Sorry so quiet! I've been busy doing things. You know how it is. Here is the latest Free Will, in which I talk with Jesse Prinz, whose book The Emotional Construction of Morals is awesome. Here is today's Marketplace commentary, in which I note that T. Boone Pickens is trying to use the public's anti-foreign bias and bottomless ignorance to help rig the regulatory structure in his favor. I think of it as the Swift Boat Veterans for windmills project. (Some of the commenters seem not to realize that this kind of mixed environmentalist/energy independence play is exactly how we got the now locked-in subsidies for ethanol they so vigorously decry. Also, I am an idiot for thinking that people will buy things, and producers will produce them, when the price is right.)

I'll be off next week to Michigan for a Liberty Fund conference on Adam Smith. And then I'm moving to Iowa City with Kerry, where she will start work on her MFA in creative nonfiction while I will do exactly the same thing [as I am doing now, i.e., working for Cato], but from a different place. We will be so far from the Orange Line. Expect puppy-blogging.

Today in Backwardsville

Don Boudreaux once again displays his weirdly rare ability to describe things correctly:

The national minimum-wage rises today from $5.85 per hour to $6.55 per hour.  In other words, Uncle Sam today arbitrarily increases the cost of employing low-skilled workers by 12 percent.

If your labor is worth less the $6.55 per hour, life is probably not easy for you. It's a travesty that politicians can posture like they're helping that guy by making it illegal for anyone to profit from hiring him. Thankfully, $6.55 still isn't very much.

Losing Faith in What?

In the Los Angeles Times, Peter Gosselin offers a “news analysis” on the theme that “Americans may be losing faith in free markets.”

For a generation, most people accepted the idea that the core of what makes America tick was an economy governed by free markets. And whatever combination of goods, services and jobs the market cooked up was presumed to be fine for the nation and for its citizens — certainly better than government meddling.

No longer.

This kind of crisis of confidence occurs every time the economy temporarily heads south — which it inevitably does from time to time. What does this tell us? It tells us that people do not understand the economy very well. And what do stories like Gosselin's tell us? That most journalists don't either.

But economic downturns do offer the motivated reporter an opportunity to speculate on the possible political consequences of unflagging public and media ignorance. The causes for our current economic troubles are evidently too complex to fathom, so instead of writing intelligibly about what is actually happening and why, we are asked to wonder (hope? fear?) whether voters can be made to demand a “New Deal Lite,” before the economy regains steam and we become too satisfied to regulate ourselves into oblivion.

It would be useful if journalists could find a way to report on the actual nature of the American economy. This would be a real public service. The American economy is in fact a byzantine amalgam of market and state institutions enmeshed in a thicket of regulation. Gosselin maintains that “most people” in the U.S. think there is something out there called “the free market” that operates without “government meddling.” I'm not really sure that most people think that, but it seems Gosselin does, because he goes on to structure his “news analysis” as if the story is that dissatisfaction with a kind of laissez faire we do not have may be generating demand for basically the kind of dirigisme we've already got. But since economic systems we haven't got can't cause our economic problems, the result is confusion.

More...Consider the fact that the Federal Reserve is a central planning committee. We are lucky, I think, to have intelligent, highly professional planners, but there are in-principle limits to what they can do with limited information, and so there is no way they are not going to get it wrong sometimes, or a lot of times. The housing “bubble,” which has turned out very badly for a lot of people, and the historically high price of gas, which is to a large extent a function of the low value of the American dollar, probably has had a lot to do with the policies chosen by our monetary central planners. Failures of government planning don't discredit free markets. Rather, they suggest free markets might be worth trying some time.

Did the ratings agencies and investment banks screw up royally in their assessment of the risk of certain classes of mortgage-backed securities? Yes they did. Did assurances of bailouts, implicit and explicit, from the government to the financial industry encourage dangerous risk-seeking? Yes they did. Many market institutions, like our advanced financial markets, are very far from being self-organizing outgrowths of unregulated market exchange. Instead they are, by and large, creatures of the vast body of law and government regulation that defines the rules of market exchange — that determine what may be bought and sold, and how — and are tightly integrated with more or less freestanding government institutions like the Fed. When these markets stumble, it's just a rookie mistake of political economy to see that as problem with markets, per se, rather than as a problem with the way regulation and government institutions happen to have structured those markets and thereby structured the incentives of the individuals and firms that act within them.

