For a change, I liked this Elizabeth Anderson post on Hayek and procedural justice. I don’t think she gets anything wrong! But do see Steve Horwitz’s smart comment, which contains worries I share.
So clean it’s practically Canadian! Electro-trams!
Joanna’s list of books she’s embarrassed not to have read is the best I’ve seen yet. Possessed by the Sheikh looks pretty great.
“To the extent that people are preoccupied with equality for its own sake, their readiness to be satisfied with any particular level of income or wealth is guided not by their own interests and needs but just by the magnitude of the economic benefits at the disposal of others. In this way egalitarianism distracts people from measuring the requirements to which their individual natures and their personal circumstances give rise. It encourages them instead to insist upon a level of economic support that is determined by a calculation in which the particular features of their own lives are irrelevant. How sizable the economic assets of others are has nothing much to do, after all, with what kind of person someone is. A concern for economic equality, construed as desirable in itself, tends to divert a person’s attention away from endeavoring to discover–within his experience of himself and his life–what he himself really cares about and what will actually satisfy him, although this is the most basic and the most decisive task upon which an intelligent selection of economic goals depends. Exaggerating the moral importance of economic equality is harmful, in other words, because it is alienating.”
Harry Frankfurt, “Equality as a Moral Ideal,” Ethics, Oct. 1987.
Tim Lee has a good post on HSAs in response to this bit of Ygelasiasism. (By the way, if Matt’s claim that HSA’s will hasten the arrival of socialized medicine in America is not a fine, fine specimen of the pundit’s fallacy, then hope has never triumphed over intelligence.)
As Jencks and Tach note, (hat tip: Reihan) your economic status is robustly correlated with your parent’s economic status. Is it “luck” that members of the middle-class, for example, pass on middle-class virtues of hard work, the importance of investment in human capital, delayed gratification, punctuality, thrift, etc., to their children. No. Not at all.
Am I “lucky” to have been born to a stolidly bourgeouis, civic-minded, church-going police chief and nurse who filled my head with the “protestant ethic”? Simply put: no.
I don’t mean to be thornily metaphysical here, but if I was not the son of James K. and Dorothy A. Wilkinson, then I would not be me. Even more to the point, if the particular germ cells that were party to my conception had been different, that being would not have been “me” with different attributes, it would have been someone else altogether. In this sense we are all “lucky” to exist at all (if existence is a perfection.) But I am not “lucky” to have the genotype that I have. I have it necessarily. That is, my genotype is not a contingent attribute of me. That a being with my genotype exists is contingent. That I exist with this genotype is necessary. The statement “I could have had a different constellation of genes” is ill-formed, not entirely different from “Gold could have had a different atomic weight.” So, insofar as any of us have “good genes,” it is not a matter of “good luck.”
Now, my manifest attributes are not simply a matter of my genes. My developmental environment will have determined how my genetic potential is expressed. So, what Dorothy Wilkinson ate, drank, and so forth while she was carrying me shaped the way I am. Am I “lucky” that mom didn’t smoke? Well, Mom considered it against her religion. Am I “lucky” that Mom was a quasi-Mormon? Um. I don’t know quite what to say here. But the point I’m trying to get at is that Mom did a lot of things vis a vis little me with the EXPRESS INTENTION that it have a particular effect on my welfare and character. That I have a tendency to feel guilty when I’m late for something is in part a INTENDED consequence of my mother’s actions. So, from her perspective, it’s not a matter of luck that I usually show up on time. It’s the way she trained me.
If I meet a guy in a restaurant, and he likes the way I look, and gives me a million a year salary to work for his firm, that’s luck. If I’m damn good speller, that’s because I’ve got a good mind for words, and good training that was intended to make me a good speller, neither of which is is “luck” in any clear sense. (Please enjoy the irony of spelling mistakes herein.) We don’t think it’s good luck that the bridge didn’t fall down when it was designed to stand up. Right?
Matt Miller seems to write the same opinion piece about luck over and over again. Maybe if he says it enough times he’ll be right.
Here’s my take on the connection between luck and redistribution.
Reihan Salam over at The American Scene has a very smart post on the Miller refrain, about which I hope to say something later.
There’s a very good reason voters, when given a chance to make a clear choice, increasingly support a stronger, not a weaker, social safety net: they need that net more than ever. Over the past 25 years the lives of working Americans have become ever less secure. Jobs come without health insurance; 401(k)’s vanish; corporations default on their pension obligations; workers lose their jobs more often, and unemployment lasts much longer than it used to.
Questions: (1) Would a rational person behind a veil of ignorance who knows all the relevant economic statistics for 2005 and 1980 choose to be a randomly selected worker in 1980 or in 2005? (2) Do labor market and income volatility have anything important to do with “economic security?” (3) If all there is to economic security is a state “guarantee,” why haven’t people in socialist economies been more economically secure?
Julian sends me this meme: “What 5 books are you vaguely embarassed to admit you haven’t read?” Here goes:
(1) Max Weber, The Protestant Ethic and the Spirit of Capitalism. I keep suspecting that my intuitions about markets and culture are closer to a Weberian sociologist than to those of an economist, which makes me feel like I should really read this book and find out.
