What I’m Re-reading

Violence and Social Orders, by North, Weingast, and Wallis. A major theme is that there are natural states, or limited-access orders, in which only a minority of the population enjoys political rights and economic opportunity. One quote:

One of the principal institutional issues that emerged in this chapter concerned the problems of constraining personality: putting the king under the law. At the level of societies, the head of the dominant coalition–whether the pope or the Catholic Church, the emperor of Rome, or the king of a European state–reflects the realities of these natural states: the ruler is often above the law. This allows him or her to adjust the rules, privileges, rights, and laws to suit the needs of the coalition as the fortunes of various elites rise and fall. Elites gaining power must be granted more privileges and rents while those losing power also lose privileges and rents. The rules is not free to make these decisions at his discretion, but must instead attempt to maintain a coalition to support the natural state. Failure to do so risks coups, civil war, and other forms of disorder.

In an open-access order, where essentially all adults have political rights and economic opportunity, the challenge of bringing the head of state under the law has presumably been met. Sometimes, I am not so sure.

Also, consider another quote:

Party competition forces parties to compromise and to moderate interest group and constituency demands. Rent-creation cannot be the primary product of party competition in open-access orders. . .Because parties need to gain the support of many interests, they must temper the (rent-creating) demands of each, lest the associated extreme positions hinder the party’s electoral prospects.

If the authors are not careful, they will seem to have explained why the sugar lobby and the real estate lobby are ineffective in the U.S. and why the teachers’ union is ineffective in Maryland. They will have explained why we have such a simple tax code, and why it is so easy for unlicensed health care providers and unaccredited schools to gain traction.

. . .the interests active on any issue are endogenous. If a group attempts to extract too much, then other groups who are not normally active on an issue are likely to begin paying attention and become active. . .The endogenous approach suggests that a few open access order markets might be cartelized and protected, such as agriculture, and certain markets regulated to produce rents, such as airlines in mid-century United States. However, these markets are the exception, not the rule.

They wish to claim that rent-preservation is the essence of limited-access orders, but it is incidental and held in check under open-access orders. Perhaps they could cite Uber’s so-far successful breakthrough into the transportation market as an example in which the open-access order was able to activate enough support for Uber to prevent its destruction by incumbent taxi companies.

However, reading these passages, I found myself inclined to disagree with the authors. I tend to give more credit to the power of interest groups and less credit to the ability of the open-access order to confine rent-seeking. I think of the sugar lobby, the housing lobby, the teachers’ union in Maryland, occupational licensing in health care, . . .But to the authors’ point, the size of these rents probably is dwarfed by the size of entitlements, which are policies directed at the broader public. And yes, they will make a frontal assault on the Olson-Downs view that special interests always win.

Exit, Voice, and Technocracy

Tim Harford writes,

several economists suggested structures that would put decision making at arm’s length from politicians, delegating it to technocrats with the expertise and incentives to do what is right for Britain.

He reports on interviews he had with several mainstream economists. Pointer from Mark Thoma.

What this tells you is that mainstream economists distrust voice (the political process), as I do. However, for mainstream economists, the preferred alternative is fantasy despotism, with technocrats in the role of despots. For me, the preferred alternative is exit, with people given more opportunities to choose among different governing bodies. See the widely-unread Unchecked and Unbalanced.

The Case for Taxing College Endowments

Jorge Klor de Alva and Mark Schneider make the argument.

many of the richest universities in the country–sitting on hundreds of millions, if not billions, of dollars in tax exempt endowments, and garnering tens of millions of dollars of tax deductible gifts every year–receive government subsidies through current tax laws that dwarf anything received by public colleges and universities, institutions that educate the majority of the nation’s low- and middle-class students. For example, we estimate that in 2013, Princeton University’s tax-exempt status generated more than $100,000 per full-time equivalent student in taxpayer subsidies, compared to around $12,000 per student at Rutgers
University (the state flagship)

However, the flaw is not that rich educational institutions benefit more than other educational institutions from tax exemptions. The flaw is that our tax system has designated certain institutions as morally superior to others because they claim non-profit status.

The essay that I wrote on this topic is one of my favorites.

Other tax issues might be moot if instead of taxing income or profits we shifted to a tax on the consumption of goods and services. Such a tax system would place profit-seeking firms and nonprofits on an equal footing. It would continue to exempt donations from tax, but it would equally exempt other forms of saving and investment.

Elizabeth Anderson Podcast

I was uncharitable to her here. I was wrong and I apologize. I listened to some of a podcast that Aaron Powell and Trevor Burrus did with her. I was impressed by her command of the intellectual history of egalitarianism.

Nonetheless, I still think that she too readily equates working for a firm with being a slave. If you were a skilled craftsman and did not want to work for a big factory, you could still ply your craft. If you chose to work in the factory, it was because you could earn more in the factory than as an independent craftsman. Which in turn means that you are more valuable to society in the factory than on your own.

