The Pox of Liberty – dixit the Political Economy of Public Health

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A few weeks ago, I finished reading the Pox of Liberty authored by Werner Troesken. Although I know some of his co-authors personally (notably the always helpful Nicola Tynan whose work on water economics needs to be read by everyone serious in the field of economic history – see her work on London here), I never met Troesken. Nonetheless, I am what you could call a “big fan” in the sense that I get a tingling feeling in my brain when I start reading his stuff. This is because Troesken’s work is always original. For example, his work on the economic history of public utilities (gas and electricity) in the United States is probably one of the most straightforward application of industrial organization to historical questions and, in the process, it kills many historical myths regarding public utilitiesThe Pox of Liberty is no exception and it should be read (at the risk of become a fan of Troesken like I am) as a treatise on the political economy of public health.

Very often, it will be pointed out that public health measures are public goods that government should provide lest it be “underprovided” if left to private actors. After all, it is rare to hear of individuals who voluntarily quarantined themselves upon learning they were sick. As a result, the “public economics” argument is that the government should mandate certain measures (mandatory vaccination and quarantine) that will reduce infectious diseases. Normally, the story would end there. And to be sure, there is a lot of evidence that mild coercive measures do reduce some forms of mortality (mandatory vaccination and quarantine). The more intense the policies, the larger the positive effects on health outcomes. For example, taxes on cigarettes do reduce consumption of cigarettes and thus, secondhand smoke. In fact, even extreme coercive measures like smoking bans seem to yield improvements in terms of public health (another example is that of Cuba which I discussed on this blog).

However, Troesken’s contribution is to tell us that the story does not end there. In a way, the “public economics” story is incomplete. The institutions that are best able to deploy such levels of coercion are generally also the institutions that are unable to restrain political meddling in economic affairs. Governments that are able to easily deploy coercive measures are governments that tend to be less constrained and they can fall prey to rent-seeking and regulatory capture. They will also tend to disregard property rights and economic freedom. This implies slower rates of economic growth. As a result, there is a trade-off that exists: either you get fast economic growth with higher rates of certain infectious diseases or you get slow economic growth with lower rates of certain infectious diseases (Troesken concentrates mostly on smallpox and yellow fever). The graphic below illustrates this point of Troesken. Countries like Germany – with its strong centralizing Prussian tradition – were able to generate very low levels of deaths from infectious diseases. But, they were poorer than the United States. The latter country had a constitutional framework that limited the ability of local and state governments to adopt even mild measures like mandatory vaccination. Thus, that meant higher mortality levels but the same constitutional constraints permitted economic growth and thus the higher level of living standards enjoyed by Americans relative to the Germans.

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But Troesken’s story does not end there.  Economic growth has some palliative health effects (in part the McKeown hypothesis*) whereby we have a better food supply and access to better housing or less demanding jobs. However, in the long-run economic growth means that new sectors of activity can emerge. For example, as we grow richer, we can probably expend more resources on drugs research to extend life expectancy. We can also have access to more medical care in general.  These fruits take some time to materialize as they grow more slowly. Nonetheless, they do form a palliative effect that contributes to health improvements.

However, there is an analogy that allows us to see why these palliative effects are important in any political economy of public health provision. This analogy relates to forestry. The health outcomes fruits from a “coercive institutional tree” can only be picked once. Once they are picked, the tree will yield no more fruits.  However, the yield from that single harvest is considerable. In comparison, the “economic growth tree” yields fewer and smaller fruits, but it keeps yielding fruits. It never stops yielding fruits. In the long-run, that tree outperforms the other tree. The problem is that you cannot have both trees. If you chose one, you can’t have the other.

In this light, public health issues become incredibly harder to decipher and understand. However, we can see a much richer wealth of information under this light. In writing the Pox of Liberty, Troesken is enlightening and anyone doing health economics should read (and absorb his work) as it is the first comprehensive treatise of the political economy of public health.


* I should note that I think that the McKeown hypothesis is often unfairly lambasted and although I have some reservations myself, it can be adapted to fit within a wider theoretical approach regarding institutions – like Troesken does. 

My favorite posts at NOL this year

Last week I promised y’all a post on my favorite reads at NOL this year. I almost always keep my promises, so below is a long-ish list of essays I really enjoyed reading and learning from this year.


