Too Rich for Our Own Good

There's lots of good stuff today on the extremely pressing problem of being too rich. Julian notes the lousy Barry Schwartz essay at TNR. Arnold Kling takes on Robert Frank at TCS.

supermarket foods.gifThe arguments basically come down to something like, “The value of the marginal dollar declines, but people irrationally keep working to get dollars, which they really want less than lots of stuff they could have, therefore. . . a single-payer national heatlh care system (or whatever one would like to see the government do.) Now, I take the premises seriously, and really don't think there is any good reason to believe that people always know what is in our interest, or always behave rationally. However, the conclusions to Schwartz/Frank-style arguments remain shining examples of the bowel-loosening non sequitur.

The first response to the S/F arguments ought to be that they've really missed the hard nugget of wisdom at the heart of the theory of public choice. The nugget is not that people are rational utility maximizers, which is certainly false, or that politicians are vote maximizers, or that bureacrats are budget maximizers, or whatever. The hard nugget is that the nature of human behavior is general, and that a theory that applies to market behavior is going to apply to political behavior, too. I call this, pithily enough, the principle of behavioral uniformity. The blatently ideological and sub-scientific character of this kind of research is manifest in the failure to apply a general theory generally and to question the ability of voters to know what is in their interests and to make rational and not self-defeating choices in the voting booth. Why don't Frank and Schwartz discuss the likelihood that politicians and policymakers will stay apprised of psychological research about well-being, or will be motivated to act in accordance with their compendious understanding of the mainsprings of happiness?

Nothing follows about policy from the fact that people make sub-optimal choices, and it's an intellectual fraud to pretend that it does.

In his NRO essay, Schwartz writes:

The point is simply that we now know there is some significant subset of people likely to be made better off through heavier taxation, and that these people reside at the top end of the wealth distribution. Given that a concern for people's welfare has traditionally been one of the chief moral objections to taxing wealth (at least among those sympathetic to redistribution in principle), a policy of heavier taxation for the very wealthy may be the only moral course of action.

The point is simply that we don't know this. To say that people would be happier if they had fewer choices is not to say that they will be happier if they are stripped of choices. We know that people are very very loss averse, and so increased taxation may well be a deep source of grievance, anxiety, and agitation, even if things would have gone better for the poor rich sods if they'd never gotten that rich in the first place. If people are in general happier with fewer than four children, you do not make them better off by stripping them of excess offspring and shipping Jan, Bobby, and Marcia off to the homes of sad, childless couples.

The flailing Kierkegaardian leap to state solutions when faced with problems of choice in a culture of plenitude is evidence of not only sloppy thinking (for there is no reason to think state action will improve upon private action) but of badly retarded imagination. The future belongs to those who seize what is in effect a huge entrepreneurial opportunity.

  • Ryan

    Will,

    I know you’re a thoroughgoing Hayekian so I thought I would point you to a very interesting essay I read recently. Though, you may have already read it. The essay is taken from a 1990 issue of The Review of Austrian Economics and was written by Joseph Salerno. Salerno introduces many Hayekian ideas, like those of “spontaneous” or “undesigned” order and the price system as “the use of knowledge in society”, and then proceeds to contrast them with the views of Ludwig von Mises. Although the differences seem fairly subtle, I think the potential implications are great. Again, I read it and figured I would point Hayekians to it as the essay presents an interesting critique to some of Hayek’s ideas. It’s titled Ludwig von Mises as Social Rationalist. Linked below.

    http://mises.org/journals/rae/pdf/R4_2.pdf

    ps. I hope all goes well with the move and that you both have a safe trip!

  • The issue is obviously not how we can “eliminate literally all theorized climate change risk.” No one worth listening to is talking about “all” risk, and the rhetorical use of ‘theorized’ here, as in the case of its use by evolution doubters, is designed to make global warming sound like a wild-ass guess.

    I wouldn’t go too hard on Manzi about this such easy polemicism (it’s not like I’ve never worked out on a wooden dummy), but it’s really a bit much holding this piece out as a model of “real, rigorous, intellectually honest debate.”

  • Jim Manzi

    Michael Drake:

    I don’t think that is an entirely fair critique. I went through in some detail in that article, in decending order: the expected costs, the probability distriobution of projected costs and then the inherently unquantifiable uncertainty (as opposed to quantifiable risk) of costs. Sonce neither the expected costs nor the risk-adjusted costs justify (by my lights, at least) the costs of the proposed remedies, one is left with no non-arbitrary stopping position on acceptable costs for abatement. This is not just a theoretical issue. I reviewed in the article various proposals by serious people (presumably people you would consider “worth talking to”), like Stern and Al Gore that would create expected costs net of benefits of $17 trillion and $23 trillion respectively. James Hansen (whom I assume is also “worth talking to”) has yet-more-severe proposals that are almost impossible to cost because they would be so draconian.

    Best regards,
    Jim Manzi

  • K

    Have you looked at Martin Weitzman’s paper on the Economics of Catastrophic Climate Change? (http://www.economics.harvard.edu/faculty/weitzman/files/REStatFINAL.pdf)

    It basically gives a rational foundation for the precautionary principle when there is structural uncertainty.

  • Jim Manzi

    K:

    I’ve written a (very) long reply to this paper here:

    http://theamericanscene.com/2008/01/04/weitzman-formalism-run-amok

  • Sigivald

    Michael Drake said (in part): […] is designed to make global warming sound like a wild-ass guess.

    Yeah, that sounds about right.

    Because, you see, it is a wild-ass guess.

    The models are, in plain Anglo-Saxon terms, shit. They don’t predict anything (accurately, and that’s what matters – I could make up a model that didn’t predict, myself – and it wouldn’t be worth using!).

    They don’t predict what we have now from past data – in part because the data is also, to again use the plain Anglo-Saxon term, shit. Extrapolations and proxy data, none of which seem to ever stand up to the test of time or critique.

    It’s a house of cards.

    (Unlike evolutionary theory, which has both mountains of strong paleontological and laboratory results to support it, not to mention the DNA evidence, and, well, the entire case. Which is, while hard to quantify, multiple orders of magnitude stronger than that for anthropogenic* global warming.

    Thus the specious comparison between climate change skepticism and creationism will not stand un-refuted in my presence.

    * I specify anthropogenic because it’s the only kind we can sensibly take action against; if, as is increasingly suspected by various scientists [see recent American Physical Union announcement], what climate change we have, in either direction, is almost entirely unrelated to human activity, no amount of Gore-like changes to society and industry will do diddly, and thus they’re pointless to contemplate, as their benefit cannot possibly approach their cost.)

  • Sigivald, I’m happy to grant that evolution is a much more secure scientific theory than AGM; nonetheless, I’d say the consensus on the latter is strong enough that any attempt to cast it merely as a wild-ass guess betrays a lack of seriousness.

    Jim Manzi, Will provided an excerpt from your paper that he felt was exemplary. For the reasons I stated, I found it overheated (pardon the pun). But I wouldn’t infer from a bit of polemics in an excerpt of a paper that the paper as a whole isn’t serious, or even that its conclusion is wrong. That would depend on whether the excerpt is representative of the whole; from your comments, it seems not to be.

  • Er, that’d be “AGW.” Sorry.

  • Those who care about existential risks should check out the Lifeboat Foundation.

    http://www.lifeboat.com/

  • David

    It would be handy if there were a single pdf that collected all the contributions to the debate, now that it is done.