process in favor of people with the most money and power. And, worse, putting money and power on the table provides a compelling incentive to invest in conflict instead of cooperation. This is doubly bad because over the long run the strongest win all the gains from conflict. The clearly optimal truce is to prohibit money and power from coming on the table, and to provide the best possible incentives to invest in cooperation. Even if the strongest take the larger share of the surplus from cooperation, the weakest at least get a share, unlike under conditions of conflict.

This is what I took Dave to be getting at. And this is perfectly consistent with Hacker’s “classic story of cumulative advantages.” The more you try to use the state to take power away from the rich, the more you will lose. Then the rich will have the power that they had, plus the power of the state that you were trying to use against them.

I think liberal-democratic egalitarians are in a bind. I think Marx(ists) saw the game structure here. The only way to win a game of conflict against the stronger is to create a yet stronger coalition of the weaker through the sheer power of numbers. And then, basically, gang up to eliminate the strongest and redistribute their stuff. Of course, this doesn’t work, either. Because the coalition of the weaker–”the Party”–simply becomes a vehicle for predation for a new class of the strongest. But if we’ve gotten to this point, then the cooperative game has been almost entirely destroyed, and all that’s left is conflict and predation, and you get the most horrifyingly inegalitarian result imaginable.

OK. So we don’t want that. So what do we do? Use liberal democratic means? I think that lands you right into the scenario I laid out above: the more money and power on the table, the more the powerful will dominate the table, and so you can’t equalize money and power by trying to put more of it on the table. The only egalitarian solution in sight is: take money and power off the table.

[What do you think about this month's Cato Unbound essays? If you write a sharp blog post about one of them, we may publish it alongside our invited contributors. Here's Chris Bertram and Harry Brighouse's contribution from Crooked Timber. Our issues are intended as a launching pad for broader conversation, not a dais from which the elect instruct us. So dig in!]

Opposite Day

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I really like Tyler’s Tyrone posts, and so in the spirit of unoriginality, I propose to do a few in the same vein. My friend Liam will happily defend any (non-offensive) position that I am known to reject. The first subject mentioned three times wins.

(By the way, if I recall, the literature does not show that defending the “opposite” position makes you more likely to think you could be wrong. What makes you second-guess yourself is when you have to point out and explain the weaknesses in the position you do hold. So if the game was “gore your own ox” then we would take time to carefully explain the holes in our favorite theories, which is different from defending the contrary.)

Self-Deception and Self-Construction

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A few years back, I had the opportunity to help organize a conference on self-deception with Tyler Cowen and Robin Hanson at Mercatus. I’m now at a Liberty Fund conference in St. Louis on “Liberty, Responsibility, and Lying.” All our readings have been about prohibitions and justifications for lies, deception, etc. The idea that self-deception can drive other-deception has come up a number of times, and this brought me back to the self-deception conference, and some thoughts I’ve subsequently had about it.

Tyler & Robin have a paper that says, very roughly, if we were rational, then we would be Bayesian updaters. If we were Bayesians, every conversation with someone who disagrees with us about some proposition, but who has access to equally good information, and is able to process information at least us well as us, and who is therefore at least as likely as us to be right, ought to lead us to revise downward the probability of truth we assign to the proposition in question. In which case, we would end up changing our minds a lot. (If Tyler or Robin, say, who are each way smarter than I am, and have each forgotten more about economics than I have ever learned, disagrees with me about a proposition in economics, I certainly ought to take that as evidence that I am wrong.) But we don’t really change our minds that much. Instead, we’re fairly instransigent. And sometimes we even revise our probabilities upwards in the face of contrary evidence. So, they argue, we must be pretty self-deceived about the relationship between our beliefs and the truth.

I’ve long been intrigued by this argument. And I’ve actually taken it to heart, to some extent. I’m convinced that I do overestimate the probability that my beliefs are true, and I’m convinced that I ought to take other people’s comparative epistemic advantage more seriously than I am inclined to. (And you too.) And I think this has made me a marginally better person. But I’m not convinced that our failure to be good Bayesians implies self-deception so much as self-construction.

In The Mind’s Past, Michael Gazzaniga argues forcefully that the function of part of the mind/brain (he calls that part the “interpreter”) is simply to make stuff up, to confabulate, in order to create narrative coherence in the stream of consciousness. There is a sense in which the self just is the narrative. But the narrative is constructed in part by confabulation on the part of the interpreter. There is a temptation, but I think it would be a category error, to say that the self is a “fiction.” Compared to what? A really real self? The point is that there is no such thing. No. Rather, the point is that the really real self, the only kind of self there is, is a narrative construction that is built by the mind/brain with little concern for veridical representation. The truth about us is that we, our selves, are streams of truth mixed with untruth. And that is just the way it is.