Here's another example of the mixed economy. Food is expensive these days, which hits poorer Americans especially hard. Part of the price hike is due to normal market forces; supply has yet to catch up with the increased demand from the rising middle class in China and India and elsewhere. But a large part of it comes from our own government's frankly idiotic policy of subsidizing corn ethanol, which pushes up the price of all sorts of foods, from wheat to milk to meat. So the conclusion we should draw from this is what? Damn you free market!?

Gosselin winds down on what to many must be a hopeful note:

Historians watching the nation's current economic and financial troubles say that just because Americans don't throw up their hands about markets and rush to an opposite pole, such as socialism, it doesn't mean that change isn't underway.

As UC Davis' Rauchway pointed out, the devastating panics and depressions of the late 19th century eventually resulted in the progressive reforms of the early 20th century and, later, the New Deal of the 1930s.

Before we get too excited about “progressive reforms” once again saving capitalism from itself, perhaps we should try a little harder to comprehend the way the actually-existing economy works (journalists might think about helping with this!), so that we can pinpoint the most likely institutional causes of the recent gloom and effectively focus our reforming zeal. Were the media willing or able to explain how our mixed economy actually functions, this downturn might just as well inspire a loss of faith in the government meddling we've already got. But what would be the point of writing an article like that?

[Cross-posted from Cato@Liberty]

Vitamin R

From this New Yorker article Tyler excerpts:

stimulants, like caffeine, Adderall, and Ritalin … may actually make insights less likely, by sharpening the spotlight of attention and discouraging mental rambles.  Concentration, it seems, comes with the hidden cost of diminished creativity.

I agree with one of Tyler's commenters. I am prone to near constant free associative reverie and find it very difficult to do anything else. What I need is to identify my best ideas, pull myself out of the infinite pool of combinatorial possibility, dry myself off, take a seat and buckle down on embodying my best ideas in some medium intelligble to someone other than me. Which is why I would be screwed without stimulants. Or blogs. If uppers keep me from going off on creative tangents while I'm trying to work, that's a feature, not a bug, because then I might possibly get something done.

When I was a teenager, I had a fanstasy that I could get paid or famous simply from having interesting ideas. It turns out people won't pay you for interesting ideas unless you show up at a certain place and at a certain time to express them verbally in an entertaining format, or unless you write them down. It's hard for me and not at all as nice as doing the backstroke through Platonic heaven.

Why Isn't Everything Worse?

James Pethokoukis of US News has a plausible conjecture:

Here's puzzled economist and blogger Brad DeLong:

I still do not understand why the real side of the economy is doing so well in relative terms. The worst financial distress since the Great Depression ought to trigger the worst downturn in demand, production, and employment since the Great Depression. It hasn't—at least not so far.

Me: My theory is that the amazing resilience of the American economy through this slowdown—as well as the lack of a bad recession in a generation—is indirect proof that the 25-year economic expansion that started in 1982 made us far richer as a nation than the economic numbers suggest. I have continually offered that the inflation numbers used by the government have for years overstated how much prices have risen. Plus, the wage numbers put out by the government are currently being revised to better reflect the shift in jobs from “old economy” to “new economy.”

Have American living standards, as Democrats often suggest, really been stagnant since the 1970s? I doubt it.

I doubt it too.

Motive, Opportunity, and Means-Testing

From Tyler Cowen's outstanding NYT column on means testing Medicare, sweet, sweet music to my ears:

[T]he argument for comprehensive and universal transfer programs does not meet the ideal of democratic transparency. If taking care of the poor is the real value in welfare programs, those programs should be sold as such to the electorate. We shouldn’t give wealthier people benefits just to “trick” them, for selfish reasons, into voting for greater benefits for everyone, the poor included.

I like the way the man thinks. As I noted in below, I get worried about means-tested programs for old people, due to the reality of gerontocracy. But Tyler points to a number of successes in other countries, and nothing could be worse than what we're in for if we stick with the status quo. In any case, the intensity of opposition among purported liberals to programs finely focused on giving aid to those who need it is simply preposterous.

Happiness, Meaning, and Knowledge

The continued discussion about kids and happines brings into focus the questions about the priority of happiness over other values and the reliability of happiness measurement. One of the hazards of blogging is to imagine that your audience has been following you all along, and so knows your positions on central topics so that your thoughts in short blog posts are interpreted in the context of your larger body of thought. Of course, that's not how it works.

