Category Archives: Institutions

Redistribution, Fairness, and Stability

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Here’s my commentary on this morning’s Marketplace. 

It’s really terribly hard saying anything in 300 words. If I’d had more space I would draw out how there is no way to succeed in promoting a unifying “we’re all in it together” mood when massive government intervention has massive redistributive consequences that track basically NO ONE’s sense of fairness or desert. That’s sure to be divisive. When Obama said in the campaign he meant to “spread the wealth around,” I’m sure most people took that to mean downward redistribution meant to rectify either the unfairness of rising inequality, the unfairness of the fact that some people are struggling for no fault of their own, or both. But bailouts of all sorts–to banks, to car companies, to underwater homeowners–spreads the wealth around in an entirely different way. “Investment” in the “green economy” spreads the wealth around. Increasing the size of the military spreads the wealth around. And so on. None of this accords with any coherent notion of fairness. And the scale of Obama’s initiatives do badly unsettle the structure around which people build expectations, and that’s an independent source of unfairness. We desperately need better framework rules for both private and public finance. It would be silly to oppose serious structural reform. But what we’re getting is the kind of half-panicked, half-opportunistic myopic intervention that breeds future half-panicked, half-opportunistic intervention. That is the opposite of what we need.

Canadians Do It Better

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Fareed Zakaria has an excellent piece in Newsweek arguing that Canada is superior to the U.S. in almost every non-weather-related way. I would agree entirely, expect that this weekend Kerry and I watched “Stick It,” an unlikely celebration of both ruthless, hyper-disciplined competitiveness and self-indulgent expressive individualism (featuring The Dude as a gymnastics coach and gratuitous montages set to Fall Out Boy), and it restored my love of America.

If you have an inner 12 year-old girl, she will thank you.

And, yes, Missy Peregrym is Canadian. Exactly.

New at Free Will: Lew Daly and Unjust Deserts

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In this week’s Free Will, I chat with Lew Daly of Demos about his book with Gar Alperovitz, Unjust Deserts: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back. I found the book, especially the first part, stimulating if unconvincing. Daly and Alperovitz adopt a Douglass North-style neo-institutionalism and emphasize the broadly social nature of scientific discovery, invention, and economic growth. I’m completely on board with all this. They begin by noting that good institutions and technological advance are the foundation of growth, which is also true enough. They go out of their way to emphasize that successful economic activity depends on an enabling climate of norms, property rights, and decent government. Yup.

But it doesn’t take them long to fallaciously infer that your dog owns your house. The main thrust of Daly and Alperovitz’s argument is that the cumulative nature of the scientific advance and entreprenuerial discovery that leads to productivity gains implies that, as time goes on, individuals add a diminishing fraction of the overall value of the goods and services they help produce. D&A then push hard on a very simple and I think largely discredited notion of desert as the basis for just distribution. Since I didn’t come up with the theory of computation, did not build this computer or the Internet, since I cannot singlehandedly prop up the entire context of wealth-enabling institutions in which I am embedded, and since taxpayers paid for the education that enabled me to read and write, I deserve next to nothing of the economic value of this blog (if it has any). Daly and Alperovitz’s view comes down to the idea that, since we’re constantly enjoying and building on the positive spillovers of prior economic activity and earlier generations of wise governnance, society deserves almost everything produced. As you’ll see in the diavlog with Lew, I had some problems with this argument.

In particular, their story seems to imply that networks of scientists and innovators now long dead deserve a large portion of the wealth that we now create, since they are causally responsible for its foundation. But if that’s true, then it’s likely true that today’s innovators are also undercompensated, since they will be able to internalize only a tiny fraction of the value they pass on to future generations. So which is it? Larry and Sergei are too rich or not rich enough? Moreover, if successful American entrepreneurs don’t deserve much of their profits, then neither do contemporary American citizens who have done even less than the entrepeneurs to create economic value. Sure, I couldn’t make a fortune selling widget polish if no one ever invented the widget, or if the institutions in which widgets could be invented never developed. But there is nothing in the argument that implies that current tax consumers deserve my profits more. Even if we buy that I don’t deserve my income, D&A don’t seem to bother showing that society does. At least, I couldn’t find the argument that shows why, if I don’t deserve X, then a big set of people who also do not deserve X have a legitimate claim to it. This confusion is compounded by their lazy identification of society with the membership of the nation state. 