(2)Derek Parfit, Reasons and Persons. Some of the smartest people I know, such as Tyler and Julian, think this is a great work of philosophy. My former grad advisor Chris Morris gave me this helpful category: “Books I’ve read, but not by myself.” I’ve read so much secondary literature about Reasons and Persons that it seems like I’ve read it. I consider it among the books I’ve read, but just not by myself. But I suppose I should actually work my way through it.
(3)Carson McCullers, The Heart is a Lonely Hunter. This is my beloved housemate’s favorite book (and number 17 on the Random House 100 best novels list) and I keep meaning to read it, but am ashamed to say, I cannot generate the motivation to do it.
(4) Thomas Hobbes, Leviathan. I sincerely believe that this is the most important work of political philosophy in the English language. So I should probably get around to reading the whole thing one of these days. I’m pretty sure I’ve read the good parts, but who knows!?
(5) Robert Nozick, Anarchy, State, and Utopia. This is truly shameful, but I’ve never actually gotten to Utopia. Again, I know what it says, but not because I’ve read what it says.
I pass the meme to Joanna Robinson, Tyler Cowen, and Alina Stefanescu.
Indeed, the Social Security debate so far has been a rare triumph for liberals: For the first time in a long while, core liberal principles are actually winning in a public debate. The idea that Social Security is an insurance program and not an investment plan is gaining traction.
Why E.J. Dionne thinks deception is a “core liberal principle” totally eludes me. Here are two options about Social Security as insurance.
(1) It is not insurance.
(2) It is “insurance,” in some loose sense. But then so is (a) means-tested welfare or (b) mandatory personal retirement accounts plus a safety net.
If (1) is true, then Dionne’s claim is a lie. If (2) is true, then saying that Social Security is insurance does nothing to tell us why we ought to prefer the status quo over (a) or (b). As it happens, there is NO “core liberal principle” that I can think of that supports the fevered defense of America’s badly structured historic welfare programs.
Check this:
* The Social Security tax is regressive.
* The overall benefit structure accomplishes, on net, either no downward income redistribution, or a small amount of upward redistribution. (I.e., it is either close to a wash, or regressive, redistribution-wise.)
*The system is structured to disadvantage current workers over current retirees, and is thus invalid as a “compact” between generations, if we take the contract metaphor seriously.
* Because the Social Security tax hits least wealthy workers hardest, Social Security prevents many from accumulating wealth, and reinforces the divide between investing an non-investing classes.
*Social Security makes it impossible for many of the least wealthy to accumulate wealth that they can pass on to their children or grandchildren, thereby helping to perpetuate generational inequality.
It is crucial to note that whatever else it might be, Social Security is not PRIMARILY insurance, if it is insurance at all. The redistribution to the elderly poor it does manage to effect is incidental to the huge volume of transfers back and forth from within the same income bracket. (Net income-related redistribution come to less than 10% of total transfers) There’s a huge amount of deadweight loss in all this pointless churn.
A system of personal accounts plus a means-tested safety net would:
* Be more progressive in every way.
* Eliminate most of the unjust intergenerational transfers that are at the heart of the current system.
* Almost entirely close the gap between the investing and non-investing classes.
* Help the least wealthy workers accumulate inheritable wealth.
* Protect the elderly against poverty AT LEAST as well.
All this is independent of the fact that the “insurance” language amounts to a “noble lie” that ought to be anathema to liberals.
Consider James Buchanan’s analysis of Social Security as a “fiscal illusion,” which is an idea he credits to the obscure Italian public finance theorist Amilcare Puviani. According to Buchanan, following Puviani, those with political power will often erect a structure of public finance that is meant to cause “tax payers to think that the taxes to which they are subjected are less burdensome than they actually are” and “make beneficiaries consider the values of public goods and services to them to be larger than may actually be the case.”
Here is what Buchanan says about Social Security in particular:
Social Security Taxes. The modern American system of old-age and survivors “insurance” seems ready made for the Puviani criticism. It is apparent to almost everyone, without detailed analysis or knowledge of the system, that the effects of promoting the institutions under the “insurance” rubric, which implies actuarial independence and integrity, tends to conceal from participants the real flows of costs and benefits. Whether or not such was the deliberate intent of the founders of the system need not concern us here. The facts are that the system, as an independent trust-fund account outside of the regular budgetary procedures of the federal government, is not actuarially sound by private financial standards, and that the plan will depend for its continued existence on the Treasury’s willingness to finance currently claims made against the system. Contributors to the system finance only a relatively small share of the benefits that they receive, especially to this date (1966), and the remaining funds must be secured from current taxes collected from prospective beneficiaries. To the extent that the current contributor accepts the regular increases in his own taxes, as well as those nominally levied on his employer, under the assumption that, on balance, these are to be accumulated for support of his own retirement benefits, he will be less resistant to such increases than if he knew that such tax increases were simply required to meet current outpayments to beneficiaries. He operates under an illusion of the Puviani sort. If future claims against the system should be properly discounted, along with future taxes that are required to meet these claims, the entrant into the system would recognize that, in the net, the costs significantly exceed the benefits, both computed in present-value terms. The fact that there is no widespread resentment or resistance against entering the system supports the hypothesis that illusion is present, and is effective. Even for the employee who may recognize the actuarial bankruptcy of the present system, who is able to dispel the fiscal illusion, it may not, however, be rational to reject the scheme when he predicts that, during his own period of retirement, other prospective entrants can still be attracted by illusory claims of “insurance.” The system in this manner provides a continuing means through which income transfers can be made to the aged from the currently productive elements of the population, which can be “explained” or “rationalized” to many taxpayers on the basis of contributory schemes of retirement protection. There seems little question but that, if the same fiscal transfers were proposed openly and without attempts at illusion, there would be significantly greater political resistance. This conclusion can be attained, regardless of one’s own value position on the quite separate question as to whether such transfers should be decreased, kept the same, or increased.
