Where Have You Gone, Harold Rosenberg?

Weirdly enough, here's David Prychitko talking about Giovanni Arrighi's Adam Smith in Beijing in a blog post, which definitely argues for my being embarrassed at having never heard of the guy. I trust Prychitko's judgment about Marxist thinkers, so what does he say about Arrighi's book?

It is challenging, and he does have interesting and even fruitful things to say about the importance of decentralized, spontaneous development at the local level.  But I'm unimpressed with the concepts of natural and unnatural [economic development], as if history follows, or can be expected to follow, such a course.

As far as I can tell, the main point of the book relies on the distinction Prychitko rejects. So I guess I'm still not embarrassed.

I wonder if the n+1 guys have read much or any William Robert Fogel, Douglass North, Joel Mokyr, Avner Greif, or Acemoglu and Robinson — that kind of thing. One of the attractive features of intellectual life throughout much of last century was the sense of a common canon. But as intellectual specialization has developed, it has become harder for literary or philosophical intellectuals to stay abreast of developments in history, psychology, and the social sciences. I think that's why I come away with an impression of erudite incompetence when I read something like a Tony Judt essay. The paradigm of the public intellectual has shifted and continues to shift away from Susan Sontag types toward Steven Pinker types, and this must be frustrating for those of us who still feel the allure of the old-timey New York literary intellectual who pops into gallery openings between psychotherapy sessions and lively coffee-house debates about “mass culture” or the elusive American class structure. Would Harold Rosenberg have kept up with the Journal of Economic Perspectives and Behavioral and Brain Sciences?  Probably not. And that's probably why our latter-day Harold Rosenbergs matter less than Tyler Cowen.

What We Are Not Embarrassed by

Here is a good debate proposition: It ought to be less embarrassing to have been influenced by Ayn Rand than by Karl Marx.

The most powerful way to argue the affirmative is to compare the number of human beings murdered by the devotees of each. That line of attack ought to be decisive, but I'm afraid it won't get you far with the multitude of highly-self-regarded thinkers influenced by Karl Marx. Fact is, commitment to some kind of socialism and fluency in the jargon of Marxism used to be mandatory for serious intellectuals. And there's something glamorous in the very idea of the intellectual. Even for those of us who came of age after 1989, Marxism, like cigarettes, remains linked by association to the idea of the intellectual, and so, like cigarettes, shares in the intellectual's glamour. I don't know if cigarettes or Marxism have killed more people, but it's pretty clear cigarettes are more actively stigmatized. Marxists, neo-Marxists, crypto-Marxists, post-Marxists, etc. have an enduring influence on intellectual fashion. So it is not only possible proudly to confess Marx's influence on one's thought, but it remains possible in some quarters to impress by doing so. It ought to be embarrassing, but it isn't. Being a bit of a Marxist is like having a closet full of pirate blouses but never having to worry.

Why am I thinking about this? Because I ran across this N+1 blog post by Benjamin Kunkel about a recently departed Marxist historian named Giovanni Arrighi. I had never heard of Giovanni Arrighi. Should I be embarrassed about this? I'm not, though I'm willing to be convinced. Kunkel seems impressed with himself for being impressed with Arrighi. I wonder whether this should be a source of embarrassment for Kunkel. Knowing nothing about Arrighi I can't be sure, but I can suspect. Here is something Kunkel says:

Not the least way that Marxism is opposed to capitalism is in its relationship to time. Capitalist culture approaches a pure instantaneousness: no future, no past. Marxism, by contrast, is a discipline of deep memory and long anticipation. It situates the effervescent eternity of our current way of life in the long sequence of the modes of production, from hunter-gathering, to early agriculture, through slave society, feudalism, the notorious “Oriental despotism,” and our own capitalism as, over four centuries, it has swamped the globe.

Do you understand the point of contrasting actually-existing economic culture to a doctrine? Neither do I. Standard, non-Marxist economic history is not only better history, but equally sweeping. Should we therefore say that the New Institutionalist school of economic history, for example, “is opposed to capitalism in its relationship to time”? Not if we don't want to sound silly.

Here's another thing Kunkel says:

People in the rich countries live longer today than ever before, even as the lifespans of our ideas, our feelings, our commitments, our fashions, our jobs, and the objects with which we surround ourselves shrink and shrink. One lives one's long life in a cloud of mayflies.

Perhaps the fear of marrying a mayfly, of being a mayfly, explains Kunkel's enthusiasm for intellectual vintage. Whatever else Marxism may be (“a discipline of deep memory and long anticipation”!), it's not a mayfly. Like other time-tested creeds, Marxism is safer than having perishable ideas of one's own. Unlike most other time-tested creeds, it's not embarrassing in Brooklyn, whether or not it should be.

