Pursuit of Truthiness

Like many utilitarians and economists, I have a hard time caring about inequality for its own sake, even though many people seem to think it is very important.  Making poor people richer is good on standard utilitarian grounds, but it is hard to imagine wanting to make rich people poorer just to make everyone feel more equal.  How can utilitarians support wealth equality, and redistribution, without putting any value on equality itself?

One reason is as old as utilitarianism itself- the diminishing marginal utility of money.  If rich people don’t value $1000 as much as poor people, in theory we can increase total utility by taking from the rich and giving to the poor.  Wolfers’ finding that happiness rises with the natural log of income supports this.  Of course in practice this leads to incentive problems and an efficiency/equality tradeoff; this lowers the optimal amount of redistribution but gives us no reason to think it is zero.

Second is the fully general trump card against utilitarians (I hope a philosopher can tell me how to get out of this): other people say equality will increase their utility, and you say you want to increase utility, so you should support their desire for equality.

I think one version of this is influential in practice.  An economist like Greg Mankiw might not care about inequality himself, but everyone around him talks about it, so he thinks of more constructive things to say than “your values are silly”.

Another version is the “realpolitik” concern.  Bismark invented the welfare state not because he cared about equality or happiness but to stave off revolution.  Similarly, we might care only about happiness, but realize that voters may be more supportive of happiness-enhancing pro-market policies when inequality is small.  Look at the Economic Freedom of the World Index- Northern European countries like Denmark have high levels of redistribution but are otherwise very free markets.  Denmark is often rated the happiest country in the world.  I would like to see a poli-sci paper on this, or write one if none exists.  If you count the Republicans as the pro-market party (iffy), I have written a paper finding this for the US.  But one should look internationally, as well as looking at survey data on opinion in addition to actual outcomes.

There is one more utilitarian argument for redistribution that I don’t recall hearing, though I am sure it has been made.  Economists like to emphasize that the price system is an amazingly efficient mechanism for allocating resources to their highest valued use.  A common response to this point is that the system is inefficient and unfair, because a poor person who will get 10 utils from a good can be outbid by a rich person who makes 4 times as much money and gets 5 utils from the good.  Somewhere, a rich kid is ignoring or complaining about a toy that a poor kid would love to have but can’t afford.  What I have yet to hear is the obvious corollary of this criticism: the more equal incomes get, the more efficient, fair and utility-enhancing the price system becomes.  The price system more efficiently allocates resources in Denmark than in Mexico.  Perhaps Danish voters are more willing to let prices work because they actually work better in the more equal country of Denmark.

I’m spending this week at a seminar put on by the Institute for Humane Studies, which involves people listening to lectures on lots of topics from a libertarian perspective and drinking free beer.  It is odd being in a place where most people around me also love to talk about economics and libertarianism, since the vast majority of Americans are not libertarians or economics majors.  But is this newfound consensus a good thing?

In some ways its great; conversations can flow at a much higher level when you can presume that most participants have taken the same classes and read the same books.  There aren’t many other places people laugh at my “how many Austrian economists does it take to screw in a light bulb?” jokes.

On the other hand, there is the potential for “groupthink”, the lack of imagination and the lazy arguments that are so easy to succumb to when there is no real live person to represent opposing views.  So a diversity of opinion can be good just to keep everyone on their intellectual best behavior.

But there can be a greater benefit to diversity than merely avoiding groupthink.  Sometimes the interplay between varying ideas allows great progress to be made; there can be an intellectual division of labor and specialization.  Richard Feynman said that other physicists thought him a math genius, but in reality he was not better at math than them, he just had a different approach; and though their approaches may be equally good on the whole, they would only come to him with problems to which their approach had failed.  There’s no reason this can’t apply in economics, or even to some extent in political philosophy.

Another way of thinking about this is the diminishing marginal returns of a political philosophy; perhaps a conservative could come here and argue libertarians out of the worst 10% of their ideas, or vice-versa in the real political world if a minority of libertarians can keep the worst 10% of the ruling party’s ideas from becoming policy.

1) The Great Zucchini: How to make six figures while working two days a week with a high-school education. Plus: the dark side. Great reporting/writing.

2) A Profile of Andrew Sullivan: I knew from his blog that his life, both personally and intellectually, was interesting and a bit contradictory; but this story truly makes the reader wonder if it could all be describing a single person.

