What is to be done?
Lenin’s famous question sounds a bit pompous, but this post will actually be a plea for modesty. When I started this post I intended to produce a grand survey of morality, politics and economics, plus an in depth discussion of Switzerland. Fortunately for you guys I don’t have my Switzerland data here with me in China, so the post will be merely overly long, not absurdly long. I’ll do a follow-up post later on Switzerland.
As I get older I become increasingly skeptical of grand, overarching theories that attempt to answer too many questions. Theories like Marxism, or dogmatic libertarianism. So let’s take things one step at a time:
1. What are the proper goals for society?
2. What specific policies can best achieve those goals?
3. What political set-up can best determine appropriate government policies?
I believe that these are three very different types of questions, which must be thought of in very different ways. A common mistake is to try to reduce a problem to a single dimension, whereas any social problem contains three dimensions. I could answer these questions with a list of ideas:
1. Utilitarianism
2. Capitalism
3. Democracy
or a list of countries;
1. Denmark
2. Singapore
3. Switzerland
or even a list of people;
1. William Shakespeare
2. Martin Feldstein
3. Thomas Jefferson
In an earlier post I argued that Denmark was the happiest, most utilitarian, most market-oriented, and most egalitarian society on earth. I won’t repeat all the evidence from the earlier post, but the focus was on Danish values, which seemed especially utilitarian. I should mention that unlike most people I tend to equate utilitarianism with egalitarianism. There is no theoretical basis for this link, but I believe that as a practical matter if you care about maximizing the total well-being of society (as a utilitarian does) rather than your own well-being (as a selfish person does) you will end up with a fairly egalitarian outlook. Survey results suggest the Danes score highest in willingness to put the well-being of society ahead of their own well-being.
I also argued that these values, which I termed “liberal,” came from the arts. Liberalism spread as literature became more widely accessible, and with the advent of TV and movies liberalism has become the dominant value system in rich counties. Even though I am only 53, I have lived to see enormous cultural change associated with attitudes toward women, minorities, and gays. For instance, isn’t it rather obvious why the younger generation is much more accepting of gay rights? The primary way they differ from their elders is that they saw many positive gay characters on TV during the period of their lives when their values were formed.
[BTW, Do you recall how fashionable it was for Hollywood types to bash Reagan for ignoring the AIDS crisis until about 1985 or 1986, when he gave his first major speech on the subject? Correct me if I am wrong, but wasn’t the film Philadelphia the first major Hollywood treatment of the issue? And didn’t that film come out in 1993?!? And even then, weren’t the brave souls in Hollywood only willing to make the film if they could get the ultra-reassuring Tom Hanks and Denzel Washington to play the leading roles, the modern day equivalents of Jimmy Stewart and Sidney Portier?]
The earlier post also touted Singapore as a model of liberalism. The difference between Singapore and Denmark is that Singapore has ultra-low tax rates, and replaces the welfare state with a forced saving plan. In other words the sort of society Martin Feldstein might want to construct if he was given a blank slate. A society that sees the trade-off between equity and efficiency somewhat differently from Denmark. More reflective of the supply-side worldview, where incentives have a powerful effect on behavior. You might think that Martin Feldstein is a rather bland, colorless model, and he’s not my favorite economist either. But that’s why he’s perfect. With Singapore I am trying to emphasize the dry, technocratic aspects of economics. Economics as a positive social science, not a political philosophy. Someone like Milton Friedman would be far too ideological.
I think David Hume said something to the effect that “reason is a slave of the passions.” So I have a vision where “poets are the unacknowledged legislators of the world,” the creators of liberal values. But poets don’t know how the world works, because economic principles are too abstract, too statistical, and too counterintuitive to be portrayed artistically. Thus we need a bunch of boring technocrats, people who actually know how the world works, people like Martin Feldstein. The technocrats construct specific policies to carry out the vision of the poets.
You may have noticed that I have skimmed over one big problem. Who determines which technocrats carry out the vision of the poets? That is where the third dimension comes in–political regimes. Democracy does two things pretty well. It gives policymakers an incentive to carry out the voter’s wishes. And it aggregates voter beliefs, insuring that policies reflect the “wisdom of the crowd.” Of course this won’t work perfectly, Byran Caplan has documented a number of biases that voters have, such as fear of imports. But before we are too quick to castigate democracy for being “the worst of all possible systems, except for the all the others,” let’s ask whether it has ever really been tried. And if so, when and where?
I think the answer is clear, over one half of all referenda in the 20th century occurred in one country; Switzerland. It is far and away the most democratic society in the world. And it is also one of the most successful. Of course no country is perfect, and Switzerland has its flaws. But it has avoided the worst excesses of nationalism, militarism and socialism. It is one of the richest societies on earth. And also the second happiest, if you believe that sort of nonsense. Perhaps some commenters can fill me in, but my hunch is that their primary economic flaw is some petty paternalistic regulations that keep their cost of living high, and hold down the PPP per capita income, despite Zurich having the highest nominal wages on earth.
[BTW, regarding the validity of happiness research, a recent post by Bryan Caplan made this sarcastic comment about my favorite Nordic nation: “matters were worse than I expected — especially in Demanrk, where I got to see the ‘happiest people on earth’ miserably bike to work in the rain.” The post itself was fine, and a follow-up post was even better. I completely agree with Bryan’s argument that living standards are higher in the US than in Europe. But I think it quite possible that the Danes might really be as happy as they claim, at least if “happiness” actually has an objective reality. In my view their happiness doesn’t come from their political/economic system, it comes from their values. The biggest source of unhappiness in the world (or at least the developed world), is other people. If you live in a country where each person takes great joy in the misfortune of their neighbors, you are likely to be treated poorly, and hence be less happy. Physical discomfort has little impact on happiness, as the body has a sort of automatic thermostat (or “set point”) to adjust for moderate levels of physical discomfort, which is why an office worker like me can suffer more “pain” from a split fingernail, than a lumberjack might feel from a deep gash. Those annoying trips through the rain don’t have much effect on the average level of happiness of Danes. It just gets balanced out as they enjoy the warm cozy fire in the hearth, whereas we Americans are too comfortable to even bother using our fireplaces much anymore.]
Switzerland’s high level of democracy doesn’t just come from referenda, it also comes from its extreme decentralization. This makes it a highly successful multiethnic society, and not just when compared to places like Yugoslavia and Iraq, but even in comparison to Belgium or Canada. Another advantage of decentralization is that small places are less likely to be protectionist, as the gains from trade are much more obvious. In addition, it is much easier to monitor and root out rent seekers in a community where most people know each other.
What these three models tell me is that we shouldn’t try to be philosopher kings. Indeed philosophers have no role in setting values, or economic policies, or political systems. Leave that to others. The role of philosophers is to understand how these roles fit together. I happen to think Singapore’s economic policy is slightly better than Switzerland’s, but if I was put in charge of Singapore I would turn it into a Swiss-style democracy, even if told that the Singapore voters would immediately start expanding the size of the state. The problem with authoritarianism is that you don’t know what sort of system you will end up with. There are far more systems that do worse than Switzerland than do better—the chance of ending up with a philosopher king like Lee as dictator are pretty remote. And the same holds for Hollywood’s liberal values. Yes, they do also encourage egalitarian economic policies that probably don’t work as well as their proponents believe. But we continually learn from our mistakes, and like Switzerland, Denmark is one of the most successful countries in the world.
Just yesterday I read a new survey of the competitiveness of nations, put together by the World Economic Forum. Keep in mind that some of the categories, such as sophisticated business culture, favor more populous countries like the US. Here are the top 5:
1. Switzerland
2. United States
3. Singapore
4. Sweden
5. Denmark
What impresses me about this list is that apart from the obvious inclusion of the US, it looks a lot like the three models that I have discussed. Now you might think it is no big surprise that three highly successful countries would be near the top of this sort of list. But my countries are highly successful in totally different ways. Denmark has ultra-liberal values, but isn’t particularly rich. Norway is much richer, but didn’t even make the top ten. Switzerland is ultra-democratic, whereas Singapore is merely a quasi-democracy. Singapore is run by highly-trained bureaucrats who think incentives matter a lot, whereas Switzerland is obviously more populist. Each does one thing extremely well, and my hunch is that this spills over into other areas. Danish liberalism insured that rent-seeking special interest groups couldn’t prevent rapid reform after 1980, when the intellectual climate around the world moved toward freer markets. Swiss democracy prevented excessive socialism during the long dark age of 1930-1980 (or what Krugman would call the “golden age.”) And with Singapore it was just the luck of the draw. They were the one relatively authoritarian regime that happened to be led by a leader who thought like Martin Feldstein.
Success begets success. Since 1980 liberal values have led to market reforms, and in any time period freer markets help instill more liberal values (according to Deirdre McCloskey.) In a world of uncertainty, Swiss -style democracy is the safest way of both identifying the best policies, and insuring that governments carry out those policies. Unfortunately, today the world only has one true democracy. Artists and economists are doing their part, but political scientists still haven’t figured out that the best policies are those favored by the voters, not by political scientists. So each group should stick to what it does best:
1. Artists should create empathy for others, through the narrative arts.
2. Economists should try to educate people about trade, markets, opportunity costs, and incentives.
3. Political scientists should advocate true democracy, not specific policies.
And be suspicious of anyone who oversteps his or her role, whether it be Lenin, or Ayn Rand.
PS. I recently had a post on the Voxeu.org website. The Economist magazine’s website had a nice commentary. I think it is one of my more forceful critiques of my fellow macroeconomists. See what you think and feel free to comment here.
