Analytical Nationalism vs. What Actually Happens

Krugman takes his point about immigration from Nolan McCarty, Keith T. Poole, and Howard Rosenthal's Polarized America. Here's how they put it:

The new immigrants are predominantly unskilled. They have contributed greatly to the economy by providing low-wage labor, especially in jobs that American citizens no longer find desirable. They also provide the domestic services that facilitate labor market participation by highly skilled people. On the other hand, immigrants have also increased inequality both directly, by occupying the lowest rungs of the economic ladder, and indirectly, though competition with citizens for low-wage jobs. Yet as noncitizens they lack the civic opportunities to secure the protections of the welfare state. Because these poor people cannot vote, there is less political support for policies that would lower inequality by redistribution.

This is just a terrific example of the distortions of analytical nationalism. If we assume a completely natural  and mundane moral perspective, in which the whole set of people involved is taken into account, what we see is a huge reduction in both poverty and inequality. If the question is “What happened to the people in this scenario?”, then the answer is “The poorest became considerably wealthier, narrowing the economic gap between them and the rest.” But what actually happened seems to be completely invisible to the authors, which certainly suggests that their analytical framework leaves something to be desired.

Here's how it ought to go:

Immigration decreased inequality both directly, by sharply increasing the wages of low-skilled foreign-born workers, and indirectly, through remittance payments to low-income relatives at the immigrants' places of origin. Because of American citizens' opposition to liberalizing immigration,  large potential further reductions in poverty and inequality have not been realized.

Reading allegedly social-scientific accounts of inequality by celebrated economists and political scientists, one would simply not know that nation states are not in fact giant firms with profits (“national income”) to be divvied up into shares to various constituencies. But such a huge conceptual gaffe cannot be the basis of a scientific analysis of a society, which is not a set of people sharing a citizenship, or even the set of people inside some political boundaries, but the actual international system of cooperative interaction we act within every day.

Framing the World Away

Joe Brewer of The Rockridge Institute (aka, the George Lakoff Center for a More Scientific Leftwing Propaganda) discusses the “cognitive dimension of climate policy” in “How Conservatives Have Duped Us in the Global Warming Fight.” As far as I can tell, this duping consists entirely of basic social-scientific literacy. Here's Brewer's expose of the enemy frame:

Idea No. 1: Protecting the environment harms the economy

This idea has been promulgated for decades by conservative think tanks like Cato Institute, Heritage Foundation, Competitive Enterprise Institute and others. It is based on the foundational claims that (1) the environment and the economy are fundamentally different things, and (2) they compete with one another in a zero-sum manner — meaning that a gain for one amounts to an equivalent loss for the other. This idea takes many forms. Here are a few that we hear all the time:

  • Environmental action will cost us jobs.
  • American companies will be burdened by additional costs.
  • Addressing global warming will put our economy at a competitive disadvantage versus the rest of the world.
  • Renewable energy must compete with traditional energy sources, like coal and oil, before it can be implemented.

This is just weird. What does (1) even mean? Does he really think anyone thinks that? And (2) is a bald-faced misrepresentation. The general market environmentalist view is that there is something like an environmental Kuznets curve (or set of curves for different pollutants and environmental goods), according to which environmental quality degrades in early stages of economic development, and then improves at later stages.

How about those bullet points? Here's what a bona fide Cato-style market environmentalist thinks:

  • Environmental action may or may not cost jobs, depending on the action. When Chad Pegracke enlists volunteers to clean up local rivers, that's both effective environmental action, and it doesn't cost jobs.
  • Most environmental regulations do burden companies with additional costs. How is this wrong? Does Brewer think regulatory compliance is free? If he thinks the cost is worth it for all of us in the end, that doesn't mean there wasn't a cost bone disproportionately by the company and its shareholders.
  • Imposing heavy restrictions on carbon emissions will put firms using America-based production at a competitive disadvantage relative to those using foreign-based production unless we can ensure general compliance with global restrictions. And we probably cannot. China and India (not to mention all of Africa) are on the left side of the Kuznet Curve, and they are not going to kneecap themselves for the rest of us. How is this incorrect?
  • Renewable energy must be as efficient as traditional energy sources, or else using them will be more expensive, and using the more expensive alternatives leaves us with less to spend on other things. I suppose the very idea of a budget is rightwing agitprop?

Here's Brewer's attempt at reframing:

Idea No. 2: A healthy economy depends upon a healthy environment

The well-being of our communities (isn't that what we mean by a healthy economy?) is intimately bound to the preservation of life-giving qualities from nature. In other words, a thriving economy depends upon protection of the environment. Separation of environment from economy is fictitious, an artifact of a flawed way of thinking.