Their real worry is inequality. They want higher taxes on the wealthy and more government spending. And they seem to think popular but confused intuitions about desert and distribution stand in the way of their egalitarian policy objectives. That may be true. But it’s hard to see how offering an even less intuitve but nevertheless false account of desert and distribution is supposed to help them.

Glaeser's Libertarian Progressivism

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I have no idea how I missed Ed Glaeser’s blog post on “small-government egalitarianism,” which he also dubs “libertarian progressivism.” By “egalitarianism” I don’t think Glaeser intends a view strictly oriented toward the equalization of economic holdings so much as he intends something like “prioritarianism,” as some political philosophers would call it: the view that the welfare of the least advantaged should be given a certain priority in policymaking. If we’re putting the poor first, we’ll want to note that big government generally redounds especially to the benefit of the rich and connected. As Glaeser puts it:

Libertarian progressivism distrusts big increases in government spending because that spending is likely to favor the privileged. Was the Interstate Highway System such a boon for the urban poor? Has rebuilding New Orleans done much for the displaced and disadvantaged of that city? Small-government egalitarianism suggests that direct transfers of federal money to the less fortunate offer a surer path toward a fairer America.

This is prefectly consonant with the idea I think liberals ought to favor: the growth-maximizing welfare state. Arrange our basic economic institutions to maximize productivity, and then directly transfer resources to those who fall below what we (through due democratic consideration) judge the threshold of sufficiency. You don’t need a big government for that. Glaeser is right that something like this is the missing position in contemporary American politics. But he points out it wasn’t always this way, And it doesn’t have to be now. 

Current American political discourse labels people as either anti-government or pro-equality, but wanting to help the poor should not require the abandonment of sensible skepticism about expanding the size of the state. Many of my favorite causes, like fighting land use regulations that make it hard to build affordable housing, aid the poor by reducing the size of government. In the wake of Hurricane Katrina, I also argued that it would be far better to give generous checks to the poor hurt by the storm than to spend billions rebuilding the city, because those rebuilding efforts would inevitably help connected contractors more than ordinary people.  

Glaeser goes on to express skepticism about the both the effectiveness as stimulus and the distributive effects of big infrastructure spending, and argues for a means-tested cut in the payroll tax — not far from what I argued on Marketplace last week. 

I declare Glaeser a liberaltarian in good standing! Anyway, read the whole, stimulating post.

More on Corruption

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I found this discussion of Blagojevich and political corruption in the U.S. more generally very interesting. My friend Chris Hayes raises a question that really interests me: Why are some places so much more corrupt than others? Corruption expert Kim Long notes that corruption seems to have largely cleared up in many cities that used to have problems with it. So what explains that?

The most cynical story is that nothing has changed and what used to count as corruption has simply been formalized. I think the following is more likely: Better monitoring technology plus economic growth shifts the expected payoff from production relative to the payoff for political predation. This, in turn, creates new expectations and improved norms, and a lot less corruption.

Here’s an interesting possibility… Maybe we used to be in an especially bad equilibrium in which most people naively trusted politicians, which only made it more likely for bad people to get and abuse power. If we have become at once (a) more skeptical of people with power and (b) less likely to abuse power when we have it, that would certainly explain a reduction in corruption. Some good government types think encouraging skepticism of power simply encourages abuse of power by communicating that we expect power to be abused. Some public choice types are so skeptical of the possibility that people might simply become less prone to corruption that they think discouraging skepticism of power is a dangerous encouragement of corruption. Is there an untenable cognitive dissonance involved in encouraging skepticism of power while at the same time encouraging norms of public-minded professionalism among politicians? I don’t feel like I have any problem with it, but then I’m weird.