PPS. Recently the air in Beijing has been very clear. Unfortunately I return to the US in a couple days. Then it’s off to GMU a few days later to present a couple papers. Don’t worry about missing anything at those two seminars, you saw all the basic ideas here first.
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11. September 2009 at 02:06
As you may expect I disagree with you about almost everything you write here. Especially your praise of moral leadership of the state, unlimited democracy and egalitarianism. In my view anyone who praises egalitarianism is a socialist.
However, I haven’t much time to grumble about it today, because of the EMH thread. What I will complain about is your methods. Why do you look to Switzerland, Denmark and Singapore? In particular, why do you look to them today? Why not compare the three most successful states in 1912 or 1856 or 1693? Doing that though would demonstrate the weaknesses of the idea, because they have changed so many times.
There are sound reasons why good economists use economic logic rather than these sorts of argument.
11. September 2009 at 02:46
Dr. Sumner – just in case you haven’t seen this:
http://online.wsj.com/article/SB125265616371902449.html
11. September 2009 at 03:52
Current, I am certainly no socialist, indeed I am a libertarian. So I think you may have misunderstood my praise of “egalitarianism.” I was praising those who do not take actions that hurt society, but help themselves, such as rent-seekers. Are you in favor of rent-seeking? Suppose a corporation lobbies Congress for protectionist measures in order to help its stockholders. That is “profit maximization.” Is that something you would approve of? Someone with an egalitarian perspective is more likely to exhibit civic virtue, which is essential for a well-functioning society. An egalitarian believes that each person’s welfare should be given equal weight in policy decisions.
I’d be glad to look at models in earlier times. I presume that those countries with the best systems in 1900 probably did the best in 1900, although obviously not the best today, as they may have different systems today. I can’t see why this issue raises any problems for my analysis.
You said;
“There are sound reasons why good economists use economic logic rather than these sorts of argument.”
I am all for using economic logic to figure out which policies are best. Indeed there is nothing in my post that would conflict with this point. One of the three model countries I mentioned (Singapore) bases almost all its policies on economic logic. But economic logic cannot tell us what the proper goals are, nor can it tell us how to decide which economists we should listen to. Obviously not all economists agree on what constitutes “economic logic.” I suggested that the Swiss may have found the best way of determining which economists to listen to. Admittedly I didn’t provide much evidence for that view, but I will in a later post that looks much more closely at Switzerland.
As far as the proper goals of policy, my view is that utilitarianism is the best criteria. If you have some alternative, feel free to advocate it here.
Jean, Thanks for the info on Sweden. Although they have an outstanding central banker in Lars Svensson, he doesn’t have enough influence to convince the Riksbank to cut rates to zero.
11. September 2009 at 04:55
Singapore:
Best quote from a global capitalism class I took: Be benevolent in your dictators.
And Democracy is not a prerequisite for capitalism to start.
Switzerland:
How much does population homogeneity affect affect country happiness? Does having one dominant culture, with a shared history and morality, in a small geographic area, influence the value system of those countries?
It seems as the US has become the worst possible combination: Rent Seeking in pursuit of selfish goals, promoted by both political parties and the oligarchy that finances them.
Joe
11. September 2009 at 04:59
Scott,
I certainly am opposed to rent-seeking and those who do it, but that doesn’t have anything to do with egalitarianism. A person can possess the civic virtue you speak of without being an egalitarian.
Your last sentence confuses utilitarianism with egalitarianism. Utilitarianism is quite reasonable in my view, but it has little to do with egalitarianism. Egalitarianism is the view that the state should make everyone materially equal, or materially more equal.
You can’t see any problems? Read what you just wrote. Clearly a successful country in 1900 was successful because of what occurred before that date. It’s institutions on that date may be the same as they were before while the countries success was being founded, or they may be different.
The current policies of the Danish state tell us very little about what makes Denmark successful. They also don’t tell us that the same policies can be applied elsewhere with the same effects. Nor do they tell us that the policies form a foundation for future success.
I agree with you about goals.
How do the Swiss do it then? Do you mean democracy? If so then the idea is ridiculous, are you saying that Swiss citizens understand enough economics to be able to vote using it? I find that very difficult to believe. If not then through what means do Swiss citizens vote for good policies?
Read Jeffrey Friedman’s stuff on democracy.
11. September 2009 at 05:09
You may be interested to know that your RRS feed is sending out nothing more than advertisements for male enhancement. I have no idea why that would be so, but until it is fixed I won’t be following.
11. September 2009 at 05:21
Scott, have you read Jude Wanniski? While I would certainly consider you far less ideological, I see some obvious parallels with his thinking in yours, and was curious what you thought of him.
11. September 2009 at 05:56
Scott,
Very well done. The problem of reconciling liberal values, democratic institutions, and capitalist efficiencies is tremendously difficult. Indeed, I find a huge portion of the libertarianish intelligentsia chasing that grail…Be it Paul Romer’s Charter Cities, Patri Friedman’s seasteading, Will Wilkinson’s general thrust, the whole left-libertarian movement, etc., etc.
This is a great contribution to the debate, and indeed a formulation I haven’t seen. If you can bring democracy back into the libertarian value-set, that would be amazing.
Have you read the autobiographies of Lee Kuan Yew? Just his thought process is pretty fascinating.
I write a little more here praising the post and here commenting on the happiness in Denmark.
11. September 2009 at 06:20
I just added the RSS feed of your site to my newsreader (google reader) and I find that your last two posts do not get displayed in google reader. Instead I just see a mishmash of words about Cialis and buying Cialis online: “Purchase Cialis OnlineCialis From CanadaCialis….”
Is that intentional, or has your site been infected by some sort of spam virus?
If it is intentional, then there is no reason for me to keep your RSS feed in my reader, since that ad makes it almost useless (all it tells me is the title of your post).
11. September 2009 at 06:32
What are the proper goals for society?
The question assumes “society” can have goals.
As Tim Worstall points out, democracy can be quite illiberal in both the old and new senses of the term. The E.U-crats realize this and so try to keep democracy to a minimum. Recall the horrors that “the war to make the world safe for democracy” unleashed. The old monarchies/empires it killed off were far preferable to the party-led bastard children of modernity that replaced them. Because America has its origins in a (foolhardy, in my opinion) war of independence from a monarchy that helped spark the terrible revolutions that later swept Europe (though many founding fathers rightly feared that sort of democracy claptrap), we are insufficiently appreciative of monarchy. That’s why it has been left to foreigners like Erik von Kuehnelt-Leddihn, Bertrand de Jouvenel and Hans Herman Hoppe to explain it to us.
Democracy enthusiasts often try to distract from the defects of democracy by calling authoritarian populists like Hugo Chavez anti-democratic. But it is really the restrictions the latin american elite of places like Honduras have put in place (like term limits) that are anti-democratic. When “power to the people” is allowed, the result is caudillos and terrible mismanagement. It requires leaders with the autonomy of freedom from democracy like Pinochet and Lee Yuan Kew to implement good policies. The do-gooding liberals of the world fail to recognize this. They denounce the Shah and act surprised when the people replace him Khomeinism. They denounce Ian Smith and puff up Robert Mugabe. Now the latter is “anti-democratic”. They launch “operation Iraqi Freedom” to get rid of Saddam Hussein, failing to realize that his grip was the only thing holding the country together and keeping islamists out of office. They insist Palestine allow elections and then reject the results when the more revanchist party wins. They insist that the old colonial powers leave and then repeatedly insist we have to “save” the third world when it all falls apart. Why would a person of wisdom ever listen to these proponents of democracy?
11. September 2009 at 07:02
I wouldn’t go as far as TGGP, but I certainly oppose unlimited majoritarianism. Though I dislike politicians I think they are preferable to direct referenda.
If Britain introduced the lawmaking by referenda it would be very difficult to do business in the place.
Imagine living in a world where whenever this sort of “anti-speculator” panic is whipped up by the media new taxes could be introduced on pretty much anyone. At least with a representative government there are some problems with introducing such taxes, such as the falls in revenue they would cause.
The results I quote above though don’t show that the public are particularly left-wing. In other polls it has been shown that they support the death penalty, castling laws and harsher prison sentences.
11. September 2009 at 07:47
this post would startle most progressives, because they tend to assume the differences they have with free market types is a difference in values. these ideas need to be broadcast more widely.
11. September 2009 at 08:21
Do you see any conflict between egalitarianism and growth?
11. September 2009 at 08:31
Actually reading Lew Kuan Yew’s autobio will make clear that Singapore did NOT just view everything through the lens of economics. Yew was very keen to promote Chinese values while understanding that relying on Chinese language and culture would not make Singapore global enough. Yew’s bio is filled with digressions about ethnic conflict and the tradeoff between developing the productivity of the Western mindset while avoiding what he views as the destructiveness of Western attitudes to work, the family, and the individual vs. society.
Since you’re in China, I think it’s safe to say that you’re observing this same problem writ much larger. The Chinese are gambling that they can import Western technocratic power without too much democracy, egalitarianism, feminism, individualism, or cosmopolitanism (i.e. anti-nationalism). Even the stated goal of the CP to have the civil service run as if the Ivy League ran the country (Can’t find the quote now) might answer the question: What would the U.S. look like with a civil service completely run by the elites but without modern elites devotion to multi-culti, cultural socialism, and kneejerk anti-Americanism? Of course, there’s the little problem that China’s dictatorship might not survive a large social upheaval, but it’s clear they want to combine the idea of Singapore with an even less democratic and more aggressively nationalistic Chinese state.
