Statusful Regulation

As an economist who leans libertarian, I’ve long struggled to account for our many apparently-excessive government regulations and interventions. Many theories offered to explain such things have grains of truth, and often do well on particular examples, but to me their sum falls flat an explanation of the whole. So I continue to seek patterns in such regulations, and theories to account for such patterns.

One neglected pattern that stands out to me is that many economically-puzzling regulations and policy inclinations tend to make everyone act like high status folks act, regardless of how appropriate that is for their situation.

Consider one-size-fits-all building codes, food and drug regulations, safety rules, professional licensing, and medical insurance regulations. Such rules tend to make sure that a typical rich person wouldn’t accidentally buy a product or service of a much lower quality than they would desire.

You might argue that rules can only vary so much with circumstances, and poor folks simply suffer by being in the tails of the distributions of circumstances – nothing personal. But many regulations seem to go out of their way to target the poor. Consider min wages, min house lot sizes, max apartment occupancy rules, and child labor laws. Rich folks are in little danger of accidentally violating such rules – the intent seems to be to stop poor folks from doing things that rich folks wouldn’t think of doing.

Policies to subsidize and encourage schooling and homeownership also encourage high status activities. Zoning regulations and complex business rules discourage poor folks from running their own small businesses, especially out of their homes, pushing them to instead become employees of rich folks. Rules against “excess” noise, and against “eyesore” lawns, cars, or clothes, also tend to impose high status aesthetic standards on everyone else.

Drugs like crack favored by poor folks get much higher penalties that drugs like cocaine consumed more by the rich. Much more concern is expressed about poor than rich alcoholics, and about cheaper mixes of alcohol and caffeine. There is also more concern about the teen pregnancies favored by the poor, relative to the over-35 pregnancies favored by the rich, even though the later have much higher medical risks.

So why does so much regulation seem designed to push low status folks into doing what high status folks do? One theory is that high status folks dominate the policy process, and by focusing on people they know, they forget that policies also apply to low status folks. But that is hard to square with policies targeted at the poor.

Another theory is that we want to push away low status folks, so that we will not be lowered in status by affiliating with them. This might make some sense of very local rules, but much less of national rules, as few movements will be influenced by such rules.

A third theory is that we think that a big reason why poor folk are poor is that they don’t act like the rich. So for their sake, we make the poor take on the styles of behavior – to help them escape poverty. This theory requires that we be pretty clueless about how behaviors should reasonably change with wealth. A closely related theory is that high status folks see their own behaviors as just more virtuous, worthy of encouragement regardless of their effect on anything else.

A fourth theory is that we are trying to make ourselves look good to foreigners. If the very visible low status actions of some could make all of us seem low status to outsiders, then we might want to limit such actions to raise our status. This theory requires that we care a lot more about foreigner opinions than we usually admit.

A fifth theory, and one I favor, is that politics isn’t about policy. We (unconsciously) don’t care much about the consequences of such policies – we instead support policies to make ourselves look good. If our support for regulations pushing high status actions is taken as a signal of our personal status, then we can want to support such regulation regardless of what results when such regulations are implemented.

In their private purchases, many people prefer brands that are widely perceived to be high quality. Many like such brands not only because their high wealth induces a higher private taste for quality, but also because such brands are visible to others, and so signal their wealth to others. Such people often prefer not only to consume such brands themselves, but also to recommend such brands to acquaintances, even poor acquaintances, for whom such quality is usually not worth the price.

For example, Apple computers are more expensive, but higher quality. As a rich professional who spends lots of time with his computer, this higher quality may well be worth the higher price to you. But you might then recommend Apple computers to everyone you know, even poor folks who spend much less time with computers.

In such cases, people aren’t recommending the high quality brands to help others, but to signal their own tastes and wealth. Similarly, such folks may well support political policies using the same priorities. More generally, most folks may support policies to make everyone act like high status folks act in order to affiliate themselves with high status acts, and thereby seem a bit higher status themselves.