Today, nobody is forced to work at a low-wage employer. If you feel sorry for people who work for a low-wage employer and you want to donate money to them, you have my blessing. If you want to force the rest of us as taxpayers to donate money to them, then you are in good company, even among some of us who call ourselves libertarians (the bleeding-heart variety). But if your approach is to force the employer to become a high-wage employer, then I do not think much of your philosophy.

Conservatarian Dilemmas 3: Israel

This is my third and final post prompted by the dialogue between Nick Gillespie and Charles C.W. Cooke. The issue is foreign policy, and although they did not discuss Israel, I think that it is about that country that conservatives and libertarians get most confrontational–and uncharitable–with one another.

Conservatives want a strong national defense, and some libertarians (seemingly including Gillespie) are ok with that. However, conservatives often want to intervene in this barbarous world, and libertarians are against intervention.

One libertarian argument against interventionism is that the U.S. government that is our agent to perform such intervention is the same flawed, bumbling entity whose intervention in domestic affairs we fear. Cooke concedes that point. However, he does not regard it as a decisive argument against any and all intervention.

There are more than a few libertarians whose vehemence against Israel makes it difficult for me to picture them joining a conservatarian coalition. The most charitable interpretation that I can come up with for the libertarian antipathy toward Israel is the following:

American libertarians are anti-interventionist. Israel is a country that wants America to intervene in ways to protect its interests. America has sometimes (often?) done so. Without Israel there would be less American intervention, and because of that Israel deserves to be singled out for opprobrium.

The conservative view might be the following:

Israel’s and America’s interests generally align. Along the civilization vs. barbarism axis, Israel is far more civilized than its enemies. American intervention is constructive and appropriate.

Some libertarians and progressives blame Israel for the costly, counter-productive attempt to force democracy on Iraq. I think it is unfair to hold Israel responsible. While some Israelis, notably Natan Sharansky, indeed were keen on spreading democracy, his views were much more popular in the U.S. than in Israel. Faith in democracy as a solution to the problems in the Middle East is as American as apple pie. If anything, President Obama took that faith even farther than President Bush.

My own feelings about Israel are similar to those expressed by George Gilder in The Israel Test, which I wrote about a couple years ago. Gilder sees hostility to Israel as reflecting a dislike for dynamism and entrepreneurial success. Progressives can seem nostalgic for the socialist poverty that Israelis shared before the liberalizations that took place over the past 30 years or so.

For some American Christian conservatives, support for Israel has a religious basis that is off-putting to more secular people (and to many Jews). Otherwise, I think that American support for Israel among conservatives is based more on Israel’s circumstances than on its diplomacy or lobbying. If there were as many medieval fanatics surrounding Singapore or Switzerland, my guess is that the conservatives who see America as the Indispensable Nation would want us to be heavily involved in those areas as well.

Another possible argument for leaning against Israel is that one should do so in order to counter Jewish political pressure. However, my sense is that most Jews feel a stronger affinity to the cause of progressivism than to Israel’s government, particularly with a conservative at its head.

Yes, there are American Jews who advocate for the U.S. to pursue hawkish policies in the Middle East, but they are far outnumbered by other American Jews who loathe the hawks. My guess is that if Binyamin Netanyahu wanted to get into a popularity contest in America with Barack Obama, he would do better if American Jews were excluded from taking part in the poll.

Finally, I have to say that I have concluded that this is a topic on which people have a hard time disagreeing with one another charitably. If you (or I) want to voice an opinion on Israel in order to vent, then fine. But you (or I) should not expect that someone’s mind is going to change as a result. Instead, expect an uncharitable response.

While I expressed some of my views on Israel, they are beside the main point, and feel free to ignore them. The main point in this post is simply the observation that Israel profoundly divides conservatives from a significant group of libertarians. If you disagree with that, or you think that the divide is caused by something I have not mentioned, then by all means weigh in.

Conservatarian Dilemmas 2: Social Issues

This is the second of three posts inspired in part by the dialogue between Nick Gillespie and Charles C.W. Cooke. The social issues that I have in mind are drugs, abortion, and gay marriage. Some thoughts.

From the civilization-barbarism perspective, one may oppose legalizing marijuana, abortion, and gay marriage to the extent that one believes that civilization depends on, or at least is enhanced by, restrictions against these. However, that is not Cooke’s conservatarian position. He instead favors allowing different communities to adopt different policies. My thoughts:

1. From the freedom-coercion perspective, I see Cooke as trying to argue for a (local) “freedom to coerce.” As a general rule, this is problematic. In fact, the controversy over Indiana’s religious freedom law (or “religious freedom” law, to those who oppose it) may be an illustration of the difficulties with this approach.

During the battle over civil rights, Barry Goldwater applied federalism to argue for states’ rights to impose Jim Crow laws. Milton Friedman argued that businesses should be allowed to engage in discrimination. Today, most Americans believe that Federal coercion to prevent racial discrimination is a good thing, and Cooke supports this consensus.

2. Some conservatives try to appeal to libertarians by arguing that progressive social policies are coercive. For example, a businessman who opposes abortion can be forced to pay for health insurance that in turn pays for abortions of employees. The libertarian counter is that the wrong involved here is not that the businessman is forced to pay for abortions but that he is forced to pay for health insurance.