Arnold Kling on Freedom as Exit

Arnold Kling riffs off my post on charter cities, in particular my mention of the possibility that illiberal regimes might have free-ish markets while granting their subjects little “real freedom.” Arnold asks:

[W]hat is this “real freedom” of which you speak?

Consider the following definition of freedom: the absence of monopoly.

The absence of monopoly means that you can exercise exit, even if you cannot exercise voice. The presence of monopoly means that, at most, you can exercise voice.

Neither my local supermarket nor any of its suppliers has a way for me to exercise voice. They don't hold elections. They don't have town-hall meetings where they explain their plans for what will be in the store. By democratic standards, I am powerless in the supermarket.

And yet, I feel much freer in the supermarket than I do with respect to my county, state, or federal government. For each item in the supermarket, I can choose whether to put it into my cart and pay for it or leave it on the shelf. I can walk out of the supermarket at any time and go to a competing grocery.

The exercise of voice, including the right to vote, is not the ultimate expression of freedom. Rather, it is the last refuge of those who suffer under a monopoly. If we take it as given that the political jurisdiction where I reside is a monopoly, then perhaps I will have more influence over that monopoly if I have a right to vote and a right to organize opposition than if I do not. However, as my forthcoming Unchecked and Unbalanced argues, the reality is that the amount of influence I have is shrinking while the scope of the monopolist is growing.

I think there's a lot that's on the right track here, but also a good deal of confusion.

“Absence of monopoly” is an attractive definition of freedom only to an anarchist who insists on begging the big questions. A world in which I am bullied and coerced by lots of different people may be a world without monopoly, but that's not a world of freedom. And Arnold is wrong that “the absence of monopoly means that you can exercise exit.” Suppose you're in an anarchocapitalist world (a world in which we do not “take it as given that the political jurisdiction where I reside is a monopoly.”) You live in a house on a piece of property boxed in on all sides by other pieces of property. Each owner of an adjacent property has credibly committed to shooting you if you trespass on her land. There is no collusion between property-owners. They're just independently jealous of their property rights. Here you have a situation where there is an absence of monopoly and an inability to exercise exit.

Perhaps you'll say, “Why can't you cut a deal with with one of the property owners?” Good question. But negotiation is voice, not exit.

Exercising the right to vote may not be the “ultimate” expression of freedom, but it is an expression of freedom. And the exercise of voice more generally is an ultimate expression of freedom if anything is, isn't it? One thing you might want to do with your freedom is to say your piece. In fact, saying your piece is almost certainly something you'll want to do with your freedom. People need each other. The main instrument of human survival and flourishing is social cooperation. Cooperation requires negotiation, the exchange of reasons, voice.

Of course, exit is also an ultimate expression of freedom. One thing you might want to do with your freedom is walk away. And threatening to walk away can be a powerfully effective exercise of voice. But you're not going to profit much from life in society if all you ever do is walk away. Sometimes you can't walk away, even if you want to, and even if there is no monopoly. Sometimes you're boxed in by other people's property or other people's unwelcoming attitudes. Sometimes you've got to ask permission, win an argument, or cut a deal. That's voice.

I think it's hugely important to promote greater awareness and activism on behalf of the human rights to free movement and association, which entail the right to exit political jurisdictions. One way to tell if a country is minimally free is to ask whether its residents are free to emigrate — free to walk away. If an illiberal state allows a charter city, and allows some of its citizens to move there, that's great. The added option, for those who get it, may represent a real gain in freedom. But I think Arnold and I would agree that even if some people are granted permission to move to a semi-independent charter city within their country's boundaries, if they don't have a right to walk away from their country altogether, then they don't have “real freedom.” And I would also say, though perhaps Arnold would not, that citizens of a state do not have “real freedom” if they are denied the right to voice their opinion about the laws, or are denied the right to have some formal role in shaping the system in which they live their lives.

I've noticed that Arnold complains a lot about Montgomery Country, MD, but as far as I know hasn't moved. What's more, the U.S. won't keep him from leaving, and there are many other political jurisdictions that would receive him. We could say that Wal-Mart has a monopoly on the land Wal-Mart sits on. But if Arnold is free to leave Wal-Mart and head to Target (which is the monopolist of its own little plot) neither has a monopoly in the relevant sense. Well, Arnold is free to leave Montgomery County for a different county. He is free to leave the U.S. for a different country. But he doesn't do it. Isn't this like complaining about Wal-Mart but refusing to walk away and shop somewhere else? What is he asking for? A Target inside Wal-Mart? The benefit of more choices without the bother of going anywhere to get them? Maybe Arnold is already sure that things are no better in other jurisdictions. But if there are 100 movie companies and none make movies that I like, does it it make sense to complain using the language of monopoly?