This begs the question, “what is wealth, and where does it come from?” A progressive response might be that wealth is the well-being of individuals, society, and the earth. Wealth is more than simply material wealth. It comes in many forms — having good relationships with friends and family, maintaining physical health, and yes, living in a community where clean skies, thriving forests, and healthy streams are preserved. Clean air, drinkable water, and fertile soils are inherently valuable because our well-being depends on them — independent of markets. A consequence of this meaning is that resource preservation is wealth creation. The logic works like this:

  • Wealth is anything that increases well-being.
  • Clean air increases well-being, so it is a form of wealth.
  • Dirtying the air reduces well-being, so it is a loss of wealth.
  • Keeping the air clean is preserving wealth.

This is not an equally valid prism through which to see the issue. This is just an insistence that words come to mean what one wishes them to mean. But suppose we accept the redefinition of “wealth” as “anything that increases well-being.” It then follows that clean air is wealth only insofar as it increases well-being. If there is in fact a tradeoff in certain places between higher incomes and cleaner air, and there is, and higher incomes do more to increase well-being than cleaner air at certain stages of development, and they do, then cleaner air decreases well-being relative to the relevant alternative. And so cleaner air can be a form of poverty. QED.

The whole thing turns on denying the possibility of tradeoffs, which is just stupid. You can't just insist that people spend more money on what you want them to spend more money on and then say that it didn't cost them anything because it made them wealthier by your very special personal definition of wealth. Well, you can say it. And you may even manage to persuade some people. But it makes you look either foolish or dishonest to people who know better.

I'm all for availing ourselves of any useful indicator of well-being. But this can't be merely stipulative. You need to show that something contributes to health, happiness, longevity, creativity, the realization of basic human capacities, etc. The story these indicators taken together tells us is that the greatest increases in human well-being have been a consequence of rapid economic growth, traditionally construed. This has taken a certain toll on the environment, but that hasn't left us worse off has it? Indeed, the opposite is true. So Brewer has it backwards.

The evidence — the whole set of well-being indicators, and not just the income numbers — says that growth-based environmental changes have been associated with an increase in well-being. Historically, pollution has been side-effect of wealth, as Brewer construes wealth. Now, it is completely misleading to attempt to try to brand carbon as a pollutant, as Brewer seems to wish to do. But even so, the places that emit the largest amounts of carbon per capita are precisely the places where people tend to do best on pretty much every well-being indicator imaginable, and this relationship seems to be largely casual, and not incidental. So pretty much all the relevant evidence points to the conclusion that cutting carbon emissions in the absence of equally efficient sources of energy will reduce well-being. It will impoverish us. This is not a right-wing framing conspiracy. It's called a considered judgment based on empirical evidence. Try it!

Now, I'm quite open to the idea that carbon taxes are an efficient method of getting folks to internalize the costs of the negative external effects of their activities. But Brewer clearly thinks that if the debate proceeds in economically-literate terms, he will not get the policies he wants.

Politics and Inequality

Ryan Avent is surprised that I think politics has a great deal to do with the level of inequality. He writes:

Even the liberal Ryan Avent believes that only some, and substantially less than a “great deal,” of the increase in inequality is due to the direct effects of taxation and redistribution. Will’s fellow libertarians Brink Lindsey and Tyler Cowen join me in believing that research by Claudia Goldin and Lawrence Katz offers the more promising explanation for much of the widening in the income spectrum. They argue that the big jumps in inequality are due to a slowdown in the growth of skilled worker supply. This supply constraint boosts the premium earned by the most educated workers and holds down wages for the unskilled.

I guess it depends on what we mean by “a great deal”. What I mean is that I agree with Krugman and Bartels that had tax and transfer policy been different, income inequality would be lower. I think this is hard to deny. Almost all the developed European economies have seen increases in inequality caused by the supply and demand for skill, same as us. But I'm pretty sure we've seen a larger increase in income inequality, and this has to do with policy differences we have with most European countries, which are driven by both cultural differences and unique structural features of America's 18th century constitution.

Krugman and Bartels think the problem is the influence rich people have on public opinion and the policy process. I think they end up really lamenting the fact that many Americans have very strong substantive moral views about inequality, mobility and the morality of redistribution that make European levels of taxation and redistribution politically infeasible. They also keep banging straight into the problem that if government is empowered to heavily affect people's fortunes, then people with the biggest fortunes will have the most at stake when it comes to influencing government. The idea that the government should do much much less is completely unacceptable, so they are left chasing their tail — trying to get money out of politics without simply increasing the incentive for money to get into politics — with mounting indignation.