So, for those of you who insist that happiness isn't the only thing that matters and that there are deep methodological problems in measuring happiness, let me say that I agree with you. Also, if I may so say myself, I believe I have written what is still one of the clearest and most sophisticated statement of these points in the paper on happiness Cato published last spring. So if philosophical and methodological questions surrounding the attempt to measure happiness interests you, let me direct you to pages 5-17 in my paper, starting at the section “The Limits of Happiness Research.'

Some people find my position confusing, since I am so critical of the methodology of happiness research, yet I also strongly support it. I don't think this should be that confusing. It can be made better as I science, and I want to help. And it can be useful in assessing policy, as long as you don't make a bunch of easily-avoidable mistakes, and I want to help with that as well. Here's what I said about this in the paper:

Despite the foregoing criticisms, happiness research as it stands is far from useless. We can make the best use of it if we don’t naively assume that happiness is really the primary subject of measurement and research, as if the elusive nature of happiness has been pinned down at long last. Happiness research does tell us something about how we feel, and it tells us a lot about the conditions under which different kinds of people are inclined to say that they are satisfied or unsatisfied with life. Good feelings are important, and so are culture-laden judgments that life is going well, even if happiness is more and less than that. It would be pretty incredible if the disposition to say that we are happy on a survey didn’t correlate well with certain good feelings and other good things. And the evidence is clear that it does.

I have done my best to expose the weaknesses of the dominant survey methods in order to provide a much-needed counterweight to the often complacent confidence in their reliability and lack of care in the interpretation of their results. When intellectuals and politicians use putatively scientific data for political purposes, it is important to apply careful scrutiny to their methods and to the way their results are interpreted and used. If, however, we are very careful when comparing happiness survey results across different cultures or across long periods of time; or when looking at studies that make no note of individual personality differences, that do not follow the same individuals over time, or that sample an exceptionally diverse population, it is possible to glean solid information about things almost all of us care about that ought to have real weight—if not all the weight—in our public deliberation about our political and economic institutions and policies. In that regard, it is heartening that recent studies deploy more sophisticated research designs, better econometric techniques, better theoretical constructs, larger data sets, and integration with more objective and rigorous biological measurement techniques.

So, about the stuff with kids, I assume the studies tell us something real both about how kids affect the balance of day-to-day feelings and overall judgments of life satisfaction. I in fact think happiness is more than that and that there are values in competitions with happiness. The brute, intense, often overwhelming attachment to one's own children may be the basis for one of those values. We are getting better and better at individuating the strands of sentiment and judgment that go into the various considerations that we take to count for an against our choices. If you believe that children make life more meaningful, then let's try to verify that by clarifying what it is psychologically that constitutes meaning and see if we can find ways of measuring it. I understand that many people resist the attempt to measure everything — meaning, religious devotion, love for a child, the sense of authenticity, a feeling of purpose. But these things are part of the intelligible world, and part of us, and I happen to prefer knowledge over ignorance. New knowledge doesn't always surprise us, but often it does, calling into question the weight and authority of our reasons. History is sufficient to predict with a high level of confidence that we will resist reevaluating the considerations that we take to count in favor of our lives as we live them. Some people think they know in advance that further knowledge, that deeper inquiry into the character of what we take to be good reasons for living the way we do, will leave us disenchanted and feeling diminished. But they don't actually know that, because they never bothered to do the work necessary to really find that out.

The "Annually Appropriated/Authorized Until Revised" Spending Distinction

My colleague John Samples, a distinguished political scientist and scholar of American politics, writes to me to pithily explain the discretionary/non-discretionary distinction:

Discretionary spending goes through the annual appropriations process. Such spending has to be approved each year, in form at least. Non-discretionary spending has permanent appropriations which are determined by demographics in tandem with specified entitlements. Non-discretionary spending can be changed but only by reopening the authorization for the program. Revising an authorization is quite difficult to do politically. This is not a principled distinction. It is just a political difference. Presumably constituencies of non-discretionary spending are more powerful than those supporting discretionary spending.

So the real distinction has to do with the political ease of exercising discretion, and not the legal possibility of exercising discretion.