Compare Buchanan’s analysis with a key idea from another of the 20th Century’s great contractarian political theorists, John Rawls:
if the basic structure relies on coercive sanctions, however rarely and scrupulously applied, the grounds of its institutions should stand up to public scrutiny. When . . . basic social arrangements and individual actions are fully justifiable, citizens can give reasons for their beliefs and conduct before one another confident that this avowed reckoning itself will strengthen and not weaken public understanding. The political order does not, it seems, depend on historically accidental or established delusions, or other mistaken beliefs resting on the deceptive appearances of institutions that mislead us as to how they work.
That’s Rawls in Political Liberalism talking about the publicity requirement for just institutions. Just rules for a free people in a liberal society must be open to them and MUST NOT be sustained by illusions that cause people to misunderstand the terms of our association, cripple our ability to govern ourselves through effective public deliberation, and ensure that we remain ignorant of the institutions that shape our expectations for our lives, and condition our preferences and characters.
By pushing the “Social Security status-quo is insurance line” Dionne is directly contributing to the violation of “core liberal principles” that ought to be even more important to welfare-liberals than the fiscally anti-egalitarian aspects of the status quo that Dionne, for some inexplicable reason, thinks are just great.
This is a “triumph for liberals”?!
Welfare iberals keep wondering aloud about what’s the matter with welfare liberalism. Dionne unwittingly points us toward a plausible hypothesis. Welfare liberals have become fetishists of the crumbling institutions of the New Deal/Great Society welfare state, which they mistake for actually existing expressions of liberal ideals. But welfare liberals don’t even understand what liberalism, as an idea, is, and so can’t recognize that their beloved programs fail according to what ought to be their own standards. All they can do to answer the what is liberalism question is to point at an amber-edged policy and say “that!”
My colleague Alan Reynolds had an outstanding op-ed in the WSJ yesterday that sheds much needed light on the income mobility hullabaloo.
“There is no more justification for using the state apparatus to compel some citizens to pay for unwanted benefits that others desire than there is to force them to reimburse others for their private expenses.”
- John Rawls, A Theory of Justice, p. 250 (rev. ed.)
My housemates are kind souls stirred by the best within the otherwise hard human heart. Do they reach out with a hand full of nutritious grain to starving children? No. Do they seek to ease the suffering of those dispossessed by tsunamis or earthquakes? No. Do they help grant one last wish to tiny unfortunates suffering from excruciating cancer of the puppy. No. Through a veritable inferno of human goodness, through altruism superlative beyond adjectives, they have extended their kindness to she among us who is in the direst need: Lindsay Lohan.
Questions about income mobility and inequality are much in the news. I’m pretty dissatisfied with what I’m seeing so far, so I thought I’d try to start getting straight on how to think about it.
(1) What is income mobility?
Income mobility is generally measured in terms of jumping quintiles, i.e., changing relative position in the income distribution.
(2) Why should we care?
Suppose, starting next year, that everyone’s real income would double every January forever. Suppose, however, that it turns out that nobody ever changes quintiles ever again. There’s no force keeping anyone from jumping quintiles, but it just never happens. Income mobility, change in relative position, has ground to a halt. But everyone now making $10,000 a year will be making over a million in eight years. Do you care that there is no income mobility? I don’t.
We do in fact care about mobility because we want to know that our system of institutions facilitates opportunity and rewards initiative and enterprise. A decent number of people changing relative position shows us that our system is amenable to upward aspirations.
(3) Is income mobility A LOT less important than high levels of economic growth that increase everyone’s absolute wealth.
Yes.
(4) Should we expect less bottom to top, number one with a bullet, mobility as an economy grows wealthier overall?
Yes. People are constantly confused by the growing gap between the rich and poor. This is good thing, not a bad thing. If the bottom is fixed, at zero income, and the top keeps going higher, you’ve got a bigger gap. But lots of people are better off and nobody is worse off. Similarly, if the lowest quintile is anchored by a fixed bottom, and the top is untethered and rising, the distance from the bottom to the top will increase. The distance from the bottom to the middle will increase. So it will take longer to get there. If today’s middle is equivalent in real terms to yesteryear’s top, people who are going from the bottom to the middle are doing no worse than people of yore who went from the bottom to the top (even if we assume, counterfactually, that there has been no change in quality of life for people at the bottom.)