Virtue and Trust: Insufficient but Necessary

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About my call for better government, my friend Lynne Kiesling writes:

I do think Will is creating a false dichotomy in his fine-hair-splitting. “Norms of anti-corruption and civic responsibility” are not substitutes for institutions, like a constitution, that recognize the inducement to corruption that is inescapable when some subset of a population has legal power to determine outcomes. The point that I think Will is missing is that the incentive is inescapable, even if the actual corruption does not occur.

Put another way: institutions matter. Formal and informal institutions matter. Constitutions that define and limit the role of government and norms of civic virtue are institutional complements in creating relatively better government than we would have in the absence of these institutions. But the reason that we need the formal institutions, and particularly formal institutions that define the scope and limit of government power and action, is that civic virtue is often insufficient to deter elected representatives from following the lure of the ever-present corruption incentive.

I agree with just about everything Lynne says. Though I think that if she checks her North and Greif she’ll find that norms count as institutions, in their broad sense of the term. And one of the deepest facts of the institutional world is that conscience is cheaper than police.

Anyway, here’s something I said in the earlier comments thread, in response to Tim Lee:

[I]t’s hard to make government work well. The public choice guys are right that its more about structure than public-spiritedeness. It is laughably naive and romantic to think that sufficient public-spiritedness will deliver good government. But it remains that we WANT good government, and public-spiritedness helps. Libertarians seem loathe to admit this, and I think it’s a problem for us.

I think this is a disagreement of emphasis and strategy. Yes, civic virtue is insufficient. But it’s also necessary, and necessary is a big deal. The best constitution in the world isn’t worth a damn in a context of pervasively lousy norms. Incentive structure and institutional form is so important that political economists often feel that a breath spent affirming honesty and public-spiritedness is a breath wasted. After all, you could be telling folks just how important incentives are. 

What I was objecting to in Steve and Mike’s posts was not their indisuputably sound opinion that institutions matter, or the idea that it is not surprising when opportunities for corruption are seized. What I thought I detected, and what I was objecting to, was a sense of vindication in the view that people with political power are irremediably corrupt and cannot, must not, be trusted. Because this view is false. If there is going to be political power, we must trust people not to abuse it, and many people don’t abuse it, for which we should be grateful. If we can remove incentives for abuse, and therefore lean less on frail conscience, then we should. But I think an indiscriminately scathing attitude toward politicians and political power (of which I have often been guilty) is harmful, both to the level of social trust that does in fact help determine the effectiveness of our suboptimal institutions, and also to the public credibility of libertarians, many of whom do have an especially rigorous grasp of what it would take to make our institutions work better.

Let me draw a parallel and see if it flies. I think the corporate form suffers from some thorny agency problems. The incentives of owners and managers are often poorly aligned. And I’m convinced some of the recent financial crisis is a consequence of corporate executives abusing the trust of their creditors and shareholders. However, I am unimpressed with arguments that this calls into question the legitimacy of capitalism, the corporation, or corporate executive power in precisely the same way I am unimpressed with the suggestion that Rod Blagojevich calls into question the legitimacy of democratic power.

We need better institutions. But there is no insitutional design, whether it be of a public system of democratic governance or a private system of corporate governance, that is so airtight in aligning the interests of principals and agents that conscience and trust are unneeded. One of the reasons many people are skeptical of “cynical” public choice-types is that the quest for incentive-compatible institutions can look like an attempt to squeeze all the trust out of the system. And it is indeed an attempt to rely less on trust. But the point is not to rely less on trust; the point is to make our institutions more likely to deliver what they promise. Emphasizing, truly, that the system can’t possibly work without some level of virtue and trust is a good way to reassure skeptics that you haven’t declared jihad on fellow feeling and are not out to wring the inefficiency from our institutions by wringing out the humanity.

