Still More on Political Authority

In a comment on this post, “Ross” writes,

If I understand Arnold’s position correctly (I guess this response is to clarify it for interested parties), the prevailing reason for the belief in authority (offices, people, what have you), is rooted in the desire for a “rule of law” or, more concretely, predictable coercion over unpredictable coercion. This is at least what I understand when I read “people like those social conventions,” for what is a convention, but a more or less predictable and more or less stable system of rules, in this case, rules for the application of force.

I think this is why the distinction between “person” and “office” is rather important. An “office” is more than just a funny hat someone wears, but also a set of common expectations about what that hat means held by a great number of associates.

Huemer might be correct that any particular convention is morally arbitrary, but I believe Arnold is arguing that arbitrary or not, most humans have some “slot” in their minds for having some mediation of force. I guess a better analogy could be language. Our brains are wired for language, though just what kind of language can fill that slot is widely variable. If my neighbor began babbling in something he and his friends constructed, I might very well refuse to learn the babble and stick with English. Am I applying a double standard? It could very well also be the case that most of my associates submitting to this authority is a good reason for me to submit to it.

I think that Arnold’s criticism is that Huemer’s examples of individuals who spontaneously declare themselves to have new official powers only goes to show that one usually rejects governmental “innovation” (usually, because in the absence of government, innovations might be accepted). In that sense, we have a commonsense justification of a limited government, not anarcho-capitalism. [emphasis added]

That does capture my position. Let us try this formulation:

1. The way I see it, political authority (the right to coerce and the duty to obey) is a social convention that has evolved over time.

2. In the United States (and in other democracies), this authority is treated as residing in offices (positions that are recognized as carrying authority, such as policeman, judge, or legislator). The people holding those offices do not have the authority when they leave those offices.

3. The authority that resides in offices is partly formal. There exist documents, such as Constitutions or statutes, that describe the responsibilities, powers, and boundaries of the offices.

4. However, there is also an informal, “common law” component to authority. This evolves over time. (Not necessarily for the better, I might add.)

5. If you come at the issue with the belief that no one should have the right to coerce, then the social convention of political authority seems absurd. However, for most people, this social convention seems natural.

6. People see this social convention as natural because they believe that it makes coercion predictable and arguably benevolent. Few people can envision a coercion-free utopia. Instead, what most people expect in the absence of government is coercion that is malevolent and unpredictable.

7. The libertarian’s task of demonstrating the falsity of the ordinary person’ belief is quite difficult. There are few, if any, examples of successful societies that have done away with government. In fact, the ordinary person may have the sounder empirical model.

8. If we grant that the social convention of political authority is legitimate, we can still argue that the social convention has evolved in adverse ways. We have endowed offices with powers of coercion that are too broad and too readily abused. But that is a more painstaking case to make, and there is plenty of room for disagreement about where and how lines should be drawn.

9. It would be neater and cleaner to convince people that political authority is a moral absurdity, but that claim seems to be difficult to ground on assumptions that most people would share.

Michael Huemer Responds, I Reply, Bryan Caplan Rejoins, etc.

Reacting to my essay, Huemer emails (my response follows his quote),

Dear Arnold,

Thanks for your blog post. There are several important points raised there. Here are a few comments; I cc Bryan [Caplan] in case he’s interested.

1. Did I identify the reason why most people believe in authority? You suggest that the real reasons are not well articulated by political philosophers.
I suspect that the real reasons are better covered by the chapter on psychology than by the philosophical chapters. I suspect that philosophical theories of authority are just rationalizations.
It sounded like maybe you thought there were other reasons, which might be real reasons and not just psychological causes, for most people’s belief in authority. So I’ll just express my skepticism that ordinary people have something more sophisticated or more rational in mind than anything that any of the experts have been able to come up with.

