Monthly Archives: February 2016

Anti-market Bias on Campus

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Check out the 2016 conference about entrepreneurship at Swarthmore College.

When the conference was initiated in 2003, I think that the idea was to expose students to the world of business. Over the years, it seems to have degenerated into another exercise in expressing anti-market ideology. I wonder how the donors would feel about a conference devoted to debating the issue of

companies reconceiving their products and markets to address unmet social needs, redefining productivity in their value chain to build in environmental and societal gains, and working strategically to build local clusters of development within regions and communities to support the overall skills set and competitiveness

(and that is the pro-market side!)

I think it is pretty common for philantropists to throw money at colleges and universities to try to encourage positive thoughts toward business and markets. My guess is that in most cases the results backfire.

I believe that it is a worthwhile goal to seek to raise the status of capitalism and of profit-seeking enterprises. But I am not sure that the best way to address the anti-market bias on campus is to put your philanthropic dollars there.

Another Way to Approach the Capitalism vs. Socialism Debate

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Rather than use the terms capitalism and socialism, formulate the question by making two statements:

(1) When it comes to X, the market tends to create the problem and government offers the best solution.

(2) When it comes to X, government tends to create the problem and the market offers the best solution.

X could be health care, or poverty, or unfair economic advantages, or environmental sustainability, or banking crises, or what have you. I think that people will tend to align on one side or the other, and you don’t need to define “capitalism” or “socialism” to describe their disagreement.

What do Economists in Government Do?

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Referring to the Council of Economic Advisers, John Cochrane writes,

One of its most important and least appreciated roles is just to stop silly stuff.

1. An interesting question is whether economists’ ability to do this is rising or falling.

2. One of the worst economic policies I can remember is Nixon’s wage and price controls. That was “silly stuff” that was dreamed up by economists.

3. Although he was not going to say so in public, Martin Feldstein at CEA probably would have classified President Reagan’s tax cuts as “silly stuff.” Was Feldstein right? Was he ineffective?

4. Alex Tabarrok points to a letter from former CEA chairs under Democrats questioning Bernie Sanders’ arithmetic. Steven Randy Waldman explains why he does not care.

I am for Bernie. I am not against Hillary. But just as it’s foolish to say that Democrats and Republicans are “all the same” because they are both corporatist parties, it is foolish to claim that Bernie and Hillary do not represent meaningfully different interests and values. I’ll enthusiastically support either Bernie or Hillary over a Jeb Bush, Marco Rubio, Ted Cruz, or Donald Trump. But it is Bernie Sanders who is for me, and I’m supporting him without apology. If your interests and values are my interests and values, I hope that you do too.

Read his comments on the role of wonks.

Yuval Levin’s Forthcoming Book

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It is called The Fractured Republic: Renewing America’s Social Contract in the Age of Individualism. I just received an advance copy, and it went straight to the top of my queue. It is due out May 24, which means that I will probably have written a review three months earlier. No point in publishing a review so early, of course.

Meanwhile, here is a quote from the middle of the last chapter (I started reading the book at the last chapter, and then I’ll go back and read the rest).

Our highly individualist, liberationist ideal of liberty is possible only because we presuppose the existence of a human being and citizen capable of handling a remarkably high degree of freedom and responsibility. We do not often enough reflect on how extraordinary it is that our society actually contains such people. . .

liberty arises when we want to do more or less what we ought to do, so that the moral law, the civil law, and our own will are largely in alignment, and choice and obligation point in the same direction. . .

It requires a commitment precisely to the formative social and cultural institutions that we have seen pulled apart from above and below in our age of fracture. They are where human beings become free men and women ready to govern themselves.

If you are familiar with his thinking, then you can predict that he will proceed to extol the virtues of civil society. If Yuval Levin were sitting in front of a caricaturist, I would tell the artist to draw Levin carrying around a hammer labeled “Burke’s ‘little platoons'” and seeing nails everywhere.

You also can predict that his writing will be clear, insightful, and persuasive. Above all, Levin exemplifies being charitable to those who disagree, without stooping to Brooksian obsequy. This is about as harsh as he gets:

In domestic affairs, the power of the executive branch is now wielded out of the White House to a greater degree than at any point in our history, not only because of President Obama’s distinctly belligerent overreaching, but because of the efforts of presidents (and the willing collusion of Congresses) of both parties over several decades.

Redefining Capitalism and Socialism

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Challenge: Define capitalism and socialism in ways that are not ideologically loaded.

People on the left are inclined to define capitalism in ways that are negative, emphasizing greed and exploitation. They are inclined to define socialism in ways that are positive, emphasizing fairness and community.

People on the right are inclined to define socialism in ways that are negative, emphasizing tyranny and inefficiency. They are inclined to define capitalism in ways that are positive, emphasizing freedom and innovation.

Is it possible to come up with definitions that would be agreeable to both sides? Here is my attempt:

Capitalism is the term that we use to mean a system in which economic decisions are decentralized, with prices and profits serving to coordinate production and guide the evolution of economic activity.