11. September 2009 at 11:11
The topic is pretty complicated so I prefer to mull it than shoot off my opinions, but I did want to post to at least say that I enjoyed your essay.
And your picture on the Voxeu.org website looks much younger than 50.
11. September 2009 at 11:15
Joe Switzerland is not homogenous, unless you consider color or immigrant status to be the only measure of heterogeneity.
11. September 2009 at 13:23
Scott,
Regarding your first question, there is no such thing as society, in the sense of a person or institution that has a goal. Society is just a collective noun for a group of people and institutions. They have their own disparate goals. I’d recommend reading Hayek and Frank Chodorov.
11. September 2009 at 13:49
1. What are the proper goals for society?
Society can have no goals, because it is not an agent (actor, doer of actions). There is no practical issue here. But there is a value issue: which states of
society are better, which worse? Indeed, I suppose there is a complete ranking of all possible (momentary) states of society with respect to goodness. Possible sequences
of social states from any particular moment on to the end of time (“futures”) can also be ranked for value. Of course, it would be unrealistic actually to attempt this, or
even to sketch it except in very vague terms (“maximum happiness”).
2. What specific policies can best achieve those goals?
We need to have it specified who the agents (the choosers and executors) of these policies are. And is it assumed that everyone else will passively accept the policies chosen by these agents, or (on the contrary) are we make realistic assumptions about the behavior of these “others”?
If we are *all* to be agents, the question is: what congeries of individual actions by the totality of people would produce the best future? Of course, the question is
unanswerable, and even if we had the answer it would be of very little *practical* interest to anyone.
3. What political set-up can best determine appropriate government policies?
Probably the question concerns the expected-best rather than the actual-best political arrangement. Again, the question is not a practical one, since no agent is specified.
Also unspecified are the constraints on alternative possible arrangements: are we to give fancy free reign, or are the alternative possibilities supposed to be limited in
some way? (In practice, Scott confines himself to arrangements that actually exist, or have actually existed recently.)
11. September 2009 at 14:06
I, for one, am disappointed that when the Economist decided to finally link to you, it wasn’t to this site! The commenters on the Economist site seem to prove your point that everyone thinks you are crazy…
Even though you have convinced me to be a semi-believer, I have a problem with the indicators you cite as evidence of tight monetary policy, because they seem tautological, at least to me. It is as if you are saying: “The stock market crashed due to contractionary monetary policy, and the evidence of contractionary monetary policy is that the stock market crashed.” –I realize the stock market can crash without an economic collapse (1987)–nevertheless I believe you agree that the stock market is on the whole a leading economic indicator, whether the cause is monetary policy or not, so it strikes one as insufficient evidence. As to the other indicators, nearly every one of them: falling commodity prices, rising bond yields, rising dollar, etc. are all positively correlated with each other and with a falling stock market…
But I did enjoy the essay and believe you are probably correct, even though it is all over my head…
11. September 2009 at 14:33
rob:
I think Scott’s point is that there’s a lot the Fed can do to be inflationary besides cutting rates.
What I believe Scott is pointing out is that the economic profession is completely contradicting itself. Prior to the crisis, everyone believed that even when you’ve cut rates to zero, the zero-bound is unimportant; quantitative and qualitative easing is perfectly possible.
But now it seems most economists either believe fiscal stimulus is necessary because monetary policy is ineffective at the zero-bound (i.e. Krugman) or that there’s only so much the Fed can do, and they’ve done all they can (i.e. Bernanke).
Paying interest on reserves is for example a deflationary policy, and yet this was only instituted after the crisis was well under way — if the Fed had not chosen to do this, it is quite possible we’d be in a better place than now.
And as Krugman, et al have long been pointing out, all the Fed needs to do is crank up the printing presses to inflate. As far as anyone is concerned, the zero-bound is completely irrelevant. Quantitative and qualitative easing are both perfectly possible even at the zero-bound.
Where Scott is I think on virgin territory is the notion that interest rates are a bad indicator of monetary policy. Scott is a bit dismissive of them as more reflective of how the markets view monetary policy, and less reflective of monetary policy itself; I think he has argued that if we were adopting an inflationary policy, we wouldn’t even need to cut rates to zero. I think his stance is that the very fact that we’ve had to cut rates so low shows that the Fed has not been sufficiently aggressive.
11. September 2009 at 14:34
Sorry, second-last sentence should be: Scott thinks of them as more reflective of how the markets view monetary policy, and less reflective of monetary policy itself; I think he has argued that if we were adopting an inflationary policy, we wouldn’t even need to cut rates to zero.
11. September 2009 at 15:23
‘Where Scott is I think on virgin territory is the notion that interest rates are a bad indicator of monetary policy.’
Not at all. Milton Friedman was famous for just that point.
More apropos to the previous post, but John Cochrane unloads on Krugman here:
http://caseymulligan.blogspot.com/2009/09/lapses-in-economic-analysis.html
‘Paul Krugman has no interesting ideas whatsoever about what caused our current financial and economic problems, what policies might have prevented it, or what might help us in the future, and he has no contact with people who do. “Irrationality” and advice to spend like a drunken sailor are pretty superficial compared to all the fascinating things economists are writing about it these days.
‘How sad.’
11. September 2009 at 17:12
Unfortunately there is no one to do for Singapore what Bryan Caplan did to demolish the myth of Denmark, so I’ll do my best. Most libertarians are far too wont to pour praise on Singapore, much more than it actually deserves. Unlike Denmark, or even urban areas of America for that matter, Singapore has no culture. It is a post-apocalyptic consumerist blight, here there be Louis Vutton and nothing else. Beyond shopping, and eating, there is not much else to do in Singapore. Everyone wants to leave, the only people who want to come are either from much poorer countries or Western expats on fat expat salaries. Hence the world’s lowest birth rate, too expensive to have kids thanks to our Chairman’s fine economic policies. No half assed fixes like maternity leave are going to rectify the simple and profound problem of affordable family formation or the lack thereof in this case.
The high hand of the bloody gahmen as it were is everywhere, choking the life out of civil society and making Singapore and intellectual wasteland as well as a cultural one. Step out of the tightly drawn square of government dictated protocol and BAM, lawsuit into penury. Want to complain and change things? Well too bad, you can’t cause we bureaucrats obviously know so much better lah! Oh and that low corruption that Singapore is noted for? Well someone obviously forgot to tell that to Lee Kuan Yew and now our new dear leader Lee Kuan Yew Jr.
No one who was born in Singapore actually has any strong sentimental attachment to the place. Not surprising as it began as a principally Chinese enclave. It used to be home to a vibrant patriotic Chinese community whose attachments were more to the motherland than to Singapore. This has died and been replaced by a nouveau rich pathos and contempt for the newly arrived bumpkin ah tongs.
If Singaporeans despise their own co-ethnics, the less said about the other ethnic populations the better. At least Denmark is full of Danes and American is large enough that you can move away from people you don’t like. In Singapore, we have two minority problems. A native Malay and Indian underclass and now a recent overclass of recent Indian professional immigrants. Economic jannissaries if you will, fueled by the Singaporean equivalent of the H1B. The Chinese hate the native Malays and Indians cause they are dirty and poor and prone to criminality. They hate the new Indians cause they are rich and stealing their jobs. The new Indians hate the old Indians cause they were elites in their homeland and they’ll be damned if they are associated with poor people in their temporary homes (until their visas for America arrive). Everyone really hates one another, but that’s ok and natural.
I don’t know why America is so keen on making itself more diverse when the only result is more social friction and more stasis when it comes to the issue of collective action. Eventually unless you have extreme decentralization like in the case of Switzerland, all political choices culminate into one of Lenin’s other famous quotations. Who? Whom? Who rules over whom. By this I mean all politics boils down into the narrow focus of ethnic politics. The question becomes not what is best for Singapore, but what is best for my ethnic group. You can see the problem in neighboring Malaysia where the Malays have been busy using their demographic majority to rob their Chinese minority for decades. Why does the Singaporean government keep importing skilled labour when there are plenty of that in Singapore, in spite of knowing full well the ramifications? Well to depress wages of course! One more way for gahmen to screw Singaporeans over. Want to limit immigration? Too bad, you get no say.
So let me summarize for you the problems of Singapore that aren’t really obvious to the average White expatriate, who is generally quite oblivious and insulated from them due to issues of race and class.
1) Too bloody expensive to live and raise a family.
2) Spiritually empty wasteland masquerading as “cultural” dynamism.
3) Government control and censorship over everyday life. Not everyone notices it, everyone suffers under it though.
4) Chinese government treat Chinese citizens like shit. Chinese citizens treat Chinese immigrants like shit. Chinese of all stripes treat Malays and Indians like shit. Rich Indians treat Poor Indians like shit. They talk about the Chinese too behind our backs, but they wouldn’t be so snooty if they didn’t have a job in Singapore. If India’s so great, why are they over here being paid so much?
4) As an addendum to point 3, too many minorities. Chinese can barely tolerate each other, no room for the Malays and Indians. Compared to this, race relations in Denmark (99% Danish!) and even America are much better. We’d give up the delicious fish curries for them to be elsewhere, its true.
Well, those are some of my opinions as to what’s wrong with Singapore. I hope my post was enlightening.
11. September 2009 at 17:24
Current
Egalitarianism is the view that the state should make everyone materially equal, or materially more equal.
Ah, no. That is one strain in egalitarian thinking, but hardly definitive. Fairly clearly, it is not what our esteemed blogger meant.
