Monthly Archives: September 2009

Thomas Friedman's New Math of Democracy

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Thomas Friedman’s New York Times column today would be astonishing in its incoherence if only Friedman hadn’t long ago sapped us of our ability to be astonished by his incoherence. Like many capital-’d’ Democrats, Friedman has soured on democracy for failing to deliver on his policy wish list.

Watching both the health care and climate/energy debates in Congress, it is hard not to draw the following conclusion: There is only one thing worse than one-party autocracy, and that is one-party democracy, which is what we have in America today.

Why does Friedman say the United States has one-party democracy? Because the Republican Party is effectively opposing the Democratic Party’s agenda! Not even kidding. Get this:

The fact is, on both the energy/climate legislation and health care legislation, only the Democrats are really playing. With a few notable exceptions, the Republican Party is standing, arms folded and saying “no.” Many of them just want President Obama to fail. Such a waste. Mr. Obama is not a socialist; he’s a centrist. But if he’s forced to depend entirely on his own party to pass legislation, he will be whipsawed by its different factions.

Only the Democrats are really playing! You might think that would mean they can do whatever they darn well please. But no! The Democrats can’t do anything! Because the other party‘s opposition is so effective! So it’s exactly as if there’s just one party: nothing gets done!

My hunch is that the Times’ editors see Friedman aiming the gun at his foot, but watching a man stupid enough to actually pull the trigger is so fun they hate to intervene. That or they’re trying to explode the myth of American meritocracy.

So where were we? Oh, yes: one-party democracy is aggravating because sometimes one party can’t do what it wants because the other party gets in the way. Sooo frustrating!!! Why have democracy at all when all you end up with is a single party stymied by the other one! And so it is that Friedman comes to wax romantic about communist central planning:

One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. It is not an accident that China is committed to overtaking us in electric cars, solar power, energy efficiency, batteries, nuclear power and wind power.

Nikita Kruschev, the enlightened leader of a now-defunct one-party autocracy, was also committed to overtaking the United States in technology and so much more. “We will bury you” is how he put it. At the time, more than a few left-leaning American opinionmakers suspected he was right. After all, how can inefficiently squabbling democracies possibly keep pace with undivided regimes wholly devoted to scientifically centrally planning their way into the brighter, better future? And that, children, is why we speak Russian today.

[Cross-posted from Cato@Liberty]

Flaws and Frictions

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I was pretty impressed with much of Krugman’s NYT Magazine magnum opus. Macro is a mess. Now, this isn’t what Krugman was saying, but I think his account of the disagreements on fundamental questions exposes macro as a proto-science at best.

Economics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system. If the profession is to redeem itself, it will have to reconcile itself to a less alluring vision — that of a market economy that has many virtues but that is also shot through with flaws and frictions. The good news is that we don’t have to start from scratch. Even during the heyday of perfect-market economics, there was a lot of work done on the ways in which the real economy deviated from the theoretical ideal. What’s probably going to happen now — in fact, it’s already happening — is that flaws-and-frictions economics will move from the periphery of economic analysis to its center.

There’s already a fairly well developed example of the kind of economics I have in mind: the school of thought known as behavioral finance.

One might have thought Krugman was going to do something like acknowledge the immensely important point, associated with economists such as Ronald Coase and Douglass North, that market institutions in which “frictions” or transactions costs are relatively low are the exception rather than the rule. Markets are not only not frictionless, frictions generally keep markets from getting off the ground at all. When frictions are managed sufficiently to get markets up and going, that’s because they are embodied in a complexly interlocking set of institutions and organizations which make this possible. A scientific economics might seek to explain how it is that embodied markets achieve otherwise impossible feats of social coordination.

The “flaw” part of “flaws and frictions” is a little loaded. It’s an annoying habit of economists to hold on to homo economicus as a standard for rationality even after they have conceded that homo economicus is a more or less useless over-idealization. That we don’t live up the standard of more or less useless over-idealizations obviously does not imply that we are somehow defective. Be that as it may, one might have thought the recognition that a useless over-idealization of rationality does not apply to us might lead one toward a more sophisticated idea of the way minds and markets work together. There are, for example, the profound Hayekian points that individuals are computationally bounded, that expertise is local, that markets enable coordination by conveying otherwise inaccessible information, that epistemic and practical norms are both cause and effect of institutional structure, etc. Maybe we could look at experimental work, such as Vernon Smith’s, that explores how real people operate in different kinds of market structures.

It’s not like Hayek, Coase, North, and Smith don’t have Nobel prizes! But Krugman ignores the best of existing “flaws and frictions” economics and jumps straight to “behavioral finance,” which I’m fairly sure is the same old shit Krugman is complaining about — elegant models of counterfactual worlds — with ad hoc emendations to improve fit with the history the actual world.

