This post is adapted from something I wrote in an email exchange with Jeffrey Friedman.
Consider two questions we can ask someone about policy knowledge.
1. Does an ordinary citizen know enough about policy area X so that you can say that things would be much better if an ordinary citizen were in charge of X?
2. Do experts know enough about policy area X so that you can say that things would be much better if they were in charge of X?
There are four possible answers: yes to both; no to both; yes to 1 but no to 2; no to 1 but yes to 2.
Yes to both is the progressive reformer quadrant. The claim is that we all know how to fix policy, but we have to overcome evil people by reforming the system.
Yes to 1 and no to 2 is the populist quadrant. Think of Trump supporters and policy area X is immigration. Or Bernie Sanders supporters who don’t believe the technocrats who say that we can’t afford free health care and free college for all.
Yes to 2 and no to 1 is the technocracy quadrant. You will find most mainstream economists here.
No to both is the skeptical quadrant. One example of a policy area in which many people can at least relate to the skeptical quadrant is “bringing peace between Israelis and Arabs.”
One thing to note is that you do not have to be in the same quadrant on every policy area. I am in the skeptical quadrant when it comes to most areas of economic policy, particularly macroeconomic management. Jeffrey and I are in the same quadrant, and perhaps not surprisingly we both champion exit over voice.
However, for me there are some exceptions. For example, I am relatively populist when it comes to breaking up the largest banks. I am in the technocracy quadrant when it comes to military operations or urban sanitation. I am not much in the progressive reformer quadrant. Perhaps the area where I come closest is housing finance policy. I see American housing finance policy as dominated by a conspiracy of interest groups, and I could see us being better off if policy were controlled by politically independent technocrats or even by ordinary citizens.
Rather than “an ordinary citizen”, isn’t the relevant alternative, “the collective knowledge of all ordinary citizens, weighted by individual familiarity with a particular circumstance”?
One thing it’s important to note is that it’s hard for ordinary citizens to evaluate #2. Just how good are our experts? On technical subjects, it’s hard to tell, which unfortunately opens the door to charlatans posing as experts or to genuine experts disclaiming on topics they have no real knowledge of. Thus you get, as you noted a few days ago, people like Paul Krugman uttering magic phrases like “zero bound” or “liquidity trap” and people treat him like some sort of prophet. The GDP Whisperer, you might call him, for the role he plays in public policy debates. With that in mind, I think skepticism on #2 should be the default. But then, it should probably be the default for #1, too, for obvious reasons.
Oh my god I want to steal that “GDP Whisperer” line.
Thanks, I was rather proud of myself for coming up with it.
We do indeed have an expert problem.
1. Nassim Nicholas Taleb remarked that “Some fields don’t have experts.” It’s in _The Black Swan_, somewhere. He says that it’s easier to become an expert on things that don’t move under their own volition (soils, bridges, machinery). People are harder. I think Taleb quotes the Hollywood guy who said “Nobody knows anything”, on the ability of anybody to predict the success of new movies.
2. Below is a link to a West Hunter post of a few years ago. It’s worth reading once a month until it really sinks in.
https://westhunt.wordpress.com/2014/10/20/the-experts/
A few other things that popped into my head.
1. Robert Conquest’s first law, “Everyone is conservative about the things he knows best” may have some traction here. An implication might be that it is easier to be an optimistic and enthusiastic reformer as you have less direct experience of long duration with something. This could actually be expressed in functional notation.
2. Paul Meehl’s “disturbing little book,” as he called it. He found that many clinicians predictions were worse than a cold blooded (and cheaper!) statistical model. I’ve never read the book–learned of it from _Thinking: Fast and Slow_.
Paul E. Meehl (new edition 2013) Clinical versus Statistical Prediction. Echo Point Books & Media,
I am extremely skeptical of anyone’s ability to properly bin the groupings.
I have sympathy for your post in general, so don’t take this the wrong way.
With housing I worry about experts because I’ve seen their effects first hand. For instance, my co-worker had his neighborhood designated for some section 8 and that was devastating. We know that Obama has worked to vastly expanded section 8 type efforts and purposely targeted middle class communities.
