Nightcap

  1. Parmesan cheese and Sunbucks Coffee Scott Sumner, EconLog
  2. In search of the true Dao Ian Johnson, ChinaFile
  3. The ‘flower men’ of Saudi Arabia Molly Oringer, BBC
  4. French anti-tax revolts are nothing new Murray Rothbard, Free Market

Nightcap

  1. After Federalist No. 10 Greg Weiner, National Affairs
  2. Photos of the Paris “Yellow Vest” Riots Alan Taylor, the Atlantic
  3. A century of HIV Thomas McDow, Origins
  4. The long, entwined history of America First and the American dream Kevin Kruse, the Nation

Afternoon Tea: “Dividing Power in the First and Second British Empires: Revisiting Durham’s Imperial Constitution”

In his Report on the Affairs of British North America, Lord Durham proposed that “internal” government be placed in the hands of the colonists themselves and that a short list of subjects be reserved for Imperial control. Janet Ajzenstat maintains that Durham did not intend to formally restrict the authority of the new colonial legislature by dividing power. This paper argues otherwise: that Durham’s recommendation fell squarely within a tradition of distinguishing between the internal and external affairs of the colony. This was the imprecise but pragmatic distinction that American colonists invoked during the Stamp Act crisis as a means of curtailing imperial authority over internal taxation while maintaining their allegiance to the British Crown. It also was a division that Charles Buller relied upon in a constitution for New South Wales that he proposed prior to sailing to Canada as Durham’s principal secretary. Durham likely was drawing upon this tradition when he made his recommendation, a distinction that began to crumble away almost immediately. In the result, Canadians inherited a robust semblance of self-government, just as colonists during the Stamp Act crisis had desired, but without the need for revolution.

This is from David Schneiderman, a law professor at the University of Toronto. Here is the link.

Are Swedish University Tuitions Fees Really Free?

University tuition fees are always popular talking points in politics, media, and over family dinner tables: higher education is some kind of right; it’s life-changing for the individual and super-beneficial for society, thus governments ought to pay for them on economic as well as equity grounds (please read with sarcasm). In general, the arguments for entirely government-funded universities is popular way beyond the Bernie Sanders wing of American politics. It’s a heated debate in the UK and Australia, whose universities typically charge students tuition fees, and a no-brainer in most Scandinavian countries, whose universities have long had up-front tuition fees of zero.

Many people in the English-speaking world idolize Scandinavia, always selectively and always for the wrong reasons. One example is the university-aged cohort enviously drooling over Sweden’s generous support for students in higher education and, naturally, its tradition of not charging tuition fees even for top universities. These people are seldom as well informed about what it actually means – or that costs of attending university is probably lower in both England and Australia. Let me show you some vital differences between these three countries, and thereby shedding some much-needed light on the shallow debate over tution fees:

The entire idea with university education is that it pays off – not just socially, but economically – from the individual’s point of view: better jobs, higher lifetime earnings or lower risks of unemployment (there’s some dispute here, and insofar as it ever existed, the wage premium from a university degree has definitely shrunk over the last decades). The bottom line remains: if a university education increases your lifetime earnings and thus acts as an investment that yield individual benefits down the line, then individuals can appropriately and equitably finance that investment with debt. As an individual you have the financial means to pay back your loan with interest; as a lender, you have a market to earn money – neither of which is much different from, say, a small business borrowing money to invest and build-up his business. This is not controversial, and indeed naturally follows from the very common sense principle that those who enjoy the benefits ought to at least contribute towards its costs.

Another general reason for why we wouldn’t want to artificially price a service such as university education at zero is strictly economical; it bumps up demand above what is economically-warranted. University educations are scarce economic goods with all the properties we’re normally concerned about (has an opportunity cost in its use of rivalrous resources, with benefits accruing primarily to the individuals involved in the transaction), the use and distribution of which needs to be subject to the same market-test as every other good. Prices serve a socially-beneficial purpose, and that mechanism applies even in sectors people mistakenly believe to be public or social, access to which forms some kind of special “human right.”

From a political or social-justice point of view, such arguments tend to carry very little weight, which is why the funding-side matters so much. Because of debt-aversion or cultural reasons, lower socioeconomic stratas of societies tend not to go to university as much as progressives want them to – scrapping tuition fees thus seems like a benefit to those sectors of society. When the financing of those fees come out of general taxation however, they can easily turn regressive in their correct economic meaning, disproportionately benefiting those well off rather than the poor and under-privileged they intended to help:

The idea that graduates should make no contribution towards the tertiary education they will significantly benefit from it, while expecting the minimum wage hairdresser in Hull, or waiter in Wokingham to pick up the bill by paying higher taxes (or that their unborn children and grandchildren should have to pay them due to higher borrowing) is highly regressive.

