From the Comments: Pushback in favor of Brexit

Brandon Christensen Comments, Current Events , , , ,

Dr Stocker‘s recent post arguing against Brexit elicited the following response from Chhay Lin in the ‘comments’ threads, and I think it’s worth highlighting in a post of its own:

Very well explained, Barry Stocker. Although it can be good for Britain to leave the EU, it entirely depends on how they go on from there. I am worried that Britain will move unto the path of less free trade which would be an erosion of the 4 freedoms – free movement of goods, capital, services, and people. On the other hand, it seems to me that the EU was steadily moving toward greater centralization and harmonization of regulations that would decrease the competition between its member states and thereby becoming quite harmful. I think that the EU should have never had greater ambitions than the 4 freedoms with a European Court of Justice that would protect these freedoms. Now they can impose EU-wide tariffs and quotas against products from countries outside of the EU or they can impose EU-wide sanctions. Some harmful examples of the EU: the quotas on cheap Chinese solar panels and EU-wide sanctions against Russia. A wise independent Britain would have free trade agreements with countries within and outside the EU, but I’m afraid that too large a portion of the Leave supporters are hostile to immigration and open markets.

Chhay Lin has written more about Brexit, in Dutch, on his homepage and I do recommend you check it out.

Brexit, free trade, and the EU

Jacques Delacroix Current Events , , , , , ,

I posted this on Facebook twenty hours before the results were known:

The United Kingdom will not leave the EU. If it does, there will be concrete talks of a trade agreement between the UK and the Union within a week. Free trade is the best part of the EU anyway. It may be the only worthwhile part. At least, it undeniably works. The EU has a free trade agreement with Norway and with Switzerland already. I don’t see it denying the UK, not even out of collective pique.

My guess (guess) is that the UK will have done the EU a favor by pointing out that much of the European Union’s bureaucratic, abstract, nebulous project is simply overambitious. The UK taught the world democracy and soccer (football). It can teach its European neighbors pragmatism.

Obviously, I called the referendum wrong. The mistake I made was to guess that people who were going to vote for staying were more likely to lie to pollsters than partisans of Leave. That would have given an underestimate for the “stays.” I should not have called it. I am not inside British culture enough to make this kind of guess. I shouldn’t have. I won’t again.

I am perplexed by some of the comments I heard all day in the US media. Perhaps as a result of a bit of psychological projection, American commentators state that anti-immigration sentiment played the main part in the victory of the “leave.” This may be the case; I don’t know enough to pronounce but I need to make a technical point that the pundits don’t seem to be completely aware of. Leaving the European Union can only lessen the flow of European immigrants into the UK: Polish (plumbers), Romanian carpenters, and tens of thousands of French citizens, at least. Since about one million Brits leave abroad and almost all in the EU, I see an exchange agreement in the making. Don’t you?

Leaving the EU will do nothing or nearly nothing to reduce the intake of immigrants of color and of Muslims. Those landed in the UK and continue to land there as a consequence of past colonial relationships. I say this because I suspect (I suspect; I don’t know) that Brits are more exercised about large numbers of dark-skinned Muslims than they are about fewer dishwater-white Catholic Poles. Call me a cynic!

Second technical point. Many of the American commentators I heard today, including those predicting Armageddon as a result of the British referendum, seem to have vague ideas about what the European Union actually is. It’s actually fairly complicated but I don’t excuse them. If they want to comment, they should do their homework. Anyway, the EU is first and foremost a free trade area and and free investment area. In this capacity, it works very well. I mean by this that any step backward would impoverish all Europeans to some extent.

I don’t see how British industry and British commerce can really face the possibility of meeting with tariff walls and other discriminatory treatments in a market of 27 countries until now wide open to them.

The Brits have two years to finalize their exit. I think (but I have been wrong before; see above) that they will say to the EU: We are leaving except that… we want to be included in your free trade and free investment area, like Iceland and like Norway. As I mentioned above, I also think they will want some mutual arrangement about citizens of the EU living in the UK and citizens of the UK living in the EU. I think there are going to be many rounds of negotiations around the theme: “We are leaving but…” It’s also possible that the most fervent Leave-ers will ultimately be satisfied with having made a rude gesture toward Brussels, the capital of the European Union. I am repeating (in fear this time) my prediction that the British referendum will cause the EU to reform itself. In fact, think it already has.

See also “Protectionism; Free Trade….” It was written for the intelligent uninformed.

A quick note on the Brexit debacle

Brandon Christensen Current Events , , , , , ,

I think Barry (here and here) and Edwin (here and here) have made the best contributions to the debate on the EU and sovereignty here at NOL to date, so I’m just going to add a couple of open-ended thoughts to the recent vote (which I think was a huge mistake).

One of the big theoretical debates over the years concerning the EU is the concept of European-ness and how it can never replace the nationalisms that already exist in each state across the pond. This makes no sense to me, though, especially if you buy the argument (as I do) that nations come and go largely in reaction to current events. German-ness or French-ness or British-ness could easily be subsumed by a European-ness.

I don’t want to be one of those doomsayers who claims that, because things did not go my way, all will be lost. The UK is going to be in for a little bit of hurt, financially, as is the European Union; losing the UK is a big deal, and so is leaving the EU. However, the UK is not exactly Sweden or Germany. The United Kingdom is poorer than Mississippi, the poorest administrative unit in the United States. It’s possible, if a bit unlikely, that the UK will be better placed to negotiate itself back to economic prominence if it doesn’t have to work through the EU to attain some of its goals. The UK has deep connections with a number of states and regions around the world thanks to its now-dead worldwide empire, and I don’t why a more Euroskeptic UK would decide to shun the rest of the world too, especially if the “rest of the world” was once a part of the UK’s empire (the glorious past of the UK seems to be an important talking point for Euroskeptics).

Immigration may not cease either. An irony here is that the Euroskeptics who won rode hard a wave of anti-immigration sentiment sweeping across the UK (and the rest of Europe, too). But it seems to me that, because of the UK’s deep connections to its former imperial provinces, most of the immigrants in the UK are going to be South Asian or Gulf Arab rather than Polish or Greek. Given that much of the anti-immigrant rhetoric in Europe stems from a deep distrust of Islam, I find it odd that British voters could be so gullible on this matter.

Does anybody know if this vote is the final say on whether or not the UK will leave the EU? [UPDATE: see Dr van de Haar’s comment for an answer to my question] It seems to me that there has got to be some legal mechanisms, via courts, that have been put into place in order to slow down things like mob rule mass voting.

Black Women are not the most educated group in the United States

Chhay Lin Lim Liberty , , , ,

Several news media have published in the past weeks that Black Women are the most educated group in the United States or that they are the most educated according to race and gender. I decided to look into the statistics, ran some numbers, and found out that this is not the case. Black Women don’t perform as well as Caucasian and Asian Men and Women.