3. Another conservative line is that without traditional family values, people will become degenerate and thus dependent on the government, leading to bigger government. Call this the David Brooks argument. My own view, as readers of this blog (particularly the posts under the category “Four forces watch”) know, is that bifurcated family patterns are unlikely to be altered by government action.

4. The elephant in the room here is religion and voters who are motivated by it. Just the other day, I saw a full-page ad in the Washington Post using biblical imagery to argue against legalization of gay marriage. There is a long tradition of conservative politicians (and, for that matter, progressive politicians) who are not themselves committed to religious beliefs wanting to appeal to voters who are.

5. Should a baker who is opposed to gay marriage have the right to refuse to sell a wedding cake to a gay couple? I think that the most appropriate libertarian answer is to say that the baker should have such a right. But it seems to me that if you open the door to a right to discriminate, then racists can use that door. On the other hand, if you say that government should be able to force a baker to do business with an unwanted customer, does that mean that government also should be able to force a customer to do business with an unwanted baker?

My preferred society would be one in which (a) there is sufficient market competition so that if you are discriminated against by x you can easily obtain what you want somewhere else. The government has to get involved only if discrimination is pervasive; and (b) religious values are enforced within religious organizations only. If you violate the beliefs of your religion, you can be excommunicated by that religion, but otherwise you should not suffer.

I do not think that this solves the conservatarian dilemma on social issues, but it’s my best shot.

Conservatarian Dilemmas 1: Immigration

This is the first of a series of three posts, inspired by several things, but primarily by a dialogue between Nick Gillespie and Charles C.W. Cooke. I will be referring to the three-axis model, as described in my e-book The Three Languages of Politics.

The libertarian argument against immigration restrictions is that they restrict personal choice in a very fundamental way. Along the freedom-vs-coercion axis, immigration restrictions are prima facie coercive.

The conservative counter is that immigrants bring a culture of dependency and support for populist demagogues. Thus, unrestricted immigration, or even loose immigration, will end up undermining America’s commitment to liberty.

One libertarian rejoinder is to argue that, empirically, immigrants value liberty. [UPDATE: For an example, see this Cato paper.] A conservative rejoinder might be to point out that progressives are salivating at the prospect of seeing more immigrant voters, and this is not because progressives expect these voters to value liberty.

Another libertarian counter would be that restricting immigration in order to preserve liberty creates too much dissonance between ends and means. If you are for liberty, then you should be for liberty, period. Fight the battle against dependency and demagoguery by arguing against those phenomena, not by restricting the liberty of people to choose where they live.

I am inclined to go with this latter view. Also, I am not worried so much about how immigrants vote. If a libertarian society is to emerge, it is likely to result from exit rather than voice.

Don Boudreaux on Exit and Voice

He writes that it is a “weird notion” to believe

that if each individual can, on his or her own, choose which offerings of private businesses to accept and which to reject, and all without having to coordinate these choices with other individuals, people are slaves to corporations – but that individuals regain their freedom and dignity only by voting to use government power to regulate businesses, with every individual forced to abide by the ‘will’ of the majority.

By the way, there is a web site called Voice and Exit, which may represent an interesting libertarian-ish movement, but the web site seems to have been designed by stoners. I just can’t penetrate it.

Housing Policy: A Civilized Approach

Joe Gyourko writes,

They should begin by completely phasing out the FHA over some clearly defined period (for example, three to five years) and replacing it with a new subsidy program that would help the two types of households the agency is meant to serve. The new program would help prospective homebuyers amass a 10% down payment that would then allow them to obtain financing at market rates from private lenders. This could be done through a simple system in which qualified households pay into a special savings vehicle and receive some type of match from the government. These funds would accumulate on a tax-free basis until they were large enough to provide a 10% down payment on a home.

On the civilization vs. barbarism axis, this would encourage saving and responsible behavior. If you read the whole article, you will see reinforcement for this. Of course, along the oppressor-oppressed axis, the only thing holding back people from owning homes is oppression, so there is no need for requiring a down payment.

Of course, what matters here is a different axis entirely. The real estate lobby vs. everybody else. And from that perspective, Gyourko’s sensible proposal does not stand a chance. Another indication of the political impossibility of this approach is that it is one that I have long advocated.

Is Voice the Answer?

In a symposium on libertarian strategy, Jim Powell writes,

Libertarian ideas are unlikely to prevail until we get to stage three. That stage involves a peaceful mass movement to mobilize large numbers of people to pressure politicians to support liberty by enacting some laws and repealing others. A peaceful mass movement is basically what you can do in a democracy when politicians fail to respond to demands.

I am not signing that petition. To me, voice is the problem, not the solution. I prefer libertarian strategies that focus on lowering the cost of exit.

Pointer to the symposium from Alberto Mingardi, who takes a more tolerant view. He writes,

any successful strategy to change the minds of people needs different actors: pluralism, in a sense. it is not just that a “monistic” approach won’t be very libertarian, but you do actually need different kinds of people and lines of effort if you hope to have success.