The More Specific Lesson of Rod Blagojevich

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I think Steve Chapman draws exactly the right lesson from the Blagojevich’s attempt to auction a Senate seat:  

Okay, so it’s obvious we don’t want Rod Blagojevich choosing a replacement to fill Barack Obama’s vacant Senate seat. But is it obvious we want any governor to have that power?

Of all the things a governor has the authority to do, this is the one that reeks most of King George III. One senator, Dick Durbin, holds his office because the people of Illinois voted for him. The other, to be named later, would hold his or hers just because the governor said so. Neither the legislature nor the courts nor the voters have any role.

Even absent corrupt motives, that role asks too much of any governor. No one can accurately represent the wishes of the people of the state, and no one should try.

If a House seat opens up more than six months before the next regular congressional election, it’s filled by a special election, letting the people choose their representative. But if there are less than two years left in a Senate term, they have no say for that entire period. It’s an insult to democracy.

Why do we tolerate this procedure? Partly because it’s invoked so rarely, making it hardly worth our time to change it. And partly because special elections are expensive. But so are regular elections, and nobody proposes to save money by doing away with them.

The people of Illinois chose Barack Obama to be their senator. Now that he’s moved on, they are the only ones who should choose his successor.

This episode powerfully illustrates why governors should not have the power to appoint senators. It also suggests that governors might have other powers that invite corruption and also need to be limited or stripped. Now would be an opportune time to look for some of those.

[HT: Kevin O'Reilly in the comments below]  

The Lesson of Rod Blagojevich: We Need Better Government!

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Two of my favorite political economists, Mike Munger and Steve Horwitz, each suggest that the Blago markets-in-senate seats scandal vindicates the public choice paradigm. I’m actually rather confused by their posts, and suspect they’re both guilty of the “libertarian vice” in this particular case. I think Ed Lopez is the voice of reason here.

I increasingly think standard liberals are right. It’s not clear why we should expect people to trust libertarians about our policy proposals when we sometimes seem to deny the possibility that any policy can be effectively administered by government. Look at Blago! He’s a politician! They’re all alike. Neener! Except, they aren’t. And some places are better governed than others, with less incompetence, waste, and corruption. Iowa is better governed than the District of Columbia. And the District of Columbia seemed better governed when I left than it was when I arrived. Most of the U.S. is fairly well-governed. That’s good! The local, state, and national government generally succeeds in protecting many/most of our basic rights. Government works best when it is much more limited than it is now, and when it is so limited, it works better than all the alternatives. What we want is: government that works better. That’s what I want, anyway.

But if government just doesn’t work, limited government just doesn’t work either. So either go ahead and come out as an anarchist or swallow your iconoclastic loathing of “good government” pap and admit that you want better government. I want better government!

Generally, we’re more likely to get relatively good government in a cultural climate that encourages good government. Ridiculing as naive norms of anti-corruption and civic responsibility doesn’t undermine belief in the efficacy of government so much as expose the one who ridicules as a defector in a crucial cooperative game, undermining his reputation as a sincere advocate of the public interest. It is valuable and necessary to point out that certain institutional arrangements are unstable and invite corruption, and should therefore be reformed. But people are more likely to listen to you if they believe you believe reform is possible.

Nothing to Do With Quarterbacks

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Malcolm Gladwell’s New Yorker piece on the crucial importance of teacher quality and the difficulty of identifying talent is typically Gladwellesque in its irresistable readability, unexpected connections, and profound blindspots. Gladwell’s hook is the “quarterback problem.” Did you know that college performance fails to predict pro performance for quarterbacks? Interesting! But what on Earth does this have to do with teachers? Nothing, as far as I can tell. One comes away from Gladwell’s essay with the ideas that (a) success as a teacher, like success as an NFL quarterback, requires a combination of traits so ineffable and rare that (b) it can be determined only by actual performance in “the show.”  But (a) is certainly false, which is a relief since we need many, many more successful teachers than the number of NFL franchises.