Here are examples of articles that wrongly claim that Black Women are the most educated group:

These media outlets have misrepresented the statistics from the National Center for Education Statistics and have misunderstood the report’s finding that

“From 1999–2000 to 2009–10, the percentage of degrees earned by females remained between approximately 60 and 62 percent for associate’s degrees and between 57 and 58 percent for bachelor’s degrees. In contrast, the percentages of both master’s and doctor’s degrees earned by females increased from 1999–2000 to 2009–10. Within each racial/ethnic group, women earned the majority of degrees at all levels in 2009–10. For example, among U.S. residents, Black females earned 68 percent of associate’s degrees, 66 percent of bachelor’s degrees, 71 percent of master’s degrees, and 65 percent of all doctor’s degrees awarded to Black students.”

From this, they conclude that Black Women are therefore necessarily the most educated group. What it shows however, is not that Black Women are the most educated, but that they have the highest proportion of graduates in comparison to their male counterparts by race. See here the data from the NCES:

Degrees conferred to Black Women
Table 1: Number of degrees conferred to females.

The data shows the following:

  • of the total Black population with an Associate Degree, 68% are female and 32% are male;
  • of the total Black population with a Bachelor’s Degree, 66% are female and 34% are male;
  • of the total Black population with a Master’s Degree, 71% are female and 29% are male;
  • of the total Black population with a Doctor’s Degree, 65% are female and 35% are male.

These findings indicate that Black Women have been much more successful in their educational endeavors in comparison to Black Men, but tell us nothing about the educational performances of Black Women compared to those of other or similar sexes of other races.

What is striking about the statistics of the NCES is that women far outperform men for all races. This graph is a clear depiction of that finding:

Degrees conferred to females
Table 2: Degrees conferred to females.

We can therefore conclude that women are more successful in obtaining degrees in Higher Education than men, but the gender gap is nowhere as wide for other races than for Blacks.

In order to have more insights in how well educated Black Women are compared to other groups, I have looked at statistics from the NCES on the educational level of people that are 25-29 years old:

Bachelor's degrees or higher for people ages 25-29 by race
Table 3: Bachelor’s degree or higher conferred by race.

According to the NCES, 60.1% of Asians aged 25-29 have at least a Bachelor’s Degree. Hispanics are the lowest performing group with 15.7%. Blacks have 20.5% and Whites 40.4%. Since the obtainment of Bachelor’s Degrees decreases the obtainment of Associate Degrees, it is more meaningful to look at the percentages of Bachelor’s Degrees or higher than to the percentages of conferred Associate Degrees. This graph however, has not specified the proportion of degree holders by gender. To approximate the degree holding male-female proportion, I have looked at table 1.

I have not found statistics that indicate the proportion of exclusively Asian degree holders by sex in Higher Education so I will make the assumption that the percentage of conferrals to Asian Women among the Asian population is approximately the same as that for Asian/Pacific Islander Women at around 55%. Hence, among the Asian group of which 60.1% aged 25-29 hold a Bachelor’s degree or higher, 55% are female: 33% of the total Asian population is female and holds a Bachelor’s degree or higher. 20.5% of Blacks aged 25-29 hold a Bachelor’s degree or higher of which around 68% is female. This means that around 14% of the total Black population is female and holds a Bachelor’s degree or higher. We can thus conclude that Asian Women perform much better educationally than Black Women with a ratio of almost 2:5.

How do Black Women perform in comparison to White Women? If we say that around 58% – this may not be entirely accurate, but from the NCES statistics it is reasonable to assume this number – of Bachelor’s Degrees and higher conferred to Whites are conferred to Women, we can assert that approximately 23% aged 25-29 of the total white population that have obtained these degrees are Women. According to my calculation, White Women thus perform far better than Black Women as well.

What if you would compare Black Women with Asian Men? According to my calculation, around 27% of all Bachelor’s Degrees and higher that have been conferred to the Asian population were conferred to Asian Men. Asian Men hence outperform Black Women with an approximate ratio of 1:2.

If you would compare Black Women with White Men, we can find that around 17.4% of the white population aged 25-29 that have obtained a Bachelor’s Degrees or higher are Men. This again is higher than the 14% of Black Women.

You can find a clear overview of my findings in the following table:

Group by gender and race Percentage holding Bachelor’s or higher degree w.r.t. their race
Black Men 7%
Black Women 14%
White Men 17%
White Women 23%
Asian Men 27%
Asian Women 33%

Conclusion
Black Women are by far not the most educated group within the United States. According to my calculations Black Women proportionally hold fewer Bachelor’s Degrees or higher compared to White Men, White Women, Asian Men, and Asian Women. An Asian Woman aged 25-29 is almost 2.5 times more likely to hold a Bachelor’s Degree or higher than a Black Woman aged 25-29. An Asian Man is almost 2 times more likely to hold a Bachelor’s Degree or higher. White Women more than 1.5 times more likely. I have not included Hispanics into my calculations, but I can see in one glance that Black Women do perform better than female and male Hispanics. Comparing Black Men with Asian Women, I find it shocking that an Asian Woman is almost 5 times more likely to hold a Bachelor’s Degree or higher than a Black Man.

I find it a shame that many news media have misinterpreted the data from the NCES and have spread the untruth that Black Women are the most educated group in the United States. Lastly, I would like to add that in order to gain more insights in how much better educated a group is we should also look into the type and quality of the courses and universities where these degrees were conferred. This is something I have not looked into.

References
Black Women Are Now The Most Educated Group In The U.S.
National Center for Education Statistics
Report: Black Women Have Become The Most Educated Group In The U.S.
Study: Black Women Most Educated in U.S.

The Case for the UK staying in the EU

Barry Stocker Economics, Liberty, Politics , , , , , , , ,

Leaving the European Union would not be a gain for liberty in the United Kingdom. This is true as a matter of general principles and is reinforced by the nature of the Leave campaign which has targeted sections of the population hostile to immigration, open markets, and free trade. Much of the Leave campaigning which has not appealed to such base arguments has at the very least appealed to a version of populist democratic sovereignty at odds with the restraints on government and the state at the heart of classical liberal and libertarian thought.

Even if we try to separate some pure classical liberal version of the Leave campaign from the crudity of the campaign, as some natural supporters of leave wish had happened to the extent they ate voting for Remain rather than go along with such an obnoxious campaign, we are still left with the question of why it liberty advocates should support Leave.

I have sometimes seen references to national sovereignty as a classical liberal doctrine. If this means never sharing sovereignty at a transnational level, then it is simply a false claim. Immanuel Kant advocated a world federation to prevent war. Kant is not often put at the centre of the history of classical liberal thought. His ideas about political institutions, individual rights, and the limits of government certainly belong in the classical liberal sphere. We should distinguish between what Kant said and what later German Idealists said, a rather big issue, and appreciate how close he is to the way of thinking of Montesquieu and Smith and even advances upon them in showing a clearer understanding of the role of representative assemblies in modern politics.