My absolute favorite essay of 2016 at NOL was Barry Stocker’s analysis of the attempted coup in Turkey. Dr Stocker has spent a quarter of a century in the Turkish-speaking world and all of his acquired wisdom of the region is on display in the piece. Barry didn’t post much here this year, but I am hoping that, given the geopolitical situation in his neck of the woods (Dr Stocker teaches political philosophy at Istanbul Tech), he’ll be able to provide much more insight into the challenges the region will face in 2017.

Jacques, who has become sidetracked ever since Donald Trump became the GOP nominee, had an excellent post titled “A Muslim Woman and the Sea” that everyone should read. I don’t agree with it, but the quality of his writing almost demands that you read through the entire piece. In it is the peaceful nostalgia for both youth and French Algeria, the almost careless way he describes his surroundings, and the slow, deliberate manner in how he attacks his enemies. It is all on display for you, his audience, to devour at your leisure. Dr Delacroix is a world-class storyteller.

Mark Koyama’s piece on Jewish communities in premodern Europe garnered a lot of praise, but I found his post on medieval China to be much more fascinating. In the post, Dr Koyama summed up his recent paper (co-authored with UCLA Anderson’s Melanie Meng Xue) on literary inquisitions during the Qing era (1644-1912). What they did was tally up the number of times the state dragged scholars and artists to court in order to accuse them of delegitimizing the Qing government. This had the unfortunate (but predictable) effect of discouraging discussion and debate about society in the public sphere, which stifled dissent and emboldened autocratic impulses.

Chhay Lin had a number of great posts here, some of which were picked up by major outlets like RealClearWorld and 3 Quarks Daily, and Notes On Liberty is lucky to have such a cool cat blogging here. My favorite post of his was the one he did on his childhood in a Cambodian refugee camp along the Khmer-Thai border. What an inspiring story! I hope there are more to come in 2017. (Chhay Lin, by the way, splits his time at NOL with SteemIt, so be sure to check him out there).

Zak Woodman had lots of good posts in his debut year (including NOL‘s most-read article), but the two I enjoyed most were his thoughts on empathy in cultural discourse and his Hayekian take on safe spaces. Both pieces took a libertarian line on the freedom of speech, but Mr Woodman’s careful articles, which are as much about being true to the original meaning of some of the 20th century’s best thinkers as they are about libertarianism, suggests that he has a bright future ahead of him as one of the movement’s deeper thinkers (he’s an undergraduate at UM-Ann Arbor). I look forward to his thoughts in 2017.

Bruno Gonçalves Rosi burst on to NOL‘s scene this year with a number of posts (in both English and Brazilian Portuguese). His blistering critiques of socialism were fundamental and – to me, at least – reminiscent of the debates between libertarians and statists here in the United States in the 1970s and 1980s. My favorite of Dr Rosi’s 2016 posts, however, was his reflection of the 2016 Rio Paralympics that took place in the late summer (at least it was late summer here in Texas). Bruno brilliantly applied the Games to the famous argument about inequality between 20th century American philosophers Robert Nozick and John Rawls. I hope the piece was but a glimpse of what’s to come from Dr Rosi, who also has a keen interest in history and international relations.

Lode Cossaer is probably busy with his very intriguing dissertation (“the institutional implications of the tension between universal individual rights and group self governance”), but he did manage to find some time to dip his feet into the blogging pool with a few insightful posts. My favorite was his explanation of Donald Trump’s Carrier move, which was blasted from all sides of the political spectrum (including libertarians) for being a prime example of “crony capitalism.” Cossaer, in his own delightfully contrarian manner, pointed out that there is a trade-off between the rule of law and lower taxes. This trade-off might not be pretty, but it exists regardless of how you feel about it. Lode, in my opinion, is one of very few thinkers out there who can walk the tight-rope between Rothbardian libertarianism and plain ole’ classical liberalism, and he does so ruthlessly and efficiently. I hope we can get more contrarianism, and more insight into Cossaer’s dissertation, in 2017.