Which countries are the most successful tends to vary over time as policies and institutions evolve. Indeed, past success may lead to present complacency, past failure may lead to present success.
Even so, the notion that society should have goals strikes me as deeply problematically, for exactly the reasons Oakeshott argued.
11. September 2009 at 18:34
“Where Scott is I think on virgin territory is the notion that interest rates are a bad indicator of monetary policy”
As Patrick Sullivan mentions things aren’t quite like that.
Also, Ludvig Von Mises made the same point in 1912. I never fully believed him until I read Scott’s writing here.
He was writing before interest rate targetting. That process complicates matter through it’s influence on the credit market. However, there are still effects beyond the federal reserve changing the rate at the discount window until they reach their target.
Lorenzo,
I didn’t know that about egalitarianism, that confuses things further. We should reintroduce the Ancient Greek term “isonomy”.
Lorenzo, Philo, Bill Stepp, Scott,
You’re all making the same basic point…
“Even so, the notion that society should have goals strikes me as deeply problematically, for exactly the reasons Oakeshott argued.”
When I read Scott’s post I didn’t think this part of it is so wrong. Certainly only individuals have aims. The point Scott seems to be getting at though is what political aims individuals should have in order to create a Great Society. (Hayek says something like this at the beginning of “The Constitution of Liberty”). Confusing this with “what the aims of a great society should be” is an easy mistake to make.
11. September 2009 at 20:30
Scott,
Can you clarify what you mean about nominal wages being the highest in the world in Zurich, as contrasted with PPP adjusted wages? I think I get what you mean, but it’s a pretty subtle point. E.g. surely nominal wages are higher in Zimbabwe, so you must be making some kind of exchange-rate-but-not-local-purchasing-power-rate comparison across countries?
11. September 2009 at 20:47
I haven’t yet had time to read all of this, but I do want to point a few things out:
1. Egalitarianism is inconsistent with liberalism (or libertarianism, if you prefer). I disagree with a previous commenter that only socialists can be egalitarians or that it involves the STATE making everyone equal. Egalitarianism is based on the idea that everyone SHOULD be equal. How to accomplish that is a matter of question for egalitarians.
Liberalism suggests that we are all free to make our own choices. It is unlikely that this will result in any sort of equal distribution, and a look at the more “liberal/libertarian” economic states of the world will show dramatic inequality in wealth. Egalitarian fundamentalists have a heart attack; libertarians cheer. Such is life.
2. Egalitarianism is not utilitarian. Egalitarian only serves to equate utility numbers. This will not necessarily maximize utility, and, in real life, this not only does NOT increase total utility, but also the great disparities in marginal utility numbers are precisely what drives a market economy…and this increase in total utility is precisely what makes a market system utilitarian.
3. Plato’s so-called “Philosopher King” is fundamentalism at its worst.
Raush’s Kindly Inquisitors would be a great read for you. In his view, there are three (and only three) legitimate systems:
1. Liberal science in the seeking of the truth,
2. Capitalism in resource allocation, and
3. Democracy in the use of force.
Fundamentalism, and Egalitarianism fail every time. Otherwise, we’d still believe the world was flat, still be killing each other over resources, still have dictators, and that dictator would probably have a divine right to rule. There’s a reason we’ve long since rejected those ideas–they don’t work. Much of the rest of the world has not yet rejected those ideas.
12. September 2009 at 01:44
That’s a fair comment. I should probably have said that modern egalitarians generally seek to use the state.
The basic Hayekian point folks have been discussing above is made very well by this article:
http://www.thedailymash.co.uk/news/health/do-we-really-need-doctors?-asks-britain-200909092044/
12. September 2009 at 03:05
Joe, You said;
“And Democracy is not a prerequisite for capitalism to start.”
Singapore and HK prove that point. However, if you want capitalism you are far far more likely to get it with democracy than with authoritarianism. The correlation between political and economic free is very strong. (Admittedly the causation issue is hard to disentangle.)
I don’t know how homogeneity affects happiness (or reported happiness.) But the US scores pretty high on the happiness surveys. And Switzerland’s not particularly homogenous (4 languages.)
Current; You said;
“Your last sentence confuses utilitarianism with egalitarianism. Utilitarianism is quite reasonable in my view, but it has little to do with egalitarianism. Egalitarianism is the view that the state should make everyone materially equal, or materially more equal.”
In that case, I am not an egalitarian. I believes everyone’s welfare deserves equal consideration. Call that value system what you like. I would only favor redistribution if it could be shown to boost aggregate happiness.
You said;
“The current policies of the Danish state tell us very little about what makes Denmark successful. They also don’t tell us that the same policies can be applied elsewhere with the same effects. Nor do they tell us that the policies form a foundation for future success.”
I disagree. Britain’s economy was a failure under the labor government of 1974-79. Under Thatcher it became relatively successful. I think the success of a country has a lot to do with current policies. China is another example.
You said;
“How do the Swiss do it then? Do you mean democracy? If so then the idea is ridiculous, are you saying that Swiss citizens understand enough economics to be able to vote using it? I find that very difficult to believe. If not then through what means do Swiss citizens vote for good policies?”
For most of the last 50 years Switrzerland has been the richest country in Europe. It is also by far the most democratic. It is mountainous and landlocked and split into 4 languages. Generally that doesn’t bode well for a country. I’d say the Swiss voters have made pretty good decisions. I admit that they make mistakes, but so do bureaucrats in less domocratic countries. The whole “wisdom of crowds” idea is deeply counterintuitive. You’d expect the average opinion of a bunch of average people to be pretty average. But tests show that the average opinion of a bunch of average people will often beat the “experts.”
In a week or so I’ll add more disaggregated Swiss data to support my point.
Anonymous. Thanks. I have repeatedly fixed the problem, and it keeps reoccurring. I have informed the tech people at Bentley and it’s in their hands.
Robert Simmons, I read a Wanniski book on supply-side economics about 20 years ago. I found it interesting. I’m a more moderate supply-sider than he is, but I am a supply-sider. Is there something more recent I should look at?
aretae, Thanks, I will look at your posts. I haven’t read the Lee autobiography. BTW, since I may not get to all the comments today, I’d like to clarify that I am a big fan of Singapore’s economic policies, Swiss democracy, and Danish values. I am not a big fan of Singapore, and even Switzerland and Denmark leave me luke warm. I’d rather live in the US or Australia than any of those three. My point is not to form overall opinions, but take what works from models and discard the rest.
JohnW, You asked;
“Is that intentional, or has your site been infected by some sort of spam virus?”
Not my intention, but the intention of soneone who deserves a very long prison sentence. In my view only murder is a more serious crime than computer viruses.
12. September 2009 at 03:29
TGGP, I disagree with almost everything you wrote. Let’s start here;
“Recall the horrors that “the war to make the world safe for democracy” unleashed. The old monarchies/empires it killed off were far preferable to the party-led bastard children of modernity that replaced them.”
WWI was certainly not a war to make the world safe for democracy. So I don’t think democracy can be blamed for WWII. You may recall that the good guys were democratic and the bad guys were totalitarian in that war. (And yes I consider Statin’s invasion of Poland as one of the aggressive acts that started the war.) My post was not a defense of wars to spread democracy, but rather a defence of democracy.
You are wrong on Latin America as well. Since the 1980s Latin America has became far more market-oriented (despite exceptions like Chavez.) And it has also become far more democratic. Under the authoritarian regimes of the 1950s-80s the economic policies in Latin America were far more statist then they are today. Pinochet was the exception, not the rule.
The other problem with your post is that you seem to ignore my point about Switzerland. I am not arguing for American-style democracy or British or France democracy, I am advocating Swiss-style democracy. There is only one Swiss-style deomcracy in the world. And there are no examples of countries that have adopted that system and failed.
Another problem with your post is that you blame democracy for the actions of authoritarian regimes like Mugabe. The fact that a country was democratic at one point in its history does not mean it will always be democratic. If it reverts to authoritarianism then any crimes committed should be blamed on authoritarianism. Democracy is not to blame for the crimes of Mugabe, or Hitler, or anyone else who might have been elected when the country was still democratic. These leaders abolished democracy precisely because they were worried the voters wouldn’t let them get away with their madness. Voters don’t enjoy seeing their countries totally ruined. Even the least effective democracies, such as India, avoided the worst policy mistakes (like the Great Leap Forward.) BTW, India’s problem is that it is about 100 times too big. I’d say 10 million people is roughly the optimal country size today.
Current, Under Swiss-style democracy income tax rates are set at the local level. So if Britain adopted the system, and one county adopted high tax rates, the rich would simply move to a different county. BTW, most polls show voters want lower taxes, not higher. Even in ultra-liberal Massachusetts voters came close to abolishing the income tax entirely in a referendum about 5 years ago.
12. September 2009 at 04:03
rob, In an earlier post I argued that right-wing liberals and left-wing liberals basically had the same value system (utilitarianism.) They differed in worldviews—questions of which policies are most effective in raising aggregate welfare. The term “right-wing liberal” includes pragmatic libertarians like Friedman and Hayek, but excludes dogmatic libertarians who think taxation is theft. BTW, although I am a pragmatic libertarian, I certainly don’t mean to suggest that the dogmatic libertarians don’t have good arguments. It is a respectable ideology, I just don’t adhere to it.