More recently F.A. Hayek advocated federation between liberal democracies. The creation and evolution of the European Union has been and continues to be supported by European political parties of a classical liberal persuasion, those liberal parties which remained most true to the principles of their nineteenth century founders and precursors. Thinkers on the left, like Albert Camus and George Orwell, known for their particular commitment to liberty and their opposition to an authoritarian state were enthusiasts for European integration. Many conservatives of the more free market and limited government sort like Ludwig Erhard (founder of Germany’s post-war, post-Nazi market economy) and John Major (UK Prime Minister from 1990 to 1997, who went further than Margaret Thatcher in privatisation and deregulation) have been and are advocates of the European Union.

The unrestrained sovereignty of the nation-state is not only not an inherently liberal idea, it is dangerous to liberalism. There is nothing illiberal in transnational rules and institutions that restrain states from violence against their own citizens, attacks on individual rights, economic protectionism, and market rigging. The European Union is particularly successful with regard to the economic and market issues at the national level.  It adds huge institutional weight to the work of the Council of Europe which promotes human rights through its court in Strasbourg. The existence of the European Court of Justice is of profound importance in ensuring that national governments and peoples are accustomed to regarding the decisions of nation states as subordinate to and accountable to a judicial process enforcing transnational laws.

The EU is open to a great deal of criticism with regard to its tendencies towards over-regulation, but this represents the median attitude of the member governments, not an imposition on the nation-states of Europe. Since the UK economy is at the more free market deregulated end of the European Union, there is some plausibility in saying the UK might go further down that road if it left the EU. However, before it joined the EU it was looking less market oriented than the EU states of the time. The period during which the UK has moved from the more statist to the more limited state end of the European nations has been during the period of EU membership. The precedents do not favour the UK becoming more classically liberal because it leaves the EU and the Leave campaign has appealed to the most insular, nationalist, anti-immigrant, anti-foreigner, and anti-free trade sections of the UK population.

It is possible to imagine the UK as a more libertarian kind of place in the EU, but a much more plausible use of the liberal imagination is to think of ways in which the UK can work with allies in the EU for a a less regulatory and centralised EU. This has already worked as in the adoption of the European Single Market and the diminishing role of the European Commission, the ‘bureaucratic’ part of the EU. The Commission employs as many bureaucrats as the larger local government units in the UK and is tiny compared with any national bureaucracy. Its members are nominated by national governments subject to confirmation of the European Parliament. Power has shifted from the Commission to the bodies in which national government representatives meet, the European Council and the Council of the European Union.

The Leave campaign in the UK, including self-styled free marketers in the Conservative Party, is committed to leave the Single Market as well as the European Union itself, in large part to terminate free movement of EU citizens across its borders. The reasoning offered to prevent this movement of human capital is in terms of anti-foreigner sentiment. This is not something than can be recognised as a pro-liberty program. The pro-liberty choice is to keep free movement of goods, investment, and labour within the EU while working to reform the more interventionist tendencies of the European Union, to stymie the regulatory drift which started hitting industrial market economies decades before the EU was created and which cannot be solved by smashing up the EU.

Group Privileges No, Detriments Yes

Fred Foldvary Liberty, Philosophy , , , , ,

The concept of “privilege” has become common in political discourse, while the term “detriment” is seldom used. One incurs a detriment, and is detrimented, when one is harmed, offended, displeased, or disadvantaged, unrelated to merit. One obtains a privilege, and is privileged, when a person or group is advantaged, benefitted, pleased, or favored relative to other groups, when the gain is unrelated to merit.

Some socialists emphasize “white privilege.” Suppose a white man is able to walk down a street without being harassed, while a black man will be stopped and questioned by the police. The socialist will say that the white man is privileged in being free of harassment. But actually, the ability of an innocent person to walk without being stopped and frisked is a natural right, not a special favor. The black man has suffered a violation of his natural rights, a detriment not suffered by the white man.

The socialist will also claim that there is “male privilege.” Suppose a man can walk down the street in peace, while a woman walking down the same street will be whistled at, aggressively approached, and may even be physically attacked. Does the man have a privilege? No, one has a natural right to be free of aggression. The woman suffers a violation of her rights, a detriment.

Women suffer many detriments because of social custom and culture, rather than governmental law. Wives tend to do more household work, even when they are working for wages as many hours as the husband. In some fields of work, men have more prestige and authority, unrelated to merit. The culture is not so much giving males privileges as it imposes on women various detriments.

Some detriments are mandated by law. In most places in the US, men are free to remove their shirts, while a bare-breasted woman would get arrested. The men do not have a privilege; the women have a legal detriment.

Female detriments can become tragic in cultures where male children are preferred. A boy is not privileged by not being aborted or killed. Rather, the girls suffer a lethal detriment. In my judgment, more progress can be made to stop this anti-female bias by calling it a detriment rather than saying the boys are privileged. Boys as well as girls have a right to not be murdered.

Female detriments have been lethal in India, where rape and violence has made headlines. But there is substantial rape in the US and throughout the world, which clearly makes being female a detriment in much of the world.

The trouble with saying there is a male privilege is that men do not feel privileged by not being attacked or disfavored. It should be normal to be left in peace, and to be respected. By identifying the problem as a detriment, we can then raise more awareness and support for remedies. We can also then better deal with the real privileges, favors to those who get subsidies from government because of political clout.

The language of privilege versus detriments influences policy. “Privilege” implies special favors that should be removed. “Detriment” implies harms and disadvantages that should be stopped. For the problem of infanticide, for example, it is not that privileged boys should be killed in an equal ratio, but that girls should not be murdered for being female.

Let’s speak less of racial and gender privilege, and more of detriments!

Muddy thinking on child care

Rick Weber Economics, Liberty, Politics , , ,

Five Thirty Eight had a disappointing discussion of an interesting issue: the cost of child care for working parents. The basic issue is that kids are expensive in time and money. Unfortunately, the discussion mostly revolved around questions of how to engage in economic engineering by government in order to expand access to child care and parental leave.

The hosts see these policies as having costs and benefits, and they see the value in studying alternatives empirically, but they miss an important issue: providing these sorts of goods doesn’t require screwing up markets by adding an extra layer of complexity to the tax code. If these goods are worth providing (that’s another couple of cans of worms) then just give money to new parents. Better yet, move to a basic income guarantee.

Another important point they miss is that if some good is difficult to get, it’s worth figuring out what to do about the root problem rather than just throwing money at the issue and hoping someone will figure out the important stuff later.

NOL Foreign Policy Quiz, Part Two

Michelangelo Landgrave Politics ,

This is a follow up to part one, where I discuss under what conditions a libertarian can engage in foreign policy beyond pursuing free trade and so whether the creation of a NOL Foreign Policy Quiz is even worthwhile.

