Category Archives: Politics

The SAEE: who was right?

Bryan Caplan argues that economists mostly agree with one another, compared to the general public, and reports results from the Survey of Americans and Economists on the Economy (SAEE):

The leading correlates of economists’ disagreement are political-ideology and, to a lesser extent, party affiliation. Liberal Democratic and conservative Republican economists disagree in expected ways about taxes, regulation, excessive profits and executive pay, and some employment-related issues. Conservative economists are also markedly more optimistic about the country’s economic future. Note, however, that there is little evidence of an ideological divide over the economy’s past or present performance. Economists
across the political spectrum can largely agree about the path of inequality, real income, and real wages over the past two decades.

I don’t find agreement about the past very comforting: the point of economic advice is to deliver good consequences in the future. However, I would point out that disagreements about predictions are an opportunity for retrospective assessment. Indeed, when Bryan’s paper was published, in 2002, the 5 year timeline of the predictions had already come and gone. But there’s nothing stopping us from checking now. [Note, I prepared this post up until this point with the intention of posting it before peeking at the data.] Results below the fold.

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Alms is not about alms experts

In September Robin suggested that there might be an Alms Expert Opening:

Today the three spending categories of medicine, school, and alms make up ~40% of US GDP, a far larger fraction than in 1800. …

Today, two of these three classic charities have very powerful associated “professions”: doctors and teachers. These professions are powerful because they are seen as representing the good in those causes – doctors are our official authorities on what is good for patients, and teachers are our official authorities on what is good for students…

The missing group here is alms experts: we have no strong profession of those who specialize in helping the poor, crippled, etc.

Are alms experts punching below their weight, given the large fraction of GDP spent on alms? I think not, because alms spending mostly bypasses the work of alms experts.

Medical spending mostly goes to pay doctors, nurses, and other medical professionals, or to provide facilities and equipment that supports their work: there were over 7.5 million technically skilled healthcare workers in 2011. In education elementary schoolhigh school, and post-secondary teachers added up to over 4.4 million people, with other spending going to school buildings, principals, utilities, libraries, and so forth.

But consider the largest alms program in the United States, the Social Security Administration, which makes cash payments to the elderly, the disabled, and surviving family members of certain deceased. Its budget request projects that in 2013 it will pay out some $873 billion to beneficiaries while spending less than $12 billion for operations, with only 80,000 state and federal employees.

The relatively small role for administration recurs elsewhere, e.g. the food voucher program SNAP disbursed $76 billion in 2011 with administrative costs of $6.9 billion and the Earned Income Tax Credit disbursed $59.5 billion with direct administrative costs of less than one percent. Staffing can be higher for programs involving social workers and foreign assistance, but less is spent on these than the large formula-driven programs.

Since alms employees are relatively scarce, they can directly deliver fewer votes or political contributions than teachers or medical workers. And since their role in the provision of alms is so much less central, it is harder for others to see them as “representing the good in those causes.” Instead, organizations of recipients can take on the role of defenders of the alms they receive. For alms influence and status, look to the 38 million members of the AARP, not 80,000 Social Security workers.

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Political Signaling Theories

My conversation with Andrew Gelman inspires me to elaborate my position on politics:

Policy wonks talk about political ideologies as sets of value weights to use in policy tradeoffs … I’m suggesting instead that “Politics Isn’t About Policy.”  In large polities, the main function of our politics in our lives is how it influences the way others see us; its influence on us via policy is far weaker.   But it looks bad to admit we do politics to selfishly show off, instead of to help society make better policy.  So we are built to instead talk, and think, as if we do politics for its influence on policy; we are build to be self-deceived about how politics matters to us.

Modern political science does a pretty good job understanding the behaviors of politicians and bureaucrats, given how the public behaves; we fail most in understanding how ordinary folks relate to political processes.  And our best hope for doing better there is, I think, the idea that we are executing strategies that evolved long ago among our distant ancestors.

Our ancestors argued beliefs and negotiated actions in groups ranging from size two to a hundred.  No doubt they evolved to adapt their behavior to the size of the group, at least within this range.  And for the largest groups, the main payoffs from their arguing and negotiating behavior was not via influencing the resulting group beliefs and actions, but from how their words and deeds influenced how others thought of them.  This is all the more true for modern group sizes, and I suspect our strategies are adaptive enough to emphasize impression management even more for larger groups. Continue reading "Political Signaling Theories" »

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Reply to Wilkinson

Responding to Will’s comments, I wrote:

Will Wilkinson seems to me a bit too quick here to assume the activities he likes are less deserving of taxes. …  If we are to tax positional or unhappy activities, then let’s do that consistently, following our best data on positionality or happiness.

Will replied:

First, I think Robin may have missed one of my key points, which is that “negative externality” is not a synonym for “harm” in the relevant sense of the word. It begs the question to just go ahead and talk about various harms as if I had not just argued that they don’t all count as harms just because someone is bothered by each of them. …

There is no clear theoretical basis for selecting a single, clear theoretical basis for determining what does and does not count as a harm. Indeed, no one is rationally bound to accept the normative assumptions underlying the case for economic competition–the clear theoretical basis for “harm” Robin is willing to accept. …

Moral diversity and disagreement are ineradicable. … I think Robin complains that I share Miller’s and Frank’s reliance on intuitions about things we happen to dislike because I’m arguing with them from within what I see to be their prior liberal moral commitments, which I share. We’re all liberals, which means we dislike many of the same things.