2. What is my view of human nature? Well, there are lots of different people with lots of different traits. With regard to any trait, there will be a variation, with some people having surprisingly high or low amounts of it. Hence, I would say that most people are basically prudent most of the time, but that there are a small number of people who are frequently reckless and violent; and also, ordinary people can be gotten to act in irrational ways in special circumstances. I hope these sound like uninteresting, banal remarks.
I really don’t think that disagreements about “human nature” are at the core of most political disagreements. I think people like to say that because it sounds profound. But I really didn’t arrive at any major views by contemplating “human nature”, except in fairly trivial, banal ways. In particular, I don’t think I disagree with liberals or conservatives because I have a different view of human nature. I think I have a different analysis of how *social systems* work.

3. Thus, you say progressives think the government needs to protect people from those with the ability to intimidate or manipulate others. And they think the government can nudge approximately-rational people in the right direction. Okay, I don’t think I disagree with the progressives about the frequency of manipulators, intimidators, or irrational people in the population. I think I just disagree with the claim that political institutions somehow screen out those people. I just think the manipulators, intimidators, and irrational people are at least as likely to be *in* the government as anywhere else, because I don’t see how our selection mechanisms prevent that. On the contrary, I think we have mechanisms that screen out honest and rational people.

4. But anyway, I think that’s all fairly irrelevant, because even if someone is rational and can protect you from bad people, that doesn’t give them authority. Take the vigilante example from the first chapter. The vigilante protected his neighbors from some vandals. That doesn’t give him authority over the neighbors. So again, what’s going on isn’t that the progressives have a special view about human nature that makes sense of their political position. What’s going on is that they are applying a moral double standard: they are exempting the state from the moral principles that they apply to everyone else.

5. If conservatives really think that the government is on the brink of collapse, such that one more person disobeying the law might cause it to collapse, then I think they’re just wildly irrational. I don’t know how many law-violations occur every year, but it’s definitely in the millions. Probably hundreds of millions. So the probability that we’re just now on the brink where one more violation causes a collapse … well, let’s just call it “negligible” and leave it at that.

6. You suggest that conservatives think the branches of government won’t cooperate in extending government power, because conservatives think people are just too prone to conflict. Well, I could see thinking that people will start conflicts *to gain something*. I can even see thinking that people will attack *the weak* purely to demonstrate their own power. But these conservatives would have to think that these government branches want to take up conflicts *with extremely powerful adversaries* (viz., each other), *where they have nothing to gain*, rather than preying on the ordinary people. I just can’t see that as a reasonable theory. (And then, incidentally, we have to hope that this conflict remains perpetually balanced at just the right point, rather than any side winning, or all sides preventing the others from carrying out their legitimate functions, etc.)

There’s a lot more that could be said in response to your comments, as you raised a lot of interesting issues, esp. about human nature. And I perhaps haven’t made my views about human nature entirely clear (mostly because I don’t have very detailed or specific views about it and don’t think we need such). But in the interests of time, I should leave it at that. Thanks again for your thoughts about my book.

My response (Bryan Caplan’s rejoinder in italics):

A. Go back to your point 3, where you say that you don’t think our political system is effective at screening out “manipulators, intimidators, and irrational people.” This is a very strong point. However, it is not a matter of simple moral intuition. It is a hypothesis concerning how political institutions work. [Of course. Mike never claimed that *everything* was based on moral intuition. In fact, the whole second part of the book is intended to answer the consequentialist critique of anarcho-capitalism.] I would argue that progressives have a different hypothesis, which is that it is possible within our political system for good to triumph. [Mike probably shares the hypothesis that this is “possible.” The question is whether it’s *likely*. Given progressives’ endless complaining, it’s not clear even they believe the latter.]

B. Similarly, on point 6, you may be right that the separation of powers fails to prevent government officials from acting in concert to the detriment of ordinary individuals. However, once again, this is not a moral intuition. It is a hypothesis about how political institutions work. [Mike isn’t claiming moral intuition is everything. He often combines moral intuition with factual claims.]

C. In point 4, you talk of the “double standard” that people apply to public officials and private vigilantes. However, ordinary people do not sense that they are guilty of a double standard. Barack Obama has authority that ordinary people do not have, but that is not because Barack Obama is judged differently from other men. It is because of the office that he holds. [An interesting point. But Mike’s critique still holds. Suppose your friends decide to create an “office” and select someone to run it. This person starts giving you orders and threatening to injure you if you don’t respect the “authority of his office.” Would this seem all right to normal people?] When he leaves that office, he will no longer have the authority to order drone strikes, change immigration enforcement procedures, threaten to veto budget legislation, etc.