But who cares? The frothy quarterback stuff is a completely superfluous distraction from the point that emerges in Gladwell’s piece. That point is (b): to find out if somebody is a good teacher, you’ve got to see how well he or she actually teaches. Gladwell illustrates how this sort of thing works by inspecting the way one financial firm casts a very wide net and then narrows the field by filtering out candidate financial advisers on the basis of real preformance. Select and compensate people on the basis of their actual demonstrated skill. It’s so crazy it just might work!

So what does Gladwell have to say about this? He makes a number of outstanding suggestions and profoundly important points: 

Teaching should be open to anyone with a pulse and a college degree—and teachers should be judged after they have started their jobs, not before. That means that the profession needs to start the equivalent of Ed Deutschlander’s [the financial firm recruiter's] training camp. It needs an apprenticeship system that allows candidates to be rigorously evaluated. Kane and Staiger have calculated that, given the enormous differences between the top and the bottom of the profession, you’d probably have to try out four candidates to find one good teacher. That means tenure can’t be routinely awarded, the way it is now. Currently, the salary structure of the teaching profession is highly rigid, and that would also have to change in a world where we want to rate teachers on their actual performance.

[...]

Is this solution to teaching’s quarterback problem politically possible? Taxpayers might well balk at the costs of trying out four teachers to find one good one. Teachers’ unions have been resistant to even the slightest move away from the current tenure arrangement. But all the reformers want is for the teaching profession to copy what firms like North Star have been doing for years. … What does it say about a society that it devotes more care and patience to the selection of those who handle its money than of those who handle its children? 

Now, there’s no point in saying things that will make your readers think you are an evilcrazy person, so I can understand why Gladwell wastes words on quarterbacks instead of on the deeper mechanisms at work here. But why is it that “society devotes more care and patience to the selection of those who handle its money than of those who handle its children?” The obvious answer is that care and patience are in greater supply when care and patience pay. When the provision of education was made a predominantly public, not-for-profit affair, “society” basically ensured that teacher selection would receive far less care and patience than money-handler selection. Maybe we should do something about that. 

Also, why should teachers need a college degree?

Technocracy vs. Liberal Democracy

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Upon return from Singapore, Bryan Caplan writes:

Singaporean bureaucrats are less afraid to criticize their government than American bureaucrats are to criticize theirs.  Neither group would be afraid of legal punishment; but the Americans would be more worried that saying the wrong thing would hurt their careers.

Why is that? Commenter Devin Finnbar writes:

I believe it. Tocqueville noted that American democracy had less free speech than the European monarchies, because of the overwhelming social pressure to say the right thing.

I find this fascinating. Let me see if I can flesh out this idea a bit more.

In a democracy, policy shifts due to shifts in public opinion. Random changes in public opinion won’t do. They have to be coordinated. Opinion is coordinated through signaling and sanctions, both subtle and unsubtle. So, in a democracy, stating an opinion is a move in a delicate coordination game. There is a lot of pressure to be on the team. Coalition democratic politics is largely about trying to sabotage the other side’s attempts at solving the opinion-coordination problem. If you are a bureaucrat, you will be especially sensitive to the demands of conformity and solidarity in producing policy change, so you will tend to toe the line. You probably won’t think about this strategically. People whose sincere opinions tend to track the needs of their political coalition will be trusted within political coalitions, and will tend to get assigned to desirable government jobs.

In a Singapore-style technocracy, public opinion is just one of many constraints to take into account in formulating policy. But then public opinion can’t serve as the basis for a sense of the legitimacy of a policy or a policymaker. If the technocrat actually cares about legitimacy, then she probably cares a lot about effectiveness. The reason its okay to go over the heads of the people is that what you’re doing actually works to make them better off. Additionally, if you’re a bureaucrat, have a good idea, and can argue for it, it just might become policy. Especially if you are willing to let your boss take credit for it. In a well-functioning technocracy, status accrues to people who produce new ideas for effective policy.