Is Medicaid Something I Dreamed?

In his response to Whole Foods CEO John Mackey, Ezra Klein writes:

Food is more like health care than it is like cable television. We worry if people don't have enough food to eat. We worry quite a lot, in fact. So we have a variety of programs meant to ensure that people have sufficient food. If you don't have much money, you rely on these programs. As of September 2008, about 11 percent of the population was on food stamps. It's probably somewhat higher now. Millions more rely on the Women, Infants, and Children nutrition program, and reduced-price school lunches.

The insight that people need food has not led us to simply deregulate the agricultural sector (though that might be a good idea for other reasons) or change the tax treatment of food purchases or make it easier for rich people to donate to food banks, which is what Mackey recommends for health care. It's led us to solve, or try and solve, the problem directly by giving people money to buy food. And that works.

Last time I checked the United States has a means-tested health-care program called “Medicaid.” I take it that Ezra has not been arguing all this time for a program the country already has. Nor do I recall Ezra's arguments about health-care reform centering on the eligibility requirements for Medicaid. But why not? Wouldn't that work?

Democracy and the Grounds of Distrust

The fight over health care reform has grown surreal indeed. Here's Ezra Klein, who says our “democracy is sick”:

What we're seeing here is not merely distrust in the House health-care reform bill. It's distrust in the political system. A healthy relationship does not require an explicit detailing of the “institutional checks” that will prevent one partner from beating or killing the other. In a healthy relationship, such madness is simply unthinkable. If it was not unthinkable, then no number of institutional checks could repair that relationship. Similarly, the relationship between the protesters and the government is not healthy. The protesters believe the government capable of madness. There is no evidence for that claim, which means that there is no answer for it, either. That claim is not about what is in this bill, or what government has done in Medicare and Medicaid and the VA. It is about what a certain slice of Americans think their government — and by extension, their fellow citizens — capable of.

It requires an amazing kind of selective amnesia to think that there is “no evidence' that the U.S. government is “capable of madness.” The government of the United States invaded Iraq and its agents have killed many tens of thousands people on the basis of the fact that some Saudis trained in Afganistan flew planes into the World Trade Center, plus some lies. Torture, extraordinary rendition, indefinite detention, etc. I call that madness. Of course, Ezra means the other parts of government concerned with domestic affairs. But not the parts that break into peoples' houses and destroy their lives for selling contraband herbs, or that subject us constantly to mendacious propaganda about drugs. Our government — and by extension our fellow citizens — is capable of terrible things and proves it every single day. Is it really possible to love government so much, to invest so much hope in its benevolent efficacy, that we grow blind to its evident capacity for evil? Anyway, there must be some parts of the government that are not capable of madness. Ezra invites us to think about those when considering health care reform. Will you accept?

I suspect Ezra thinks that his side of the debate has done nothing to engender distrust. But that would be wrong. The reason I wrote a whole paper about the “noble lies” underpinning the American Social Security system is precisely that our system did and does violate the spirit of transparency and openness needed for good-faith democratic deliberation. And, as I argued last month in my column for The Week, the demonstrated willingness of Democrats, both politician and wonk, to dissemble about whether or not they're trying to set in motion a chain reaction toward a single-payer system practically demands distrust.

I get fed up when intensely ideological partisans, left or right, start to officiously scold a skeptical democratic public for failing democracy by veering wildly from the party line. We should not be surprised when a history of prevaricating partisan strategy calls forth a paranoid response. Ezra's right that this is bad for democracy. But if he wants Americans to put more trust in politics, he might try advocating a politics more deserving of trust.

The strength of all governments lies not in weapons but in the spirit which puts the weapons at their disposal.

At Double X, Kerry Howley uses Myanmar's latest sham trial of Suu Kyi to explain why a certain perception of legitimacy is a necessary for the persistence of even the least legitimate regime:

[E]ven when the world isn’t watching, which is to say, even when the accused is not Suu Kyi, Burma tries political dissidents. It does so because even totalitarian regimes need to justify themselves to the people they rule and the bureaucrats who do their bidding. At some level Suu Kyi’s elaborate trial was held for the benefit of the minor officials, judges, and attorneys who orchestrated it—educated people who need to believe that their jobs are necessary and just, that they are ministers of due process rather than yes-men for a bunch of thugs.