Now, this is narrative coherence at a very basic experiential level. I think we need it at higher levels, too. Agency requires it. If we’re going to be active units that can choose ends, make plans, enact those plans, and coordinate with others in a way that benefits us, we need a relatively stable self-conception. If our plans, say, are a partial function of our beliefs, but we are willing to change our beliefs every time we confront somebody who knows more than us, then we will keep changing plans. But if we keep changing plans, we will never enact one. But we need to enact plans or we will cease to exist as active units. And, coordination . . . if I come home on Tuesday and announce to my wife that I am now a Democrat, and then come home on Wednesday and announce I am now a Seventh Day Adventist, and then come home on Thursday that I am now an ethical vegetarian and cannot eat the meatloaf, well, my wife isn’t going to be my wife for long. If we were good Bayesians, we would be schizophrenic, we would disintegrate, the self would dissolve. Maybe you reach Nirvana when you destroy the self and become a true Bayesian. But you are not self-deceived in virtue of having a self.

We often associate integrity with being true to ourselves. But when ourselves are, in some sense, false, integrity is. . . what? Integrity, self-coherence, requires . . . falsehood. To be true to the self is to endorse the fabric of truth embroidered with untruth that is the self.

We all self-mythologize and confabulate to varying degrees. People with delusions of grandeur and convictions of surpassing personal exceptionalism may be annoying to the extreme. But there is no escape from some self-constituting delusion. (In my experience, some of the people with the grandest delusions are those living out a narrative of unflinching commitment to authenticity and truth. ) If selves are constructed in part by untruth, it raises vexing questions about our duties to the people we love. (And to ourselves, if we love ourselves.)

When are we required by love or the obligations of friendship to puncture their illusions and press them to center their selves more firmly in truth or more forgiveable fantasy? When we are openly disturbed by their illusions, can we be sure our complaints amount to more than a request that they exchange theirs for ours? When are we required to pass over benign self-constituting myths in silence? Are we required to reinforce and positively encourage them when self-constituting myths are a source of what we admire and love, even if we do not ourselves believe them? Are we required to amend our narratives so that we come to believe them, the better to reinforce and support the best in those we love?

I suspect that the answer to the last two questions is “yes.” And that makes me exceedingly uncomfortable. Because I like to think I have an unflinching commitment to authenticity and truth. But the present deliberation is in part a process of reconsidering the meaning of authenticity and the meaning of truth with regard to the self. So what is it exactly I am committed to? The standards have readjusted. Though a distinction between good self-constitution and bad self-constitution remains, I am wary of allowing too much and acquiescing to what is self-indulgent, rotten, and ignoble. So, we must go forward with wariness, and, let’s hope, good faith.

Meet me in St. Louis!

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If you’re in St. Louis this evening, I’ll be giving a talk sponsored by IHS and the Show-Me Institute (Show me the freedom! That’s what!) on “Identity and the Psychology of Persuasion,” a version of the talk I’ve delivered the last couple years for Cato University.

Here’s the deal:

Although armed with impressive logical and empirical arguments, you have probably discovered that your liberal and conservative friends aren’t immediately persuaded by your devastating dialectical acumen. No matter how many times you explain the economics and philosophy of individual rights and free markets, many of your friends and family remain unconvinced.

Why do some people seem impervious to logical argument? You’re invited to an event in the St. Louis area entitled “Identity and the Psychology of Persuasion.” Will Wilkinson, a friend of ours and a policy analyst at the Cato Institute, will draw together recent research in social and cognitive psychology that can help you become more effective at persuasion.

Will argues that political and moral beliefs aren’t just an embellishment tacked on to our personalities. We tend to see our beliefs as expressing or constituting our sense of who we are. We worry that if we change our minds, we’ll be selling ourselves out. That’s one reason why it is hard to argue somebody into a new position, even if you are right. Will’s talk touches on a wide range of psychological studies dealing with, among other things, religious conversions, coalitional thinking, personality traits, and the importance  of metaphor in respectfully and effectively navigating issues of identity when trying to persuade.

The event is co-sponsored by the Show-Me Institute, a new free-market think tank based in the St. Louis area. In addition to meeting Will and hearing his talk, you’ll have the opportunity to meet SMI staff members and learn about its programs. If you enjoyed participating in IHS’s programs, this is your chance to get involved in a sister organization in your home town. You’ll get a free glass of Schlafly’s beer, courtesy of IHS.

The event will be held at the Schlafly Brewery and Tap Room, located at 2100 Locust Street, at 7:30 PM on Wednesday March 8. More information about the location, including a map, is available here:

http://www.schlafly.com/brewpubs.shtml

Thanks for your past participation in IHS programs, and I hope you’ll join Will and the Show-Me Institute at the Tap Room on March 8.