We should be AIMING at a system where the middle of the middle is, say $500,000 per annum, and so the trip from the bottom of the bottom to the top of the bottom, much less to the middle of middle, is a VERY BIG trip indeed.
This is a priori theorizing. So perhaps a real economist will pipe up.
(4) What don’t studies about income mobility tell you?
Among other things, they don’t tell you how many people really TRIED to improve their relative economic position but couldn’t. The relevant normative question about a system of institutions here is how easy it is to do well if one really TRIES to acquire human capital, takes initiative, exerts effort, etc.
We might assume that everyone tries equally hard across cultures, but I think this would be mistaken. I think it would also be mistaken to take widespread cultural beliefs about income mobility to predict effort. Salient cultural figures like pop stars and athletes often have rags-to-riches stories, and probably reinforce the sense that rags-to-riches is in principle possible, even if one has no athletic or musical ability, and does not believe in one’s particular case that effort is going to be very worthwhile.
And if you’re looking at things in terms of quintiles, you won’t be seeing significant movement within the quintile. As the economy grows, the range of each fifth should widen, and movement from the bottom to the top of a fifth becomes more significant. At a certain point, dividing things into fifths is going to mask a lot of dramatic income mobilitty, and so it becomes more useful to look at things at a finer grain of division. But this is trivially easy to do.
(4) Does the New York Times have an irrational fetish for ominous tales about relative position?
Yes.
[Update: Ron Bailey has some good thoughts on the NYT series.]
OK. I’m officially sick of it. The very moment folks started calling themselves “members of the reality-based community,” it made me want to wretch on my Pumas. Why not be honest and call yourself a proud member of the “you’re either stupid or evil if you don’t agree with me community?” I understand the supposed contrast with “faith-based” and the ironic embrace of its derisively intended non-opposite. But come on, really. I think we all understand and appreciate what a hard-headed empiricist you are by not attending Sunday school. Your epistemic virtue bowls us over. But just maybe it’s time for new blog slogans, people. Why not try something along “my scat smells like honey-based” or “self-congatulation-based” lines?
I don’t often have occasion to say that Charles Krauthammer’s latest column is excellent. It’s about Social Security.
As I have been writing for years with stupefying redundancy — and obvious lack of success — this idea is a hoax. There is no trust fund. The past Social Security surpluses were spent the year they were created. The idea that in 2017, when the surpluses disappear, we will be able to go to a box in West Virginia to retrieve the money we need to make up the shortfall (between what Social Security takes in and what it pays out that year) is a deception. There is no money there. It will have to be borrowed or garnered from new taxes.
But things are worse than that. The fiscal problem starts to kick in not in 2017 but in 2009. The Social Security surplus, which Congress happily spends every year, peaks in 2008. Which means that starting in four years (and for every year thereafter) a budgetary squeeze begins, requiring new taxation or new borrowing.
If in 2010 tax revenue and spending remain exactly the same as in 2009, the Treasury will not end up with the same size deficit. It will end up with a larger deficit, because the amount of money it was receiving free and “borrowed” from the Social Security surplus will have shrunk.
That surplus shrinks from its peak in 2008 to zero in 2017 and goes negative after that. That is a very serious fiscal problem that starts not in 50 years, not even in 12 years, but in four.
Does anyone have numbers on what United employees’ retirement benefits would be worth if they had been in a defined contribution plan like a 401(k) all along rather than a broken defined benefit pension? That is what I’d like to know.
Alex Tabarrok has nailed the lesson of the failed United pension plan. Yglesias, on the other hand, is piling confusion atop confusion.
Alex Tabbarok takes the opposite view and holds that the moral of the increasing unviability of defined-benefit pensions is that we should eliminate our defined-benefit public sector pensions as well. Frankly, I think this is a bit silly. If one aspect of your finances is becoming riskier, that’s a terrible moment to transform a different aspect of your finances into a riskier system as well. It’s particularly foolish if the risks entailed are essentially the same. Under privatization, your Social Security benefits will be down at the exact same time your 401 (k) account is down, i.e., just when you need it most.
Frankly, I think Matt is being more than a little silly. Most personal account plans encourage annuitization of at least some of the assets in the plan upon retirement. (The Cato plan would require purchase of an annuity that provides a stream of checks at at least 120% of poverty. You can cash out the extra, buy a boat, send your granddaughter to college, or leave it in the market.) If the market goes down, your annuity pays the same as ever. It would be a good idea not to buy an annuity right after the market takes a dip. And, hey!, you don’t have to. Matt pretends as if the market is a giant unpredictable roulette wheel that has not developed sophisticated financial instruments for managing the modest risks of investment. He also pretends that the personal account plans do not include some means-tested assistance to people whose personal retirement savings and investments leave them below a critical threshold. But they do. There is simply nothing left in his point once the actual features of the actual world relevant to the argument are fairly acknowledged.