123, I may have used the term “egalitarian” improperly (see my earlier replies to Current.) If you mean a conflict between policies that redistribute, and growth, then the answer is yes. Otherwise Denmark would be much richer than Switzerland, not much poorer. Denmark has freer markets than Switzerland, but is held back by much higher tax rates.
Indeed this is the reason I favor low tax regimes like HK and Singapore. And why I was pleasantly surprised that Singapore was able to provide univeral health insurance with very low tax rates.
kilgore. I agree that Lee had other cultural goals, but I ignored that on purpose, it had no implications for my argument. On most economic questions he acted much like an economist would. And I agree that China is using Singapore as a sort of model (although China is very unlike Singapore in that it has much more statist policies.)
I agree that the current Chinese government wants to hold on to power as Lee did. Whether they will succeed depends on how well they do. Lee did so well that his party would probably have been able to win, even without the heavy hand of the state favoring his party. My hunch is that China will not do as well, and hence that there will eventually be more contested elections. It is much harder to govern big countries.
bababooey, Thanks. I am almost 54. The picture was taken when I was in my 30s. I couldn’t find anything more recent, and don’t own a digital camera (or even a cellphone.)
Bill Stepp, Thatcher once said there is no such thing as society, and got a lot of criticism. I know your point is slightly different, and more defensible. I suppose I meant what should the government do. Even libertarians who oppose government have an opinion on that question, even if the answer is “nothing.”
Philo, You said;
“Of course, it would be unrealistic actually to attempt this, or
even to sketch it except in very vague terms (“maximum happiness”).”
That is precisely my answer. And of course it is hopeless imprecise. Still, I have never seen a better answer.
2. Yes, I meant what GOVERNMENT policies.
3. Yes, I meant expected results. And why shouldn’t we focus on actual examples? The Danish values and the Singapore economic policies and the Swiss-style democracy are so much better than almost any other country that we know we could get huge gains simply by adopting their best practices. At that point we can worry about making things even better.
rob, Thanks. Maybe I need to go over there and leave a comment. I certainly don’t think the stock market is an ideal policy indicator. My point was that we have been teaching our students for years that you can’t rely on interest rates as an indicator of the stance of monetary policy, you have to look at asset prices. This isn’t me, it is from the number one money textbook in the world (with I believe 50% of the market) Then when we get in a crisis and we ignore what we have been teaching our students and focus on interest rates, which are a nearly worthless indicator.
12. September 2009 at 04:31
johnleemk, I agree with almost all of your comments, except this one puzzles me.
“Where Scott is I think on virgin territory is the notion that interest rates are a bad indicator of monetary policy. Scott is a bit dismissive of them as more reflective of how the markets view monetary policy, and less reflective of monetary policy itself; I think he has argued that if we were adopting an inflationary policy, we wouldn’t even need to cut rates to zero. I think his stance is that the very fact that we’ve had to cut rates so low shows that the Fed has not been sufficiently aggressive.”
I sure hope it isn’t “virgin territory” to say interest rates are a bad indicator. That is what we have been teaching our students. Don’t we believe what we teach out of our textbooks? Joan Robinson’s 1938 claim that easy money couldn’t have caused the German hyperinflation because rates weren’t low was treated like a big joke by the 1970s. Have we reverted back to the 1930s?
I hope this doesn’t sound too negative, your comment was excellent. And maybe you are even right about the point I contested. But I hope not.
Thanks Patrick, I am planning on doing a short post on the Cochrane piece. It is excellent (although we disagree on certain things.)
Jing. You said;
“Unfortunately there is no one to do for Singapore what Bryan Caplan did to demolish the myth of Denmark, so I’ll do my best.”
I don’t recall any posts where Caplan demolished any myths of Denmark. Denmark is not a particularly rich country by European standards. It is particularly egalitarian. Did he demolish that myth? It does have high taxes. It does have very free markets. The people there claim to be happy and also to have a strong civic spitit. Did he demolish any of those ideas? I don’t recall him doing so. I never have advocated adopting the Danish economic system.
Most people I talk to in Asia say Singapore is the best country on the continent, with the highest living standards. That may not be the case, but when I visited in 1991 it seemed pretty well run. The air is cleaner than in other Asian cities, for instance. You mention that the groups there don’t respect each other. The beauty of capitalism is that even groups that don’t particularly like each other have an incentive to cooperate, not fight as they do in so many other Asian nations. In the 1970s Sri Lanka announced it wanted to follow in the footsteps of Singapore. If only thay had.
I never claimed Singapore had much of a culture, and as a libertarian I certainly don’t approve of their repressive social or political policies. I was touting their economic policies.
you said;
“Eventually unless you have extreme decentralization like in the case of Switzerland, all political choices culminate into one of Lenin’s other famous quotations.”
And in my post I recommended that Singapore adopt Swiss-style democracy.
Despite these differences I appreciate your very informative comment. It did provide needed balance, and I certainly agree that Singapore is not ideal.
Lorenzo, You said,
“Even so, the notion that society should have goals strikes me as deeply problematically, for exactly the reasons Oakeshott argued.”
On what basis did Oakeshott think we should decide a particular government policy? If we have no goals, how would we decide whether or not to build, say, a high speed rail line? Or did Oakeshott simply assume the governmnet should do nothing?
I agree with your other points.
12. September 2009 at 04:45
Current, Yes, and not just Mises, but many have made the same point.
Bob, I meant nominal when converted into dollars at current exchange rates–which is why Zimbabwe doesn’t lead the list, its currency is almost worthless (at least before the currency reform.)
But Switzerland has a very high cost of living, higher than the US, so I am pretty sure that in PPP terms Swiss incomes are not the highest in the world, although they are still pretty high.
Tim, I used the term ‘egalitarianism’ in a sloppy way–see my earlier replies to Current. But I don’t agree with you about capitalism being the only legitimate system. I think socialism would be legitimate if it worked. It doesn’t work very well, however, which is why I support capitalism. I don’t see how someone can simply assert capitalism is best, without first considering what goals you are tyring to achieve. If government ownership of industry made for a happier society, then I’d support it.
Current, Regarding the doctor-free society, didn’t Shakespeare say something to the effect of “first kill all the lawyers.”
12. September 2009 at 05:05
I haven’t had time to keep up, so let me just thank Scott for the extremely clear Voxeu post – now when I get into arguments over the Fed’s tight money policies, I can just reference a link rather than clumsily and repeatedly walking through history.
Regarding all of the expansive topics in the post above, I just wish to add one point: there is a huge concern among (and I do mean huge) in modern democratic theory about the tyranny of the majority. This concern is not new, and dates back AT LEAST to the Federalist Papers. Questions of how to limit the abuse of power by the majority are paramount, yielding such institutions as a balance of republican institutions, the requirement of supermajorities, and the court system (which is deliberately anti-democratic). The notion that direct democracy is the best of all possible systems merely because it has worked in Switzerland (which has 600 year old local institutions and a unique culture and highly educated people) is potentially frightening.
This is why most political scientists do not advocate true direct democracy. Also, substantively, MANY of the referenda in the US end up getting struck down by courts because they infringe on individual rights, they violate contracts between the state and various groups (like employees), and so forth. Some referenda are quite bad, others are probably good.
“True” democracy is also unstable – one of the key results of Arrow’s Impossibility Theorem. Any given coalition of 50% + 1 can be trumped by at least one other coalition. This is one reason why politics is non-deterministic, with extensive opportunities for political “entrepreneurship”.
The plea for direct democracy seems somewhat Quixotic – perhaps it does work for Switzerland, and might work for other small countries with 600 year old domestic stabilizing institutions and cultural practices. That’s bloody well nice for the Swiss.
Of course, Switzerland also remained neutral during Hitler’s Nazi rampages in the 30’s and 40’s, faithfully holding onto Nazi wealth – some of it for decades.
So yeah, bully for the Swiss. Too bad for those Jews and Gypsies and Gays. And everyone else.
So we can love “small states” and “local democracy”, but the world is such that sometimes it’s necessary to fight big wars far away – at least until everyone _else_ is also enlightened. (Back to the Fukuyama debate.) The reality of politics is Power, and trying to figure out ways to limit that power while still perserving enough capability for directed social action that the government can sometimes get things done. (The US system is specifically designed so that “big” changes can only occur during a crisis or when there is overwhelming consensus.)
Economists frequently fail to realize that Politics is about power, and by extension so is economics. They prefer the illusion that economics is about free exchange, but the ROOT of that free exchange is the enforcement of contracts via Power. Money, at its root, is about power – even if we use gold instead of fiat money, it’s STILL about power, because _someone_ needs to ensure that my money is not simply stolen. Believing in the fallacy that Politics has economic roots (aka, Locke’s version of the freely-engaged-in social contract) requires believing in a mythical happy-smiley state of nature that belies the true state of nature identified by Hobbes – nasty, brutish, and short. The existence of civility, and civilization, is predicated upon the controlled used of force by socially created institutions.
Holding up Switzerland as an example of what the US should be, or New Hampshire as an example of what Massachusetts should be, simply ignores a great deal of political reality. Perhaps you simply mean that these larger states should be _more_ like their smaller cousins. Or that it’s really nice to live in these smaller states when they can live under the protective aegis of the larger political institutions around them (aka, NATO and the US Federal Government).
12. September 2009 at 05:29
I think we agree about “egalitarianism”.
I mentioned Mises because I’m familiar with him. Certainly you are right, many economists have made the same point, and not just recently. Joan Robinson’s view, and that of the early Keynesians is strange since several economists before her had understood this.