Will is such a pleasure to converse with that I didn’t notice how differently we use words.  Like most economists, I do count anything that bothers anyone as a “harm,” and anything that benefits anyone as a good.  (The same act can be both.)  To decide which acts should be taxed or subsidized, I use the usual economists’ efficiency criteria to rank policies.  Call me morally naive, but this seems a good guide to me.

Given these choices it becomes a matter of fact whether taxing any given activity increases or decreases efficiency, and disagreement should be eradicable.  In the absence of substantial market failures it is clear that ordinary competition is favored.  What I meant when asking for “a clear principle we are willing to apply consistently” is a way to see through the mass of detail to discern the efficient policies in the other subtler cases.

I get that you can offer quicker stronger arguments to your fellow liberals by referring to your shared assumptions with them.  But I seek more widely acceptable arguments.

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Reply to Gelman

Andrew Gelman disagreed with me Sunday:

Conservatives support low taxes so that those who have worked hard for their money can show off the fruits of their labor and earn full respect for it.

I don’t think that showing off is anything like a basic conservative value, beyond the idea that people should feel free to show off if they want to. … Conservatives support low taxes because they think the market is more effective than the government at producing prosperity.

Liberals support gay marriage because they want us all to officially respect gays as much as straights; gay activists have earned their group more respect.

Liberals support gay marriage because they don’t think it’s fair that straight people can marry and gays can’t.

His commentators said I meant unconscious strategies, and I said:

This was an attempt to identify the signaling persona behind common ideologies, not the conscious rationalizations people give.

Andrew clarified:

I don’t think signaling is as important as [Robin] does, but I’m pretty sure it’s more important than most of generally assume. … That said, I think his descriptions of conservatives and liberals are so caricatured as to be a hindrance to his thinking.

Monday, Andrew elaborated in a new post:

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Missing Liberaltarians

Officially, the libertarian world view is equally distant from standard liberal and conservative political views.  See for example, the World's Smallest Political Quiz, where liberals like social but not economic freedom, and conservatives like economic but not social freedom.  In practice, however, libertarians hang out more with conservatives than liberals. At least they do in the academic and think tank worlds I know.

I've been attending some "liberaltarian" dinners arranged by CATO's Brink Lindsey, where we discuss commonalities and differences of liberals and libertarians.  So I've been pondering why libertarians seem to connect more with conservatives than liberals.  Some say it is just a natural alliance of outsiders, but it seems more to me than that.  Some say it is because conservatives are more willing to adopt libertarian rhetoric in national politics, but that is just more data to explain.

Tyler Cowen's insight that ideology is mainly about who gets respect suggests an answer to me: libertarian heroes are more like conservative than liberal heroes.

  • In the conservative view, we should most respect the pillars of local communities: dependable connected leaders who respect authority, do their job, help their neighbors, raise their kids, go to church, and go to war when needed. 
  • In the liberal view, we should most respect passionate cosmopolitan subgroup activists: folks who identify strongly with an oft-disliked non-geographically-defined subgroup and who via sheer impressiveness of art or word gain their group a wider respect.
  • In the libertarian view, we should most respect "self-made" men or women, able to achieve glory with minimal help from government, family, or community, if only such meddling outsiders would get out of the way. 

Libertarians support low taxes because individuals should be free to choose how their money is spent, rather than being forced to accept collective choices.  Conservatives support low taxes so that those who have worked hard for their money can show off the fruits of their labor and earn full respect for it.

Libertarians support gay marriage because individuals should be free to have whatever consenting relations they want.  Liberals support gay marriage because they want us all to officially respect gays as much as straights; gay activists have earned their group more respect.

It seems to me that libertarian self-made heroes are more similar to conservative community pillars than to liberal subgroup activists.  Self-made men are mostly not made in the bedroom; their glory shows more in their income than in their subgroup identity.

Perhaps some future Ayn Rand Two will describe new compelling libertarian hero characters, who are more like liberal activist heroes.  But until then I predict conservatives and libertarians will remain closer than official libertarian doctrine can explain.

Added 25May:  Andrew Gelman comments here, and Tyler says not to forget the villans, a great suggestion.  I should say this was an attempt to identify the signaling persona behind common ideologies, not the conscious rationalizations people give.  And that I'm not at all confident in this.  Also, it would have been better to say that libertarians support low taxes and gay marrriage because such policies allow self-made heroes to make more of themselves.

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Meta Institutions

Institutions are stable social contexts which make and coordinate actions.  Examples include elections, agencies, courts, clubs, debates, peer review, malls, games, media, etc.  It is by now an economic truism that institutions matter a lot.  Good institutions can induce good choices and info sharing, while bad institutions do the opposite.  