Although not nearly enough people say it, university is not for everyone. The price tag confronts students, who perhaps would go to university to fulfill an expectation rather than for any wider economic or societal benefit, with a cost as well as a benefit of attending university.

Having said that, I suggest that attending university is probably more expensive in your utopian Sweden than in England or Australia. The two models these three countries have set up look very different at first: in Sweden the government pays the tuition and subsidies your studies; in England and Australia you have to take out debt in order to cover tuition fees. A cost is always bigger than no cost – how can I claim the reverse?

With the following provision: Australian and English students don’t have to pay back their debts until they earn above a certain income level (UK: £18,330; Australia: $55,874). That is, those students whose yearly earnings never reach these levels will have their university degree paid for by the government regardless. That means that the Scandinavian and Anglophone models are almost identical: no or low costs accrue for students today, in exchange for higher costs in the future provided you earn enough income. Clearly, paying additional income taxes when earning high incomes but not on low incomes (Sweden) or paying back my student debt to the government only if I earn high incomes rather than low (England, Australia) amounts to the same thing. Changing the label of a financial transfer from the individual to the government from “debt-repayment” to “tax” has very little meaning in reality.

In one way, the Aussie-English system is somewhat more efficient since it internalises costs to only those who benefited from the service rather than blanket taxing everyone above a certain income threshold: it allows high-income earners who did not reach such financial success from going to university to avoid paying the general penalty-tax on high-incomes that Swedish high-earners do.

Let me show the more technical aspect: In England, earning above £18,330 places you at a position in the 54th percentile, higher than the majority of income-earners. Similarly, in Australia, $55,874 places you above 52% of Aussie income-earners. For Sweden, with the highest marginal income taxes in the world, a similar statistics is trickier to estimate since there is no official cut-off point above which you need to repay it. Instead, I have to estimate the line at which you “start paying” the relevant tax. What line is then the correct one? Sweden has something like 14 different steps in its effective marginal tax schedule, ranging from 0% for monthly incomes below 18,900 SEK (~$2,070) to 69.8% for incomes above 660,000 SEK (~$72,350) or even 75% in estimations that include sales taxes of top-marginal taxes:


If we would place the income levels at which Australian and English students start paying back the cost of their university education, they’d both find themselves in the middle range facing a 45.8% effective marginal tax – suggesting that they would have greatly exceeded the income level at which Swedish students pay back their tuition fees. Moreover, the Australian threshold would exchange into 367,092 SEK as of today, for a position in the 81st percentile – that is higher than 81% of Swedish income-earners. The U.K., having a somewhat lower threshold, converts to 217,577 SEK and would place them in the 48th percentile, earning more than 48% of Swedish income-earners – we’re clearly not talking about very poor people here.

The fact that income-earners in Sweden face a much-elevated marginal tax schedule as well as the simplified calculations above do indicate that despite its level of tuition fees at zero, it is more expensive to attend university in Sweden than it is in England or Australia. Since Australia’s pay-back threshold is so high relative to the income distribution of Sweden (81%), it’s conceivably much cheaper for Australian students to attend university than for it is for Swedish students, even though the tuition list prices may differ (the American debate is much exaggerated precisely because so few people pay the universities’ official list prices).

Letting governments via general taxation completely fund universities is a regressive measure that probably hurts the poor more than it helps the rich. The solution to this is not some quota-scholarships-encourage-certain-groups-version but rather to a) increase and reinstate tuition fees where applicable or b) cut government funding to universities, or ideally get government out of the sector entirely.

That’s a progressive policy in respect to universities. Accepting that, however, would be anathema for most people in politics, left and right.

RCH: death and taxes

I’ve been so busy I forgot about my Tuesday column over at RealClearHistory (I have a Friday column, too). Last week’s column was about the trial and execution of two Italian-born anarchists in Massachusetts:

The anarchism of Nicola Sacco and Bartolomeo Vanzetti was left-wing and violent. Very violent. The two young men were admirers of Luigi Galleani, an Italian anarchist who advocated violence as the best way to achieve a more anarchist world. Sacco and Vanzetti, the executed, were part of an American syndicate dedicated to Galleani’s ideals. This syndicate was responsible for bombings, assassination attempts, printing and distributing bomb-making books, and even mass poisonings in the United States. The Galleanists were so violent that they sat atop a list of the federal government’s most dangerous enemies. On April 15, 1920, an armed robbery at the Slater and Morrill Shoe Company in Braintree, Mass., went awry and two men, a guard and an accountant (“paymaster”) were killed by the robbers. Sacco and Vanzetti were accused, convicted, and sentenced to death.