In this post I outline how to design a foreign policy quiz.

For starters I imagine two major axis:

  • Soft vs. Hard Power and,
  • Nationalist vs. Internationalist

The first axis corresponds to whether an individual prefers using soft non-coercive actions to achieve their foreign policy goal or hard coercive actions. The second axis would correspond to whether someone prefers to act unilaterally, a “Nationalist”, or through multilateral institutions such as the United Nations, an “Internationalist”. Combined the two axis produce the below spectrum.

 

The questions themselves would be formatted something like the below:

Question: A foreign policy question on defense, trade, or resources/environment.

Answer 1: Nationalist, Hard Power action.
Answer 2: Nationalist, Soft Power action.
Answer 3: Internationalist, Hard Power action.
Answer 4: Internationalist, Soft Power action.
Answer 5: Do nothing.

On each question respondents would be given two points, one for the Soft/Hard axis and another for the Nationalist/Internationalist axis. A respondent’s coordinates would be the average score for the two respective axis.

For simplicity I think we ought to limit the NOL quiz to ten or so questions, but if a longer version were developed we could also assign scores on whether the question was about defense, trade or resources/environmental issues. That way we could further distinguish foreign policy views dependent on the type of issue at stake.

Note the inclusion of a fifth answer for all questions – to do nothing. This is an essential option as there are times, especially for the libertarians among us, where all available options are just awful. In those scenarios it may be better to simply not act at all.

I suspect that most of us who are based in the United States will tend to be most ‘nationalist’ than others all else held constant. Beyond that I am not sure where most libertarians would fall on spectrum. To be sure I think many would elect the fifth answer – “Do nothing” often and gravitate towards the center, but I’m doubtful many would be perfectly in the center.

Thoughts? Opinions?

In part 3 I will hopefully have an actual quiz developed so that we can have fun calling one another statists.

BC’s weekend reads

Brandon Christensen Links , , , , , , , ,
  1. Anthropology as critique of reality: A Japanese turn (pdf)
  2. Flat-footed Giants: Zaibatsu and Industrialization in Meiji Japan, 1868-1912 (pdf)
  3. A hypothetical federation between Japan and the United States

We don’t have to ruin markets to do charity

Rick Weber Economics , , ,

This post is for Democrats and Republicans, not libertarians. Let’s take it for granted that we want to help poor people and we’re willing to use the coercive power of government to do so.* The trouble with the interventions below is so troubling that we don’t even have to bother about having a deep philosophical debate. I’m not trying to change your destination, I’m just trying to get you to get out of that explosive Ford Pinto.

Minimum wage, water pricing, education, and just about all of American health care finance involves distorting markets to give charity and/or gifts. Essentially, they change rules so that group X pays Y instead of Z with the hope that X can afford it and Z can do more good with the money than Y. But this indirect giving has serious flaws.

Take the case of the minimum wage: it’s supposed to help the working poor by making their boss and consumers pay a bit more for their services. Of course it might simply be to help interest groups, and that further raises the burden of proof for those who would prefer a minimum wage to less invasive alternatives.

So what is this less invasive alternative? Cash transfers. We’ve already got some imperfect versions of this. School vouchers, food stamps, and a host of other welfare programs. What I want to see is a simpler version that takes the best features of these programs to eliminate the problems created by market interventions.

The economics of this proposal are simple and important. Prices are essential to help people use resources wisely. Interfering with the market process makes those prices less effective at communicating information about value and opportunity cost. And with an interconnected markets, a small price control can lead to worse decisions being made all across an economy.

Simple economics tells us that if we impose a minimum wage (or give special tax treatment to XYZ, or whatever) then something’s got to give. It might be higher unemployment, it might be worse working conditions, or it might simply be that rich people are a little less rich than before.

(It’s worth remembering that rich people are people too; even lawyers. They can do good and bad things, and those actions determine their moral quality, not their wealth per se… we don’t want to redistribute wealth for its own sake, we want to do so if/because we think it will do some good. The hope is that the harm of a few bucks out of your pocket does more good for the poor people who get that cash. And no, it’s not possible for “corporations” to suffer; corporations aren’t people, but they are owned by people.)

Consider the case of feeding the poor. It’s not hard (even for non-economists) to imagine how imposing price controls on food could lead to shortages. If there’s one thing we learned from socialism, it’s that bread lines are bad. Food stamps are a much simpler and targeted solution.

We should prefer straightforward transfers over market intervention because it will do more good at less cost. More importantly, it is humbler–distorting markets requires a lot of information, transfers don’t.

Transferring money rarely jives well with American intuition, and that brings up an important bundle of issues: responsibility and social engineering.

Republicans, for all their talk about the importance of individual responsibility, seem unwilling to let the poor exercise it themselves. They’re sure that enough poor people will abuse the system that some bureaucrat needs to exercise responsibility for them. Similarly, Democrats want to ensure the dignity of the poor, but how is anyone supposed to remain dignified while navigating labyrinthine bureaucracy?

The left should like cash transfers because they can help those we want to help, and take advantage of the information available to those with intimate knowledge of their context. The right should like it because it can replace a series of bloated bureaucracies while returning responsibility to the poor. Everyone should like that it will be cheaper and more effective than what we’ve currently got while creating better prospects for long-run economic growth.

We should absolutely debate whether specific transfers are a good idea (particularly middle-income to middle-income transfers like higher ed subsidies, mortgage interest subsidies, etc.), but for those programs we ultimately take on, we shouldn’t shoot ourselves in the foot by trying to do good by screwing up markets.

*As an economics professor I get to see what economic superstitions recent high school grads have. I’m struck with the confusion between the health of government and the health of the country a government is supposed to be helping. A related pair of confusions is that what a government can do, it should do; and if something isn’t already happening, and might be nice, government should make it so.

Missing from these superstitions is that the fundamental feature of government is force. What differentiates government from any other non-profit organization, is that charities and associations can’t put you in jail if you choose not to behave as they see fit. But for the sake of clarity, let’s put aside that issue and just focus on how the government can help the poor.

Rick solves the gun crisis

Rick Weber Current Events, Law, Liberty ,

My best (uninformed) reading of the data is that gun ownership is slightly positively correlated with successful suicide attempts but little else, and that sounds about right to me. I’ve met (other) gun owners, and for the most part they aren’t likely to turn into Rambo in an emergency situation just because they’ve got a sweet gun.

But the 30 seconds of Facebook commentary on this last event before I had to close the tab led me to a revelation. I’ve said before that there’s no such thing as no gun control. Throw that together with the notion that government is a monopoly on coercion, and you’ve got my recent insight: a liberalized gun policy is equivalent to deputizing just about everyone.

Frankly, if I threw a Nerf ball into a crowd, I wouldn’t be likely to hit someone who should own a gun, but I also wouldn’t hit someone who should vote. (That hypothetical person’s vote would probably do more harm than their gun.) And that responsibility problem is similar in both cases. Everyone should have a right to vote and own a gun, but both rights should come with a heavy responsibility.

