More on the Missing Evidence of Anxiety

Not surprisingly, I found Ezra's reply to my post on the demand for populism unpersuasive. Here's Ezra:

Notice, here, that Will uses “life satisfaction” rather than anything directly related to the economic numbers for his point. That's because the economic numbers are very bad for his point, But as Will — who dearly loves his “alternative status hierarchies” — fully knows, economic status is not the only determinant of life satisfaction. If you don't have health care but are really happy with your attempts to restore the heat and spark to your marriage, you may be both satisfied and a populist!

Moreover, invoking current polls is completely non-responsive to Ross's claims. Ross — and Alan Blinder, and everyone else — expect tens of millions of white collar jobs to come under pressure from outsourcing within the next few decades. If Will doesn't think this will upset anyone, he's got to construct a plausible theory as to why, not note that the Harris poll says many folks are satisfied with their lot now.

And this goes across the board. Will may not like the trends, but it requires some fancy libertarian footwork to argue that continually rising health costs, substantially stagnant wages, the enduring pressures of globalization, the decline of the corporate welfare state, and all the other forces buffeting the bottom 80 percent will elicit no response in the electorate. Indeed, it's hard to argue they've not already done so.

Why cite numbers on people's satisfaction with life and their assessment of whether their “life situation” has improved or will improve? Because Ross claims that middle-class Americans in fact are and are going to continue to be highly anxious about their economic condition. If people's alleged economic anxiety is important enough to create a powerful demand for populist policies, you would think it would have some effect on either their life satisfaction or their evaluation of their “life situation.” But the evidence is that people are increasingly satisfied, and fewer people expect their life situation to get worse. Either increasing economic anxiety is a myth, or it is not sufficient to affect people's evaluation of their satisfaction or prospects. Either way, it is difficult to see how it is supposed to drive demand for a middle-class populism. Ezra notably fails to address the troubled Jacob Hacker thesis on volatility, which seems to have been Ross's main piece of evidence in favor of the existence of high levels of economic society. Should I assume Ezra thinks I'm right, and that there is no good evidence for an especially politically significant level of anxiety?

Indeed, Ezra proceeds, as he often does, simply by changing the subject. So now we are talking about the future and what people will be feeling. Ezra says people will be upset by outsourcing. But I was talking about evidence for economic anxiety and the demand for populism now.

Anyway, like Alan Blinder and all sensible people, I think lots of firms will be seeking less-expensive foreign labor, that this will have a significant effect on the jobs available to Americans, but also on the price of many goods and services (down) and on the incentives to acquire new and/or improved skills (stronger). This is going to make middle-class Americans wealthier, improving their objective economic security. Many people will surely be temporarily upset when the shifting incentives of the global market upset their usual patterns of work and life, very much as people in the Rustbelt were upset by the process of deindustrialization. But these changes are going to take place incrementally over decades, not all at once. At any time during the process, huge segments of the middle-class will be seeing significant improvements in their standard of living while other, smaller segments struggle to find new niches in the labor market.

I don't believe I bear any burden to show that this transition won't produce demand for populist policies. The positive claim, and the burden, is on the other side. Indeed, the sometimes dramatic dislocations of America's transformation from a primarily industrial to a primarily service economy delivered two terms of Ronald Reagan, a term of George H.W. Bush, and two terms of Bill Clinton, while leaving the U.S. with historically low rates of unemployment, a leaner, more efficient, more productive manufacturing sector, lower taxes, scores of free trade agreements, etc. Ezra should explain to us why the anxieties of deindustrialization fell so far from delivering a populist politics.

I don't deny that there are business cycles, and that the electorate's economic anxieties rise and fall, or that politicians can ride a cyclical wave of economic discontent to power. I was replying to Ross's suggestion that there is a long-term or secular trend toward increased middle-class economic anxiety, and that this is likely to generate a populist politics that could dominate politics for twenty years. Neither he nor Ezra has said anything more than fantastically conjectural on the point.

Last, what is populism anyway? I think of a politics that pictures the economy as a huge zero-sum game, sets social and economic classes against each other, and promises “the people” free stuff at the expense of some other, usually richer, people. Ezra adduces evidence from the recent Pew Political Typology that shows increased support for a bigger, more domestically activist government. I certainly don't dispute it. But what does that have to do with populism, exactly? Is this shift in opinion Ezra identifies motivated by “people vs. the powerful,” “two America's” stuff? Where's the evidence of that? And, more to the point, if there is any evidence of it, where's the evidence that it is driven largely by economic anxiety? Because that's the specific point I was rebutting.