Interfluidity had a piece on this that, while it has its flaws, notes something very basic:
http://www.interfluidity.com/v2/6487.html
Namely, the places with the worst housing prices are those on the coasts with bad geography. Prices have been rising ever since the easy to fill-in virgin land dry-ed up. The inland great centralization cities don’t just have easier zoning regs because they are full of non-NIMBY’s, but because there is just a bunch of land everywhere to fill in as far as the eye can see.
“To stabilize real rents at their current, absurdly unaffordable level, Fischer finds that the number of housing units would have to increase in real terms by 1.5% per year, holding other factors constant. [*] So, is it plausible that San Francisco could build its way out of its housing crisis? As Fischer notes, that would imply a unit growth rate more than 3 times the average rate since 1975.”
“The last time San Francisco achieved a unit growth rate of 1.5% was in… 1941. So many decades of NIMBYs! What was really different about 1941 compared to now? No exclusionary zoning regs? No pesky environmentalists? Maybe! But perhaps a more parsimonious explanation is the one that Fischer himself gives.
From 1935 to 1943, the Central Sunset and Parkmerced filled in. From 1944 to 1954, the Outer Sunset and Ocean View were built. And that was essentially the end of the easily developed greenfield housing.
In the history of San Francisco, 1.5% unit growth has never been achieved via “infill” development of an already occupied peninsula. There was a brief boom that managed a few years of 1% to 1.3% growth in the mid-1960s, but during that period developers “still could fill in the hillsides of Twin Peaks and above O’Shaughnessy Boulevard.” After that, the vacant land was gone. From 1967 to the present, the city managed a growth rate of more than 0.5% in barely one third of years (17 years out of the 48 from 1967 through 2014, when the data ends.) During the post-greenfield, post-1967 period, which years were best? Was it during the good old days before “homevoters” shut down the “growth machine” with their exclusionary zoning laws? No. The best years of the post-1967 period in terms of unit growth were 2008-2009, and then again in 2014 (the most recent year in Fischer’s data). No year exceeded 1% unit growth. But 2009 and 2014 did achieve a remarkable 0.9%.”
So maybe NIMBY’s are a problem, but they aren’t THE problem. Meanwhile, we know that abuses take place when you give government power over property. Besides the obvious example of section 8-ing in some thugs, there is the very first case that got me studying constitutional law:
Kelo v. City of New London
They seized people’s houses because the experts thought they knew better. How did it end:
“In spite of repeated efforts, the redeveloper (who stood to get a 91-acre (370,000 m2) waterfront tract of land for $1 per year) was unable to obtain financing, and the redevelopment project was abandoned. As of the beginning of 2010, the original Kelo property was a vacant lot, generating no tax revenue for the city.[2] In the aftermath of 2011’s Hurricane Irene, the now-closed New London redevelopment area was turned into a dump for storm debris such as tree branches and other vegetation.[13] As of February 2014, it was still vacant.[14][15]
Pfizer, whose employees were supposed to be the clientele of the Fort Trumbull redevelopment project, completed its merger with Wyeth, resulting in a consolidation of research facilities of the two companies. Pfizer chose to retain the Groton campus on the east side of the Thames River, closing its New London facility in late 2010 with a loss of over 1000 jobs. That coincided with the expiration of tax breaks on the New London site that would have increased Pfizer’s property tax bill by almost 400 percent.[16][17]”
“The final cost to the city and state for the purchase and bulldozing of the formerly privately held property was $78 million.[19] The promised 3,169 new jobs and $1.2 million a year in tax revenues had not materialized. As of 2014 the area remains an empty lot.[20]”
“The inland great centralization cities don’t just have easier zoning regs because they are full of non-NIMBY’s, but because there is just a bunch of land everywhere to fill in as far as the eye can see.”
Creates positional goods which are regulated to be protected. Its the hills and the river and ocean fronts which are key, not an alleged shortage of land.
How could average citizen participate in macroeconomic management?