During Thatchers first term from 1979 to 1983 there was a long recession. The conservatives only won in 1983 because of the Falkland’s war. It took many years for the benefits of Thatcher’s reforms to show themselves.
The same sort of thing is true of the earlier periods you mention. In the 1960s Britain had a Labour government with very similar policies to that of the 1970s Labour governments.
However in the 60s there was low unemployment, little welfare dependency and the nationalized industries weren’t that dysfunctional (except British Rail). There were many industrial disputes, but nothing like the 1970s.
The processes by which these sorts of things happen are centuries long. You can’t just look at a small space of time and a small success and elevate it into something special. For example, many of the problems of the 70s in the UK were due to the way the Labour movement was setup in the 19th century.
12. September 2009 at 05:56
Scott, Current, et al.:
Yes, I suppose “virgin territory” was not the best phrase to use. I’m sure many besides Scott have made this observation before. The point I meant to make is that most people with a basic knowledge of macroeconomics assume interest rates are a good indicator of monetary policy. The business press and pretty much everything I’ve read about the current crisis (besides this blog and a few exceptions) has been chirping about how low rates have fallen and thus how aggressive the Fed has been.
Maybe this speaks more about my economic education than it does about the state of the macroeconomic field, but until I started reading this blog, I didn’t have more than the vaguest of inklings that interest rates might not be a great indicator of what the monetary policy stance is. It certainly did not occur to me that if rates fall to zero, then you haven’t been aggressive enough, because the markets’ inflationary expectations would push them up if you had been sufficiently aggressive.
12. September 2009 at 07:06
‘…most people with a basic knowledge of macroeconomics assume interest rates are a good indicator of monetary policy. The business press….’
I agree, but that just shows how woefully ignorant the press is. Consider, for instance, this howler from Barack The Magnificent a few days ago:
‘I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. But by avoiding some of the overhead that gets eaten up at private companies by profits….’
That screams, ‘Dilettante!’, yet I haven’t word one from any journalist, even the Fox News types, about it.
12. September 2009 at 07:11
Dr. Sumner,
I see your post as surprisingly open-minded and taking non-economic factors into account that matter. I am a liberal with a libertarian streak and I agree with almost everything you wrote, though I might prefer the mediterranean to the other countries you mentioned. That’a just personal preference, mainly climate and laid back cultures.
I do think the ideas expressed are a bit idealistic and I’m not sure I could favor so much direct democracy. However, it’s posts like this that have already made this my favorite economics blog, among many others I read.
12. September 2009 at 10:12
“Tim, I used the term ‘egalitarianism’ in a sloppy way-see my earlier replies to Current. But I don’t agree with you about capitalism being the only legitimate system. I think socialism would be legitimate if it worked. It doesn’t work very well, however, which is why I support capitalism. I don’t see how someone can simply assert capitalism is best, without first considering what goals you are tyring to achieve. If government ownership of industry made for a happier society, then I’d support it.”
There is no such thing as a “happier society.” A society doesn’t have feelings. It’s not something you can observe or identify empirically. The utility of a “society” is merely the sum of each individual’s utility.
Capitalism is the only legitimate system because it is the most efficient known method of resource allocation, and thus produces the highest total utility. Egalitarians are concerned with average utility, even to the detriment of total utility–which is why egalitarianism and utilitarianism are irreconcilable.
Socialism doesn’t work because without the incentives of unequal utility marginal utility, there is little incentive to work hard and produce.
The goals we are trying to achieve are simple–greatest total utility–because that is precisely why and how capitalism has pulled hundreds of millions of people from poverty.
12. September 2009 at 11:44
I might also add that this is one of the most serious flaws with Keynesian thinking, because it comes from MICROECONOMICS. Keynes work is nearly totally irreconcilable with micro. That’s why the new Keynesians exist–to attempt to reconcile Keynes with microeconomics.
12. September 2009 at 16:49
Statsguy, You said;
“”True” democracy is also unstable – one of the key results of Arrow’s Impossibility Theorem. Any given coalition of 50% + 1 can be trumped by at least one other coalition. This is one reason why politics is non-deterministic, with extensive opportunities for political “entrepreneurship”.”
Democracy doesn’t work in theory, but it does work in practice. Reagrding Switzerland, I think people are putting too much weight on my referendum argument, and too little on the decentralization argument.
I don’t agree that Switzerland is far more educated than other developed countries. And I would argue that even in underdeveloped countries democracy tends to work best. India may be the world’s least efficient deocracy (it is far too big) but it is still better governed than the other members of former British India. Taiwan is better governed that Mainland China. West Germany was better governed than East Germany. When you compare democracies to non-democratic countries with similar cultures, democracy usually (not always) comes out ahead.
But let me emphasize once again that without decentralization you don’t have true democracy, at least as I define the term. The principle-agent problems get too big in a large country. Rent-seeking becomes hard to monitor and stop. Voters are less informed. New York City needs 100 school disticts, not one. Let voters worry about their own high school, and let other voters worry about other high schools.
I am not opposed to systems where super-majorities are required for constitutional change.
You said;
“The plea for direct democracy seems somewhat Quixotic – perhaps it does work for Switzerland, and might work for other small countries with 600 year old domestic stabilizing institutions and cultural practices. That’s bloody well nice for the Swiss.”
All countries should be small countries, as I argued in another post. Big countries have enormous diseconomies of scale.
You said;
“Of course, Switzerland also remained neutral during Hitler’s Nazi rampages in the 30’s and 40’s, faithfully holding onto Nazi wealth – some of it for decades.
So yeah, bully for the Swiss. Too bad for those Jews and Gypsies and Gays. And everyone else.”
I said “Switzerland has its flaws.” But almost all other European countries had far worse human rights records over the past 100 than Switzerland. In most cases, it isn’t even close. Lot’s of other countries considered “good guys (such as Britain and Sweden) also stole money from the Jews.
Switzerland didn’t cause WWI or WWII. It did not kill millions in the Congo like Belgium. I could go on and on. In comparison with the rest of Europe the Swiss look pretty good.
The argument that Switzerland is special and hence its system wouldn’t work in other places seems bizzare. Why wouldn’t it work in Austria, for instance? The point isn’t that every cvountry would do as well as Switzerland, that is crazy. But some (like the Danes) would probably do even better. The point is that even though Switzerland has been more successful than even fairly similar European countries, political scientists don’t believe the evidence right in front of their eyes. It doesn’t fit their theories, and their arrogance that they know better than the stupid voters. Lot’s of politcal scientists were communists during the 1930s. The Swiss voters (not nearly as educated as political scientists) never fell for that nonsense.
You said;
“So we can love “small states” and “local democracy”, but the world is such that sometimes it’s necessary to fight big wars far away – at least until everyone _else_ is also enlightened.”
The solution is alliance like NATO. Yes, NATO is dominated by the US, but even without the US it was far too strong to be attacked by another evil power. The Russian had trouble subduing Chechnya, imagine what would have happened if they went after NATO.
You said;
“Economists frequently fail to realize that Politics is about power, and by extension so is economics.”
The goal is to set up institutions that limit power. Democracy is one. Free markets are another.
You said;
“Money, at its root, is about power – even if we use gold instead of fiat money, it’s STILL about power, because _someone_ needs to ensure that my money is not simply stolen. Believing in the fallacy that Politics has economic roots (aka, Locke’s version of the freely-engaged-in social contract) requires believing in a mythical happy-smiley state of nature that belies the true state of nature identified by Hobbes – nasty, brutish, and short. The existence of civility, and civilization, is predicated upon the controlled used of force by socially created institutions.”
No country has succeeded in this regard better than the Swiss. Their banks are secure. Their money is secure. Their borders are secure. Even Hitler didn’t think an invasion was worth the cost, as they have a surprisingly effective military despite their small size. The question is how do we overcome the problems cited by Hobbes. And the answer is that the Swiss have done it better than anyone. Even better than the US (which had its Civil War.)
You said;
“Holding up Switzerland as an example of what the US should be, or New Hampshire as an example of what Massachusetts should be, simply ignores a great deal of political reality.”
No one has ever convinced me that Massachusetts shouldn’t follow New Hampshire’s low tax model. Why not? Sure the states differ, but not in ways that explain the difference in tax rates. Massachusetts is simply far more wasteful with its spending.
BTW, can I infer that you believe the fact the other countries have universal health coverage has no bearing on whether a system like that would work in the US? The same “political scientists” who say the US has nothing to learn from Switzerland, insist we should follow the Swedish social welfare state model.
I’ll take the other comments after I return to the US.
12. September 2009 at 17:26
Though I hate to agree with Statsguy, I must in this case.
If it were not for limitations of democracy I could not live in Ireland, which is now my home though I am English by birth. If the masses actually ruled by direct democracy I would be strung by a rope from a lamp-post. I owe my life to limitations of democracy.
12. September 2009 at 19:35
To be honest, Current, I myself don’t go quite as far as the devil’s advocate I’ve been playing here. It’s merely that Scott was displaying what Bryan Caplan calls “democratic fundamentalism” and needed a dose of reaction in response.
Switzerland is pretty well run. Does that have anything to do with democracy? So many other countries can’t manage it. I believe Denmark also had fairly pro-market policies as a monarchy. What have they gained from democracy? Perhaps Switzerland is getting all of its benefits from decentralization, which helps to neuter the potentially destructive effects of democracy. Limits on power can be important, but they are also found in a constitutional monarchy constrained by an aristocracy jealous of its privileges. Democracies over time tend to undermine constitutional restraints on power. Anthony de Jasay has written a lot about that in works like The State, which also has an interesting critique of utilitarianism and egalitarianism.