This week’s column focused on Shays’ Rebellion:

The Shaysites, as supporters of Daniel Shays came to be known, eventually grew to thousands of men, and the movement grew confident enough that it planned to seize a federal armory. However, the governor of Massachusetts, James Bowdoin, directed a local militia leader (William Shepard) to protect the armory. The armory, though, was federal property, and the militia was operating under state direction, so the seizure of the armory in the name of protecting it from rebels had the potential to ignite a powder keg of legal ramifications throughout the war-torn eastern seaboard.

Y’all stay sane out there!

Between anarchy and minarchism: the redistributive state

While sometimes we think of ideologies in strict terms of left and right, more frequently we look at political schemes that incorporate a statism dimension. Big government is possible for both conservatives and progressives; so, maybe, is minarchy. If minarchy is possible, and achievable, it must attain popular support less it be thwarted by revolution or contrarian voting. From this, maybe it makes sense that a minarchism utilize fundamental values from each side, in order to be pragmatic and achieve democratic (and thereby stable) ends. Here there may even be room for an ultraminarchy.

In Anarchy, State and Utopia, Robert Nozick defended a minimal state slightly more restrained than traditional classical liberalism. This minimal state arises through natural market forces from statelessness, and serves to enforce contracts and produce monopolistic law. Nozick, although countering his fellow academic Rawls, was also responding to the natural law anarchists, who criticized coercive states for violating human rights — which, in many interpretations, boil down to rights of property.

However, before arriving at the minimal, night-watchman state, Nozick articulates an ultraminimal state, i.e. a private protection agency that claims exclusionary right over the use of force for a given geographical area. It has its voluntary clients; the extension of coverage to others makes the agency a “state” as it introduces taxation.

In ASU the state is an entity formed from an invisible hand to produce heavily libertarian functions of government like protecting rights. Because of this, the minarchist state was a refuge for archist libertarians to claim as their own, relatively consistent with centuries of Western liberal thought. Accordingly, in response, the anarchists question the viability of a lasting minimal state — cue David Friedman in Machinery of Freedom:

“It took about 150 years, starting with a Bill of Rights that reserved to the states and the people all powers not explicitly delegated to the federal government, to produce a Supreme Court willing to rule that growing corn to feed to your own hogs is instate commerce and can therefore be regulated by Congress.”

Government grows; modern government grows really, really fast. Minimalism hasn’t seemed to last. So the question is, what sorts of minimal governance could last?

The traditional ultraminimal and minimal state are concerned with, as stated, traditionally libertarian public functions such as police, the judiciary, and possibly roads and maybe even national defense. The problem with these utilities is that they feel wildly inadequate to the modern American used to entitlements, welfare, or a president. The privatization of nearly all federal departments is seen as wild enough for John Oliver to entertain millions of viewers, at the blight of Gary Johnson, and make hardcore libertarianism a losing electoral program. The contemporary world is too complicated, or our enemies are too powerful, or the market is too corrupt for the reinstitution of laissez-faire in the 21st century.

Nevertheless we want a smaller government, or no government, and losing to the tide isn’t a good death; we’d rather fight, and we’d rather win. A lasting minarchism satisfies the purposes of limited governance — liberty, protection, and preserving the benefits of the market — while sufficiently completing basic democratic demands, lest it erode into statism or collapse internally. (Keep in mind that anarchism, at least this week, is not a winning platform.)

Here’s what I think lies between anarchism and minarchism: the redistributive state. We can make a couple assumptions which are likely true: (1) every public service currently offered by the state could be provided (and, maybe, could be provided better) by the market and non-coercive communities instead, and (2) the entitlement theory of distributive justice offered by Nozick is correct, i.e. holdings are just if acquired by peaceful initial acquisition, voluntary exchange or gifting, or rectification of a previous unjust acquisition. Taking these assumptions, and leveraging the fact that the American populace will not currently settle for brutalist governance, the redistributive state (RS) seeks only to collect tax revenues and redistribute money progressively.

Instead of offering vouchers, EBT, or public options like housing, schools, security and roads, a RS would only tax its citizens and reallocate revenue based on some progressive variables like income, net worth or consumption. (These details are less important, for now.) The only administration is something like an IRS, Census Bureau and investigation unit suffused together, with over ninety percent of the current staff eliminated, with tax escapees adjudicated in private courts and sent to private prisons or some other form of punishment.