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  • Andy McKenzie

    Most high status acts also seem to be about gratification delay, which is highly correlated with income, which is highly correlated with status. This is what I think of when you mention apple. Apple comps require more of an up-front investment, but tend to last longer (b/c of less viruses, etc). So people who have bought apple comps in the past are happy with their investment, and encourage others to get over the “hump” and buy one themselves.

    So on the basis of this I think that theory #3 holds a lot of weight too, although of course status is also a key component. Perhaps the reason you give less weight to theory #3 is because you have more faith in the non-cluelessness of non econ PhD’s. Maybe you should read some more Caplan?

  • Andrew

    Third, people are cluless. High-status people dominate the policy making process, they want to help poor people, and their attempts suffer from the law of unintended consequences.

    Imagine you see a poor person and you feel sorry for them:

    How can they possibly live off a wage of $5/hour? Obviously what they need is for the government to raise the minimum wage. It’s not so obvious that this will decrease employment at the margin.

    That poor child, he has to work to survive. His parents are taking advantage of him. Obviously we need the government to ban child labor.

    Poor people can’t afford rehab for their drug problems – perhaps a higher disincentive that’ll help them to get off crack.

    If she has a baby now then she’ll have far fewer chances to get out of poverty. Let’s try to stop her from having the baby.

    I could go on. For every one of your examples it’s because people want to help, but they don’t understand the consequences of their actions.

    • Robert Koslover

      I think you are on the right track, re: the “road to Hell is paved with good intentions.”

    • Another narrative is “if low status people had the market power that we did, they would make these wise choices; but they don’t, so we help them.”

    • CaptBackslap

      “it’s not so obvious” that a minimum wage will decrease employment at the margins because there’s no empirical evidence it’s true. States that increased their minimum wages in the 1990s actually experienced higher subsequent employment rates, relative to states that did not.

      • Anonymous

        Source please? I’d like to check that claim.

      • Peter H

        I assume you’re referring to Card & Kruger? Subsequent studies found that Card & Kruger simply didn’t take a big enough sample and didn’t go after the best data sources (due to their surveying method, they couldn’t get the data the people who followed up did) and that there were small, but not statistically significant increases in unemployment among low-wage NJ employers along the NJ/PA border when NJ raised the minimum wage.

  • Vladimir M.

    So why does so much regulation seem designed to push low status folks into doing what high status folks do?

    A lot of the regulation you mention is meant to keep low-status folks away from high-status folks, not to make them behave like the latter. Some laws like zoning regulations do this rather explicitly by applying only locally, but many other laws that are theoretically uniform serve the same purpose because their enforcement in practice is far from uniform (and it’s triggered with high probability by low-status folks not knowing their place).

  • jb

    IMO There’s no coherency to regulation. Regulation is a chaotic mess of random crap thrown together by 8 generations of bureaucrats with random levels of intelligence.

    Some of these bureaucrats create regulations so they can give the appearance of trying to “protect” the poor, because they know that the reason poor people are poor is because they’re too stupid to avoid making bad decisions.

    Other of these bureaucrats create regulations so they can give the appearance of trying to “incent” the poor, because they know that the poor wouldn’t be poor if they just got off their lazy asses and got a job and smartened up.

    • CaptBackslap

      Wow, almost everything dislikable about smug Internet glibertarians in one brief comment! We have just-world hypothesizing, flagrant dispositionism, and the nauseous smugness of someone who is sure he would be a titan of industry if only those damned bureaucrats and lazy poors weren’t standing in his way. No bonus points for guessing what jb’s mental image of a poor person looks like.

      There’s a smart way to challenge the logic of regulation (many regulations are, of course, utterly ridiculous or counterproductive); Robin, Will Wilkinson, Tyler Cowen, etc. all manage it just fine. Then there’s disgusting Social Darwinist crap like this.

      • Wonks Anonymous

        I think jb was paraphrasing what he thinks the motivations of the two groups of bureaucrats are. My impression was that he was mocking them.

  • spandrell

    ” Regulation is a chaotic mess of random crap thrown together by 8 generations of bureaucrats with random levels of intelligence.”