Vincent has been on a roll this month, and I simply cannot choose any single one of his 2016 posts for recognition. His pêle-mêle comments on the debate between historians and economists over slavery is well-worth reading, especially his insights into how French Canadians are portrayed by economic historians in graduate school, as are his thoughts on the exclusion of Native Americans from data concerning living standards in the past. These posts highlight – better than his more famous posts – the fact that economists, along with political philosophers and anthropologists, are doing way better historical work than are traditional historians. Dr Geloso’s post on fake news as political entrepreneurship did a wonderful job, in my eyes, of highlighting his sheer passion for history and his remarkable ability to turn seemingly boring topics (like “political entrepreneurship”) into hard talking points for today’s relevant policy debates.

Federico is still practicing corporate law in Argentina, so every article he writes at NOL is done so in his free time. For that I am deeply grateful. His early August question, “What sort of meritocracy would a libertarian endorse, if he had to?” was intricately stitched together and exemplifies Federico’s prowess as one of the world’s most novel scholars of Hayekian thought. I also enjoyed, immensely, a careful, probing account of human psychology and our ability to act in this short but rewarding post on homo economicus. I look forward to a 2017 filled with Hayekian insights and critical accounts of social, political, and economic life in Buenos Aires.

Rick spent the year at NOL blogging about whatever the hell he wanted, and we were all rewarded for it. Dr Weber is obviously emerging as important conduit for explaining how “politics” works in democratic societies, and perhaps more importantly how to be a better, happier person within the American system. I hope Rick continues to explore federalism though a public choice lens, but I also suspect, given Dr Weber’s topics of choice this year, that Elinor Ostrom would have been interested in what he has to say as well. 2017 awaits! Here is Rick breaking down Trump’s victory over Clinton. You won’t get a finer explanation for why it happened anywhere else. Oh, and how about a libertarian argument for an FDA?

Michelangelo, who is now a PhD candidate in political science at UC Riverside, won my admiration for his brave post on safe spaces and the election of Donald Trump. While 2017 may be composed of uncertainties, one thing that is known is that Trump will be president of the United States. We need to be wary and vocal (just as we were with Bush II and Obama).  Michelangelo was in top form in his piece “…Why I Don’t Trust the Police,” so much so that it stuck with me throughout the year. It is libertarianism at its finest.

William Rein, a sophomore (“second-year”) at Chico State, has been impressive throughout the year. His thoughts do very well traffic-wise (literally thousands of people read his posts), and it’s all well-deserved, but I thought one of his better pieces was one that was relatively slept on: “Gogol Bordello & Multiculturalism.” Mr Rein points out that Political Correctness is destroying fun, and the election of Donald Trump is merely the latest cultural challenge to PC’s subtle tyranny. William weighed in on the safe spaces concept as well and, together with Zak’s and Michelangelo’s thoughts, a coherent libertarian rationale has formed in response to this cultural phenomenon. If you want to know which clouds young libertarian heads are in, NOL is a great place to be.

Edwin initiated the best debate of the year here at NOL with his post on classical liberalism, cosmopolitanism, and nationalism. Barry replied (in my second-favorite post of his for 2016), and Dr van de Haar responded with a third volley: “Classical Liberalism and the Nation-State.” At the heart of their disagreement was (is?) the concept of sovereignty, and just how much the European Union should have relative to the countries comprising the confederation. Dr Stocker concluded the debate (for 2016, anyway) with a final post once again asserting that Brexit is bad for liberty. For Edwin and Barry, sovereignty and international cooperation are fundamental issues in Europe that are not going away anytime soon. NOL is lucky to have their voices and, like Dr Stocker, I hope Dr van de Haar will be able to provide us with many more fascinating and sometimes contrarian insights in 2017.

Lucas Freire wasn’t able to post much here this year (he is doing postdoc work in South Africa), but his post on economics in the ancient world is well worth reading if you are at all interested in methodology and the social sciences. Dr Freire has continually expressed interest in blogging at NOL, and I am almost certain that 2017 will be his breakout year.

Those are my picks and I’m sticking to ’em (with apologies to Rick). Notewriters are free to publish their own lists, of course, and if readers would like to add their own in the ‘comments’ I’d be honored (you can always email me, too). The post I most enjoyed writing this year, by the way (thanks for asking…), was a snarky one questioning the difference between Saudi Arabia and Islamic State. Thanks for everything.