In theory, any one of us could become a policeman, a legislator, a judge, or an official at a government agency. The authority resides in those offices, not in the individuals who hold those offices.

Most people find it intuitively appealing to have everyone around them ultimately subject to a single authority, rather than having competing authorities. To most people, having competing “protection agencies” and competing judiciaries is as inconceivable as two football teams playing a game without using the same rules and the same referees.

In fact, try making your double-standard argument in the context of the football metaphor. “We don’t let any ordinary fan run onto the field, blow the whistle to stop play, and call penalties. Why do we let referees do that?” Well, because that is what we want referees to do. [When pressed, wouldn’t the answer be, “Because the players and audience actually consented to follow the rules”? If a football team started playing in my backyard without my permission, the referee wouldn’t get to ignore my request to vacate in virtue of his office. And I think even football fans would admit this.] Unfortunately, the same holds for government, at least to some extent. A lot of people want government to do many things, and the scope of government reflects that. I wish it were not the case, but I do not think that there is any plain, philosophically intuitive argument that is going to make a difference. [“Make a difference” in the sense of actually persuading normal unreasonable sheeple? You’re right. “Make a difference” in the sense of persuading people of common sense and common decency? I say Mike’s case is overwhelming.]

[For those of you have read this far, I also recommend the comments on my earlier post.]

Huemer adds,

I was basically going to say what Bryan said. But there’s more to say.

I think what Arnold is responding to is my idea that the disagreement between libertarians and others turns on beliefs about authority. So you (Arnold) are trying to identify other beliefs that the disagreement (also?) depends on.

Okay, maybe progressives disagree with me about how the political system works. But I don’t think that’s the main disagreement. Because I also think that *even if politicians were wise, rational, and benevolent*, they still wouldn’t have authority. Compare: suppose I’m really wise, benevolent, and rational, and I’m issuing some commands that are similarly wise, etc. Does that mean that I get to demand money from you and use violence against you if you don’t pay?

A similar point goes for the conservatives: let’s say they’re right, and separation of powers prevents most abuses. (Aside: I’m pretty sure conservatives think that the government screws up a lot of things and oversteps its bounds, so they can’t think separation of powers is completely effective.) I still don’t think there would be authority. Compare: Suppose that Bryan and I start demanding money from you. But suppose that Bryan and I restrain each other from asking too much or abusing you too much. Does that mean that you’re now obligated to pay us? And that we can use violence against you if you don’t?

So again, I don’t think you can’t explain why leftists and rightists reject libertarianism except by appealing to their common belief in a special sort of authority for the state.

I certainly agree with the last sentence. That is, non-libertarians (and even minarchist libertarians) believe in the authority of the state.

I think that the intuitive theory of government legitimacy is that there are certain offices that can legitimately exercise authority. It is not because Obama is particularly wise, benevolent, and rational that he has authority. He has authority because he occupies the White House, and from a progressive point of view we hope that the occupant is as wise, benevolent, and rational as we can find.

How are these offices, in which authority is vested, created? To some philosophers, they are created formally, by a contract. However, I would argue that they emerge as a social convention. True, many countries have constitutions, which are attempts to formally define the expectations about authority. However, in my view, constitutions are merely one part of the collection of social conventions. Constitutions act like statutory law, but ultimately it is common law that rules.

What Huemer wants to argue against are the social conventions whereby we obey the laws and commands of people holding certain offices and whereby the people holding those offices are allowed to use force against those who do not obey. My claim is that most people like those social conventions, for the same reason that they like the social convention of having a referee for a football game. As I see it, the conservative argument for government is that having such a convention keeps people from descending into tribal barbarism (Lord of the Flies). The progressive argument is that it enables wise, benevolent leaders to emerge, overcoming what otherwise would be a world of oppression and individual folly.