3) A Hagiography of Larry Summers: Definitely a puff piece, but it does make him sounds perfectly suited to his current job; and as Dr. Horn says, given who his parents and his uncles were he had no chance of living a gaffe-free life among ordinary people.  My favorite part of the piece is Summers’ quote about why he chose to be an economist:

During his senior year of college, Summers was considering graduate school in both theoretical physics and economics. For weeks, he anguished over whether to pursue his passion (physics) or the family business (in addition to his economist parents, Summers has two uncles–Paul Samuelson and Kenneth Arrow–who won Nobel prizes in the field). After he finally decided on the latter, he explained his thinking to Rollins: “What does a bad theoretical physicist do for a living? He walks into an office, sits at a desk, and stares at a plain white sheet of paper.” “But,” Summers added, “there’s a lot of work in the world for a bad economist.”

4) John Rawls: On My Religion gives insights into the mind of the most influential political philosopher of recent times.  Apparently Rawls was at one point quite religious and considered attending a seminary to study for the Episcopal priesthood.

David Brooks’ NYT column introduces a useful framework for evaluating the stimulus and economic policy.  In the short term this a welcome exhortation for less grandiose plans.  In the medium term, the stimulus and bailout packages will provide an excellent test for the potential of government planning.  I hope people will look back two and five years from now at our current economic policies using the lenses provided in the column.  An except:

President Obama has concentrated enormous power on a few aides in the West Wing of the White House. These aides are unrolling a rapid string of plans: to create three million jobs, to redesign the health care system, to save the auto industry, to revive the housing industry, to reinvent the energy sector, to revitalize the banks, to reform the schools — and to do it all while cutting the deficit in half.

If ever this kind of domestic revolution were possible, this is the time and these are the people to do it. The crisis demands a large response. The people around Obama are smart and sober. Their plans are bold but seem supple and chastened by a realistic sensibility.

Yet they set off my Burkean alarm bells. I fear that in trying to do everything at once, they will do nothing well. I fear that we have a group of people who haven’t even learned to use their new phone system trying to redesign half the U.S. economy.

We can all think of specific times when a political party has shot themselves and their base in the foot.  In fact, the last eight years may have been one of these times.

If we believe what most say, that power corrupts, then any party long in power will get old and corrupt.  There is no one party, or set of ideas, which can govern well indefinitely; that is not how human nature works.  They must eventually be replaced by new people and new ideas.  In traditional political systems this could be accomplished through royal marriage to outsiders, or weak regimes being conquered, or revolution.  In a liberal democracy, the new regime can be voted in.

There will always be new political challenges that call for new leadership.  But there are also old challenges that emerge anew.  Some problems may move in a cyclical manner.  I posit that inequality is one of these.

For many voters (though not myself), relative equality is an important consideration; even if no one is starving, it is wrong or obscene for a CEO to make 400 times the pay of his company’s janitor.

In a place where inequality is greater, these voters are more likely to support policies which reduce inequality; where inequality is less of a problem, voters will not support redistributionist policies so strongly.  As these policies take effect, they will change the political reality and bring about the end of the economic reality which gave them political life.

Suppose one party, lets call them Republicans, became associated with policies which brought inequality, while another party, call them Democrats, became associated with redistributionalist policies to reduce inequality.  These parties, if strongly associated with these policies, could become tied up in the back-and-forth political cycle of equality.  So if Republican tax policies over the past 8 years increased inequality in America, then Republicans faced a more hostile political environment of their own creation.

David Frum in the New York Times from puts forward a similar thesis from an explicitly conservative perspective and with loads of anecdotal evidence.  This theory deserves further investigation using rigorous statistical analysis, comparing data on inequality at the most local level available with election results at static points in time, and how changes in inequality over an election cycle or over longer periods affects results.

The Strange Death of American Liberalism by H.W. Brands purports to explain why LBJ-style liberalism no longer has any real influence on American governace.

He is right to note that its influence has faded away.  No matter how many times Bill Clinton is labelled a tax-and-spend liberal, the facts remain that he balanced the budget, reformed welfare, and introduced no major government programs.  The comparison to LBJ and even Nixon could hardly be more stark.

Brands’ main thesis is that liberalism is a political philosophy that puts enormous trust in the government, and that Americans are only willing to give that much trust to a government which is successfully prosecuting a war.

Most basically, Americans only tolerate the expansion of government power during wartime.  Brands tells the story of government expansion during and after each American war.  Each time the government takes on extraordinary powers; at the end of each conflict, the size and power of the government ebb- but never all the way back to prewar levels.

The Cold War allowed America to remain in a war mentality for decades, building a huge military and national security bureaucracy at the same time as it expanded domestic spending and policing abilities.