    Best explanation ever

  • Ken S

    I think some regulation could be explained as ideological sparring between high status folks. Minimum wage laws prevent rich people from paying subsistence wages, and there are certainly rich folks who would never think of doing that and don’t want the rest of the rich to either. This theory would only work out if many of the subsistence wage jobs that would be created were ones that only the ‘rich’ and their workers could benefit from, like hiring security guards or private cooks/housekeepers. Also, the extra unemployment is not such a problem with a proper social safety net.

    Similarly, things like occupancy limits, building codes, and safety regulation drive up what is considered a subsistence wage, making it still harder for the rich to get more bang out of their buck in employing others. The framing is almost never “bring poor folks’ status up” but more ‘prevent a race to the bottom’.

  • I’m not an expert, but it seems to me:

    -politics is sometimes about policy
    -the absence of a regulation is a default regulation
    -sometimes regulations solve coordination problems of us individual agents and reduce our collective existential risk.

    It seems a bit skewed to me not to incorporate these points.

  • Lord

    I think you are making rather superficial observations on who is rich and poor by their displays, but one quickly learns you can only tell who is high or low spending from such displays. I would say it is more about emphasizing social conformity and cohesion.

  • Lemmy Caution

    Drugs like crack favored by poor folks get much higher penalties that drugs like cocaine consumed more by the rich.

    I agree that the sentencing guidelines need to be changed. However, crack cocaine was associated with an epidemic of violence in the early 1990s. There were reasons for the penalty disparity besides mere dislike of the poor.

  • Philo

    “One theory is that high status folks dominate the policy process, and by focusing on people they know, they forget that policies also apply to low status folks. But that is hard to square with policies targeted at the poor.” Therefore it is only part of the explanation; but it *is* part. Your theory, that “our support for regulations pushing high status actions is taken as a signal of our personal status,” is also only part (perhaps a weightier part) of the explanation, since your slogan, “politics isn’t about policy,” is at least slightly overstated—politics *is* somewhat about policy. (Your third expalantion–casual-paternalism–also has some value.)

  • Someone from the other side

    Lots of it can be explained by the attempt to reduce the externalities that some behaviors of the poor have on the rich – lowering their status by affiliating with the poor is one of them, but there is a couple more obvious ones…

    Eyesore laws? I dont know about you, but I kinda like living in a nice looking area
    Teen pregnancies? Much more likely the rich will have to pay welfare at some point.
    Welfare itself? Reduce the risk to get mugged by a starving poor (same for crack vs cocaine and cheap vs expensive alcohol)
    The only one I cannot readily do is minimum wage. It may just be a feel god thing if people criticize you for your low wages (“I am paying him what the government thinks is right, so shut up”)

    • Eric

      Ideally government regulations should focus on mitigating negative externalities. Actually, it really would be nice to see libertarians talk about negative externalities more, since, to me libertarianism can only be wishful thinking without a good answers about how to deal with externalities.

      Anyway, lots of regulation is more about setting barriers to entry for special interest groups rather than any public good. Lobbying and interest politics capture regulatory systems pretty effectively.

  • Sam Bhagwat

    Imagine a hypothetical Universal Drug Sentencing bill is in Congress.

    Senator X sees proposed equal sentencing for crack and cocaine. He’s heard about the dire consequences of both drugs from his drug warrior friends. But he remembers his college buddy Greg a couple months ago caught his son with cocaine in his backpack.

    Greg’s son isn’t that bad of a kid. Just the normal teenage rebellion. Could cocaine *really* be that much worse than the pot Greg and I smoked back at Ivy College? I don’t want to lock the kid up for ten years for making a mistake.

    So Senator X suggests that the punishment for cocaine possession be weakened…and to avoid looking weak on the war on drugs, proposes lengthening the punishment for crack possession….

    Our own sins always seem less egregious than others’.

  • Noumenon

    When you use abbreviations like “min wages”, it will make it hard for people (or yourself) to Google what you think about minimum wage. In my case I posted your article, someone commented about minimum wage, and I ctrl-Fed and said “He didn’t mention minimum wage, did he?”

  • Steven

    Maybe some of it is because poor people vote? A lot of these policies were supported by unions and the unemployed, especially during the Depression.