An RS violates rights based on a Lockean conception; it also does something which sounds pretty socialist to right-wing circles. For this reason, though minarchist, it may not be libertarian. However, the pragmatic element is also highly utilitarian, which may interest bleeding-hearts; and, being essentially one big welfare program, it may intrigue American leftists currently eyeing universal healthcare and socialized education. We would do well to keep in mind that Friedrich Hayek and Milton Friedman were not averse to basic income either — a redistributive state keeps a UBI and abandons the active functions of the state. I think it is obvious that, in a situation where we are already giving a person $X in the form of schools, transfer payments, utilities, roads, defense, firefighters, planning, retirement funds, mail service, etc. etc., instead we should just give that person $X to spend however they see fit. If anyone disagrees, they are probably too authoritarian to consider minarchism in any scenario.

The RS has many benefits over our contemporary goverment. In the first case, the reductionist perspective of right-wing anarchists — that the state is essentially a conquer-tax-and-redistribute machine — is validated, and a lot of the mysterious machinery and bootlicking, ivory-tower political philosophy is dissolved. (And mindless political science about the Rousseauian general will collapses.) And, for the Marxists, their critique of the state as a tool of the capitalist class expires, since the state now greatly serves labor more than capital. Some of the income of the upper classes is directly allocated to the lower classes. Also, the state ceases to be paternalistic — it no longer chooses what food is available through SNAP, or issues health and safety warnings; it just straight-up hands out the money without assuming value for consumers. It doesn’t determine what is taught in schools, or what color the roads are, or what country gets bombed on Tuesday.

Perhaps best of all the RS almost completely eliminates bureaucracy. With one small administrative branch which functions like a hyper-specialized agency, there is little room or need for massive proliferation. Likely, all seats will be elected positions along with some underlings, with the marginal tax brackets pre-established constitutionally. But, that can all be figured out later.

Now, there are some obvious flaws for an RS. First of all, the very wealthy have little incentive to stay in a redistributive state. Their money is seized without visible benefit for themselves, like roads or security. They have to buy those things on their own dime. The only solution to this I can think of is that, in a society with less state involvement, community ties will be closer — the rich will want to pay their “fair share.” This is the Hoppean trust in private charity, except that it’s now “forced private” charity. Also, taxes would be much, much lower than the current situation and hopefully tolerable. The taxes are also going directly to other citizens instead of politician’s wallets, oil tycoons and potassium chloride. Furthermore, they’re paying to live in — the government still has a coercive monopoly on land — the freest nation in the world. An RS is significantly freer than the other statist regimes, and less stressful. Government plays no role at all in everyday life.

One other flaw — maybe an inherent flaw of government brightly illuminated by a raw redistributive state — is what Murray Rothbard saw as an eternal tension between net tax-payers and net tax-consumers. To the extent that the RS administration is elected, and to the extent that politicians have platforms, a lot rests on whether or not taxes will be raised/redistribution will increase or not. The left will continually be concerned with income inequality, regardless of whether or not the poor can afford sustenance. The goalposts might keep climbing. Dialectically, the very wealthy will want to keep the maximum amount of their money, regardless of my arguments above. Raw societal tensions like these require a dynamic form of governance, with fluctuations in party dominance, but the RS is too minimalist to feature such parties or other contrivances. The only hope here, I guess, is that the tension will be less than in the current system. And very likely it will be. (Also, the market will correct much of the gratuitous wealth diparity.)

In conclusion, a redistributive state would be baldly organized around theft (in a libertarian interpretation) and using people as means rather than ends. To that extent it is hardly libertarian. It achieves Nozick’s end of minimal government but distorts the typical functions we correlate with small government. Still, it’s ultraminarchical, preserves innovation, balances right-wing virtues like liberty and industry and left-wing virtues like equality and positive freedom, and, for a radical populace not quite keen on revolution, politically viable. It serves welfarist functions demanded by 21st century citizens without the authoritarian, corporatist monster of the present. Also, no one starves. For all of this, even if a redistributive state is not perfection incarnate, it seems far better than the current system, and provides such a culturally-celibate political framework to possibly achieve acceptance in totally disparate societies from the United States. I don’t advocate a redistributive state quite yet, but I think it’s a useful, radical place to look for bipartisan solutions to a complicated and overwhelmingly statist world.

I’m pretty sure I’m the first one to suggest a state organized singularly around redistribution of citizen wealth, either because it’s too stupid or it’s too grossly unattractive, so I welcome all feedback. But, if voluntarist institutions are possible at all, this implies all the state is is a redistributor anyway. The idea of an RS just accepts this conclusion and makes it efficient. Keep in mind I haven’t elaborated on the many complications of UBI, which is an entire field to articulate more extensively. For now the only question is would it work.