A certain degree of “buy in” is a necessary condition of stability in any kind of regime. The great advantage of democracy is that it keeps policy and public opinion at least loosely aligned and provides a mechanism for peaceful transitions in government when public opinion disagrees too much with the prevailing policies of the state. As the great democrat Ludwig von Mises once put it:

Its function [i.e., the function of “the democratic form of constitution”] is to make peace, to avoid violent revolutions. In non-democratic states, too, only a government which can count on the backing of public opinion is able to maintain itself in the long run. The strength of all governments lies not in weapons but in the spirit which puts the weapons at their disposal. Those in power, always necessarily a small minority against an enormous majority, can attain and maintain power only by making the spirit of the majority pliant to their rule. If there is a change, if those on whose support the government depends lose the conviction that they must support this particular government, then the ground is undermined beneath it and it must sooner or later give way. Persons and systems in the government of non-democratic states can be changed by violence alone. The system and the individuals that have lost the support of the people are swept away in the upheaval and a new system and other individuals take their place.

But any violent revolution costs blood and money. Lives are sacrificed, and destruction impedes economic activity. Democracy tries to prevent such material loss and the accompanying psychical shock by guaranteeing accord between the will of the state—as expressed through the organs of the state—and the will of the majority. This it achieves by making the organs of the state legally dependent on the will of the majority of the moment. In internal policy it realizes what pacifism seeks to realize in external policy.

Myanmar's current regime will collapse some day and chances are it won't be peaceful.

The Illiberal Liberalism of Charter Cities

I think it's an idea worth trying, though I share some of Tyler Cowen's concerns.

Romer says good rules make countries rich. But countries with bad rules, because they have bad rules, often have no clear path to good rules. Romer says what countries with bad rules need are new rules for generating better rules. His proposed solution is to give up on both the purely endogenous development of better rules and the attempts of the global Lords of Poverty to bribe rulers into imposing better rules. Instead, Romer wants to try to get rulers of countries with bad rules to cede to better rulers effective (but limited) political authority over small, largely unoccupied bits of state territory. It strikes me that there's still an obvious problem here. Why won't the bad rules that have impeded endogenous development also impede the adoption of a higher-order rule-reforming rule? I don't really see the loophole that Romer needs to get started. Anyway, the idea is that the rulers of screwed up countries will be so impressed by these zones of high economic performance that they will seek to replicate them in the territory they haven't leased to Canada or Belgium or whomever.

Hong Kong and it's effect on China is Romer's big example. Alex Tabarrok says that Hong Kong's reintegration into China really marked China's integration into Hong Kong. I think this is too hopeful. China remains authoritarian, illiberal, undemocratic and not at all enamored of the distinctively English spirit of laissez faire behind the Hong Kong experiment. I think it's interesting that these facts are clearly assets to the Charter Cities project. What the example of Hong Kong communicates is that authoritarian, illiberal, undemocratic regimes need not feel threatened by semi-independent city states with working “liberal” market institutions. It says to rulers that their countries can get rich without granting their subjects real freedom.

What should we make of this message? Should we encourage it? Is Romer trying to encourage it? Does Romer believe it? Or does he believe that high growth rates sooner or later lead to broader liberalization. Maybe it's OK to let this cat out of the bag as long as the pace of liberalization is slow enough that current illiberal rulers are never really threatened by the liberalizing externalities of charter cities. But is there any way to credibly make this assurance?

I'm convinced that it would probably be better for both the liberty and welfare of the Burmese people, for example, if the junta tried to go the Singapore/China market authoritarianism route rather than hold free elections and establish a democratic government. I'm not happy with this conclusion. Unlike many of my libertarian friends, I do not think democracy is incidental to liberty. But suppose it turns out that democracy is incidental to economic growth — that it is correlated with but unnecessary to growth. Suppose further that illiberal rulers will welcome isolated experiments in the institutions of growth as long as they don't come bundled with democratic institutions. If economic liberalization eventually has liberalizing political spillovers, promoting democracy directly could turn out to be self-defeating. Could it turn out that liberal democrats do the most for liberal democracy by promoting market authoritarianism? Would this make Naomi Klein right or wrong?

Gregory Clark Uses Computer over Phone, Predicts "Economic Redundancy" of Working Class

Gregory Clark's basic assumption would seem to be that some people are born idiots. His argument in this Washington Post op-ed goes something like this: real wages of idiots have not increased because the demand for idiot labor has fallen due to the rise of the machines. Soon, the machines will be able to do anything an idiot can do for less than it costs to pay idiot subsistence wages. So idiots will be left “socially needy but economically redundant.” What will we do?! “There is only one answer,” Clark says. “You tax the winners — those with the still uniquely human skills, and those owning the capital and land — to provide for the losers.”