Now what needs to be brought into the picture here is that the federal government is not like a big corporation. Governments don’t go out of business. Governments don’t experience unexpected new competition for their customers. Corporations can’t just generate new revenues by taking a vote. And of course corporate managers are supposed to have a different attitude vis-à-vis their employees than elected representatives have vis-à-vis their constituents.
This makes no sense. Governments CONSTANTLY go out of business (while the state abides), and new governments bring new policy. See, sometimes there are differently constituted congresses with different policy preference profiles. And there are different Presidents with different policy preferences. Etc. Which is why people get so very excited about elections. And which is why there is a lot of policy volatility. I assume Matt voted for Kerry because he wanted him to implement different policies from Bush’s. No?
And Matt would not be up in arms about the prospect that Social Security might fundamentally change in nature and structure if it was not the case that it could change fundamentally in nature and structure. If government, like Everest, is unmovable, then why all the high-toned rhetoric about saving the jewel in the crown of the New Deal, yadda yadda?
Matt also seems to entertain the fantasy that government can raise revenues simply by turning up the tax spigot. But government does not exist in a blissful parallel plane where economic logic does not apply. Even fairy folk respond to incentives. Surely he has heard of optimal tax policy.
Now, it is true that the government is not like a big corporation. It is less efficient, suffers from far more severe principal/agent problems, is more inclined to corruption, and is rather more like an extortion racket.
I think I now get what Justin’s saying. The problem with Wilhelmine Germany he mentions–that the democratic body didn’t have control over foreign policy–I think points to the kitten/wolverine problem. To say that a regime is a democracy is not to say much. Democracy, per se, is certainly not a very useful category for social scientific generalization. As I mentioned a couple posts down, there can be immense variation in institutional structure within democracies, and the specific structure probably does much more work than the generic type.
My guess is that democratic peace theory is a bit retarded because its too atheoretical and there is not sufficient attention to institutional dynamics. I’d like to see a good NIE/public choice comparative analytic narrative of an instance where democratic institutions seems to have prevented war and an instance where they seem not to have. (Dissertation topics are free here at the Fly Bottle.)
My totally uncoached guess about why democracies don’t attack each other much is that (1) democracies in general make less agressive offensive warlike noises, (2) democracies recognize each other as having a kind of legitimacy.
I know next to nothing about this, but I won’t let that stop me!
Via Logan, this Brad Plumer post:
At any rate, I can’t see any real reasons why democracies wouldn’t go to war with each other. Presumably I’ve missed something. But if not, that means the question of why, historically, democracies haven’t bloodied each other up is mostly due to the fact that democracies are a recent phenomenon, the bipolar structure of the Cold War made everything weird, and the ironclad law’s just an aberration.
Weird. I always that the answer was that people, when not inflamed by propaganda, as they tend not to be in democratic nations with a free press, don’t like war. It’s expensive and nice boys get killed. So leaders of democratic nations, who don’t like getting kicked out of office, generally avoid war. Is it really more complicated than that? Justin?
The obvious answer to Tyler’s puzzle about why people don’t have more sex is that the cost is not in fact low. It strikes me as bizarre on its face to think of sex as a low-cost activity. Most people don’t want sex, per se, but want sex with a person with whom they want to have sex that wants to have sex with them. For many, then, supply is low, and search costs are high.
Even within the context of a relationship, there may be sticky emotional issues that raise the cost. There may be performance or aesthetic anxiety. I think many partners in effect trade for their preferred kind of sex, but the price needs to be right. A does X to B and B does Y to A. However, although A would love him some Y, he finds doing X boring, and B is craving a bit of X, but Y-ing A sounds like a big drag. And so sex happens only when A wants it enough to not mind doing X for it, and B wants also it enough to not mind doing Y for it. If A gains ten pounds, and B has been acting like a jerk lately, it just might not happen at all. And the expected cost of getting sex outside the relationship seems even higher. So we get investment in poor, low-cost replacements, like pulsating showerheads and streaming video.
[Update: And I should have mentioned religious guilt. That's a real cost for many, many people.]
Yale Law Professor Akhil Reed Amar has suggested:
Divide the state into one hundred equally populous single-member districts, as under the current system. Give each person one ballot and one vote, but within each district, after the votes are cast, don’t just add up the votes and in effect waste or ignore the votes of those of the minority party or parties– the “losers.” Instead, treat all voters, all ballots, equally, but in a different way. Suppose we put all of the ballots from a given district in a twirling drum, pull one ballot out in a lottery, and declare the candidate listed on that ballot the winner from that district. Ex ante, each ballot has an equal chance of casting the winning vote. If you get 20 percent of the vote in a district, you have a 20 percent chance of winning the election even if someone else got more votes. Like the current system, lottery voting uses small single-member districts, but because of the law of averages, lottery voting generates an overall legislature that looks much more like the one generated by cumulative voting. A geographically dispersed 20 percent minority party will win around twenty of the one hundred seats. Each party will get its fair share–its proportionate share–of legislative representation, tracking pretty closely the overall percentage of the vote it received statewide.