I can imagine a universe where the bouncers are armed and deputized as a routine matter. And I think that in such a world it would be relatively easy to have a liberalized 2nd amendment combined with a cultural understanding that a gun is a powerful tool to be wielded carefully rather than an entitlement.

The Right would do well to focus on their strong point here: responsibility is key. And the Left as well: barbaric intolerance is bad. Both sides confuse amoral tools with moral judgments.

The problems of ‘Exit’ and ‘Autonomy’ in (mostly American) libertarian thought

Brandon Christensen Politics , , , ,

Over at EconLog, Italian political theorist Alberto Mingardi has a great post up on defining national socialism. Here is the money shot:

So, the nationalists are going to be more socialist, because they want to vindicate the power of the nation state in taking control of the national economy, and the socialists are going to be more nationalist, because strengthening regulation and advancing redistribution is all the more difficult in supranational arrangements, where a cooperative understanding is seldom reached.

My own mind was drawn to this insight, though:

I fear there is a symmetric problem for libertarians. If we take Applebaum’s points seriously, as we should, we are put in a very awkward position: which is defending the status quo, made of relatively free international trade plus relatively weak supranational institutions, as the least bad of all possible worlds. And yet libertarians are highly critical of the status quo and won’t feel well in the company of the current global elites.

This is largely correct. Libertarians are right, I think, to be critical of the status quo (even though it is the least bad of all possible worlds, and has been for the last three decades), but they veer off in the wrong direction when they start emphasizing exit and autonomy over entrance and interconnectedness.

This is not just a complaint about rhetoric, either. When libertarians constantly focus on exit and autonomy, a tendency begins to develop where these two concepts become harder and harder to critique and develop into more coherent ideas about liberty and freedom. Just look at all the support for Brexit by libertarians, or the support still given to the Confederate States of America (!). These libertarians have become so obsessed with exit and autonomy that they end up failing to even entertain the notion that you can’t have exit without entrance, or autonomy without interconnectedness.

Would a Universal Basic Income Increase Poverty?

Zachary Woodman Economics, Liberty , , , , , , , , , , , , , ,

Switzerland has recently overwhelming voted against a proposal that would establish a universal income guarantee (sometimes called a “basic income guarantee” or the similar Friedman-influenced “negative income tax”[1]). Though I myself am a supporter of BIG as a nth best policy alternative for pragmatic reasons,[2] I’m unsure if I myself would have voted for this specific policy proposal due to the lack of specifics. A basic income is only as good as the welfare regime surrounding it (which preferably would be very limited) and the tax system that funds it.[3] However, the surprising degree of unpopularity of the proposal—with 76.9% voting against—was quite surprising.

The Swiss vote has renewed debate in the more wonkish press and blogosphere, as well as in think tanks, about the merits and defects of a Basic Income Guarantee here in the States. For example, Robert Goldstein of the Center on Budget Policy and Priorities[4] has a piece arguing that a BIG would increase poverty if implemented as a replacement for the current welfare state. His argument covers three points:

  1. A BIG would be extremely costly to the point of being impossible to fund.
  2. A BIG would increase the poverty rate by replacing current welfare programs like Medicaid and SNAP.
  3. A universal welfare program like a BIG—as opposed to means-tested programs—is politically impossible right now due to its unpopularity.

For this post, I’ll analyze Goldstein’s arguments in detail. Overall, I do not find his arguments against a BIG convincing at all.

The Political Impossibility of a BIG

Goldstein writes:

Some UBI supporters stress that it would be universal.  One often hears that means-tested programs eventually get crushed politically while universal programs do well.  But the evidence doesn’t support that belief.  While cash aid for poor people who aren’t working has fared poorly politically, means-tested programs as a whole have done well.  Recent decades have witnessed large expansions of SNAP, Medicaid, the EITC, and other programs.

If anything, means-tested programs have fared somewhat better than universal programs in the last several decades.  Since 1980, policymakers in Washington and in a number of states have cut unemployment insurance, contributing to a substantial decline in the share of jobless Americans — now below 30 percent — who receive unemployment benefits.  In addition, the 1983 Social Security deal raised the program’s retirement age from 65 to 67, ultimately generating a 14 percent benefit cut for all beneficiaries, regardless of the age at which someone begins drawing benefits.  Meanwhile, means-tested benefits overall have substantially expanded despite periodic attacks from the right.  The most recent expansion occurred in December when policymakers made permanent significant expansions of the EITC and the low-income part of the Child Tax Credit that were due to expire after 2017.

In recent decades, conservatives generally have been more willing to accept expansions of means-tested programs than universal ones, largely due to the substantially lower costs they carry (which means they exert less pressure on total government spending and taxes).

I agree that Goldstein is right on this point: universal welfare programs are extremely unpopular right now, like the Swiss vote shows. I imagine that if a proposal were on the ballot in the States the outcome would be similar.[5] However, this is no argument against a Basic Income. Advocating politically unpopular though morally and economically superior policies is precisely the role academics and think tank wonks like Goldstein should take.

If something is outside the Overton Window of Political Possibilities, it won’t necessarily be so in the future if policymakers can make the case for it effectively to voters and the “second-hand dealer of ideas” in think tanks and academia get their ideas “in the air,” so to speak.[6] It wasn’t that long ago that immigration reform or healthcare reform seemed politically impossible due to its unpopularity, yet the ladder has popular support and the former was actually accomplished.[7]

If anything, the unpopularity of a BIG is precisely why people like Goldstein should advocate for the policy.

The Fiscal Costs of Funding a Basic Income Guarantee

Goldstein points out, rightly, that a Basic Income Guarantee would be extremely expensive:

There are over 300 million Americans today.  Suppose UBI provided everyone with $10,000 a year.  That would cost more than $3 trillion a year — and $30 trillion to $40 trillion over ten years.

This single-year figure equals more than three-fourths of the entire yearly federal budget — and double the entire budget outside Social Security, Medicare, defense, and interest payments.  It’s also equal to close to 100 percent of all tax revenue the federal government collects.

Or, consider UBI that gives everyone $5,000 a year.  That would provide income equal to about two-fifths of the poverty line for an individual (which is a projected $12,700 in 2016) and less than the poverty line for a family of four ($24,800).  But it would cost as much as the entire federal budget outside Social Security, Medicare, defense, and interest payments.

Where would the money to finance such a large expenditure come from?  That it would come mainly or entirely from new taxes isn’t plausible.  We’ll already need substantial new revenues in the coming decades to help keep Social Security and Medicare solvent and avoid large benefit cuts in them.  We’ll need further tax increases to help repair a crumbling infrastructure that will otherwise impede economic growth.  And if we want to create more opportunity and reduce racial and other barriers and inequities, we’ll also need to raise new revenues to invest more in areas like pre-school education, child care, college affordability, and revitalizing segregated inner-city communities.