So bureaucrats in a technocracy will be motivated to explore ideas, while bureaucrats in a democracy will be motivated to signal and recruit fidelity to the coalition’s pre-assigned ideas. Free-thinking exploration could spell defeat! 

Some related thoughts:

  • The glacial nature of shifts in democratic public opinion are part of what kept the U.S. from adopting more heavily socialist policies mid-century. 
  • Implementing the policies best supported by the social-scientific consensus once meant “economic planning,” and that is bound to fail for familiar reasons. But the fact that those reasons are familiar explains why technocracy is now less likely to fail.
  • Milton Friedman claimed that capitalism and freedom are inextricably linked. If this is an empirical and not a conceptual claim, we could find that this is false if politically free people again and again choose against economic freedom, or if the rulers of politically unfree countries show some tendency to choose policies of economic freedom.
  • In principle, free-market technocracies seem dangerously unstable in ways liberal democracies do not. But that doesn’t imply a free-market technocracy can’t have a good run before becoming captured by malign forces. How much will it matter to people in democracies that their liberties are more secure in the long run if it comes to pass that a technocracy on a heater is actually producing 3x the democracy’s per capita income?
  • In that scenrio, “Canadian citizen living in Singapore” will dominate “Canadian citizen living in Canada” or “Singapore citizen living in Singapore.” Why not live in the richest jurisdiction as long as you can always retreat to the freest if things go south? 
  • Singapore can’t absorb a ton of Americans or Canadians, but China could. If China becomes a huge Singapore, do liberal democracies develop a brain drain problem? Could this push democracies toward freer market policies and vindicate Friedman in the end?

Complementarity and Contingency

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Tyler Cowen’s post on Malcolm Gladwell’s Outliers is fascinating. 

The main point, in economic language, is that human talent is heterogeneous and that the talent of a particular person must mesh with the capital structure of his or her time if major success is to result.

[...]

It is too easy to find contingency in the world and Gladwell doesn’t begin to look for a theory of which contingencies are interesting or not.

[...]

Gladwell descends into the swamp of contingency but he is unwilling to really live in it and take it seriously or, alternatively, to find a way out. 

In reality the complementarity concept is easier to work with and also more fruitful for thinking about policy implications or for that matter the implications for management or talent training.  Success is fragile but foster competing cultures based on clusters of talent motivated by rivalry and emulation.  Don’t filter out the eccentrics or the risk takers.  That’s about where David Hume ended up but Gladwell never gets anywhere close.

I agree with Tyler, especially that Hume is teh awesome, but I’d like to emphasize the contingency of complementarity. Tomorrow’s capital structure may be too different from today’s to attempt to cultivate in young people the talents that will mesh with it. Who knows what those will be? As the pace of innovation continues to accelerate, this will be an ever bigger issue. For example, nobody I knew had heard of the Internet when I was in high school. But I spent a huge amount of my time in college talking to people on the Internet. Without it, I’d probably be a high school art teacher today. With it, I’m doing everything I’m doing instead. All my best opportunities came from meeting people in online discussion groups and having a blog. That’s weird!

Dean Baker on Libertarians and the Fight Against Corporatism

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In yesterday’s Cato Unbound lefty economist Dean Baker sees the possibility for common ground between libertarians and progressive in fighting corporatism, but doesn’t yet see libertarians making good on their part of the deal. While making largely sensible case against the status quo system of patents and copyrights, Baker writes:

The extraordinary abuses that we see every day as a result of patent protection for prescription drugs and copyright protection should be sending libertarians through the roof, and perhaps it does. But, where are the libertarians’ research programs on alternatives to patents for financing drug research or alternatives to copyrights for financing creative and artistic work? (I couldn’t find either program on Cato’s website.)