Vietnam and Watergate brought a loss of trust in the government, while detente meant a partial end to the Cold War.  By the time Nixon resigned, the liberal era was over.

Brands thesis is fine as far as it goes.  I get the sense that the heart of this book is about the wartime expansion of government power, in ways liberal or not; the title was probably chosen to sell more copies rather than to describe the contents.  His writting is clear and occassionally compelling.  He makes one prediction which is obvious in the abstract, but bracing given he timing: in a book published in early 2001, he states that the next major expansion of government would come only after a “national emergency.”  The emergency, and the expansion, of course followed swiftly.

This made me wonder how far the government’s size and power will ebb when Americans perceive the “War on Terror” to be over.  How many of us will outlive the Department of Homeland Security?  Or Federal security and shoe removal at airports?

Mostly I wonder what a President Obama would do.  His stated position of ending the war in Iraq, restoring many civil liberties, and also introducing major new government programs such as national health care, is impossible according to Brands.  Major new domestic powers can only come in wartime.  So will Obama continue the war in order to have a freer hand domestically?  Will he end the war along with his plans for major new initiatives like health care?  Or will he prove Brands wrong?

This has been, I think, the most popular book written about economics in the 20th century. Having read many thicker and more obscure tomes on the subject, I figured it was time to give Friedman a try.

As the title might suggest, the book is full of both economics and political philosophy. Its overriding message is that our government has grown too large and taken over many functions it should stay out of in a free and prosperous society.

Given his government-reducing mission, it may come as a surprise to modern readers that Friedman continually refers to himself and his ideas as “liberal”. He says, “as it developed in the late eighteenth and early nineteenth centuries, the intellectual movement that went under the name of liberalism emphasized freedom as the ultimate goal and the individual as the ultimate entity in society. It supported laissez-faire at home as a means of reducing the role of the state in economic affairs and thereby enlarging the role of the individual; it supported free trade abroad as a means of linking the nations of the world together peacefully and democratically.” Today, I think, these principles would resonate most with people who call themselves libertarian.

Capitalism and Freedom was first published in 1962. While it contains many timeless statements about economics and political philosophy, it was intended to be a book of its time. Friedman looks at the United States of 1962 and explains what its problems are and how they might be fixed. Some of these “fixes” have been implemented; it is somewhat surreal to read someone proposing a new way of doing things, only to realize, ‘wait- that is how we do things!’. We give many scholarships for higher education directly to students, we allow people to buy and sell non-decorative gold, we don’t require “loyalty oaths” of potential employees, we allow banks to pay interest on demand deposits, we have floating exchange rates; we do many things that in 1962 were only ideas biding their time in the minds of people like Friedman.

Most of the ideas presented in Capitalism and Freedom, however, are just as relevant and just as radical today. Many government agencies which he advocated axing are still alive and kicking; the Post Office and its monopoly, the Federal Communications Commission and its powers of censorship, mandatory Social Security, massive agricultural price supports. Controversy still surrounds many of these and similar programs; others have become even more entrenched, like the proverbial “third rail” of American politics, Social Security.

Friedman devotes a chapter to education, beginning what would become a lifelong advocacy for a voucher system, and considering how best to bring about desegregation (in 1962 Chicago!).

He devotes a chapter to occupation licencing, comparing it to the medieval guild system. He argues against the form of licensure “for which the strongest case can be made”, that of doctors. He calls the American Medical Association “the strongest trade union in the United States”, having succeeded wildly in the traditional union goals of keeping wages high by keeping the barriers to entry high (ie with a long, difficult and expensive training process at schools which only they can approve). Correspondingly, there are not enough doctors and medical care is too expensive (sound familiar?). His argument that doctors should not be required to have medical licences to practice is surprisingly convincing; like with Social Security, it has been around long enough and makes enough sense at first glance that almost everyone supports it, but almost no one has been confronted with the best argument (or any argument) against it.

Having advocated so many ways to reduce the size and scope of government, Friedman finishes the book with a surprising argument for a form of welfare- the negative income tax, also known as a basic income guarantee. Below a certain income level, people would receive money instead of paying it out; those who earned no income at all would receive the most from the negative income tax. It would be phased in slowly over the brackets so people at every level of income could still earn more by working more. Though this might sound like a “lefty” proposition, Friedman advocates it because it could in fact reduce the size and scope of government interference in the economy, by replacing other anti-poverty programs which are much more intrusive (ag supports, minimum wage) and much less efficient (all of them).