I think that most people believe that without the social convention(s) of government they would be much worse off. Nearly everyone believes that without these social conventions, violent gangs would run around terrorizing the population. Influenced by progressives, many people believe that without these social conventions, their children would not be educated, their elderly parents would not have health care or adequate incomes, etc. Influenced by conservatives, many people believe that without these social conventions, barbaric foreigners would overrun our country.

Taking such beliefs as given, a libertarian gets nowhere by arguing that there is something morally wrong with allowing government officials to use coercion. Until you challenge those beliefs, you are making arguments that appeal only to those who already are inclined to agree with you.

Solar Power

Noah Smith writes,

I guess I should give a concrete prediction about when solar will actually start being cost-competitive with fossil fuels, without subsidies, in some locations for some customers. My prediction is: around 2020, or 7 years from now. 95% credible interval would be…um, let’s see…2014 to 2040. So that’s a fairly wide interval.

He mentions some promising technologies. What has to be stressed is that once solar power becomes cost-competitive, we will never go back. That is, solar power is going to continue to get cheaper at a faster rate than other technologies (barring some spectacular discovery of a new energy source or a dramatic development in nuclear energy).

Having said that, in 2005, I quoted the Department of Energy as predicting that solar power would be cost-competitive within 10 years, which at this point would be 2 years from now. So, relative to predictions made during the Bush Administration, solar power seems to have fallen short.

I strongly support funding research into solar technologies. I strongly oppose subsidizing deployment of uneconomical solar power, particularly by companies led by the President’s political cronies.

Along these lines, Timothy Taylor writes,

The fundamental problem, Everett argues, is that showing something is possible at high cost is one thing, but commercializing it at low costs is quite another….

after 40 years of watching the U.S. government try to force energy markets on to a different path, it’s time for an alternative approach. The U.S. government should stop subsidizing commercial energy firms, and instead put that money into a dramatic increase in energy research and development.

Neo-Georgist?

The proposed Commonwealth of Belle Isle (near Detroit).

There are three sources of revenue. The first is user fees, which apply primarily to the monorail. A 10% sales tax provides a second source. Importantly, sales taxes encourage thrift and are collected outside the cost structure of the products. Real estate taxes provide the third, but the system is radically different than that employed in the U.S. Only the raw land value is taxed, not what the owner builds on it. This follows the principle of government only receiving compensation for what it provides. Government didn’t pay to construct buildings on the owner’s land, nor does it bear the risk of loss. We encourage development of property, not discourage it.

With no offense meant to Paul Romer, Michael Strong, or other folks in the movement to establish a free city, I have always felt that the best qualification to execute this project is experience in real estate development. The main proponent behind this concept has such a background.

Tip from Tyler Cowen.

My Sense of Huemer

I have a long review essay of Michael Huemer’s The Problem of Political Authority. I conclude:

I believe that Michael Huemer has put his finger on an important question, namely: What justifies having an institution with special privileges to coerce and to which we have special obligations to obey? The explicit justifications given in the literature of political philosophy are not very satisfying. One’s views on the issue ought to be tied to one’s views on human nature. Unfortunately, readers are likely to have difficulty buying in to Huemer’s own views on human nature, and I believe that this will limit the persuasiveness of his arguments.

Housing and Wealth Destruction

Thomas J. Sugrue writes,

The bursting of the real estate bubble has been a catastrophe for the broad American middle class as a whole, but it has been particularly devastating to African Americans. According to the Center for Responsible Lending in Durham, North Carolina, nearly 25 percent of African Americans who bought or refinanced their homes between 2004 and 2008 (and an equivalent share among Latinos) have already lost or will end up losing their homes—compared to 11.9 percent of white families in the same situation. This disparate impact of the housing crash has made the racial gap in wealth even more extreme. As Reid Cramer, director of the Asset Building Program at the New America Foundation, puts it, “Basically, we have gone from an average minority family owning 10 cents to the dollar compared to the average white family to now owning less than a nickel.” The median black family today holds only $4,955 in assets.

Sugrue can only process this through the oppressor-oppressed model. He blames predatory lending. If he could open his eyes a little wider, he might be able to see the role played by government housing policy. Some notes:

1. From a wealth-destruction perspective, you cannot just look at the people who lost their homes. People who stayed current on their mortgages nonetheless experienced wealth destruction.

