Brink Lindsey and Steven Teles’ book The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality came out November 10. Steven Pearlstein titled his review “What’s to blame for slower growth and rising inequality?
It seems to me that the system tipped irrevocably in the direction of regulatory capture around the turn of the century and there simply are no viable solutions any longer. Generally societies in this situation end up, after a prolonged and chaotic interregnum, being ruled by strong-men.
In at least some cases I can see some better incentives coming from a more centralized regulator.
1. Zoning local government have a strong incentive to restrict building in order to drive poor people away. The fed Government does try to keep poor people from coming to the USA but they do not try to drive the poor out. 2. With the Federal Government paying for half of all medical care there is some incentive for local politicians to regulate with more focus on quality and less on keeping costs low.
If the problem is capture of government then the answer is changing the incentives of the political representatives. Currently our political representatives are incentivized to serve themselves and by extension their party, above anything else. For instance, because it gives the job of drawing voting districts to state politicians, our constitution incentivizes those politicians to draw district boundaries that favor themselves and their party. Another example is campaign financing laws. Our courts have allowed virtually any amount of money to be given anonymously to any politician. This obviously incentivizes politicians to favor, with at the very least access, those giving them the most money. There are many more examples of our system incentivizing political representatives in ways that are counter to the public interest or even acceptably competent or even just functional government. Anytime you wonder why politicians (or anyone really) acted the way they did, figure out what the incentive was.
"Are you looking for how to get out of our current mess? The Captured Economy is perhaps the very best place to start." -- Tyler Cowen, Professor of Economics, George Mason University - https://www.amazon.com/Capt...
Expecting private foundations to step into the breach is just wishful thinking. I also don't see why larger scale government entities would generally be better than smaller scale ones, and there are good fragility reason to keep power partially decentralized. In general Congressional staff, though, is a pretty good investment as it's reasonably accountable to the voters, and, indeed, is about the only power center which is. The crusade to reduce the costs of Congress is classic self-destructive behavior because Congressional staff is effectively the voters' only oversight for government spending. Note that Congressional staff is a good solution to the problem of restricted information.
The one big exception where larger scale government entities are better than small scale, however, is land use, so ideas like a zoning budget imposed from higher up are good. There are big incentives for homeowning neighbors to oppose improvements in land use because restricting the stock of housing drives up the prices of their own houses, even though it can be very destructive to the nation as a whole. We are seeing that conflict here in California as the state legislature has realized how pathological our housing market has become and is trying to take steps to allow slightly more sensible land use, with almost all local governments resisting in every way possible, causing the state to take additional steps to block the resistance. I expect we'll see a couple more rounds before things actually start happening.
It seems to me that the system tipped irrevocably in the direction of regulatory capture around the turn of the century and there simply are no viable solutions any longer. Generally societies in this situation end up, after a prolonged and chaotic interregnum, being ruled by strong-men.
In at least some cases I can see some better incentives coming from a more centralized regulator.
1. Zoning local government have a strong incentive to restrict building in order to drive poor people away. The fed Government does try to keep poor people from coming to the USA but they do not try to drive the poor out. 2. With the Federal Government paying for half of all medical care there is some incentive for local politicians to regulate with more focus on quality and less on keeping costs low.
If the problem is capture of government then the answer is changing the incentives of the political representatives. Currently our political representatives are incentivized to serve themselves and by extension their party, above anything else. For instance, because it gives the job of drawing voting districts to state politicians, our constitution incentivizes those politicians to draw district boundaries that favor themselves and their party. Another example is campaign financing laws. Our courts have allowed virtually any amount of money to be given anonymously to any politician. This obviously incentivizes politicians to favor, with at the very least access, those giving them the most money. There are many more examples of our system incentivizing political representatives in ways that are counter to the public interest or even acceptably competent or even just functional government. Anytime you wonder why politicians (or anyone really) acted the way they did, figure out what the incentive was.
"Are you looking for how to get out of our current mess? The Captured Economy is perhaps the very best place to start." -- Tyler Cowen, Professor of Economics, George Mason University - https://www.amazon.com/Capt...
If the problem is special interest capture of regulators and rent seeking of subsidies, why advocate more regulation and subsidies?
Expecting private foundations to step into the breach is just wishful thinking. I also don't see why larger scale government entities would generally be better than smaller scale ones, and there are good fragility reason to keep power partially decentralized. In general Congressional staff, though, is a pretty good investment as it's reasonably accountable to the voters, and, indeed, is about the only power center which is. The crusade to reduce the costs of Congress is classic self-destructive behavior because Congressional staff is effectively the voters' only oversight for government spending. Note that Congressional staff is a good solution to the problem of restricted information.
The one big exception where larger scale government entities are better than small scale, however, is land use, so ideas like a zoning budget imposed from higher up are good. There are big incentives for homeowning neighbors to oppose improvements in land use because restricting the stock of housing drives up the prices of their own houses, even though it can be very destructive to the nation as a whole. We are seeing that conflict here in California as the state legislature has realized how pathological our housing market has become and is trying to take steps to allow slightly more sensible land use, with almost all local governments resisting in every way possible, causing the state to take additional steps to block the resistance. I expect we'll see a couple more rounds before things actually start happening.