Of course, Goldstein is right that a BIG would be fairly expensive and we are already having serious issues funding our existing welfare state. However, he grossly oversells the difficulty in funding it. In particular, it is not necessary to raise taxes to pay for it or for current welfare expenditures.

Goldstein likely gets the $10,000 figure from Charles Murray’s proposal for a BIG. Personally, I’m no fan of Murray’s proposal as it goes too far and he proposes financing it by increasing payroll taxes, which are economically inefficient. However, let’s assume that the relevant proposal is around $7,000 dollars.[8] Multiplying that by the US population of 320 million makes for a total cost $2.24 trillion per year.[9] This could be paid for by using the BIG to replace the following current welfare programs and cutting discretionary spending:[10]

  1. $65.32 billion annually in discretionary spending on Veteran’s benefits
  2. $66.03 billion in discretionary spending on Medicare and other healthcare benefits
  3. $69.98 billion in discretionary spending for education.[11]
  4. $13.13 billion in discretionary spending for food and agriculture (eg., SNAP).[12]
  5. $1.25 trillion in mandatory spending for Social Security.[13]
  6. $985.74 billion in mandatory spending for Medicare and Healthcare.
  7. $95.3 billion in mandatory spending for veteran’s benefits.[14]

Spending a UBI Could Replace

That’s a total of $2.542 trillion in savings annually, more than enough to fund the proposed BIG with another $300.3 billion to spare that could be used for tax credits for low-income households to use on healthcare,[15] education,[16] retirement,[17] and/or basic necessities like food.[18] Funding the program would be a huge challenge, but it is possible to do it without tax increases.

Additionally, Goldstein ignores the fact that similar proposals, such as Friedman’s negative income tax, would have a much lower cost while having a similar effect. The Niskanen Center’s Samuel Hammond has estimated that a NIT could cost only $182 billion annually.[19] From Hammond’s analysis:

Just how much of a cost difference is there between a UBI and NIT? To get a rough idea, I used the Census population survey’s Annual Social and Economic Supplement, which has the distribution of individuals over the age of 15 by income level in $2,500 intervals (I subtracted retirees). I then calculated the transfer each quantile would receive based on a hypothetical NIT which starts at $5,000 for individuals with zero income and is phased out at a rate of 30%. Multiplying the average transfer by the number of actual individuals in each grouping and summing, I arrived at total cost of $182 billion—roughly the combined budget for SSI, SNAP and EITC.

The Effect of Replacing Welfare with a BIG on Poverty

Goldstein would object to my line of reasoning by saying cutting all that spending would harm the poor and increase the poverty rate. He says as much in his piece:

UBI’s daunting financing challenges raise fundamental questions about its political feasibility, both now and in coming decades.  Proponents often speak of an emerging left-right coalition to support it.  But consider what UBI’s supporters on the right advocate.  They generally propose UBI as a replacement for the current “welfare state.”  That is, they would finance UBI by eliminating all or most programs for people with low or modest incomes.

….Yet that’s the platform on which the (limited) support for UBI on the right largely rests.  It entails abolishing programs from SNAP (food stamps), which largely eliminated the severe child malnutrition found in parts of the Southern “black belt” and Appalachia in the late 1960s, the Earned Income Tax Credit (EITC), Section 8 rental vouchers, Medicaid, Head Start, child care assistance, and many others.  These programs lift tens of millions of people, including millions of children, out of poverty each year and make tens of millions more less poor.

Some UBI proponents may argue that by ending current programs, we’d reap large administrative savings that we could convert into UBI payments.  But that’s mistaken.  For the major means-tested programs — SNAP, Medicaid, the EITC, housing vouchers, Supplemental Security Income (SSI), and school meals — administrative costs consume only 1 to 9 percent of program resources, as a CBPP analysis explains.  Their funding goes overwhelmingly to boost the incomes and purchasing power of low-income families.[20]

Moreover, as the Roosevelt Institute’s Mike Konczal has noted, eliminating Medicaid, SNAP, the EITC, housing vouchers, and the like would still leave you far short of what’s needed to finance a meaningful UBI.  Would we also end Pell Grants that help low-income students afford college?  Would we terminate support for children in foster care, for mental health, and for job training services?

This is by far and away the weakest part of Goldstein’s argument.

First of all, as my analysis above showed, Konczal’s and Goldstein’s idea that eliminating the current welfare state “would still leave you far short of what’s needed to finance a meaningful UBI” is just false. Even a relatively robust UBI of $7,000 a year is doable by significantly cutting current welfare programs.

But more importantly, Goldstein’s assertion that replacing the welfare state with a UBI would increase poverty is fully unwarranted. He seems to take a ridiculously unsophisticated idea that “more means-tested programs immediately reduce welfare.” His assertion that the programs in question “lift tens of millions of people, including millions of children, out of poverty each year and make tens of millions more less poor” is, at best, completely erroneous. For three reasons: first, individuals know better what they need to lift themselves out of the than the government, and these programs assume the opposite. Second, the structure of status quo means-tested programs often creates a “poverty trap” which incentivizes households to remain below the poverty line. Finally, thanks to these first two theoretical reasons, the empirical evidence on the success of the status-quo programs in terms of reducing the poverty rate is, at best, mixed.

The way our current welfare state is structured is it allocates how much money can go to what basic necessities for welfare recipients. So if a household gets $10,000 in welfare a year, the government mandates that, say, $3,000 goes to food, $3,000 goes to healthcare, $3,000 goes to education, and $1,000 goes to retirement.[21] This essentially assumes that all individuals and households have the same needs; but this is simply not the case, elderly people may need more money for healthcare and less for education, younger people may need the exact opposite, and poorer families with children may need more for food and education than other needs. It’s almost as if our current welfare system assumes interpersonal utility function comparisons are possible, or utility functions of poorer people are fairly homogenous but they’re not. It also ignores the opportunity cost of the funding for helping individuals and households out of funding; a dollar spent on healthcare may be more effectively spent on food for a particular individual or household.

In sum, there’s a knowledge problem involved in our current welfare policy to combat poverty: the government cannot know the needs of impoverished individuals, and such knowledge is largely dispersed, tacit, and possessed by the individuals themselves. The chief merit of a UBI is, rather than telling poor people what they can spend their welfare on, it just gives them the money and lets them spend it as they need.

Second, universal programs are superior to means tested programs precisely because the amount of transfer payments received does not decrease as income increases. Our current welfare programs too often make the marginal cost of earning an additional dollar, above a certain threshold, higher than the benefits because transfer payments are cut-off at that threshold. This actually perversely incentivizes households to remain in poverty.[22] For example, the Illinois Policy Institute while analyzing welfare in Illinois found the following:

A single mom has the most resources available to her family when she works full time at a wage of $8.25 to $12 an hour. Disturbingly, taking a pay increase to $18 an hour can leave her with about one-third fewer total resources (net income and government benefits). In order to make work “pay” again, she would need an hourly wage of $38 to mitigate the impact of lost benefits and higher taxes.