2. Probably more borrowers were “victimized” by Freddie Mac, Fannie Mae, and FHA than by Wall Street. That is, my guess is that a majority of the homeowners whose wealth has been crushed paid for their homes with loans backed by one of those agencies.

Speaking of housing, Luigi Zingales finds some numbers regarding occupancy fraud.

In fact, the authors find that more than 6% of mortgage loans misreport the borrower’s occupancy status, while 7% do not disclose second liens.

You get a lower rate by saying you plan to live in the home, so speculators will often lie about that. One of the reasons that programs to “help owners stay in their homes” are not doing very much is that a lot of those owners never occupied the homes in the first place.

Zingales references a working paper that I cannot find. Thus, I cannot tell whether the borrowers defrauded the lenders or the lenders defrauded the investors who bought the loans. I always presume that it is the borrower instigating the fraud. However, Zingales says that the bankers should be prosecuted. He makes it sound as if the lenders would record a loan internally as backed by an investment property and report it to investors as an owner-occupied home. That would require a much more complex conspiratorial action on the part of the lender, and until I learn otherwise, I will doubt that it happened.

Betting Aversion

Derek Thompson interviews Daniel McFadden. McFadden says,

If two “rational” people meet and disagree on the probability of an event (e.g., the AFC team wins the super bowl, the price of Google stock goes up), then both can gain by wagering on the event. In the real world, however, wagering is the exception, not the rule. On the one hand, you could say that getting someone to bet on an event, pay attention to the outcome, and finally make the payoff, is too much work. But actually, if you ask people why they don’t bet often with their friends, they will simply say that it would make them uncomfortable to do so.

Thanks to Jason Collins for the pointer.

What accounts for this aversion to wagering? McFadden says that people do not like choices. I do not see how that follows.

I do not like to bet with friends because it can feel like a lose-lose action. I feel bad losing, and I feel bad taking my friend’s money when I win. I stopped playing poker at a very early age, because I realized that for me it was lose-lose in that sense.

Someone like me would be more willing to wager in a blind market, such as the stock market, than to make the same wager against a friend. It is hard to hold all else equal, however. When you wager against a known individual, you have additional information about that individual’s strengths and weaknesses, and that might make you more willing to wager.

In wagers among friends, one is often motivated by bragging rights, ego, and other psychological factors. The monetary stakes are often secondary. The pleasure you get is from “I won a bet against ____,” not “My wealth increased by _____.”

Given all of those considerations, I am not convinced that our propensity to avoid wagering tells us something about an aversion to choices.

The overall interview is about a paper on behavioral economics. Long-time readers will know that I am not a fan of that field. Proponents get excited by “gotchas” that show people making decisions that are arguably not rational. These gotchas strike me as superficial.

I would like to see some deeper philosophical thinking. Do these findings make the doctrine of subjective value untenable? Or should they be viewed instead as casting yet more doubt on the project of assigning objective value? Some researchers think that we should be understood as having multiple selves. What are the implications of that?

Geithner, Wallison, and History

What is the legacy of Timothy Geithner? In an essay, I write,

In 2009, at the height of the financial crisis, there was widespread public and political support for making serious changes to how Wall Street and the financial sector operated. Presented with an opportunity to break these too-to-big-to-fail banks down to a size where an institution could be allowed to fail without threatening the entire national economy, Geithner instead attempted to restore the status quo. This was a win for the biggest banks, but the nation as a whole may eventually come to regret his policies.

The American Enterprise Institute sent me a copy of Peter J. Wallison’s Bad History, Worse Policy, which provides Wallison’s take on the financial crisis and the Dodd-Frank legislation. At $90, the book is priced for libraries and specialists. The book reprints his essays written over the period 2004-2012, with some added commentary in hindsight.