You are saying that I can’t blame “undemocratic” regimes on democracy, but precisely the point I was trying to make is that democratization often results in undemocratic regimes. Totalitarian parties like the Nazis and the Bolsheviks are demotist phenomena in that they exist to whip up mob support and justify their rule based on it. If the Hohenzollern and Romanov monarchies had survived, they would have stopped those mobs from seizing power. Ian Smith tried to appease international critics by having elections but excluding Mugabe, this was criticized as anti-democratic (which, like term-limits, it was). Allowing that extra dose of democracy brought disaster. North & Weingast have written about how “natural states” serve a vital function of managing power to avoid violence. Many democracy-proponents don’t get this and try to introduce democracy into such states, and then wonder why it turns out badly.
I’m in Bryan Caplan’s camp on how socialism fares if you judge it by its intentions rather than results. Socialists, Rawls and (to a lesser extent) Rorty receive praise from “right-liberals” for their good values, but since their ideas led to the endorsement of harmful policies, I’d consider those ideas to be somewhat harmful as well. Consign them to the fire. There is of course the is-ought gap and no accounting for each person’s morality, but I don’t want my positive beliefs infected by such nonsense. That’s also why I don’t read fiction. Though I should note its been suggested that Shakespeare was an anti-democracy Tory.
12. September 2009 at 19:42
First, let me say I agree with you that we can learn a lot from smaller states, and that (short of marshalling for war or other major endeavors that require concerted top down authority) there is probably an optimal scale of government that is smaller than the current US federal system. And the cleptocratic Massachusetts state government can learn plenty from New Hampshire, even though New Hampshire is far from perfect. It’s just that you present a vision of small state democracy that is just a bit too idyllic.
“The goal is to set up institutions that limit power. Democracy is one. Free markets are another. Democracy is one”
Democracy is not an institution that limits power. It is the tyranny of the majority, pure and simple. Constitutional Democracy is such an institution that limits power. Adding courts helps. Free markets help as well (probably the most important observation Milton Friedman made). Other institutions in civil society help (schools, businesses, the free press, etc.). Pure democracy is frightening beyond belief.
“Democracy doesn’t work in theory, but it does work in practice.”
It works in practice only because in practice it isn’t really democracy. See above. We have many examples of mobs turning on individuals. The Salem witch hunts are an example of democracy run amok (and the failure of institutions, notably the church, to stem the mob).
Also, if you recall in the Federalist papers, there was a strong argument that the sheer size of the federal government helped preserve individual liberties by making it harder for “factions” to grow large enough to dominate the government.
Finally, in terms of the virtue of referenda, do you recall when you stated that you were distrustful of public opinion polls on complex/technical issues? Referenda are only one step removed.
I’m not saying _more_ direct democracy than we have today is a bad thing. I’m saying that too much is a bad thing.
13. September 2009 at 03:51
When I wrote my last post, I was pretty drunk, I’d just come back from a party and it was ~3am.
Oddly enough I think that it may be useful to the discussion to describe that party. Two of my friends were celebrating their upcoming emigration to New Zealand. We had a garden party in the garden of the converted church where he lives. This place, which he rents, is the most beautiful house. There is a grand piano in the rather grand entrance hall, in case you want to knock out a tune. In case you want to play a tune upstairs there is a second grand piano in the upstairs living room.
This set of friends I was with are mostly educated people in their 20s and 30s. Some work for charities, some are architects, some are students and a couple are unemployed.
As we sat around the table I drank gin & tonic and my friends drank that very nice cider that’s grown from a single variety of apple. In the conversation the subject of the english cropped up. Most of the people around the table agreed that the english are horrible dispicable people, and that I am a notable exception. They went on to discuss how the english created everything that evil and wrong about the world, concentration camps, imperialism and so one. (It is perhaps not that untrue to blame the english in this way, but the english have created much else besides evils).
I’ve had discussions with the same group about Israel. In the view of several of them the Israelis are secretly murdering thousands of palestinians. This is supposedly kept secret by an international conspiracy of governments and jewish dominated media companies. Though I give some credence to the tails of genocide I think the mass conspiracy quite ridiculous.
At work my colleagues sometimes discuss politics at the table in the canteen during lunch. These are a set of experienced, well-paid engineers most of them much more important than me. These are upper middle-class people who work for a huge multi-national corporation. Yet, several of them support executions without trial. They discussed Phillip Garrido recently and one of them seriously said that he should simply be shot without trial because a trial would be a waste of money. Another of them regularly, and seriously, supports guillotining the government.
Now, these are the views of the upper middle class. What do you think the views of the masses are like? This is something I’ve noticed American economists are very bad at understanding. George Selgin once tried to convince me that the masses understand fractional reserve banking he cited the fact that he had asked several faculty wives at an event and they all understood it. The problem with this should be obvious. Those who works in a university are anything but normal, and neither are their wives. University towns are anything but normal. Often the level of education and respect for truth is generally higher in those places, amongst all parts of society.
You talked earlier about the “wisdom of crowds”. That phrase is really a slogan. It is used to describe certain phenomena. But, all social scientists must recognise that there is nothing mysterious about it. Social science is about examining the ways crowds may become wise. The individual interactions that have particular consequences. In the case of a market this is quite complicated. But, as you have pointed out yourself, in the case of direct democracy it is simple. If the individual people hold wise views then wise decisions will be taken, if they don’t then bad decisions will be taken.
Now, it may be that in a country of very educated and tolerant people, like Switzerland, the masses can make wise decisions. But this isn’t the case everywhere.
This argument about taxes is silly
How exactly is this an argument for democracy? What you are saying is that because a rich person may leave a Canton then that Canton can’t set taxes too high. But, that freedom to leave stems from liberty. It is the power of “exit” not “voice”.
In Britain “majoritarian fundamentalists” are OPPOSED to such devolution of power. Currently the Guardian newspaper and other large parts of the left are waging war against tax havens. They rightly recognise that such local tax setting is anti-democratic. As you mention it would lead to a game-theoretical “race to the bottom” where each County has to compete with others. It’s cheap a trick to let the market in by the back door. This is already recognised because of the example set by the Channel Islands and the Isle of Man. Each have a great measure of independence and much lower tax rates than the rest of the UK. They are “tax havens”. The populist left are lobbying for this to be stopped by perhaps forcing those who live in the tax havens to pay mainland UK tax if they have moved from the mainlands, or some sort of similar scheme. The correctly realise that the existence of such tax havens is anti-democratic because it allows a minority to escape from the wishes of the majority.
13. September 2009 at 16:47
TGGP,
I thought you weren’t serious. I haven’t read much Anthony De Jasay, though I probably should.
I agree with a lot of what you’ve written. But, I’m not in the Bryan Caplan camp. I’m in the Jeffrey Friedman camp.
Shakespeare was certainly a tory, a sort of tory anarchist. See the quote about lawyers from Scott.
14. September 2009 at 02:57
Current; You said;
“Certainly you are right, many economists have made the same point, and not just recently. Joan Robinson’s view, and that of the early Keynesians is strange since several economists before her had understood this.”
What is “very strange” is that today 95% of economists seem to use the same policy indicator as Joan Robinson.
You said;
“During Thatchers first term from 1979 to 1983 there was a long recession. The conservatives only won in 1983 because of the Falkland’s war. It took many years for the benefits of Thatcher’s reforms to show themselves.”
But this supports my point, as the Danish/Swiss/Singaporean systems have been in effect as long as Thatcher’s system was when the success showed itself (around the late 1980s.)
Johnleemk and Patrick, See my reply to Current. The view you describe is even common among economists.
Mike; You said;
“I see your post as surprisingly open-minded and taking non-economic factors into account that matter. I am a liberal with a libertarian streak and I agree with almost everything you wrote, though I might prefer the mediterranean to the other countries you mentioned. That’a just personal preference, mainly climate and laid back cultures.”
I agree. I also prefer warm countries. I was just commenting on the values/economics/politics. I’m not crazy about the family-oriented value system of Sicily.
Tim, You said;
“There is no such thing as a “happier society.” A society doesn’t have feelings. It’s not something you can observe or identify empirically. The utility of a “society” is merely the sum of each individual’s utility.”
That’s exactly what I meant. Of course happiness is hard to measure, so I should specify perceived happiness.
You said;
“Capitalism is the only legitimate system because it is the most efficient known method of resource allocation, and thus produces the highest total utility. Egalitarians are concerned with average utility, even to the detriment of total utility-which is why egalitarianism and utilitarianism are irreconcilable.”
Most egalitarians are not concerned with average utility, but rather total utility. I’m sure those that favor the Danish model think the total utility is higher. Their reasoning is that if you you take a hundred dollars from a billionaire and give it to a poor person, total utility will rise. That reasoning involves total utility, not average utility. I don’t happen to agree, but I think they have a respectable argument. To call it “illegitimate” seems wrong to me. It is an empirical question. If you applied that term to communism, then I would completely agree.
More to come . . .
14. September 2009 at 04:06
Current; You said;
“If it were not for limitations of democracy I could not live in Ireland, which is now my home though I am English by birth. If the masses actually ruled by direct democracy I would be strung by a rope from a lamp-post. I owe my life to limitations of democracy.”
I assume you are joking, as I have not argued against constitutional protections that require supermajorities to change, nor do I think your life would be in danger in Switzerland or Ireland.
I do think your life would be in danger in North Korea, and other non-democratic countries, however.