If you’d like to attend please RSVP to Tim Lee: tlee -at- showmeinstitute -dot- org

And after that, I’ll be at a Liberty Fund conference on “Freedom, Responsibility, and Lying.” The readings have been fascinating, and would have been useful when preparing my paper on Social Security as embodying an illiberal “noble lie.”

Bad Marriages

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As I’ve been thinking through a number of different issues, I keep arriving at the utter stupidity of two contingent, harmful linkages in our social system. Both linkages should be dissolved immediately.

(1) The house-school linkage.

(2) The work-health care linkage.

Both of these connections are an accident of history, make almost no sense whatsoever, and make it very very difficult for people to create unique modes of living that suit their individual situation. If I could push a button and divorce houses from schools and work from health care, I would do it. I would prefer generous federal-level education vouchers, and generous federal-level universal insurance coverage over the status-quo. And I don’t like either of those ideas very much.

(I will die in the last ditch, however, to prevent further government involvement in the provision, as opposed to the financing, of education and health care. Whether you can get redistributive taxpayer financing without terrible government provision and control is a question for the ages. Other things equal, you should be opposed to a policy roughly in proportion to the degree that it interferes with price signals.)

Are there any other bad policy marriages that need to be annulled?

David Schmidtz on Inequality at Cato Unbound

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This month’s Cato Unbound ought to be catnip for Fly Bottle readers. Dave Schmidtz kicks off this month’s issue with a great little essay about “When Inequality Matters.” It draws from his new book, Elements of Justice, which is, to my mind, the best book in libertarian political thought since Nozick, and truly deserves wide attention.

Dave is one of my biggest philosophical (and personal) influences, and I can’t help but think the world would be better off if he influenced more people’s thinking. I hope you’ll take a look at Dave’s essay, buy his book, and if you have a blog, tell us what you think. Peter Singer will comment on Wednesday, Cato’s Tom Palmer on Friday, and Yale’s Jacob Hacker next Monday. Should be good stuff.

Institutions, Boundaries, and Useless Statistics

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Don Boudreaux has been doing the Lord’s work by pointing out that economies are not bounded by political borders. I’ve made the point before that the better a state’s institutions are, the less the state level is the appropriate final unit of analysis. Good institutions within a state’s borders are precisely what enables the people under the jurisdiction of a state to create complex networks of economic, political, and moral cooperation with people outside that jurisdiction. Which is a way of saying the good institutions in here increase our interdependence with people and institutions out there.

Nothing has brought this point home to me more than the lovely, truthy, graphics accompanying Richard Florida’s Thomas Friedman takedown “The World is Spiky” [pdf] in the October 2005 Atlantic.

Scientific CitationsPatents

[click for full-size]

What is manifest in the pictures is that U.S. institutions, in addition to producing more wealth and using more energy, produce scientific discoveries at a rate far outpacing the rest of the world. Just glancing at picture, it appears that MIT and Cal Tech combined produce almost as much scientific discovery as all of of Europe, which in turn produces more science than the rest of the world. The market economies of the Pacific Rim produce a trickle of science, but produce on overwhelming proportion of the world’s tehnological innovation as measured by patents.

Here is one of these pictures’ 1000 stories. American institutions confer a fantastically huge positive externality, in terms of knowledge, to the rest of the world. Science is a root cause of economic growth. New knowledge enables new technologies, which enable increases in the productivity of capital, which enable growth. And good institutions are the root cause of science. If the U.S. produces most of the world’s knowledge and Asia produces most of the world’s technology, then the institutions that underpin epistemic and technical advance are chiefly responsible for growth in states that have different institutions, but which are able to import knowledge. Which is why it is nonsense to compare, say, American and French GDP growth, as if those growth rates were a function of American and French institutions in isolation from one another. Because institutions are not isolated. The interesting question is: what would French GDP growth have looked like if the U.S. had produced, say, only 10% of its actual scientific output? If the Japanese had made only a 10% of their technological advances? My sense is that French growth would not have looked good. (NB: I have picked the French because they are very good in science and tech, but even so, the point is, others are much better.)
And there’s the point. French institutions are good enough to take advantage of American science and Asian technology, and so can remain stable because they are plugged into others’ comparative advantages, and can power their system (literally: the French did not think up the nuclear reactor) on the uninternalizable positive externalities of other systems of institutions. The flip side, though, is that it would be a tragedy for the French, and the world, if American institutions produced less science. It is not just that the U.S. would be worse off if its institutions were more like France. France would be worse off if U.S. institutions were more like France.