On Capitalism and Slavery : Pêle-Mêle Comments

Last week, a debate was initiated via an article in the Chronicle of Higher Education that relates to the clash between historians and economists over the topic of slavery. The debate seems acrimonious given the article and at the reading of a special issue of the Journal of Economic History regarding the Half has never been told by Edward Baptist, its hard to conclude otherwise. Pseudoerasmus published comments on the issue in a series of posts and a Trumpian twitterstorm (although the quality is far from being Trumpian). I find myself largely in agreement with him in response to the historians, but there are some pêle-mêle points that I felt I needed to add.

On Historians Versus Economists

To be honest, when I took my first classes in economic history, it seemed clear that there were important points that were agreed upon in the literature on slavery. The first was that the accounting profitability of slavery was not the same as the economic profitability (think opportunity cost here) of slavery. Thus, it was possible that (concentrating on the US here) the peculiar institution could more or less thrive regardless of the social costs it imposed (i.e. slavery is a tax on leisure which also increases the expropriation rate from slaves, and non-slaveowners often had to shoulder the cost of enforcing the institution). This argument is not at all new; in fact it is basically a public choice argument that Gordon Tullock and Anne Krueger could have signed on to without skipping a heartbeat (see Sheilagh Ogilvie – one of my favorite economist who does history in equality with Jane Humphries). The second point of agreement is that no one agreed on how to measure the productivity of slavery in the United States and the distribution of its costs and gains. The second point has been a very deep methodological debate which related to the method of measuring productivity (CES vs Translog TFP – stuff that would make your head blow and which also lead to the self-invitation of the Cambridge Capital Controversy to the debate). The quality of the data has been at the centre-stage as well, and datasets on slave prices, attributes, tasks and many other variables are still being collected (see notably the breathtaking work of Rhode and Olmsted here and here).

Thus, I will admit to being unimpressed by the use of oral histories to contest that literature. In addition, the absence of theory in Baptist’s work yields an underwhelming argument. Oral histories are super-duper important. The work of Jane Humphries on child labor is a case in point of the need to use oral histories. She very carefully used the tales told by children who worked during the industrial revolution to document how labor markets for children worked. The story she told was nuanced, carefully argued and supported by other primary evidence. This is economic history at its best – a merger of cliometrician and historian. In fact, while this is an evaluation that is subjective, the best economists are also historians and vice-versa. The reason for that is the mix of theory with multiple forms of evidence. But they key is to have a theory to guide the analysis.

Unexpectedly for some, the best exposition of this argument comes from Ludwig von Mises in his unknown book Theory and HistoryI was made aware of that book in a discussion with Chris Coyne of George Mason University and I proceeded to reading it. I was surprised how many similarities there were between the Mises who wrote that book and the Douglass Norths and the Robert Fogels of this world. The core argument of Theory and History is that axiomatic statements can be applied to historical events. The goal of historians and economic historians is to sort which theory applies. For example, the theory of signaling and the theory of asymmetric information are both axiomatically true. Without the need for evidence, we know that they must exist. The question of an economic historian becomes to ask “did it matter”? Both theories can compete to offset each other: if signaling is cheap, then asymmetric information can be solved; if it is not, asymmetric information is a problem. Or both may be irrelevant to a given historical development. To explain which two axiomatic statements apply to the event (and in what dosage), you need data (quantitative and qualitative). Thus, Theory and History actually proposes the use of econometrics and statistical methods because it does not try to predict as much as it tries to a) sort which axiomatic statements applied; b) the relative strengths of competing forces; c) the counterfactual scenario.

Without theory, all you have is Baptist’s descriptions which tell us very little and can, incidentally, be distorted by he who recounts the tales he read.

On the Culture of Peasants/Slaves/Slaveowners

When I started my PhD dissertation Canadian economic history, the most annoying thing I saw was the claim that the French-Canadians had “different mentalities” or “more conservative outlooks”. This was basically the way of calling them stupid. This has recently evolved to say that they “maximized goals other than wealth”. Regardless, this was basically: the French-Canadian was not culturally suited for economic development.