Krugman should go further, but he won’t. He should say that beginning without “flaws and frictions” — assuming at the start unbounded perfectly rational agents and zero transactions costs — has all the virtues of theft over honest labor. An economics based on those assumption is ipso facto unscientific. The same goes for ad hoc variations on these assumptions. What sciences do is explain. (Sorry Milton.) And scientific explanation is largely a matter of detailing the causal mechanisms underpinning observed regularities.

“Freshwater” economics is not a science. It is a sometimes illuminating exercise in modeling counterfactual worlds. Insofar as “saltwater” economics recognizes that the need for a better account of human psychology and transactions costs in embodied institutions, it is better. But, so far, it isn’t. So far, “behavioral” macro is mere aspiration. It’s not something anyone is actually doing in a systematic way.

Maybe the most important conclusion I drew from Krugman’s piece is the politics of the freshwater/saltwater divide is complete nonsense. To seriously acknowledge “flaws and frictions” is to acknowledge that some institutions create friction while others reduce it; that some institutions enhance the salience of certain “flaws” while others work around them; etc. Having recently read a bunch of “Keynes was right” pieces, it seems pretty clear that lots of left-leaning economists are mistaking flawlessness and frictionlessness as necessary premises in the argument for limited government intervention in market institutions. But the upshot of flaws and frictions could very well be that we shouldn’t expect very much from government intervention. It seems pretty clear to me that Keynes’ characterization of the role of not-exactly-rational “animal spirits” in recessions is a very small part of an adequate general account of the way the quirks of human psychology tend to scale up to the macro level. The inference from flaws and frictions to Keynesian technocracy tends to be embarrassingly hasty.

The fact is, macro isn’t close to resembling a real science. (“The economy,” nationalistically construed, isn’t even close to resembling a subject of scientific investigation!) But we can’t count on elite economists to admit it, since their claim to authority on matters of public policy stands or falls with their claim to scientific expertise.

The Tragic Flute

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I found this little thought experiment, inserted by a Forbes editor into an interview with Amartya Sen, pretty peculiar.

[Note: In the book, Sen describes a problem of divergent views on justice in which you have one flute and three children who want it. One child wants the flute because she knows how to play it, the second one wants it because he is poor and doesn't have toys, and the third one says she made the flute, so she should get it. Who do you give it to?]

This is no knock against Sen, since there’s probably more context in the book. But this is not really such a puzzling question, is it? The correct answer is: It all depends on how “you” ended up with the flute!

Is the flute yours because you provided the materials (which were yours) and paid the kid who made it? If so, you can give it to anyone you want, or you can keep it. It’s yours! Did you steal it from the kid who made it? Then you should give it to the kid who made it. It’s hers! You’ve got no right to redistribute her flute.

Anyway, I find this thought experiment, and the not uncommon practice of assuming away the relevance of property rights when considering questions of distributive justice, confusing. A settled scheme of property rights is the main solution to the problem of distributive justice. As Hume said:

No one can doubt, that the convention for the distinction of property, and for the stability of possession, is of all circumstances the most necessary to the establishment of human society, and that after the agreement for the fixing and observing of this rule, there remains little or nothing to be done towards settling a perfect harmony and concord.

Of course, ingrained intuitions about equality, reciprocity, need, desert etc. will tend to shape this most necessary convention as it develops over time. One of the things we already know before coming to questions about who should get a flute is that things like flutes don’t grow on trees. Somebody has to make them. And the production of valuable goods, like flutes, tends to take place within a stable scheme of property. It’s sort of silly to drop that context and ask who “you” should give the flute to. If the conditions under which flutes are produced is in already place, then the answer about who should get it is likely already settled.

Anyway, Sen’s point no doubt was just that if you’re trying to do the best you can in giving away your rightful possessions, considerations of desert (e.g., both “I made it” and “I can best use it”), need, and fairness (e.g., “I don’t have ANY toys!”) are definitely relevant, but it’s not clear how to weigh them against one another.

What I’d add is that because the relative importance of considerations such as desert, equality, need, reciprocity, etc. tends to be indeterminate in the abstract, we need a system of property to peacefully settle particular distributional questions. Stable property conventions will tend to have evolved over time in a way that has taken the various elements of justice into account. If they didn’t, they’d likely lead to conflict and wouldn’t be stable. But we shouldn’t be surprised that the aggregate pattern of holdings that emerges from cooperation and exchange according to a just scheme of property rights will fail to resemble a counterfactual pattern determined solely by considerations of desert, or of equality, or of need.