So,why not?
During a nice conversation about alternative voting schemes last night at the Amsterdam Falafelshop with my friend Clark, I got thinking about just how little most Americans are aware of the degree to which the democratic rules of the game constrain the range of the politically possible. We blithely believe that since we have some scheme of universal suffrage that the government must reflect the “will of the people.” But this is utterly fallacious. There are probably an uncountable number of different voting schemes that are equivalently “democratic,” but which would produce wildly different legislatures, policies, and civic cultures. Amar’s ingenious idea is just one example of an alternative democratic scheme that would give quite different results from our current system.
The interesting normative question is whether a political community can truly exemplify the ideal of republican self-governance if they do not understand the extent to which the rules of collective decision-making limit their choices, some possibilities being ruled out of bounds simply in virtue of being governed by one set of rules rather then another.
Amar speaks of law schools, but I think his point is general:
Too few of us–citizens and lawyers–recognize that a choice exists. This is largely a failure of education, especially in law schools where professors train students much better in the arts of textual and doctrinal analysis, and now even in certain law and economics and statistical techniques, than in the basic rudiments of social choice theory. Plain meaning, expressio unius, judicial review, the Coase theorem, regression analysis, and T tests–these are all part of law school vocabulary. But the Condorcet Paradox, agenda manipulation, May’s Theorem, single peakedness, Downsian equilibrium, Black’s Theorem and the like, are not–not yet, at least.
I think our attitude toward democracy would undergo a fairly radical change if it was broadly understood just how much we are ruled by the rules.
I have a new piece up at Fox News on the the relative political security of personal retirement accounts and the Social Security status quo. Reform obstructionists like to say that the status quo is at least as secure because Social Security is so popular, and, in any case, Congress could just tax the hell out PRAs if they wanted. This argument doesn’t work because the reason SS is so untouchable is that it was designed to create the illusion of property, contract, and insurance. If fake rights are the electricity in the third rail, then real rights should pump out even more wattage.
My conclusion:
The political vitality of Social Security-as-we-know-it was designed to be parasitic on the American commitment to property and contract. But parasites cannot be more secure than the host. If Congress fears to trespass on illusory property, it will not be bolder when encountering a real legal fence. Personal accounts — real ownership, real rights — offers in reality what the status quo offers only in appearance. The shadow, as Plato would remind us, is not more solid than the form.
Americans deserve real ownership, real property, and real retirement security. Unlike the slowly eroding status quo, PRAs offer Americans the real thing.
I am convinced that the mind is at least moderately modular. The mind is composed of an interrelated suite of neural “programs” selected to solve problems specific to different domains of human activity. I’ve recently been intrigued by the idea that a variety of modules that operate according to different rules might provide some basis for the thesis that there are plural, incommensurable values.
I don’t believe in extreme versions of value realism, that there are value-properties out there in the world independent of their relation to human beings. I think value-properties are relational, and are what they are in part because of the contribution of human emotional and cognitive capacities. However, they are not subjective. Things aren’t valuable just because I believe they are, or because I want them to be. Beauty, for example, is not a matter of opinion, but a matter of the way objective features of external objects or events jive with certain more or less universal human mental capacities. People can have wrong opinions about beauty, because the relevent capacities might be insufficiently developed, or because they haven’t learned to pay attention to right thing, or because their judgment is clouded by a specious theory. So there can be right or wrong answers about value questions within the class of people who share the relevant capacities.
Value-properties, and accurate value-judgments, are capacity-dependent in this way. But there is no single value-responsive capacity. Our ability to judge a fair trade, a good mate, a decent piece of meat, or a nice song, likely depend on different capacities that produce judgments based on different standards. The love for one’s daughter may be produced by a very different cognitive/emotive mechanism than one’s love for Bach. Our value judgments in a particular case likely depends on which module is activated and deployed. It may be that we judge our own reasons in a different way than we judge other people’s reasons, due to the different standards implicit in the operation of different modules, which may lead to seemingly hypocritical sets of judgments. Different contexts, which elicit different modules, may lead to varying value-experience and (correct) value-judgments about the same subject matter, and thus our reasons for action may seem to fail to cohere. It is well-confirmed that people make different judgments when in “hot” and “cold” states. And it may be that neither state produces the uniquely correct judgment, but that different contexts activate programs that sensitize us to different, incompatible values, each of which we are responsive to and regard as reason-giving.
Moral “learning” might then involve becoming conditioned to activate one module rather than another in certain contexts where the other module is “naturally” dominant. One social convention about the proper mode of value-response might enable different coordinative possibilities and therefore different social formations than another convention, although both sets of social formation are, at bottom, the consequence of value-responsive motivation and action. Culture we can think of as a set of institutions and practices that reinforces patterns of contextual modular activation, and therefore value-response, and therefore individual action, shared expectations about individual action, social coordination, and social formation.