My guess is that a decade from now Wallison will look better than Geithner. In particular, I think that Wallison will be vindicated on the following points:

1. Freddie Mac and Fannie Mae lowered their lending standards considerably during the housing bubble, under political pressure. On p. 169, Wallison quotes from Fannie Mae’s 10K disclosure form for 2006:

We have made, and continue to make, significant adjustments to our mortgage sourcing and purchase strategies in an effort to meet HUD’s increased housing goals and new subgoals. These strategies include entering into some purchase and securitization transactions with lower expected economic returns than our typical transactions. We have also relaxed our underwriting criteria to obtain goals-qualifying mortgage loans and increased our investments in higher-risk mortgage loan products that are more likely to serve the borrowers targeted by HUD’s goals and subgoals, which could increase our credit losses. [emphasis added]

2. As a result, Freddie and Fannie purchased large amounts of high-risk mortgages, helping to fuel the housing bubble.

3. Dodd-Frank was enacted in order to enshrine a narrative of the financial crisis. That narrative attributes the crisis primarily to predatory lending and to financial deregulation.

4. The narrative enshrined in Dodd-Frank is false. Predatory lending was a minor factor, especially relative to government housing goals. There are few actual examples of financial deregulation, and the examples most often cited (such as the repeal of portions of Glass-Steagall) had little or no bearing on the crisis.

5. The most significant impact of Dodd-Frank is to entrench the largest banks, as they benefit from their status of “too big do fail.”

Incidentally, Wallison probably would disagree with me that we should go so far as to break up the big banks.

Wallison calmly presents evidence. His enemies would do well to try to do the same.

Where are the Macroeconomic Bulls?

Bill McBride writes,

the 780 thousand housing starts in 2012 were the fourth lowest on an annual basis since the Census Bureau started tracking starts in 1959. Starts averaged 1.5 million per year from 1959 through 2000. Demographics and household formation suggests starts will return to close to that level over the next few years. That means starts will come close to doubling from the 2012 level.

Residential investment and housing starts are usually the best leading indicator for economy, so this suggests the economy will continue to grow over the next couple of years.

Another area of pent-up demand is the auto sector. How many cars would have to be sold over the next two years to reduce the average age of the U.S. auto stock from 11 years to 7 years? Is 7 years even too old?

The “oil tax” is going down. Even if the price of oil does not decline, the U.S. is becoming more of a producer and less of a net consumer.

If you think that the depressed economy was caused by weak private-sector balance sheets and de-leveraging, then, as McBride points out, our troubles are over. Also, the stock market has trended up since 2008.

It seems to me that more macroeconomists should share McBride’s bullishness. If you think that the economic activity consists of spending, then all signs point to a surge in spending over the next two years.

At a place like the Fed or CBO, I can imagine that few people want to forecast an economic surge. Calling a turning point in the economy is hard. It is much safer to project a continuation along recent trends, and then to revise your forecast when it becomes clear that the trend has changed. Also, the bulls of 2009 and 2010 must be feeling sheepish today, leaving the bears with more clout in the room.

I do not believe in the “economic activity = spending” mainstream view. The PSST model does not make me either bullish or bearish at this point. I would forecast something like normal growth in real output, say 3 percent, over the next two years. That should make me a pessimistic outlier, because the mainstream economists should be forecasting at least 5 percent real economic growth over the same period. But apparently not:

In a survey of economists the Federal Reserve Bank of Philadelphia conducted in the fourth quarter, individual forecasts for the change in gross domestic product from the end of 2012 to the end of 2013 were unusually clumped around the average forecast of a 2.3% gain. The forecast at the top of the 25th percentile—that is, a pessimistic outlook in which three-quarters of forecasts were higher—was for a 2.1% increase in GDP. The forecast at the 75th percentile, or the optimistic camp in which just a quarter of forecasts were higher, called for a 2.5% gain.

David Brooks on Inequality

He writes,

Decade after decade, smart and educated people flock away from Merced, Calif., Yuma, Ariz., Flint, Mich., and Vineland, N.J. In those places, less than 15 percent of the residents have college degrees. They flock to Washington, Boston, San Jose, Raleigh-Durham and San Francisco. In those places, nearly 50 percent of the residents have college degrees.

He cites the under-appreciated Enrico Moretti. Read the entire column. I agree with it, particularly his conclusion. However, does the relative strength of Texas in recent years undermine the model in which highly-educated elites flock to Blue locations?