Update: Also, I like what Sen says at the end of the interview:

The idea of perfect justice drives to a mistaken route. If you believe that any judgment has to be examined through public agreement, reasoned agreement, it’s my submission that

a) We won’t have agreement on the nature of a perfectly just society. But very likely, we will have agreement, reasoned agreement, on a variety of arrangements, outcomes, social states which are unjust and should be removed.

b) Secondly, even if we succeeded in identifying a perfectly just society on which everybody agrees, that’s not what we are debating about. No one expects we can have a perfectly just society in the foreseeable future. Our policies don’t depend on it. So why waste your time on a question which is probably unanswerable and certainly redundant.

The Gender Politics of Mad Men

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Micha Ghertner takes me to task for saying that a lot of guys enjoy Mad Men because they like to glimpse the world when men were men who had hot secretaries and bars in their offices. Micha says:

I don’t know what Will was thinking of when he wrote this. Maybe he just hasn’t watched enough episodes yet? The overall point he is trying to make is a fine one, but Mad Men displays exactly the opposite of what he is trying to express.

What I see when I watch Mad Men is a bunch of privileged dominant white males – and their trophy wives – who are absolutely miserable, partly ( largely?) because they can see their privilege and dominance cracking under the weight of inexorable social change.

That’s why Peggy seems to creep everyone out except Don, who is too busy trying to juggle all of the various lies he has made to his wife, kids, coworkers, mistresses, and clients to care that Peggy is breaking the glass ceiling, getting impregnated out of wedlock, and doing all of the things a woman of her station in life shouldn’t be doing. Don sees himself reflected in Peggy, as a rule breaker and successful social status climber who has to navigate a new, false identity.

No one is truly happy in the show, and we the audience, with the advantage of 50 years of hindsight, know that things are only going to get worse for those characters desperately trying to clutch onto some romanticized, illusory past.

Notice the title sequence of a businessman falling from the top of a skyscraper, eliciting a sense of vertigo? It’s not that subtle Will, and you were an art major!

I think everything Micha says is right on. I like to watch Mad Men for the menswear and a sense of the superiority of my postmodern egalitarian consumption partnership. But that’s not inconsistent with the idea that lots of guys who like the show don’t get the point of it and like to imagine how sweet it would be to have women take care of all the annoying details of life and smoke at work.

Like Micha, I see Mad Men as a show about status and status anxiety in an age of cultural ferment. Let’s talk about it! In this week’s episode [SPOILERS, if my stupid tendency toward abstraction can actually spoil anything] I particularly enjoyed the contrast between Peggy and Joan.

Joan is omnicompetent, authoritative, and in full control of her abundant femininity. She has fully mastered the arts of mid-century haute bourgeois womanhood and she knows it. Yet her clear clerical, sexual, social, and domestic excellence cannot guarantee her a status among women–a status among wives–equal to her own sense of her worth. Her status, in the end, is a function of her husband’s. And she does not seem to second-guess that this should be so. She gambled and lost with Sterling and is now confronting the suspicion that her fiance is not really good enough for her. And she is getting on in years. Despite her flawless performance of womanhood, her ambitions may end up stymied by the flaws in her men.

Peggy is equally talented and ambitious. But in stark contrast to Joan’s knowing, cultivated breed-standard womanly completeness, she is a naive, raw, curious puppy of a female. She is anxious and awkward about how she stacks up in the world of women and she is anxious and awkward about how she stacks up in the world of men. But she is toughly confident in how she stacks up as a creative worker. The new willingness of the world to reward her for what she does rather than for what she is grants her a power to independently realize her ambitions unavailable to perfect, normatively realized women.

As I see it, Mad Men is centered on Peggy, not Don. The very possibility of Peggy’s success is the engine of dramatic conflict. It threatens to devalue the relative status both of the professional men with whom she directly competes and of their wives with whom she doesn’t compete so much as humiliate by rejecting the grounds of their social and self-esteem. She is not yet in a position to really much threaten anyone, but the broader movement of liberation she represents will seem to many as little more than a violent, unfair, ad hoc emendation to the rules of the game they shaped their lives around.

Don is comfortable with Peggy, for now, because he sees these rules as little more than a fixed creative constraint, like the form of a sonnet. Don knows everyone is a manufactured thing, a product, advertising him- or herself in some market niche or other. (Don cannot believe Sterling is happy rather than performing happiness, which he finds unbecomingly “foolish.”) The fact that Don is a self-conscious and thus superlative performer explains both his outward success and his sense that it is empty. But what if self-construction does not necessarily mean living a lie? What if something like authenticity is compatible with success? In the end, Peggy may threaten Don more than she threatens the hierarchies of the trads by proving the possibility of successful integrity–by creating a persona, however awkward, that is both outwardly successful and inwardly satisfying.

Anyway, I’m totally overinterpreting. But that’s how I’m guessing things might shape up. Also, menswear!