SingleMomWelfareCliffChart

Or consider this chart (shown above) from the Pennsylvania Department of Public Welfare showing the same effect in Pennsylvania

UBI does not suffer from this effect. If your income goes up, you do not lose benefits and so there are no perverse incentives at work here. Ed Dolan has analyzed how the current welfare state with its means-tested benefits is worse in terms of incentivizing work and alleviating poverty extensively. Here’s a slice of his analysis:

P140810-11

The horizontal axis in Figure 1 represents earned income while the vertical axis shows disposable income, that is, earned income plus benefits. To keep things simple, we will assume no income or payroll taxes on earned income—an assumption that I will briefly return to near the end of the post. The dashed 45o line shows that earned and disposable income are the same when there are no taxes or income support. The solid red line shows the relationship between disposable and earned income with the MTIS policy.

This generic MTIS policy has three features:

A minimum guaranteed income, G, that households receive if they have no earned income at all.

A benefit reduction rate (or effective marginal tax rate), t, indicted by the angle between the 45o line and the red MTIS schedule. The fact that t is greater than zero is what we mean when we say that the program is means tested. As the figure is drawn, t = .75, that is, benefits are reduced by 75 cents for each dollar earned.

A break-even income level, beyond which benefits stop. Past that point, earned income equals disposable income.

When these two factors are taken into account (that individuals know better than the government what they need to get out of poverty and there are significant poverty traps in our welfare state), it is no surprised that the empirical evidence on the effectiveness of these anti-poverty programs is far less rosy than Goldstein seem to think.

After reviewing the empirical literature on the relationship between income and welfare improvements for impoverished households, Columbia University’s Jane Waldfogel concluded “we cannot be certain whether and how much child outcomes could be improved by transferring income to low income families.” The Cato Institute’s Michael Tanner wrote in 2006:

Yet, last year, the federal government spent more than $477 billion on some 50 different programs to fight poverty. That amounts to $12,892 for every poor man, woman, and child in this country. And it does not even begin to count welfare spending by state and local governments. For all the talk about Republican budget cuts, spending on these social programs has increased an inflation-adjusted 22 percent since President Bush took office.

Despite this government largesse, 37 million Americans continue to live in poverty. In fact, despite nearly $9 trillion in total welfare spending since Lyndon Johnson declared War on Poverty in 1964, the poverty rate is perilously close to where it was when we began, more than 40 years ago.

Tanner’s point remains true today. The chart below shows that, despite a massive increase in anti-poverty spending since the war on poverty was declared under Johnson’s “Great Society,” Poverty rates have remained woefully stagnant. In fact, the reduction in poverty that was occurring prior to Johnson’s interventions stopped soon thereafter.

US Poverty Spending

Also, the point is that UBI is a replacement for current welfare benefits. Most households probably would not see a decrease in amount of benefits under a UBI, depending on the specifics of the proposal, and some might even see an increase, contrary to Goldstein’s analysis. Further, they’d be able to actually spend this on what they know they need rather than what government bureaucrats thin they need.

UBI lacks the flaws of the current welfare state, and would likely decrease poverty far more effectively than Goldstein thinks, especially when compared to his favored status-quo.

[1] Though there are some technical differences between Milton Friedman’s proposal for a “negative income tax” and most Basic Income Guarantee proposals, they essentially have the same effect on income. See the Adam Smith Institute’s Sam Bowmen on this point.

[2] See Matt Zwolinski for the “Pragmatic Libertarian Case for a Basic Income,” it should be noted that “pragmatic reasons” here does not refer to my pragmatist philosophical views. Zwolinski has also made a moral case for the basic income on Hayekian grounds that a BIG could reduce coercion in labor negations. I am unsure to what extent I am convinced by this line of reasoning, but it is a valid argument nonetheless.

[3] The Niskanen Center’s Samuel Hammond has made the case that universal transfer programs like a Basic Income cannot be analyzed outside of the tax system that pays for it.”

[4] Or, as my think tank buddies jokingly call it, the “Center for Bigger Budgets.”

[5] Having said that, polls have shown that it is popular across the pond in the Eurozone. The Swiss proposal would call into question this point but it could be argued that the vagueness of the Swiss proposal is why it was turned down not necessarily the spirit of it.

[6] My colleague Ty Hicks of Students for Liberty has made this point well. See also Hayek’s “Intellectuals and Socialism.”

[7] Granted, the Affordable Care Act was not really what most on the left or the right wanted in the first place and has been a disaster.

[8] This number is selected because, according to the CBO, $9,000 is the average amount in means-tested welfare benefits per household for 2006. But that’s for households and a BIG discussed here is for individuals, so it is understandable to make a BIG slightly less than the current average. Goldstein would object that this is far below the poverty line, but BIG is not meant to be a replacement for total income on the labor market at all, so it is unclear why this is an objection in the first place.

[9] This is admittedly a crude and naïve calculation but it is virtually identical to the method Goldstein himself uses to estimate the cost.

[10] All figures for this section are for the 2015 budget and are taken from here.

[11] Goldstein is sure not to be happy with cutting education, and I myself would like to replace this spending with few-strings-attached funding for local education or private school tax vouchers. I’ll address this point more later in this piece.

[12] Much of this is food stamps, which would be rendered obsolete by a BIG anyways. Goldstein would object, more on that in the next section.

[13] Not all of this could be cut, and there would be legal and detailed nuances on how to treat financial obligations for Social Security, veteran’s benefits, and Medicare. The specific legal complexities of mandatory welfare spending are not my areas of expertise, admittedly, and is outside the scope of this paper. I’m just illustrating that it is possible to cut at least some of this spending, perhaps even the majority of it, to fund it.

[14] Many people would object to cutting veterans benefits. First of all, BIG could act in place of these benefits

[15] I have in mind expanding tax-exempt Health Savings Accounts here. I also think funding this by eliminating the employer-based deduction would be a step in the right direction and reduce cost fragmentation in the healthcare market, as Milton Freidman argued.

[16] I have in mind a private school taxpayer voucher system like what is in Sweden.

[17] I have in mind something similar to this proposal to reform social security from the Cato Institute.

[18] I have in mind something like the pre-bates proposed in the Fair Tax.

[19] For this reason, I prefer an NIT to a BIG, but I prefer both to our current welfare state.

[20] This point is Ironic considering the fact that CBPP’s own research shows that government benefits in America overwhelmingly goes to households above the poverty line, in the middle and upper classes. See this chart (source):

1-SOlzSwsxa08Cno7PiQ9R7A

[21] The real-world numbers are probably different and vary a little bit from household to household, but this is just a hypothetical to illustrate a more general point.