  • Wow, surprised (not) that you didn’t even mention the real reason,

    Hypothesis #6. The rich want to actually hurt the poor, make their lives more desperate so the poor will be forced to do desperate things which the rich can then exploit. They do so by erecting artificial barriers that can only be overcome with money the poor don’t have, or by dissipating other resources the poor do have (wasting their time with Byzantine regulations) so the poor cannot accumulate resources, or by thwarting efforts the poor make to not worsen their situation (abortion in case of unwanted pregnancy).

    Several comments have suggested that without a mandated minimum wage that employers could pay an even lower “subsistence wage”. *Blinks* *blinks* again.

    “You keep using that word, I do not think it means what you think it means.”

    From the Free online dictionary. Subsistence Wage:

    “(Economics) the lowest wage upon which a worker and his family can survive.”

    The Federal minimum wage is $7.25 per hour. Once we subtract FICA, (4.2% employee, reduced from 6.2% this year) and Medicare (1.45% employee), we are down to $6.84 per hour. There is no requirement for severance pay, sick leave, vacations, or holidays. In a year, there are 365 days, or 52 weeks plus 1 day. If we assume that day is a work day, a person working minimum wage for 8 hours per day could (in principle) work 261 days. But there are 10 Federal holidays, so lets say 251 days. That is $13,734.72 per year.

    If the worker and his family decide they need health care to survive, then it will cost them their entire wages, $13,375 in 2009. It is higher now, but no worker and his family could pay 97.4% of their take home income and expect to have enough for food and shelter. They probably couldn’t afford the co-pays.

    How about housing? According to McClachy, there is no county in the US where a minimum wage worker can afford to rent a single bedroom apartment.

    Oops. They can survive but only if they remain homeless.

    So how about food? Under the USDA’s “thrifty” meal plan, a worker and his family of four

    requires $523.70 per month (we will assume the children are young, and since they will probably grow up stunted, it isn’t a bad assumption).

    Housing, food, healthcare, one out of three isn’t that bad. If they are healthy, and it is the summer, or if they live someplace warm, minimum wage is enough to survive on.

    Of course the employer feels like the worker is being paid a lot more because the employer is paying more than the employee’s wages. There is 6.2% FUTA (employer) 6.2% FICA (employer) and 1.45% Medicare (employer). The employer is paying $8.25 per hour if you include just the federal taxes or $16,574.28 per year.

    • Begin sarcasm:

      Yes the last I went to rich people’s meeting we agreed that if we could hurt the poor trough such regulations, we could make their lives more desperate so the poor will be forced to do desperate things and work like slaves for us.

      End sarcasm

  • More generally, most folks may support policies to make everyone act like high status folks act in order to affiliate themselves with high status acts, and thereby seem a bit higher status themselves.

    As I pointed out earlier, this makes absolutely no sense. If people are truly motivated primarily with status, then it is not in their interest to elevate lower-status people to their own level.

    And it’s exactly backwards from a historical standpoint. The rise of the regulatory state is part of the larger story of the rise of nation states and their displacemenmt of feudal status hierarchies. Nation-states operate by flattening feudal relationships into citizenship, with a concommitent idea that citizenship entail a certain degree of rights and equal treatment. As part of this dynamic, regulations like the ones you deplore serve to mark that there is a certain level of poverty and risk that we will not allow citzens to fall into. Your attempt to paint this as an imposition on “low status folks” is perverse.

    Of course, looking at minimum wage laws as a restriction on what poor people can do is perverse to begin with. It’s a restriction on what employers can do.

    • “As part of this dynamic, regulations like the ones you deplore serve to mark that there is a certain level of poverty and risk that we will not allow citzens to fall into.”
      A basic income guarantee might stop citizens from falling into a certain level of poverty/risk, regulations which deny options does nothing of the sort. And there’s no meaningful distinction between restricting one party to an agreement and the other.

  • Your theory puts me in mind of laws (usually from previous eras or more illiberal countries) which mandate the religion/language of the dominant social group. I’m somewhat surprised Robin didn’t mention them, perhaps because he was focused on our today’s status quo.

  • I actually agree that a guaranteed income would be better policy than minimum wage, but we were talking about motivations, not policy.

