Culture and Institutions

Bryan Caplan writes,

Simple economics implies that government enterprises should be far worse than they really are.

I am reading (admittedly a bit late to the party) Peter T. Leeson’s collection of essays on anarchy. In at least one of the essays, he takes the view that the cultural margin is more important than the institutional margin. That is, he seems to be saying that there are no societies in which anarchy will work well but government would work poorly, or vice-versa. Instead, on the one hand there are well-developed cultures, which could have good government or good anarchy, while on the other hand there are poorly-developed cultures, which could have only bad government or bad anarchy.

I have referred often to the debate about the relative primacy of culture and institutions. I tend to side with the culturalists. The classic institutionalist counter-example is Korea. I think that it is reasonable to suggest that North Korea would be much improved under anarchy. But in general, I think that Leeson’s view, which I take to be one of cultural primacy, holds.

WSJ on Boettke

A nice article (you may have to use Google News to view it).

the 50-year-old professor of economics at George Mason University in Virginia is emerging as the intellectual standard-bearer for the Austrian school of economics that opposes government intervention in markets and decries federal spending to prop up demand during times of crisis. Mr. Boettke, whose latest research explores people’s ability to self-regulate, also is minting a new generation of disciples who are spreading the Austrian approach throughout academia, where it had long been left for dead.

The Pew Quiz on Political Typology

I found it repetitive and unsatisfying. Thanks to Mark Perry for the pointer. I thought that the responses that were supposed to be conservative were left-wing stereotypes of conservative views. Not so much the other way. I thought that sometimes small wording nuances that they probably did not notice affected my answers. The difference between “most” and “every” was significant to me, but my guess is they chose those words more casually.

It called me a Business Conservative.

Business Conservatives generally are traditional small-government Republicans. Overwhelming percentages think that government is almost always wasteful and it does too much better left to businesses and individuals. Business Conservatives differ from Steadfast Conservatives in their positive attitudes toward business and in their strong support for Wall Street in particular. Most think that immigrants strengthen the country and take a positive view of U.S. global involvement. As a group, they are less socially conservative than Steadfast Conservatives.

I wonder if they have a libertarian category and I failed to make it there. Otherwise, what they call business conservative may be the closest thing you can get to libertarian within the confines of the survey.

I think that the three-axis model is better. Some people did not care for the quiz in The Three Languages of Politics, but I think it was actually a better quiz than what the Pew people came up with.

Ferguson

A reader writes,

I think Ferguson is a great illustration of your 3 axis model. Would love to read a post of your’s discussing that.

I have been on vacation with only sporadic skimming of news. All I know is that a black resident was shot by a white policeman, and some rioting has ensued. The three-axis model would predict:

–progressives would view the black resident as representing an oppressed class. They would be critical of society’s unjust inequality and racism.

–conservatives would view rioters as representing barbarism. They would be critical of anyone they think encourages rioting.

–libertarians would view the police as representing coercion. They would be critical of police who act as if the unlimited use of force is their prerogative.

Again, I have only been skimming the news. Is that actually how views have been falling out?

Profit vs. Nonprofit

Natalie Scholl writes,

AEI’s Values and Capitalism program just released a new book titled “Entrepreneurship for Human Flourishing.” In it, the authors, Chris Horst and Peter Greer, argue that entrepreneurial businesses, “which sustain productive development long after charitable giving dries up,” are the real engine of true human flourishing. Here, Horst and Greer answer a few questions about the book.

In a number of posts, I have argued that we should raise our estimate of the moral standing of profit-seeking enterprises relative to that of non-profits.

Break up California?

Tim Draper’s proposal.

“It’s important because it will help us create a more responsive, more innovative and more local government, and that ultimately will end up being better for all of Californians,” said Roger Salazar, a spokesman for the campaign. “The idea … is to create six states with responsive local governments – states that are more representative and accountable to their constituents.”

…But the plan has raised bipartisan hackles across the state, and opponents say it stands little chance of gaining voter approval. If it does win the support of voters, it must still be passed by Congress, which opponents say is also unlikely.

This may be the best hope for those of us who want better, less-intrusive government. Governmental institutions need to be broken up into smaller parts, both in size and scope. Narrowing scope means having different units of government for education, transportation, trash collection, etc.

Boudreaux on McCloskey

He writes,

Until the 17th century, those who earned their living through trade were the Rodney Dangerfields of their eras: they got no respect. Merchants and other people operating on the supply side of commercial activities and transactions were tolerated. But they were viewed and spoken of with contempt. Unlike warriors who dirtied their hands honorably (namely, with blood), traders dirtied their hands dishonorably (namely, with profit). Unlike the nobility who got their riches honorably (namely, by idly collecting land rents), merchants got their riches dishonorably (namely, by actively trading). Unlike the clergy who won their rewards honorably (namely, by pondering the eternal), the bourgeoisie won their rewards dishonorably (namely, by responding to what Hayek later called “the particular circumstances of time and place”).

In the same symposium, Joel Mokyr writes,

Corruption is the institutional dog that did not bark. It is perfectly reasonable to think of a hypothetical world in which predatory rent-seeking by a powerful elite could have expropriated the profits of innovative entrepreneurs in the Industrial Revolution, as was traditionally done in the medieval world. Instead, the British aristocrats who ruled the country in the 18th century let the entrepreneurs have their way and pocketed the capital gains on their real estate holdings and the interest on their railway bonds. Organizations such as the rent-seeking monopolies, set up in the age of mercantilism (think of the East India Company or the Bank of England), were either dismantled or turned into public institutions. Slowly but certainly rent-seeking institutions were weakened. By 1850 or so the country was as free of it as any nation had the right to hope for.

How then to think of the “ideas vs. institutions” debate? Oddly enough McCloskey and Acemoglu-Robinson both seem committed to a “one-or-the-other” mode. But it is not so. Institutions rest on beliefs. If we have rules against the sale of narcotics, it is because someone in power believes that such drugs are socially bad. When those beliefs change, the institutions (hopefully) adapt. Adaptiveness requires meta-institutions that can change the rules when beliefs and/or circumstances change. Britain’s great success between 1750 and 1914 rested on the existence of such meta-institutions. When needed, Parliament set up a committee that researched and investigated matters ad nauseam and then changed the rules. Slowly, and perhaps not always quite perfectly, British formal institutions adapted. But the same was true for private-order institutions: the rather sudden rise of country banks in the second half of the 18th century illustrates the high degree of adaptiveness of private-order British institutions

The Case for Skepticism

About a book by sociologist Duncan Watts, I write,

Watts’ book can be regarded as an extended argument in favor of what I might term Epistemological Skepticism about Social Phenomena, or ESSP. Those of us with ESSP believe that we should be skeptical about how much we can know with certainty in the fields known as the social sciences. We may learn things that are true for a majority of cases under specific circumstances. But we are less likely to find perfectly reliable, broadly applicable laws comparable to those found by physicists.

Further Remarks on Nonprofits

I am thinking of the huge nonprofits that are dominant local economic enterprises, like UPMC or Washington U.

1. They are non-profit for tax purposes, but otherwise they behave like businesses. Administrators are well paid. They engage in business strategy, including mergers and expansions.

2. They exploit their non-taxable status, particularly in taking over land. You have a comparative advantage in building on land if you don’t pay real estate taxes.

3. Their CEO’s (or equivalent) have a lot of power, because they are not answerable to customers. I have said many times that a non-profit is like a for-profit except that it must satisfy donors rather than to customers.