[22] It should be noted, however, that the EITC, and some other programs, is largely free of this defect. This is because the EITC itself is modeled after Friedman’s NIT.

Note: The first chart has been edited since this was initially posted for readability.

The Moral Worth of Chloe Kardashian

Rick Weber Economics, Liberty

Like many pack animals, I judge the hell out of the idiots surrounding me. It’s impossible not to have immediate gut reactions when we see our neighbors making stupid decisions; our brains are hard-wired to be nervous about how wisely our tribe used scarce survival resources. And let’s face it, it’s fun to make fun of doofuses in vinyl wrapped electric Hummers.

A couple semesters ago I asked my class for examples of useless things and landed on tabloid articles about Chloe Kardashian. Surely that’s one thing our economy can save some cash on without any real harm.

But it’s not so simple. Nobody is being forced to print those rags which means someone (bless their hearts) wants to read about Chloe Kardashian. And they want it enough that they’re willing to work for it.

If you set up an amateur print shop in your basement and made up a bunch of celebrities to gossip about as a hobby, nobody would have any reason to stop you. We may agree that your hobby is silly, but if you can’t have a silly hobby, then what’s the point of it all?!

When people buy those magazines at the check out counter, they’re putting their own effort into making up celebrities to gossip about, the difference is they don’t have to put in so much time and the production value is higher because of gains from trade.

Even silly things have moral worth when they exist because of people’s voluntary choices. We should all be more hesitant to ban behaviors we don’t understand.

Where did Homo Economicus come from?

Zachary Woodman Economics, Liberty, Philosophy , , , , , , , , , , , , , , , , , , , ,

Over on my Facebook page, I posted a short criticism of both neoclassical and behavioral economic scholarship on rational choice (drawing from a paper I’m working on exploring that topic). Stated a bit polemically,  though homo economicus has largely been dead in neoclassical theory, his spirit still haunts the work of most modern neoclassical scholars. Likewise, though behavioral economists are trying to dig the grave and put the final nails in the coffin of homo economicus, their nightmares are still plagued with the anxieties of his memory.

This led a former colleague from Hillsdale to ask me where I thought homo economicus came from historically. I wrote the following in response (lightly edited for this post):

It could be argued, in a sense, that the protestant Christian aim to complete moral purity and the Enlightenment aim to make man perfect in knowledge in morality (as embodied in Franklin’s virtue ethics) helped give rise to a culture that would be primed for such a model. Within economics, historically it comes from Bentham’s utilitarianism and Jevon’s mathematical extrapolations from Bentham’s psychology. However, I’d say this comes from a deeper “Cartesian anxiety” in Bernstein’s use of the term to make economic a big-T True, capital-C Certain, capital-S Science just like physics (which Jevon’s himself stated was an aim of his work,[1] and has preoccupied economists since the days of JS Mill). If economic science cannot be said to be completely positive and “scientific” like the natural sciences with absolutely falsifiable propositions and an algorithmic means of theory-choice, it is feared, it must be written off as a pseudo-scientific waste of time or else ideology to justify capitalism. If economics cannot make certain claims to knowledge, it must be solipsist and relativist and, again, be another form of pseudo-science or ideology. If economic models cannot reach definitive mathematical results, then they must be relativistic and a waste of time. This is just another example of the extreme Cartesian/Katian/Platonic (in Rorty’s use of the term) either/or: objectivity OR relativism, science OR nonscience, determinate mathematical solutions OR ideological emotional bickering. Homo economicus was erected as a means to be an epistemic foundation to solve all these anxieties and either/ors.

Of course, as any good Deweyan, I think all these either/ors are nonsense. Their understanding of science, as revealed through the so-called “growth of knowledge” literature in postempiricist philosophy of science (ie., the work of Thomas Kuhn, Lakotos, Karl Popper, Paul Feyerabend, Michael Polanyi, Richard Bernstein, Richard Rorty, etc.) has shown that this positivist conception of science, that is science consists of algorithmic theory choice selected based off correspondence with theory-free, brute “facts” of the “external world,” is woefully inaccurate. Dialogical Aristotelian practical reasoning in the community of scientists plays just as much of a role in formulating a scientific consensus as empirical verification. This does not undermine science’s claims to objectivity or rationality, in fact it puts such claims in more epistemically tenable terms.

Further, the desire to make the social sciences just another extension of the natural science, as Hayek shows in the Counterrevolution of Science, and as even positivists like Milton Freidman argue, is a completely misleading urge that has led to some of the worst follies in modern social theory. Obviously, I cheer the fact that “homo economicus is dead, and we have killed him,” but now that we’ve “out-rationalized the rationalizer of all rationalizers,” we must try to re-evaluate our economic theories and methods to, as Bernstein or Dewey would put it, “reconstruct” our economic science.

In short, immenatizing the eschaton in epistemology and philosophy of science created homo economicus.

For the record, you don’t have to be a radical scientific anti-realist like Feyerabend or Rorty to agree with my analysis here.[2] I myself wax more towards Quine than Rorty in scientific matters. However, the main point of philosophy of science since positivism is the exact type of foundationalist epistemology undergirding modern positivist methodology in the mainstream of the economics profession, and the concept of rationality that is used to buttress it, is a naive view of science, natural or social.

Notably, this critique is largely unrelated to much of the Austrian school. Mises’ own conception of rationality is mostly unrelated to homo economicus as he understands rationality to be purposive action, emphasizing that economists first understand the subjective meaning from the point of view of the economic actor him/herself before declaring any action “irrational.”[3] [4]

What are your thoughts on this? Are neoclassical and behavioral economics both still way too influenced by the spirit of homo economicus, or am I off the mark? Is my analysis of the historical conditions that led to the rise of homo economicus right? Please, discuss in the comments.

[1] Consider this quote from Jevon’s magnum opus Theory of Political Economy “Economics, if it is to be a science at all, must be a mathematical science.”

[2] In fact, I doubt anybody mentioned is really a scientific anti-realist, I agree with Bernstein that Feyerabend is best read as a satirist of the Cartesian anxiety and extreme either/or of relativism and objectivism in philosophy of science and think Rorty’s views are more complex than simple scientific anti-realism, but that’s an unrelated point.

[3] Of course, any critique of epistemic foundationalism would apply to Mises, especially his apriorism; after all, Mises did write a book called “Ultimate Foundations of the Social Sciences” and the Cartesian anxiety is strong with him, especially in his later works. Notably, none of this applies to most of Mises’ students, especially Schutz, Machlup, and Hayek.

[4] For a more detailed discussion of Mises and the Austrians on rationality, see my blog post here or this paper by Mario Rizzo. For a more general discussion of the insights of the type of philosophy of science I’m discussing, see Chapter 2 of Richard Bernstein’s excellent 1983 book Beyond Objectivism and Relativism: Science, Hermeneutics, and Praxis.