But culture is not a fixed variable, it is not an exogenous variable. Culture is basically the coherent framework built by individuals who share certain features to “cut out” the noise. Everyday, we are bombarded with tons of pieces of information and there is no way that the human brain can process them all. Thus, we have a framework – culture (ideology does the same thing) – which tells us what is relevant and what is irrelevant and what interpretation to give to relevant information.

People can cling to old beliefs for a long time, but only if there is no cost to them. I can persist in terrible farming practices if I am not made aware of the proper valuation of the opportunity I am foregoing. For example, British farmers who arrived in Quebec in the 19th century tended to use oxen as they did in England for tilling the soil. They had probably been taught to do that by their parents who learnt it from their grandparents because it was part of the farming culture of England. The behavior was culturally inherited. However, when they saw that the French-Canadians were using horses and that horses – in the Canadian hinterland – got the job done better, they shifted. The culture changed at the sight of how important was the foregone opportunity by continuing to use oxen. Where the British and the French co-existed, both were equally good farmers. Where they could not observe each other, they were all sub-optimal farmers. Seeing the other methods forced changes in culture.

The same applies to slaveowners and slaves! Slaveowners were a more or less tightly knit group that frequented similar circles and were constantly on the lookout to increase productivity. If some master had noticed that he could increase production by whipping more slaves, why would he not adopt this method? Why would he leave 100$ bill on the street? Why did the masters growing cotton in South Carolina not adopt the method of whipping adopted by growers in Louisiana? Without a theory of how culture changes (and what purposes it serves beyond the simplistic Marxist power structure argument), there is no answer to this question. With the work of Rhode and Olmstead, there is an answer: the type of cotton that had higher yields was not suited for growing everywhere! In this case, we are applying my comment from the section above on Historians versus Economists. There are competing theories of explaining increasing output: either some slave masters were unable to observe the other slave masters and adopt the torture methods they had (which would need to be the case for Baptist to be right) or there were biological limitations to growing the better crops in some areas (Rhode and Olmstead).

Two competing theories (they are not mutually exclusive though) that can be tested with data and they set a counterfactual. That is why you need theory to make good history.

One last thing: slave owners were not capitalists

This is probably the most childish thing to come out of works like those of Baptist: to assert that because slaves were capital assets, that the owners were capitalists. That is true if you want to adhere to the inconsistent (and self-contradicting) Marxist approach to capital. In fact, as Phil Magness pointed out to me, slave owners were not free market types. They were very much anti-capitalists. Slavery apologists like Fitzhugh and Carlyle were even more anti-capitalists than that. It’s not because you own capital that you are a capitalist unless you adhere to Marxist theory.

But, capital is just a production input. Its value depends on what it can produce. As Jeffrey Hummel pointed out, there is a deadweight loss from slavery: enforcement costs, the overproduction of cotton because slavery is basically a tax on leisure and the implicit taxation of the output produced by slaves. All three of these factors would have slowed down economic growth in the south. Thus, as capital assets, slaves were relatively inefficient.

What if fake news was merely an attempt at political entrepreneurship?

Fake news! The new plague that besets mankind! That is largely the new name given to what 19th century folks would have called “yellow journalism“.

Yellow journalism was sensationalist to the point of distorting the news in order to carry a very emotional message. Generally embedded in that message was a political narrative supporting progressive reforms (not all yellow journalists were progressive but it seems that most were).

The aim of many progressives was to design a new society, to reform the old society by getting rid of old institutions. In many cases, economic historians have documented that these reforms (like with prohibition, workers compensation, antitrust) ended up serving very narrow interest groups who either allied themselves with reforming zealots (as in bootleggers helping baptists pass Sunday sales bans), gained through the restriction of competition or gained at the expense of future workers and minorities. But it is not as if the “previous” order was paradise. The postbellum era prior to the progressive era was highly protectionist, used public funds to bailout poorly performing railways and solicited the federal army to deal with natives rather than peacefully deal with them.  Basically, both eras had their political entrepreneurs who found their way in the political process to obtain favors.