Every culture in one sense is equally natural, relying on natural capacities for value-response. But some cultures might be less natural than others in the sense that rely less on the “default” modular activation rules and rely more on “trained” modular activation, or on conventional external institutions and cues “designed” to manipulate the default rules. Certain patterns of modular activation might have unintended coordinative consequences, which might undermine the pattern, further reinforce the pattern, or create pressure to modify the pattern and create cultural change.
We get cranky sometimes because our culture constantly reinforces and rewards counter-”intuitive” activation of non-default modules, and this can be effortful and feel unsatisfying, leaving us constantly feeling that there is something it might have been better to do. But reversion to default patterns is badly maladaptive within a set of social formations built on coordination around heavily reinforced non-default patterns. Alienation. We don’t crave the Pleistocene. We’d just like to take a little holiday from time to time, and respond to value, and be motivated by reasons, according to the “natural” default pattern of modular activation.
That was more for me than for you. But if you got this far, thanks for listening. Pope Benedict: beware modular pluralism!
Yglesias, guesting over at Talking Points Memo, contests Julian’s claim that it doesn’t make sense to think of Social Security as “insurance” (making some of the same points I made in this TCS column.)
First and most obviously, Social Security provides insurance against disability. Through the survivor’s benefits it also provides a kind of life insurance. Third, through the fact that you keep drawing benefits until you die rather than until some lump sum has been exhausted, it provides a kind of longevity insurance. Living until over the age of 65 is a very common and quite predictable feature of contemporary life, but none of us know exactly how long we’re going to live. Someone who dies at 78 and someone who dies at 100 would need nest eggs of very different sizes to live comfortably in retirement. One’s ability to keep working during the earlier portions of old age is also not-exactly-predictable. In my line of work it’s a reasonable bet that I’ll be able to keep on writing away for the vast majority of my lifetime, but many careers aren’t like that. The guarantee of benefits starting in your mid-sixties serves as a kind of second-tier of disability insurance against the possibility that the vicissitudes of life will leave you unable to ply your trade into your late sixties and seventies even though you might be healthy enough to live.
Matt does an extremely effective job of evading the issue. First, let me point out that the big debate we’re all having is about retirement policy, not disability. So let’s leave that aside. Second, Matt seems to implicitly accept that turning 65 years old does not constitute an insurable “loss” that might be thought to require reimbursement. Older people are on average wealthier. In terms of buffering people against risk, it makes a heck of a lot more sense to transfer money from chi chi retirees in Boca to people facing the “risk” of turning 20. I think we can all agree that birthdays aren’t insurable events. It’s both weird and dishonest to represent a birthday or the event of voluntarily leaving the labor market as an insurable “loss.” Social Security checks are event-conditioned welfare payments. That’s just what they are.
Now, yes, it turns out that we don’t know exactly how long we’re going to live, and so there’s some chance we might outlive our savings. Or we might face some kind of financial catastrophe that guts our retirement nest egg. You don’t know how long you’ll be able to be a productive contributor to the economy, etc. But the point that Matt fails to address is that insofar as Social Security “insures” against these contingencies, so does means-tested welfare, and to a very great extent, so do personal accounts. Means-tested benefits are much MORE like insurance in the sense they kick in only upon the occurrence of some kind of loss or hardship. An annuity from a personal retirement account is exactly like a stream of Social Security checks, except that you actually own something. If Social Security is insurance, then so is a personal account annuity. The reason why Feldstein, in his presidential address to the APA, “Rethinking Social Insurance” discusses the current system, personal accounts, and means-tested benefits as alternative forms of “insurance” is simply that if the current system counts as social insurance, then so do the alternatives.
Regular commercial insurance works by subsidies across the risk pool. (And is by its very nature “social.”) Premiums are actuarially determined on the basis of bunch of variables like the probability of the occurrence of loss and the likely cost of reimbursing it. It’s a kind of bet. The premiums of people who get lucky, and don’t experience the relevant kinds of losses, reimburse people who get unlucky and do experience them.
Social Security isn’t like this at all. It “reimburses” everyone who turns 65 (or 62 or 67). Like I said, this event isn’t a loss; it is in fact correlated with being rich. A system that pays everyone–Warren Buffet, Tom Cruise, etc.– is conspicuously un-insurance-like. It’s sort of like a system of home-owners insurance where everybody’s house burns down ten years after you move in. There’s nobody who gets lucky, so no way to transfer risk across the pool. Rather than being structured at all like regular insurance, Social Security is a system of chained intergenerational transfers — a chain letter, a Ponzi scheme — which is not what insurance is.
If you insist on calling non-insurance insurance, then Social Security is like insurance in the way that any stream of income is like insurance. It makes it possible to pay for stuff that you wouldn’t otherwise be able to pay for. But that’s not what insurance is, except in the loosest possible sense. You don’t think that you have insurance because you have a salary. You don’t think you have disability insurance because you walk around with a helmet on. Most people who receive Social Security are perfectly able to “self-insure.” And Social Security improves their ability to self-insure largely because it’s replacing income that the government took away in the first place.