My guess is that some intellectuals get excited about populism because they thrill to the fantasy of riding popular passions to power and harnessing them to set in place their ardently desired policies. It is a thrilling, if repulsive, dream. The best evidence the dream does exist is the habitual evidential overreach of pro-populist intellectuals. A complacent electorate is routinely met with desperately table-pounding op-eds practically begging readers to be mad as hell. Any faint sign of traction, that the fickle mood of “the people” is turning their way, is greeted with bold predictions of an all-new politics! Our politics! Hope triumphs over reason, but, inevitably, hope is dashed.

There are also ups and downs and quick reversals, if not cycles, in political opinion. As Ross mentions in his article, just a year or so ago, there were still books rolling off the presses trying to explain why the Democrats are perpetual losers. Are Republicans wizards at “framing”? Are they more fluent in the visceral emotional language of politics? Have they gerrymandered themselves permanent majorities, destroying any chance of a real American democracy? I don't believe it is even minimally reasonable to now think the tide of public opinion has semi-permanently turned. What I think it is safe to say is that the incompetence, corruption, and disastrously failed war delivered by years of Republican rule have powerfully soured many Americans on policies they identify, rightly or wrongly, with conservatives. Anyone making projections further out than the next election is just guessing, and usually wishfully. A big majority opinion seemingly in favor of a big policy change — in favor of social security privatization or nationalized health care, for example — can collapse in a matter of months in the face of well-coordinated negative political and media campaigns. Go ahead, Ezra, dream. But brace yourself.

So, again: What is the evidence that there is in the U.S. a secular trend toward increased economic insecurity or anxiety?

The Demand for Populism in the Imaginary Age of Anxiety

I read Ross Douthat's new Atlantic article on the electoral opportunity open to the Democrats as a chance to characterize the Democratic “threat” in a way that makes Douthat's conservative “populist” alternative look like an attractive counter-strategy for '08 Republicans in the market for advisers.

The pressure of continued outsourcing may also increase the public’s appetite for a smart left populism, as even well-educated workers—in fields from financial services to health care—begin to face stiff competition from overseas. In this landscape, it’s easy to imagine the middle-class anxiety that the political scientist Jacob Hacker termed “office-park populism” defining the domestic debate over the next 20 years, and easy to imagine a Democratic majority that capitalizes on the opportunity.

The phrase “easy to imagine” has all the virtues of theft over honest toil. It is “easy to imagine” that the Kaiser won the Great War and that I'm writing in German (and a pith helmet). Likewise, it is easy to imagine Jacob Hacker's nowlargelydiscredited thesis of income volatility and our current cyclical financial worries defining domestic politics in a generation, but why would we bother to imagine it? Let's imagine instead the centrality of the coming “robot gap” in American politics.

There is good evidence that many Americans just now are worried about the economy and find it hard to pay off debt, as this Harris Poll shows. But, on the other hand, this doesn't seem to be breeding the kind of discontent likely to push a populist to power. According to another very recent Harris Poll, the level of overall satisfaction is up since 2003, well over half of Americans say their life situation has improved over the last few years, and nearly 2/3 expect it to improve over the next five. Some of this pretty clearly has an economic component. When broken down according to generation, Gen X-ers, like me, (ages 31-42, according to Harris) were most likely to report improvement in their life situation over the past five years, and this is likely because we saw the largest wage gains in that period as many of us finished the 20s transition from entry-level to mid- and upper-level positions. By contrast the oldest cohort–either holding steady in late career, or retired–was least likely to report an gain in life satisfaction over the last half-decade. Sensibly enough, the young group Harris calls the “Echo Boomers” (aka “Gen Y” — ages 18-30), slightly edges out X-ers as most likely to expect improvement in their life situation. The level and trend of American life satisfaction looks so rosy and expectations for future improvement are so high, that it is hard for me to see how a populist politics is supposed to hit takeoff velocity, or how Democrats are supposed to capitalize on some kind of alleged trend of high anxiety that never seems to materialize in the numbers.

Economic anxiety is cyclical. Housing market aside, the current economic indicators look good. I'll be surprised if the public isn't pretty happy with its economic lot in a year or so–and especially when Bush is clearing brush full time. In any case, conservatives don't need to think right-wing populism is just the thing to stave off left-wing populism, since left-wing populism built on some elusive but magically potent middle class economic anxiety is about as authentic a threat as Osama's caliphate.