Progressives who indulged in yellow journalism merely wanted to replace one set of political entrepreneurs with another. Just like the Alt-Right, from which emanates most of the fake news. In a way, both are exactly the same. Many members of the Alt-Right are not interested in restraining government abuses, they’re in favor of redirecting government indulgences towards them (Trump did promise less immigration with paid maternity leaves and no reduction in social transfers). Some are well-meaning like the baptists of lore. But there are still bootleggers (example: Steven Mnuchin from Goldman Sachs) who co-opt the process in order to continue indulging in rent-seeking just as they did before.

Are we about to swap one bad set of institutions for another? Given that all I see is the same type of political entrepreneurs (after all, Bannon from the flagship of the fake news alt-right outlet Breitbart is now a member of the government) as those we saw during the progressive era, I am inclined to respond “yes”.

Theory versus Common Sense? The case of Free Trade

[…] the [World Baseball Classic] allows Organized Baseball to sustain the structures that constitute its inner purity, maintaining the boundaries of its regular and post seasons above all against all challenge by foreign teams, all the while increasing its global reach in recruiting talent and vending its commodity […A]ll the champions and perennial powers of the world’s other leading leagues need not apply.

[…] To call [Organized Baseball] an empire, or even a monopoly, is to seriously underestimate it. It is to fail to see the form of power it wields in shaping the separateness of its own commodious world, controlling access, avoiding and deflecting competition, limiting liability, sustaining and elaborating fictions of separate but equal, and mostly separate.

[…] For all of our ease in understanding objections to racism, for all that we can see the flaws in separate but equal when it generated the Major Leagues and the Negro Leagues, most of us now, not only but especially Americans, have no inkling how strange and immoral will someday seem our sanguine acceptance of the legal fortresses of limited liability and nation-state self-determination. (170-172)

These passages are from the last few pages of American anthropologist John D Kelly’s short book The American Game: Capitalism, Decolonization, World Domination, and Baseball. You can read it for yourself, but my short summary of the book is that it pleads for free trade. Not the theoretical free trade of economists, mind you, but of a practical free trade that opens up borders to labor (Kelly points out that it is really hard to play in the Majors if you are not an American, but shortsightedly blames US policy when other nation-states harbor just as much of the blame; if anything, the US has one of the more open immigration policies in the world today) and to marketplace competition (i.e. capital) in the realm of goods and services. I don’t know if this is a conclusion that Kelly would be comfortable being associated with, given that he is a man of the Left, but what would you call a world where baseball teams from Cuba, the US, the Netherlands, Japan, etc. compete with each other on an even playing field for labor, fans, and prestige?

The stubbornness of the Left is sometimes astounding. Kelly is right to lament the fact that the American baseball league (“Organized Baseball”) wields so much power in international baseball, but he doesn’t spell out an explicit remedy for solving this issue. Instead, it seems as if he is mystified as to how this could possibly happen. He understands and acknowledges that Organized Baseball derives much of its power from being located in the world’s most powerful nation-state, but he also understands that free trade (of labor and capital) is the answer to this issue without explicitly acknowledging this fact.

It seems to me that this is an issue where libertarians and internationalist Leftists can work together, provided we clarify a few concepts. Free trade is the answer for a lot of problems in the world today. Internationalists on both the Left and the Right realize this (see also Delacroix). The New Left intelligentsia, though, wants a practical free trade, and it often accuses economists of arguing for a theoretical free trade. But this critique is made in bad faith: Because economists are more familiar with the theoretical version of free trade, they are, as a whole, more willing to make compromises in the form of small steps towards more free trade. The New Left intelligentsia, instead of taking into account all the various options that can be done to move toward a freer world, including political limitations on what can be done to open societies up more to each other, has decided instead to poo-poo the small steps advocated by economists, and all in the name of practicality!

I agree with Kelly and others about the nation-state being a tool of segregation in today’s world. Unlike the New Left, though, I wholeheartedly embrace the pragmatic steps being taken to erode this segregation through the peaceful medium of free trade, even if it is not True Free Trade.

We don’t have to ruin markets to do charity

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.