The point is: A system that pays everyone benefits upon the occurrence of a near-universal, non-loss event by means of a system of intergenerational wealth transfer just isn’t insurance in the paradigmatic sense. If “insurance” just means “making sure that people don’t suffer when they don’t have enough money,” then ANY system that makes sure that people have enough money is insurance. Inter-family transfers, churches, charities, clubs, etc. count as insurance in this sense. And so do means-tested old age benefits and personal retirement accounts.
Is there any liberal reason to prefer the current system over means-tested benefits or personal retirement accounts? None that I can think of. Most of the people who are freaking about progressive indexing provide a distinctly illiberal reason. Unless we trick the middle class by taking their money away and then giving it back to them later while deceptively framing the whole enterprise as a kind of contractual agreement between a consumer and an insurer, mean spirited voters will starve ol’ Ethel and Wilbur.
The first thing wrong with the argument is that there is nothing other than sheer knee-jerk ideological prejudice behind the assumption that a non-deceptive system wouldn’t provide big enough benefits. I think the reverse is more likely true. Under a mean-tested system, sentimental Americans prodded on by massive interest groups like the AARP and heavily voting seniors would end up supporting benefits that are way too big, thereby causing a serious moral hazard problem. That’s why we need mandatory investment accounts instead!
Almost everyone now thinks welfare reform was very a good thing. The problem before wasn’t that Americans are stingy. The problem was that means-tested benefits really were TOO GENEROUS. As far as I can tell, there is nothing whatsoever to the “hard-hearted Republicans will starve gramps” argument other than reactionary boogety boogety.
Second, from a liberal perspective, it’s just wrong to use the power of the state to trick the voters. The voters are supposed to tell the government what to do, not the other way around. We get righteously ticked when the Bush administration distributes faux pro-Bush “news” segments, and pays off opinion writers in an attempt to manipulate public opinion, and we should. And any good liberal, who cares at all about public reason, transparency in government, and informed reflective deliberation among self-governing citizens should throw up a little bit every time they think about the Social Security status quo.
So, there’s no reason to believe that you’ve got to trick the voters to make sure they’re generous enough. And it’s wrong to trick them in any case. Is this really the liberal argument? Seriously?
The closer you look at the current system from anything resembling an authentically liberal perspective the more its appeal recedes. There’s just no there there. Institutional path dependency and historical inertia is all it’s really got going for it. A free, self-governing people should hope that’s not enough.
Thank you President Bush. This is beautiful.
The important thing to understand is that the attempt to turn Social Security into nothing but a program for the poor isn’t driven by concerns about the future budget burden of benefit payments. After all, if Mr. Bush was worried about the budget, he would be reconsidering his tax cuts.
No, this is about ideology: Mr. Bush comes to bury Social Security, not to save it. His goal is to turn F.D.R.’s most durable achievement into an unpopular welfare program, so some future president will be able to attack it with tall tales about Social Security queens driving Cadillacs.
It is simply impossible to square Krugman’s worry with the idea that Social Security is supposed to provide “old age insurance.” If we understand insurance very loosely as anything that mitigates the harm caused by a financial loss, or simply by the lack of adequate finances, then a means-tested welfare program for the elderly poor would serve this “insurance” function quite effectively. It would also achieve a much more progressive redistribution of wealth, normally a liberal desideratum.
Social Security reactionaries like Krugman often talk out of both sides of their mouths, on the one hand touting the democratic popularity of Social Security, and on the other hand throwing a fit if the mirage of pointless middle-class to middle-class transfers is exposed for what it is: an illiberal and indefensible manipulation of voters by the political class. What’s Krugmans complaint here? That once we throw back the curtain on American old age assistance, and expose Social Security for what it is, a Rube Goldberg device designed to manufacture a sense of middle-class entitlement (that’s F.D.R’s “most durable achievement”), the American voting public will not support programs for the elderly poor at a level people like Krugman deem adequate. That is to say, if the deceits of the Social Security system are not in place to manipulate the preferences of American voters, then American voters will express their own preferences, and that is not OK. Because . . . why? No, Krugman, THIS is about ideology.
In any case, is there any reason, other than an insane conviction in the rottenness of American voters, to buy into the prediction that citizens with unmanipulated political preferences would not support fairly high levels of assistance for the elderly poor? I simply cannot believe that the massive political energy now being wasted to conserve the Social Security status quo–a regressive tax and a huge set of transfers that achieves precious little progressive redistribution–would not be effective in ensuring a decent level of benefits for the needy in old age. Little old ladies with no savings simply do not generate the suspicion of free-riding and the resentment of parastism that Great Society welfare at its worst managed to do.
Of course, a system of personal retirement accounts would do a great deal to ensure that few Americans are needy in old age. That’s the great appeal of personal accounts together with a well-designed means-tested safety net. Fewer people will need help, and those who do need it will get it — and without the waste and anti-democratic deception of “insurance contributions,” “trust funds” and the sky-blackening green tornado of pointless transfers.
Last, it is very encouraging that Krugman chose to compare Social Security reform with welfare reform, the biggest American public policy triumph of the past twenty years.