    Labor markets are highly asymmetric in terms of the power, knowledge, and flexibilty of the paricipants. Read any (non-libertardian) work on labor economics, you could start here.

    • fructose


      This is about the highest level of debate you are capable of mtraven.

      So sad.

      • that’s not true.

      • I notice that none of my serious critiques get any response around here. So I don’t think it’s me whose incapable of debate.

      • mtavern, sometime you post constructive critiques, but sometimes your posts are non-constructive and inflammatory. If you want to be engaged, I suggest being consistently civil.

      • mtraven, you should have noted that your above comment to which I responded to was non-serious.

        Stiglitz portrays the thinking which he is attacking as “standard economics”. So he’s not indicating that most texts on labor economics take his viewpoint.

      • Yes mtravan, shame on you for using the term “tard” as a pejorative. The intellectually disabled are not responsible for the state they are in, and terms that use archaic names for the mentally disabled as insults are disrespectful to the mentally disabled.

        It is not the case that Libertarians are intellectually disabled. Instead they are ethically disabled and morally disabled hypocrites. They pretend to favor individual rights, but they don’t, they favor enriching themselves at everyone else’s expense and then lie to cover it up. They especially lie to themselves.

        Real Libertarians would pay the true costs of their activities and not try to externalize those costs onto others. Real Libertarians would demand a level playing field, not the one they have wildly tilted in their favor.

        Nowhere is this more apparent than in how AGW is being dealt with, or rather not dealt with. Emitting greenhouse gases into the atmosphere is changing the Earth’s climate. That change will impose costs on some individuals. A real Libertarian approach would be for those who emit greenhouse gases be responsible for mitigating the effects of those greenhouse gases. What is the actual approach by those who claim to be Libertarian? Denialism; to simply deny that it is happening, lie about what the data says, lie about what scientists are saying, pay sycophants to spout what ever lies are convenient, pay to spread disinformation in the media, subsidize the election of politicians who will support their denialism, and pay to astro-turf political protests.

        Real Libertarians would be willing to pay for in taxes the government that they have bought with their campaign donations. I think a better term would be Lie-bertarians because the essence of their philosophy is lying and self-delusion.

      • George


        Just who are you calling a libertarian, exactly? It seems like you’re bashing a make-believe version of a libertarian that exists only inside your head, because real libertarians don’t believe in using campaign donations to direct force against others, and in fact, real libertarians do believe that all forms of illegitimate aggression, including air pollution, are open to redress in the courts of law.

        I suggest you get yourself educated on what a libertarian actually is, because you have some pretty ill-conceived notions and I don’t have time to bring you up to speed. I suggest you start here:

      • George, When people self-define themselves as Libertarian, who am I to disagree with them?

        I think you are making the “no true Scotsman fallacy”

        Of course Robin only called himself “an economist who leans libertarian”, so my remarks are not addressed to him. He doesn’t have the resources to do what those more powerful Lie-bertarians are doing. He just works for them.

      • Koch funded Ronald Bailey on internalizing carbon externalities.

        I’m sure the Kochs want to pay less taxes. A lot of Americans do. Most Americans also don’t want cutbacks in government programs (other than foreign aid and “waste, fraud and abuse”). The Kochs will be just fine without middle class entitlements, so it’s not surprising that they’re able to be consistent in their call for less spending and less taxes. I find it odd that you’re making some accusation of hypocrisy or inconsistency though. The fraction of campaign expenditures coming from them is quite small, and as mentioned they advocate reducing the expenditures of “the government their campaign donations have bought and paid for” to a level consistent with their preferred lower tax rate. It’s really the American people who are deluded and inconsistent (“rationally irrational”).

      • TGGP, yes people do tend to do that, but that doesn’t make then non-hypocrites. It doesn’t make their disingenuous argument valid. Most people who want lower taxes don’t have the resources to manipulate the political process on a grand scale and lower taxes for themselves while raising taxes for others.

        Manipulating the political process to favor yourself at the expense of others is not a libertarian tactic. When that manipulation rises to a certain level we get to call it something else. A term that most people who use it (on the right) do not understand what it actually means.