What, then, would be a descriptively accurate way of making the distinction? Suppose a responsible journalist wanted to convey the facts as they actually stand rather than reinforce the political choice to make the distinction in this confusing way? Spending that is “annually appropriated” versus spending that is “authorized until revised”? That would be accurate, wouldn't it? (Please come up with something better!) But “authorized until revised” leads you to think immediately of the possibility of revising it. “Non-discretionary” or “mandatory” leads you to think that that the spending is somehow legislatively off-limits, which is of course false and so misleading.

This is one of those cases where I think language must have political effects. So here's one for you, George Lakoff. The labeling of Social Security and Medicare spending as “non-discretionary” encourages the sense that the programs are part of what Cass Sunstein calls “the second Bill of Rights” — that they are underwritten by some kind of legal guarantee that goes beyond the will of the current congressional majority, when in fact reopening authorization, though politically difficult, could in principle happen at any time. Strangely enough, I think the “non-discretionary” frame is partly what led Social Security reformers to attempt to motivate reform as necessary to avert a “crisis.” It's non-discretionary! Like a barrelling train with the brakes out heading for a cliff! Here is out plan to use massive dirigibles to lift the train aloft! However, by successfully rebutting the “crisis” meme by pointing out how easily the benefit formulas can changed–the brakes work fine, thank you–defenders of the status quo loosened the sense of guarantee crucial to the social insurance frame. So what we saw were Democrats simultaneously arguing that we can just change the formulae whenever, so no worries, while at the same time fretting over how certain changes, like progressive indexing, would dislodge the sacred myth of universal social insurance.

By the way, I just glanced at Jason Furman's short paper about progressive indexing. I really like progressive indexing.

I also like mandatory retirement accounts for paternalistic reasons that are also sort of libertarian. Means-tested benefits for old people is a better idea than our stupid current system, but would encourage too little retirement savings. Why? Old people are so politically powerful that these benefits will be too high to make saving rational. So forcing people to transfer their own money to their future selves prevents them from later forcing others to transfer them money when old.

GNP: Partisan and Meta-Partisan Critiques

So, when Sullivan says I “tear into GNP,” I was in fact tearing into the whole genre of partisan political books, which is obviously a banging-head-against-wall sort of thing to do. The bit he quotes was a coda to a post that defended Grand New Party against the charge that it is irrelevant because the authors are too naive to see that the Republican Party is the sworn enemy of anyone without a yacht. Just so you know.

Criticisms from the partisan left, like Hayes' and Yglesias', I think lazily impute bad faith to the GOP. I'm obviously open to the charge that politicians act in bad faith, but I'd just like to see that argument made more credibly and with less transparent coalitional bias. In contrast, I've found Andrew's conservative criticisms pretty effective. “[I]f this remoralization doesn't work out, aren't you just left with a vast redistributionist scheme?” is I think the right question to ask.

Of course, I think Kerry's just killin' it over at the TPMCafe Book Club. I think it's pretty safe to say that Kerry's criticisms are coming from “the left” of Ross and Reihan. Now, Kerry's liberalism (pretty much my own) is obviously less immediately politically relevant, but is I think a more authentic and  powerful conception of liberalism than the semi-coherent, compromised creed of commited Democrats. So she is able to pitch the liberal critique of GNP with a force most Dems are unable to.

Oh! And now I see that Reihan has just replied to Kerry's last post. Reihan is characteristically wide-ranging and ecumenical. I feel Reihan's difficulty here is a failure to clearly separate the strategic from the moral. He seems to really want them to coincide, which is the desire that drives the chief fallacy of political strategy books. Yet he also seems to sense that they don't really coincide, which leaves him in a position where he will neither endorse nor reject the nationalist assumptions of GNP. But either you're morally in favor of a more cosmopolitan political order or you're against it. If he's for it, then he should be arguing for incremental steps that move us toward it. But he's not arguing that. So either he thinks morally we shouldn't be moving toward it, or that it is just unstrategic for Republicans to do so. If he actually believes in moral nationalism (and what else justifies analytical nationalism?), then it's not so hard to cop to it. Larison does it all the time. If Reihan's not really a moral nationalist, but simply thinks defending a more cosmopolitan politics is a near-term loser for Republicans, then he should go ahead and admit that the moral and the strategic clearly come apart, but that it's worth arguing for strategy over morality in anyway. In that case, there better be some longer-run moral payoff from the success of the short term political strategy. But I'm not seeing what it is.