I’m not raising these issues as debating points. I absolutely believe that copyrights and patent monopolies for prescription drugs are extremely pernicious forms of government intervention into the market. I can’t understand why any serious libertarian would not be as bothered as I am.

Well, I am as bothered as Baker is. And over at Cato@Liberty, Tim Lee brings Baker up to date on some of his and Cato’s work on IP. Tim has a few disagreements with Baker about the best government framework for encouraging innovation, but the extent of overall agreement really is pretty impressive, and promising.

Yglesias on Libertarians and Corporate Power

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Today at Cato Unbound, Matthew Yglesias replies to Roderick Long’s plea for distinguishing devotion to genuinely free markets from corporatism. Matt agrees with the general point, but thinks that it is absurdly utopian to think we can somehow keep the economy untainted by political power. So libertarians don’t really do anything to help by pointing out that it would be better to keep politics out of the economy. Here’s what I take to be the core of Matt’s argument:

… the larger problem is that libertarianism, even at its very best, tends to suffer from an impoverished set of ideas about how corporate domination of the public policy space might be prevented. The political left has, by contrast, the tradition of community organizing, a set of public interest advocacy organizations, allies in the trade union movement, efforts to improve the quality and independence of the civil service, and various notions about changing the methods by which campaigns are financed in the United States. This is hardly a perfect toolkit, and it can be enhanced in some ways by drawing on libertarian insights, but it’s something. And libertarians tend to be either indifferent or hostile to it, campaigning against public financing, strong labor unions, and the civil service.

In practice, libertarianism seems to have little to say about how to bring about political change except to work hand-in-hand with business lobbies when the interests of business and free markets are aligned, or else when business interests are masquerading as libertarianism.

I think this is an interesting challenge. My own view, which I take from Hayek and Buchanan, is that we need constitutional reform that requires redistributive policy to meet certain conditions of generality or non-discrimination. I don’t think this would will work perfectly, and I’m sure that any paper barrier to special-interest payoffs would be interpretatively eroded over time. But I think it would be a barrier to corporate abuse of political power.

I agree with Matt when he says:

Much of the world labors under hopelessly corrupt governments, wherein the police and security services are little more than shakedown operations or enforcers for local bigwigs. But elsewhere, justice is administered with a modicum of efficacy. Similarly, there are real alternatives to run-amok corporate dominance of the policy environment. There are better and worse civil services in the world, and even within individual countries some agencies work better than others.

Government in the U.S. is in fact relatively limited by constitution and custom. We have our free speech and our guns and cops still can’t come into our houses uninvited, etc. And it could be even more limited. I don’t think Matt takes seriously enough the degree to which progressives and New Dealers opened the way for today’s government-saturated corporatist markets. His position seems to be that we should keep all that regulatory and redistributive discretion for the government, I guess on the off-chance that his favorite political coalition might use it for something other than the benefit of corporations and other narrow interests. But, since we all know that’s not going to happen, we should promote “countervailing forces” within government and without. Yet if Matt is right, and justice can be administered with a modicum of efficiency and government can work relatively well, then why not simplify matters a lot and put stricter limits on the government’s power to rig the economic system?  We may not be able to get politics out of the economy altogether, but Matt seems to agree in principle that we could do a lot better, so I wonder why is he making such a big deal out of campaign finance reform, community organizing, and labor unions, as if there is simply no hope of more directly reining in the use of government power for private advantage.

Are People In Commercial Societies "Better"?

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In a characteristically penetrating and insightful post on the question “Does the Free Market Corrode Moral Character?” Richard Posner concludes:

History teaches that a commercial society is bound to be more prosperous and peaceful than an honor-based traditional society. The commercial culture creates incentives and constraints that, provided that economic activity is effectively regulated, (an important qualification) maximizes the values that are important to most people. This doesn’t mean that people in a commercial society are “better” than people in other types of society. The human race is genetically uniform, and our “moral” genes are not much different from the corresponding genes in chimpanzees. The success of commercial societies just illustrates that different institutional structures produce different human behavior.