Sanders Supporters Don’t Support Sanders’s Policies: A Short Note on Yet Another Reason why “Deliberative Democracy” is a Myth

In the previous part of my democracy series, I took note how the notion of democracy as a “deliberative” means of policymaking is a myth. Contrary to John Dewey, Sidney Hook, and Joshua Cohen, who characterize democracy as an application of the scientific method to political problems and as deliberative “intelligence” directing society, democracy is really the rule of the irrational and ignorant, as public choice theory teaches. Deliberative reasoning does not determine policy in democracies, but rather whoever can cater the best to systemically biased and rationally ignorant voters. Voters don’t give deliberative reasons for their policies, and if they do they, contra Cohen, clearly do not have an equal say in the formation of policies as, according to public choice theory, special interests have the most control over it.

However, I neglected one important other reason why actual political democracies are anything but “deliberative:” voters rarely chose their candidates based off of careful deliberation of issues; they instead chose candidates based off of cultural associations with the candidates. Christopher Achen and Larry Bartels recently took note of this in the New York Times:

The notion that elections are decided by voters’ carefully weighing competing candidates’ stands on major issues reflects a strong faith in American political culture that citizens can control their government from the voting booth. We call it the “folk theory” of democracy.

…But wishing so does not make it so. Decades of social-scientific evidence show that voting behavior is primarily a product of inherited partisan loyalties, social identities and symbolic attachments. Over time, engaged citizens may construct policy preferences and ideologies that rationalize their choices, but those issues are seldom fundamental.

That last note is very reminiscent of another point made in my last article on democracy about how evidence from moral psychology, specifically Jonathan Haidt’s The Righteous Mind, shows that voters do not use reason to determine their political or moral views, but rather reason serves as a servant to the passions. In this case, far from deliberatively and intelligently choosing policy preferences, it seems voters are letting their deliberation serve passions that are influenced by social and cultural affiliations rather than actually informed policy stances.

Achen and Bartels show how this is in action specifically in the recent Democratic Primary:

…It is very hard to point to differences between Mrs. Clinton and Mr. Sanders’s proposed policies that could plausibly reflect account for such substantial cleavages [in polls]. They are reflections of social identities, plausible commitments and partisan loyalties.

Yet commentators who have been ready and willing to attribute Donald Trump’s success to anger, authoritarianism, or racism rather than policy issues have taken little note of the extent to which Mr. Sanders’s support [sic]is concentrated not among liberal ideologues but among disaffected white men.

More evidence casts further doubt on the notion that support for Mr. Sanders reflects a shift to the left in the policy preferences of Democrats. In a survey conducted for the American National Election Studies in January, supporters of Mr. Sanders were more pessimistic than Mrs. Clinton’s supporters about “opportunity in America today for the average person to get ahead” and more likely to say that economic inequality had increased.

However, they were less likely than Mrs. Clinton’s supporters to favor concrete policies that Mr. Sanders has offered such as remedies for these ills, including a higher minimum wage, increasing government on health care and an expansion of government services financed by higher taxes. It is quite a stretch to view these people as the vanguard of a new, social-democratic-trending Democratic Party.

Achen and Bartels further note that, despite the enthusiastic support from young Democrats, these younger voters actually disagree more with Sanders on specific policy issues than older democratic voters, noting that “even on specific issues championed by Mr. Sanders” such as “increased government funding of healthcare,” “a higher minimum wage,” and “expanding government services,” younger Democrats tend to disagree with Sanders’ more than older ones. In fact, I would be willing to bet that most of Sanders’ voters that Achen and Bartels write about are completely rationally ignorant of their disagreements with their favorite candidate in the first place. I also would add these cultural influences on voting at the expense of policy deliberation to Caplan’s theory of “irrational rationality;” cultural associations and symbolic commitments decrease the costs of holding an irrational political belief.

It is clear, then, that this “folk theory of democracy” in which voters deliberately consider policy alternatives and make reasoned, rational decisions for why they prefer one candidates’ policies to another is a myth. If it is the case that voters are not only rationally ignorant and irrational, that democracy is more controlled by concentrated interests at the expense of the public good, and that voters make their electoral decisions based off of cultural associations rather than deliberations about policy, what can be said about political democracy’s aim at philosophical democracy? What can be said of the existence, or possibility, of intelligent, deliberately directed democratic institutions? It seems that democratic institutions in reality completely undermine democratic aspirations in theory.

PS: No, this is not the fourth part of the democracy series, should be up this weekend.
[H/T Jason Brennan]