Shaw on Inequality

From George Bernard Shaw's The Intelligent Woman's Guide to Socialism and Capitalism:

Between persons of equal income there is no social distinction except the distinction of merit. Money is nothing: character, conduct, and capacity are everything…. There would be great people and ordinary people and little people, but the great would always be those who had done great things, and never the idiots whose mothers had spoiled them and whose fathers had left them a hundred thousand a year; and the little would be persons of small minds and mean characters, and not poor persons who had never had a chance. That is why idiots are always in favour of inequality of income (their only chance of eminence), and the really great in favour of equality.

This analysis is … flawed.  For example, Shaw ignores the countless forms of social distinction based on neither income nor merit. Physical attractiveness, for example. Also, capacity may not itself be merited. Also, he overlooks the role of money in motivating greatness. The concluding inference could have gone the other way, perhaps with greater psychological plausibility: idiots favor equality as their best chance of effacing invidious distinctions. This strikes me as a completely sophistical passage. Perhaps Shaw didn't really think all that highly of women's intelligence.

Why Isn't Caplan in the Kitchen?

Bryan Caplan argues the 50/50 husband/wife domestic work norm runs afoul of the principle of comparative advantage.

What if a man has a much higher wage than his wife, but can't clean, cook, or shop to save his life? Should he still do half the cleaning, cooking, and shopping? Wouldn't husband and wife alike be better off if he specialized in bringing home the bread, and she specialized in baking it?

Well, maybe not. Maybe the wife would be better off with the sense of increased social status and independence that comes from labor market participation. Maybe the wife hates cooking and cleaning and would like to realize some of her potential as a human being through satisfying work that engages her talents. Imagine a possible world in which Bryan makes less than his wife. Is he making pot roast?

Moreover, part of the 50/50 point is about social expectations. If girls are expected and encouraged to semi-specialize in domestic labor and boys are expected and encouraged to specialize completely in some kind of non-domestic career and always burn the toast, it comes as no surprise when it turns out that it is generally more efficient for the husband to head to the office while the wife heads to the kitchen. But in this kind of case, the efficiency of the arrangement is evidence of a prior injustice, not of general hunky-doryness.

Top Ten!

I was alerted today that my happiness paper has edged into the top ten downloads in a couple of SSRN categories. Apparently it doesn't take much. (11 whole downloads! Woo!) Anyway, I sense that these things can be sort of self-reinforcing. People want to read what other people have read. So, if you think you'd like to read my happiness paper, but haven't yet had a chance, feel free to download it today. You'll help keep it in the top ranks for a while, and helping to increase the chance that some who might not otherwise will read it, too.

Almost Nothing Rotten in Denmark

My colleague Dan Mitchell complains that Denmark's new tax cuts aren't deep enough. That's his job. And he's probably right. But, I wonder: Does Denmark's tax policy imperil its citizens' well-being? I imagine there are a good number of Danes upset about their astronomically high taxes, but they also must be pretty popular. Also, if you don't mind boring, or blondes, Denmark appears to be one of the best place for human beings to live in the history of world. Look at these various rankings:

GDP per capita: 7th
Human Development Index: 16th
Economic freedom: 13th
Self-reported life satisfaction: 1st
Ease of doing business: 7th

Denmark also gets top grades (not a ranking) from Freedom House for political rights and civil liberties.

Now, I think Denmark should cut their taxes. Their GDP growth is lower than the OECD average, despite their being relatively aggressive free-traders. I doubt they'll stay so high in all these rankings if they begin to fall behind their neighbors over time, GDP-wise.

But these high taxes and slowish growth surely have something to do with this:

Welfare state and social spending as % of GDP: 1st

which leads to:

Low income inequality: 1st

And the Danes seem to like it that way. From almost all indications, the Danish model of a free-market welfare state is a stunning success. They no doubt need to fiddle with their tax rates to keep it sustainable. But it's certainly hard to blame them if they don't think the cuts need to be as aggressive as Dan or I think they should be.

Also, to be clear, I don't want the U.S. to look more like Denmark in terms of tax and social policy. I also don't think Denmark should want the U.S. to look like Denmark. The continued viability of countries like Denmark depends on the success of countries like the U.S. But, unless one insists on being ax-grindingly ideological, you've got to admit that both Denmark and U.S. are huge successes in terms of human flourishing. They'll never have our levels of innovation, we'll never have their Gini coefficient, and you know what? That's OK.

Also, did I say that Denmark is boring?