What to say? Tim Worstall says a good deal of it. This diagnosis by Bruce Wilder in Mark Thoma's discussion thread seems to me in about the right neighborhood:

[In his book Farewll to Alms] Clark could find few institutional differences between 12th century England and 20th century Britain. In his mind, Henry II laid down the law of equity securing property rights, and nothing else much mattered. If anything, he regards the 12th century, with its low tax rates, as much more amenable to economic growth and innovation than the burdensome 20th century welfare state. So, I'm not surprised that he doesn't credit institutional changes for changes in income distribution over the last three decades.

So, the shape of his fears that machines will soon displace the near-cretins serving him hamburgers at McDonald's form a unitary theme. He sees his class burdened by taxes to support the no-account lower classes, who are even more useless now than in centuries past, but, perhaps, can reconcile himself to it as his paternalistic obligation.

Here is what I said some time ago at Free Exchange about Clark's baseless truculence toward institutional explanations in economics.

Here's what I think about Clark's op-ed.

First, technological innovation over the past two centuries has been incredibly rapid, and workers have been repeatedly displaced by technology only to move on to different kinds of jobs. Why hasn't technological change so far created much higher rates of unemployment? Does Clark think this is a historical fluke? Why does he think this pattern is about to be broken? Why does he think technological change is finally reaching a tipping point? His failure to address this obvious point at all is glaring. Is this whole conjecture really built on his experience with an automated phone call to United Airlines?

Second, I think that Clark wrongly accepts that real wages toward the bottom of the distribution have not risen. This is, to my opinion, an artifact of mistaken measurement techniques. See Broda and Weinstein. There is no reason to believe that the market forces which have improved standards of living for the poor will not continue to do so. Indeed, Clark's assumptions about the efficiency gains from future technology provide us reason to think the real prices of many goods will continue to decline.

Third, insofar as wages have stagnated toward the bottom, a decline in hours worked for low-skilled workers explains a good deal of it. Doesn't this show Clark is right?! No. It shows that badly structured welfare policy has provided an incentive for many low-skilled workers to work fewer hours in order to qualify for transfer payments. Because experience (hours worked at a task) is a main determinant of skill level, and skill level is a main determinant of wage levels, an incentive to reduce hours worked is an incentive to remain at a lower level of skill and thus wages. See Deere and Welch ($$$).

Fourth, Clark's theory of blood-born idiocy leads him to conclude that there are little or no gains to be had from improvements in education. Here's what he says:

Others see education as a way out of this dystopia. The root problem is, after all, the widening of the income gap between the skilled and the unskilled. Can expanded education give the poorest the tools to resist the march of the machines? I'm skeptical. Already, much of the supposed improvement in high school and college graduation rates has come by asking less of graduates. We can certainly arrange to have everyone “graduate” from high school, but whether they will have the skills needed to make it is doubtful.

This is maddeningly dense. Clark apparently believes the only way to make graduation rates go up is to devalue diplomas by giving them to irremediable idiots. That is to say, idiots are idiots and education can't do anything about that. A more plausible view is that so many young people graduate high school (or don't) with such poor abilities because the American public education system has failed disastrously to provide a minimally acceptable level of training to children who grow up in poor, predominately minority neighborhoods. The best explanation for this failure is an institutional explanation. The political forces in control of public schools in low-income neighborhoods have strong incentives to resist almost every potentially effective reform. There are no competitive markets in educational services for low-income families because such markets are, in effect, against the law. Were low-income families to have access to a competitive market in educational services, there is every reason to believe the quality of training would rise, the real level of ability of high-school graduates would rise, and the portion of high-school graduates prepared to benefit from higher education would rise.

The fundamental bone of contention here is over the fixity or flexibility of the human capacity to gain and improve economically relevant skills. Here is Cato Unbound's issue on IQ.

Fifth, the piece is short-sighted. If robots can crowd out all low-skilled workers, there is no reason they cannot also crowd out all high-skilled workers. See Hanson. Would this be bad? Growth would proceed so rapidly that the returns to even small amounts of capital should be outrageously high. The gap will be between those with income from capital gains and those with none. To prevent this, some version of Clark's recommendation might be desirable. I'd recommend Charles Murray's scheme for replacing the United States' social insurance apparatus with basic income grants and mandatory retirement and medical savings accounts. In a world of doubling-every-fifteen-minutes Hansonian robot growth, the portion of GDP necessary to fund universal grants sufficient to ensure a modestly lavish level of consumption would be so trifling that no one would even notice. For now, we should try to hasten the arrival of this post-human economy, in which case we should try to optimize incentives to innovation and growth. Higher taxes and higher levels of welfare spending is about the opposite of that.