        “The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism — ownership of government by an individual, by a group, or by any other controlling private power.” FDR

        Are we there yet? Not for lack of trying.

        People can call themselves anything they want to, but when they call themselves a term that supposedly mean something, some people (like George above) become confused. But then that is the objective.

        Their objective isn’t the open transparency that a free marketplace requires. Buyers of goods need to know what they are buying and sellers need to know what they will receive in exchange. Idea marketplaces need open transparency too. Obscuring that with secrecy is one thing, but obscuring it with lies is deception and fraud.

        Any form of lying is a form of hypocrisy. Finding people who are willing to lie to themselves and everyone else and then hire them to spread those lies is no different than lying yourself. The wealthy do have the money to buy friends and even lying friends. They have the money to buy people who will agree with them no matter what kind of nonsense they are saying.

        This is why power corrupts and why absolute power corrupts absolutely and why societies with corrupt governments will eventually fail. When the social structure that gathers the power of individuals together is hijacked and that power is used by the “leaders” to maintain power instead of maintaining the social structure, then eventually the social structure will collapse.

        This particular thread started with a comment by mtravan that tweaked libertarians for putting out biased analyses of labor-employer negotiation asymmetries. The response was faux outrage (by a libertarian I presume) at being mocked and a complete ignoring of the substance of the argument. How does the libertarian economist deal with the effects of power asymmetry between employers and employees? Other than by ignoring it and pretending it doesn’t exist?

        I agree with you that much of the American population is deluded and inconsistent. Of course they are, they are being fed lies by the media. Lies bought and paid for by corporations and the wealthy, and those at the top of the social power structure who are willing to lie to stay there.

        A population that is deluded and inconsistent results in a government that is deluded and inconsistent. I would rather have a government that was not deluded and inconsistent because I don’t want to live in a world based on delusion and inconsistency. I appreciate that those who profit from the delusion and inconsistency of government want to keep it that way. I appreciate that much of the signaling that people do is to maintain the status quo level of delusion and inconsistency. That is why some non-libertarians call themselves libertarians, even when they are not. Then when they do non-libertarian things (government subsidies for themselves), they can still delude the “real” libertarians.

  • Popeye

    Instead of trying to explain the source of ideas that you disagree with, why don’t you apply your insights to explain the motivations behind ideas you favor?

    Why would anyone be a libertarian, convinced that individuals are fully responsible for their behavior and life situations? Oh I don’t know, maybe because that’s true for high-status people and we don’t want to take low status circumstances into account?

    Let’s try another one. Why would someone repeatedly make the counterintuitive claim that X is not about X and instead insist that everything in life s motivated by signaling concerns? Oh I don’t know, maybe because they don’t really care what’s true or false and just want to signal how smart and novel they are?

    I’m a genius!

  • Some useful background on regulation. I haven’t had a chance to do more than skim the intro page, it’s two free current books surveying the topic from the tobin project.

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  • Mark

    The problem with this article is that it thinks of regulations as intended to control behavior. Outside of the penal system, they’re not. They’re intended to prevent exploitative, non constructive situations.

    Something like a landlord being able to give you a same day notice of raising your rent 100x and making it due at noon and taking possession of your property at 12:01PM if you haven’t paid, then selling your stuff and re renting the place the next day at the original rent isn’t just behavior on the part of the landlord that the government thinks is ethically wrong. It would be bad for society because it would effectively allow a situation where a perfectly steady productive member of society is turned into an impoverished, needy person.

    It’s a bad trade of short term exploitation over long term potential; the trade is only a positive to the exploiter, it’s a disproportionate and obvious negative to the exploited and to society. That’s the real societal motivation.

    Broken or dangerous products and unsafe buildings are inefficient. They can easily cause problems much more costly than it would be to avoid the situation in the first place; and society benefits from avoiding them because it becomes more stable, safe, and trusted. The individuals who avoided those situations get to spend their money on something they want instead of fixing a stupid, avoidable problem that came about because of some selfish, short sighted other individual.

    It’s about the behavior of systems, not individuals.

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  • Apple computers are higher quality? ROFL!!!

    Otherwise, spot-on article. Laws are very “swipple”– “stuff white people like”.