All in all, it is a very slim, straightforward book that packs in a lot of ideas, many of them quite novel. It has been, and hopefully will to be, very influential.

Edmund Burke, the 19th century British statesman and writer, is something of a patron saint to conservative intellectuals- the same people who spent countless hours arguing about whether the war was a good idea, the same people who largely decided that it was. So I was quite surprised to realize that I’ve never heard this question asked before.

Burke’s most celebrated book, Reflections on the Revolution in France, put forward the most basic conservative idea- that human institutions have evolved as they have for good reasons, and even seemingly unjust and arbitrary institutions should be changed gradually rather than completely overthrown. It is not obvious why overthrowing a government and trying to rebuild a country from the ground up is a better idea in the Iraq of 2003 than it was in the France of 1789. There are arguments to be made, of course, for why this time is different; but, by and large, they were not made. The problem was ignored.

Less famously, Burke was a leading anti-imperialist of his time, advocating a lighter hand in Ireland and India, and supporting the American revolutionaries. He was not a man to easily support the occupation of another nation.

This is the problem with having dead heroes. When they would agree with you, you take comfort in the fact and proclaim it. But when their condemnation should ring loud and clear, we do our best to silence their nagging voice.  When people we claim to respect cannot speak with their own voice, we must remember their words, whether they are convenient for us or not.  This sort of intellectual honesty, practiced widely, could have made for some very different recent history.

The memory of the Great European War, of millions of young men fighting and dying to win a few yards of shell-pocked mud, was enough to convince many that war was an ugly, irrational, pointless endeavor which civilized nations should have the good sense to avoid in perpetuity.  They hoped that something good could emerge from the mass of suffering, that this worst of all wars would also be the last.

Modern minds, in the knowledge that this war would only be the First to earn the dubious honor of being a “world war”, have looked back on the inter-war idealism as hopelessly naive.  I myself have ridiculed their dream, and still do feel safe predicting that wars will be with us for some time yet.

But in some sense, the dreamers and pacifists were right.  World War One did not instantly bring perpetual peace.  But it was the beginning of the end for European war.

In the ninety years since World War One, only a single inter-state war has erupted in Western or Central Europe, and the prospect of another seems quite unlikely.  The length of the peace and the current absence of plausible threats to it marks a major departure from millenia of European history, a history often remembered as one war after another.

There remained only one detour on the road to peace.  World War Two would wrest from the First World War the grim title of deadliest war of all time.  New technology and extreme mobility meant that the Second World War would be fought very differently.  But while the how of the war was very different, the why was largely the same.  The unification of Germany fundamentally changed the geopolitical balance of Europe.  The Germans thought that their newfound strength deserved recognition.  The spirit of the age was one of imperialism and social Darwinism.  German philosophers had spent a century glorifying the will to power and dismissing morality as born of slavery and meant for the weak.

Before each World War, the geopolitical situation of a rising Germany able to dominate its neighbors combined with a philosophical and ideological situation which made Germans willing to invade their neighbors.  Just as with previous attempts by the Hapsburgs and the French to establish European hegemony, Germany’s naked desire to dominate the Continent inspired her neighbors, individually less powerful that her, to form coalitions able to defeat her.  Geopolitics functioned as always.  Fundamental change came not when the European map was redrawn for the thousandth time, but when the hearts and minds of Europeans were realigned.

Human beings are naturally aggressive, and tend to cluster into groups distrustful of outsiders.  A disposition toward war is bred into our very beings.  It is there in babies jealous for food, there in children fighting in streets and in playgrounds.  This tendency from our nature requires a strong dose of “nurture” if it is to be overcome.  Instead many children of the time learned from parents and teachers that war was honorable and glorious and that other countries were untrustworthy and must be taught respect.  Nurture, rather than fighting the worst tendencies of nature, reinforced them.

World War One drove people to deeply question the beliefs that allowed such a war to take place.  Germany had sent a generation to die on French soil and gained nothing.  Germans questioned their beliefs, but in the end elected a man who give their beliefs one more try, saying in essence- we had the right idea, we just didn’t try hard enough.  So they did try harder, they even succeeded in conquering France.  But a second defeat, this time with Germany not only bled dry but also bombed out and occupied, finally convinced them.  They didn’t need to fight harder, or come up with a better plan of invasion; they needed a total gestalt shift.  They needed to look at their neighbors and see people like themselves, people who could be lived with.