I think Posner is off the mark here. He seems to think that moral dispositions are exogenous to institutional structures because humans are genetically uniform. This is wrong. Humans are genetically uniform, but one of those uniformities is a capacity for acquiring and transmitting culture, some of which is moral culture, from which comes variation in moral dispositions. Different institutional structures are possible only because cultural variation is possible. And a configuaration of institutions, once in place, exerts pressure on culture, which in turn exerts pressure on institutional structure, and so on. If more peace and prosperity is better, and the institutions and behavior that produce peace and prosperity are mediated by  moral cultured, and moral culture is embodied as emotive and behavioral dispositions by the people within that society, then it seems evasive to deny that those people are “better” in a pretty obvious sense. People who are better at producing moral ends are morally better. It’s not wrong to visit a place rife with corruption, dishonesty, racism and cruelty and remark that “the people are horrible.” It may not be anyone’s fault that they turned out this way, but people do turn out that way, and whole societies, whole peoples, can and do get better.  If behavioral dispositions were in fact invariant, and variations in peace and prosperity were entirely due to variations in institutional structure, Posner would be right. There would be no difference in the people. But since variations in institutions are themselves due in large part to variations in people, Posner is wrong. The evidence points to the conclusion that people in commercial societies are better, which is one of the best reasons to prefer commercial societies.

I answered the Templeton question here.

Herb Gintis on Naomi Klein

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Herb Gintis is one of my favorite thinkers, and I find his Amazon reviews more interesting the the NYRB. So I’m sorry I missed his August review of the Shock Doctrine, and maybe you are too. Here it is. The peculiar thing about the review is that Gintis is rather gentler with Klein than he is with today’s big winner, Paul Krugman. He basically savages Krugman, but seems to extend to Klein the warmth of comradeship, apparently seeing in her traces of his own dissapointed socialist radicalism. He joins in on the Friedman bashing, heartily derides “free market economics,” and then quietly suffocates Klein’s own ideological dreams (so like his, once!) with a pillow and a sigh.

[Klein] reveals her own sympathies towards the end of the book, when she remarks that “Democratic socialism, meaning not only socialist parties brought to power through elections but also democratically run workplaces and land holdings, has worked in many regions, from Scandinavia to the thriving and historic cooperative economy in Italy’s Emilia Romagna region. It was a version of this combination of democracy and socialism that Allende was attempting to bring to Chile between 19870 and 1973.” (p.569) 

[...]

… it would be nice if Klein’s alternative were generally viable. Thomas Jefferson’s vision of forty acres and a mule would be vindicated, albeit in a more socially organized manner. But it is not. Worker’s control is a great dream (I dreamed it myself for many years), but it founders on the reality of capital diversification, which the worker-owned firm cannot handle. Cooperative land holding is just a myth, pure and simple, and always has been, throughout human history. 

Like many progressives, Klein’s instincts are anti-market (although even her precious cooperatives are marketing cooperatives, after all). It is a plain-faced fact that poor countries that have attempted to compete in the world market place rather than shelter themselves from it have done quite well, China and India being the most prominent. The idea that socialist cooperatives might outcompete capitalist firms has little going for it. Perhaps a country with mountainous oil revenues can play at sounding anti-capitalist (e.g., contemporary Venezuela), but the future of prosperity in virtually all poor countries depends on developing markets and state institutions that support markets in a synergistic and democratic manner. It is up to us to dirty our hands (and hearts?) to help them attain this, rather than remaining pure but ineffectual, fighting for a socialist world that, far from struggling to be born, simply cannot exist.

It’s the narcissism of small differences, I guess. Krugman gets it good and hard for being the wrong kind of market-friendly egalitarian liberal social democrat. Klein gets a lovingly exasperated “Oh Naomi!” for her benighted advocacy of the dangerously impossible. Yet, in the end, Gintis does not allow his sentiments to overcome his final judgment. Krugman and Klein both get two lousy stars.