Socialism is the term that we use to mean a system in which the results that would arise from decentralized markets are significantly altered by collective action. In representative democracies, this collective action is undertaken by government officials, who are subject to periodic judgment from the voting public. Under non-democratic systems, this collective action is undertaken by government officials without giving the public a meaningful electoral voice.

In this formulation, the phrase “significantly altered” is the question-begger. Depending on where you set that bar, the proportion of socialist countries in the world could be anywhere from a handful to 100 percent.

In fact, I think that we are better off without a binary classification system. I believe that there is conflict between those of us who want fewer outcomes altered by collective action and those on the other side who want more outcomes altered by collective action.

Is Housing Regulation the Fifth Force?

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Joel Kotkin writes,

High housing prices are also rapidly remaking America’s regional geography. Even areas with strong economies but ultra-high prices are not attracting new domestic migrants. One reason is soaring rents: According to Zillow, for workers between 22 and 34, rent costs claim upwards of 45 percent of income in Los Angeles, San Francisco, New York, and Miami compared to less than 30 percent of income in cities like Dallas and Houston. The costs of purchasing a house are even more lopsided: In Los Angeles and the Bay Area, a monthly mortgage takes, on average, close to 40 percent of income, compared to 15 percent nationally.

Read the whole thing. Nearly every paragraph has something I could have excerpted.

Ryan Avent, Matt Yglesias, and Matt Rognlie have already each made a point that a lot of wealth disparities in the U.S. economy can be traced to the real estate market. Avent and Yglesias have made zoning regulations an issue.

I have instead focused on what I call the four forces: New Commanding Heights of health care and education; bifurcated family patterns; globalization; and the Internet. Maybe real estate regulation is a fifth force?

My question would be how much real estate regulation has changed over the past fifty years. If zoning regulation has only gradually changed, then it would not be a fifth force.

Ed Kane on Financial Regulation

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The headline on the interview is confusing, but his remarks are not.

She [Hillary Clinton] goes part way toward Senator Sanders in proposing to give regulators more power to break up financial firms. But federal regulators have a lot of authority already. The key is to give them the incentive to use that authority. When a bank is in distress, fear of disrupting the system becomes their dominant concern.

Pointer from Mark Thoma. Kane has been around for a long time, and he has been for right for a long time. In the 1980s, he was among those warning about the weakness of capital requirements and the political power of big banks. The fact that his warnings today are similar tells you that Dodd-Frank and other responses to the financial crisis were not sufficient.

The Charitable Deduction

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Jeremy Horpedahl writes,

the benefits to society are not clear from this tax deduction, and many of the benefits of charitable activities flow to private groups and individuals

Most taxpayers would be better served by eliminating the charitable contributions deduction and using the additional revenue to lower tax rates.

You know that I am not at all a fan of non-profits. Still, I personally make maximum use of the charitable deduction. I see it as enabling me to choose how to spend money, rather than handing it to the government.

So I have mixed feelings about this. If the consequence of eliminating the charitable deduction would indeed by “lower tax rates,” then fine. But if it means that the political class has even more resources to allocate, then no.

David Brooks Sends a Valentine

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He sent it on Tuesday, to President Obama.

Obama radiates an ethos of integrity, humanity, good manners and elegance that I’m beginning to miss, and that I suspect we will all miss a bit, regardless of who replaces him.

Tyler Cowen said that he agrees with the column.

I find myself feeling less charitable.

Brooks claims that the Obama Administration was scandal-free. I think it was more of a case that the mainstream press had his back. Could George Bush have survived the IRS scandal? Could Ronald Reagan have gotten away with choosing not to enforce immigration laws?

Brooks claims that President Obama “grasps the reality of the situation” in the Middle East. Certainly there are plenty of delusions that President Obama does not hold. I think he is right to be skeptical about how well military intervention would work out. But he appears to be stuck in a very sophomoric delusion, which is that virtue-signaling constitutes an effective foreign policy.

Brooks credits President Obama with listening to other points of view and having good manners. I don’t think he shows any real understanding of or good manners toward those who disagree with him about the relative merits of markets and government or about the relative merits of civilization-barbarism vs. oppressor-oppressed in describing the conflict involving radical Islam.

We certainly can do worse than President Obama. No one should be surprised if the next President turns out to make a lot of mistakes and to have major intellectual and moral defects. But any comparison with President Obama should be based on the reality, not Brooks’ air-brushed portrait.

What Students Actually Are Told to Read

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Peter Berkowitz writes,

The books that dominate are “recent, trendy, and unchallenging.” Racism has been the most popular subject the last two years. Many books feature adolescent protagonists. Works dealing with immigration and environmentalism or, to use the trendier term, sustainability, were featured frequently. Several colleges selected works about transgender identity. Books about military and diplomatic history, particularly ones that depict valor on the battlefield and prudence and statesmanship in government, are rare.

To me, the lesson from the typical recommended reading list is one of dogmatic conformity. If you go back to my list, I think you will find a lot more diversity. My goal is to stimulate someone to think, not to drive home a particular set of beliefs.