You put you hand into a fire and it gets burned.  You might wonder if your technique of fire-touching was incorrect.  The more scientifically minded way wonder if fire caused pain or was only sometimes correlated with it.  But if you get burned again, and worse than the first time, you learn your lesson, and stop touching the flame, lest it consume you.  It took two World Wars, but Germany and Europe along with them learned their lesson.  The next geopolitical imbalance, pitting the U.S. and Western Europe against the Soviet Union and Eastern Europe, lasted forty years, but saw no no major war.  The Americans and the Russians had learned along with Europe, and saw major wars in Europe as a very last resort.  Gone were the days when a European nation would dare to, or even desire to invade their neighbor.

Most of you who know me probably know that I’ve spent a lot of time in the conservative movement. Growing up watching American television and going to Bangor schools left me with a general wash of liberal assumptions; once I learned to consider these dispassionately, I found that the consistent conservative principles I read about and heard on the radio made a lot more sense. And so by my freshman year of high school I was strong conservative, in the sense of the modern American movement that will always be exemplified in my mind by Rush Limbaugh. Now I read the more diverse and intellectual National Review, founded by conservative icon William F. Buckley; it is the magazine that converted conservativism’s most effective political champion, Ronald Reagan. This last year I served as vice-chairman of the College Republicans at the University of Tulsa.

I’ve become much less vocal and less sure of my political views in college; I no longer accept conservative positions wholesale. But I still agree with many of them, and even when I disagree I can at least understand why rational people could be on the other side.

Until now, that is. Those who care about politics at all should know that there is currently a comprehensive immigration reform bill before the senate, one that will simultaneously deal with border enforcement, immigration laws, and the status of the 12-20 million people here illegally. It is a compromise bill, one that no one really likes; it is being supported in the senate by Ted Kennedy, Nancy Pelosi, John Kyl, and John McCain, and in the White House by George Bush himself. It is being opposed on the left, I hear, for being to hard on illegals and for changing immigration policies to favor education over family reunification. And it is opposed on the right by the entire hard-core conservative movement for giving “amnesty” to illegals and for failing to protect the border. George Bush, it seems, was unhappy with his 30% approval ratings and decided to alienate the only constituency that has consistently supported him for the last 7 years.

Now to the real point of the post: why do conservatives oppose amnesty for illegal aliens? We can come up with some dark theories, such as:

1) people scared of getting deported are willing to work for lower wages

2) once illegals become citizens, they will all vote for democrats

3) conservatives are are just racist and don’t want so many mexicans in their country

President Bush himself has implied that he thinks the third. I think its a bad idea to impugn people’s motives like this; never to attribute to malice what can be explained by ignorance. Furthermore, I think I can say from personal experience that these are not real concerns to most conservatives.

No, the real reason is about the rule of law. We don’t want to reward people for breaking the law, for insulting those who came here legally and those who are in long lines waiting to do so. We don’t want to show people that if they too come here illegally, they will eventually be pardoned.

There are some other concerns too, like illegals driving down wages and taking public services like schools, hospitals and welfare without paying taxes. I can understand the nativist-wages argument, though I have no sympathy with it; nativism is utterly hypocritical in a country of immigrants like the United States. As for taxes, the easiest way to get them to pay is to declare an amnesty! Make them citizens and they’ll have to pay; we can even make paying back taxes a condition of citizenship. But these arguments don’t really do the work.

It’s really about the rule of law. I really do sympathize with the rule of law argument in theory; but no one wants to say how it can lead to a solution in reality. It is only being used to knock down proposed solutions, never to set them up. We can criticize the newest plan all we want; but if we shoot it down, we will be left with the status quo; 12 million people here illegally, living in the darkness of black markets, but still subject to what John McCain calls a “de facto amnesty”. So what can we do? All most conservatives will say on this point is, “start enforcing the laws.”

Again, a great idea in theory. It would have worked wonderfully after the last amnesty in 1986. But what would it look like in reality? To we send the police through neighborhoods, asking for ID’s, rounding up people and deporting them by the millions? Do we wait for them to come into the open, getting a few thousand a day, making people afraid of going to work, to school, to the hospital? All for the crime of wanting to live and work in our country?

I, for one, couldn’t stomach seeing America turn into that much of a police state for such a trivial reason. If we could restrain ourselves from a mass deportation of Arabs after the crime of 9/11, I think we can avoid a mass deportation of Mexicans for the crime of cleaning our houses and picking our fruit.

I can respect the few people who think through what their enforcement position means and still support it; that’s a legitimate disagreement about how big an issue this is. But I think that most conservatives are simply trying to deny reality on this one.