Rather than advise particular choices, economists prefer to advise on general policies, that apply to many choices.  We prefer even more to advise on choice of institutions, since an institutional choice can influence a great many policies.  Following this meta line of reasoning, we should prefer even more to advise on meta-institutions, i.e., institutions that structure our choices of institutions. 

We allow most of our familiar institutions to at least influence our institutional choices.  But no doubt we use some more often in that role, and some are better suited to that role.  While I'm excited that decision markets can help advise organization decisions, I'm most excited about their potential as meta-institutions, advising us on key policy and institutional choices.  Of course we'll have to demonstrate their effectiveness more on small issues before folks will rely on them for big issues.

Some basic questions:

  1. What institutions are especially good as meta-institutions?
  2. What institutions should we use to evaluate meta-institutions?
  3. What institutions are biased to prefer other institutions like themselves?
  4. How often do different institutions agree on particular institutional choices?
  5. What institutions can sensibly say if to rely on them as meta-institutions?
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On Liberty vs. Efficiency

To "win" a debate you aren't supposed to tip your opponent to the arguments you'll use.  But to promote a more productive conversation, that is exactly what you might do.  So in this post I'll lay out my basic (rather technical) argument for tonight's debate.  I've said:

The topic, as I see it, is the relative value/importance for economists of pushing "liberty," i.e., a policy of minimal government interference, and "efficiency," a standard policy evaluation metric that attempts to neutrally weigh policy consequences for different people.

Humans often find themselves in conflicts where they might make (and enforce) "deals" instead of "fighting" (or doing "nothing").  Such conflicts are often complex enough for many parties to be uncertain how they would fare, relative to fighting, under various possible deals.  In such situations, I see a noble and important role for expert arbiters who are "neutral," i.e., who develop deserved reputations for suggesting "win-win" deals where most or all parties should expect to benefit, relative to fighting.  Given access to such neutral expert advisers, conflicting parties can make better deals, to their mutual benefit. 

One reason I'm proud to be an economist is that we often fill this neutral expert arbiter role to varying degrees, and could do so even more if we tried.  And "efficiency," also known as "cost-benefit analysis," helps make this possible.  To estimate the efficiency of a deal, relative to a status quo, one adds up estimates for each person of the dollar value that person would place on this deal. 

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New Tech Signals

New tech is usually adopted not for direct productivity gains, but to signal one is in fashion, one is technically capable, etc.  From a Post Oped Tuesday:

President Obama's proposed health-care reforms include investing $50 billion over five years to promote health information technology. Most notably, paper medical records would be replaced with linked electronic records to try to improve quality of care and lower medical costs. The recently enacted stimulus package included $20 billion for health IT. …

Yet while this sort of reform has popular support, there is little evidence that currently available computerized systems will improve care. … Large, randomized controlled studies — the "gold standard" of evidence — in this country and Britain have found that electronic records with computerized decision support did not result in a single improvement in any measure of quality of care for patients with chronic conditions including heart disease and asthma. …

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Yes, Tax Lax Ideas

Politicians who really wanted to show they would keep their campaign promises would post bonds, judged by neutral third parties, forfeit if they broke their promises.  Similarly, pundits who really wanted to show they believed their punditry would offer to bet on their claims.  Pundit Tyler Cowen says this would be too much bother:

Bryan Caplan believes that scholars should be ashamed if they do not publicly bet their views.  In contrast I fear this requirement would become a tax upon ideas. How would you feel about an obligation (if only a moral one) for scholars and commentators to publicly reveal the content of their investment portfolios?  Those portfolios are their real bets.  Yet I still favor the privacy norm and I should note that Bryan never has (nor need he) revealed his portfolio to others at GMU, much less to the broader public.

Let's say that I, as a prolific blogger, express opinions on hundreds of economic policy topics, often involving either explicit or implicit predictions.  Then say that hundreds of people wish to bet with me.  Can I not simply turn them all down as a matter of policy and practicality?

If you're wondering, I practice "buy and hold and diversify," with no surprises in the portfolio and a conservative ratio of equity purchases.  But those investment decisions don't necessarily reflect my views on any given day.  I think it is intellectually legitimate (though perhaps not always prudent) to engage in mental accounting and separate those two spheres of my life.  I change my mind lots of times, on many economic issues, but does that mean I have to become an active trader?  I hope not and I'm not going to.

Yes, transaction costs keep investments from closely matching beliefs. For example, my investments have long been mainly in my house, family, job skills, and relationships; I don't have much money for more.  But that wouldn't prevent me, or Tyler, from having hundreds of small token bets on our public claims, at least the claims that lend themselves to bets.  Yes, a bit of a bother, but well worth it if our readers actually cared that we believe what we say, or wanted to track our accuracy.

Yes, most readers and voters probably don't care much about pundit and politician accuracy and sincerity; they mostly want to affiliate with a stately staccato stream of statusful statements.  Slowing this down to post bonds, make bets, or even just think carefully, would just not be worth the tradeoff.  But I'll join most of Tyler's commenters in saying that some of us do care about accuracy and sincerity.  I'm open to bets on my claims, even if that slows me down.

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