TGGP, You said;
“To be honest, Current, I myself don’t go quite as far as the devil’s advocate I’ve been playing here. It’s merely that Scott was displaying what Bryan Caplan calls “democratic fundamentalism” and needed a dose of reaction in response.”
I just read Bryan’s book on the plane back from China, and I agree with most of what he has to say. Either you have misunderstood Bryan’s argument, or you have misunderstood my argument. Bryan says democratic fundamentalism is when people advocate democracy regardless of its effectiveness. My argument is 180 degrees different. I advocate democracy solely because of its effectiveness (which is also the reason I advocate capitalism.) Bryan says that democracy may not work because people have systematic cognitive biases. I totally agree, and indeed in this blog have listed even more biases than Byran listed.
Bryan Caplan did not do an empirical study comparing democratic and non-democratic regimes. Indeed his book doesn’t even mention Switzerland.
You said;
“Switzerland is pretty well run. Does that have anything to do with democracy? So many other countries can’t manage it.”
I know of no other country that tried. Maybe it is pretty well run because it is more democratic. I don’t think the Swiss are genetically or culturally superior to other people, and they have the disadvantage of multiple languages, mountain ranges, etc. When countries in other parts of the world do poorly, even compared to their neighbors, it is often blamed on being landlocked, mountainous, multilingual, etc.
You said;
“Democracies over time tend to undermine constitutional restraints on power.”
The problem with this argument is that restraints on power fall even faster in non-democracies, so it doesn’t really prove your point. Is there some ideal system better than both democracies and non-democracies? Perhaps, but how would we find it?
You said;
“I’m in Bryan Caplan’s camp on how socialism fares if you judge it by its intentions rather than results. Socialists, Rawls and (to a lesser extent) Rorty receive praise from “right-liberals” for their good values, but since their ideas led to the endorsement of harmful policies, I’d consider those ideas to be somewhat harmful as well.”
This argument confuses me. The economics profession as a whole was very statist from about 1935-80. Later they moved in a market-oriented direction. This is the same change that Rorty went through. So if we must reject Rorty’s liberal values because at one time he understood economic causality poorly, then why not condemn the entire economic profession. Should we abolish economics and replace it with sociology, or political science? Obviously not. People can learn from their mistakes. Because they make a mistake in policy views outside their area of expertise, hardly refutes their research on values which is in their area of expertise.
For the same reason, Shakespeare’s views on politics aren’t that relevant. Democracy didn’t even exist when he was alive, how could he be expected to have an intelligent opinion on it. I would also have opposed democracy in 1600, based on what I knew then. Democracy seems like a crazy idea, the most stupid idea possible. But it works.
You said;
“Totalitarian parties like the Nazis and the Bolsheviks are demotist phenomena in that they exist to whip up mob support and justify their rule based on it. If the Hohenzollern and Romanov monarchies had survived, they would have stopped those mobs from seizing power.”
This argument makes no sense. The Nazi example seems to prove your point (that a democracy may be too weak to stop totalitarians from taking over), but then the Russian example undermines it, as the Czarist monarchy was also too weak to prevent the totalitarians from taking over.)
14. September 2009 at 04:27
Statsguy,
“Democracy is not an institution that limits power. It is the tyranny of the majority, pure and simple. Constitutional Democracy is such an institution that limits power. Adding courts helps. Free markets help as well (probably the most important observation Milton Friedman made). Other institutions in civil society help (schools, businesses, the free press, etc.). Pure democracy is frightening beyond belief.”
You misunderstood my argument. I was advocating Swiss-style democracy, which has markets, courts etc. I believe that democracy is more likely to give you those institutions that protect rights than non-democracies. The correlation is far from perfect, but on average the more democratic, the more rights are protected and markets encouraged.
You said;
“It works in practice only because in practice it isn’t really democracy. See above. We have many examples of mobs turning on individuals. The Salem witch hunts are an example of democracy run amok (and the failure of institutions, notably the church, to stem the mob).”
First of all “the mob” is not the same as “democracy.” If you guys think so no wonder you misunderstand my argument. Second, mobs are a much bigger problem in non-democratic countries than democratic countries. Remember how people often cite China as a “success” of non-democracy? China currently has about 100,000 riots a year. The US has about zero. So which system gives you more “mobs.”
Current, You said;
“As we sat around the table I drank gin & tonic and my friends drank that very nice cider that’s grown from a single variety of apple. In the conversation the subject of the english cropped up. Most of the people around the table agreed that the english are horrible dispicable people, and that I am a notable exception. They went on to discuss how the english created everything that evil and wrong about the world, concentration camps, imperialism and so one. (It is perhaps not that untrue to blame the english in this way, but the english have created much else besides evils).”
The beauty of Swiss-style democracy is that it prevents violence. Even if groups don’t like each other, they get along because they have control over their own affairs. Of course the Irish hate the British, everyone knows that. But that doesn’t stop huge numbers of Irish from moving to Britain to work. People are pragmatic, unless then don’t have the right to control their own affairs (as in Yugoslavia, or the Middle East. Then they turn to violence.
you said;
“How exactly is this an argument for democracy? What you are saying is that because a rich person may leave a Canton then that Canton can’t set taxes too high. But, that freedom to leave stems from liberty. It is the power of “exit” not “voice”.”
People don’t seem to be listening to me. I am not calling for democracy, I am calling for Swiss-style democracy. If you want to give it a different term, I don’t care. But that’s what I favor. To me, the term ‘democracy’ means the people rule over their own affairs. But then how can you have democracy without decentralization? My town just wasted $200,000,000 on a new high school. I don’t favor people in Montana voting on that school, nor do I think they should be taxed for it. Is that so controversial?
And stop drinking so much! I like you better sober.
14. September 2009 at 05:36
Well, Khadafy’s view of Switzerland is that it should be abolished: http://www.nydailynews.com/news/world/2009/09/03/2009-09-03_libya_leader_col_moammar_khadafy_to_united_nations_abolish_switzerland.html
Myself, I liked the place.
14. September 2009 at 12:55
Point taken about the drinking.
I think this is the problem we’re all having….
In lots of discussions of democracy there is this sort of confusion. Like “liberty” authors tend to use the word to denote their own view. Which is reasonable since neither are clearly defined in dictionaries.
Let’s call “Majoritarian Democracy” the type of government where the democratic mandate can authorize anything. In this cases there are no limits. Similarly, “Constitutional Democracy” is that sort where a Constitution provides an extra barrier, a simple majority can’t override this Constitution. This brings up one of the first questions about Democracy, which of these two is the “more democratic”? Some say that the Constitution provides a long-term process of learning akin to democracy, so our forefathers have “votes” in a sense since they played a part in voting on constitutional agreements. I don’t think this is really true though. Constitutions have been amended by popular votes, but they have not generally been made by electorates. The changes have been quite small. As David Brin writes in the book “The Postman” the US constitution would begin “We the Intellectuals…” if it were a bit more honest. (Is it even the intellectuals? How about “We the Impersonal Forces of Hayekian Evolution…”).
I think that the advocates of unlimited majoritarian democracy are right that it is true democracy. But, I think that Constitutional barriers are very useful and I wish we had them in Britain.
Now, what you are advocating is a more Direct Constitutional Democracy. The direct part is the major difference. Many countries have Representative Constitutional Democracy.
A Constitution could put significant restraints on a more direct constitutional democracy. Perhaps I wouldn’t get hung by visiting Ireland, perhaps though I wouldn’t be allowed in in the first place. The point of my earlier discussion of my friends opinions was to show that even quite educated people hold very illiberal opinions.
So we need to ask: are constitutions really a sufficient safeguard against the electorate? I don’t think they really are, they contain too many vagaries and are too open to interpretation. I don’t think the electorate will knowingly vote for something that would be bad for them, but I think that they are very ignorant about the effects of policies. Understanding cause and effect in wider society requires the counter-factual reasoning of social science.
Elected representative, as insiders, have more understanding. For example, suppose the Irish decided that they don’t like the Brits, so they’re going to ban them from being employed in Ireland. If they did that economics tells us that it would likely not be good for them. The electorate are not likely to know that but politicians will. Similarly, it is likely that Britain would enforce a corresponding ban on the Irish working in Britain. Now, a politician (of almost any party) would immediately see the likelihood of that scenario. The electorate though would not, though they could perhaps be persuaded by a careful campaign.
I don’t think people appreciate just what the general population are like. Converse found in 1964 that only 4% of the population knew clearly the difference in philosophy between conservatives and liberals.
Having popular referenda on issues may work in Switzerland, but I don’t see how it would work in any Anglo-Saxon country.
Lastly, what you are proposing is a localist sort of Government. I was watching the film “Wings of Desire” recently. There is a quote in that which is apposite:
If every person were a state that would be a form of anarchy. If every 100 people could form a democratic state that also would be quite similar to anarchy. What happened between such states would be decided by some sort of higher-law. This is like what happens in federations like Switzerland, or the US federal government. That higher law requires a constitution of some sort, and is therefore more limited than majoritarian democracy.
He we have another problem of definitions.
Democracy doesn’t mean decentralization though. It means everyone in a group doing what the majority and their representatives say. It means the electorate consider everything within the state to be “their own affairs”.
I agree with you that a set of small regions with autonomy is useful. Each can set up their laws in slightly different ways. In a situation with free movement between regions bad laws in one place may result in activities and people moving elsewhere. But that is a check on democracy.
A pro-democracy policy would be to support states that are sufficiently large enough that they can prevent competition of that sort from taking place, or to suppress it by some other means. I think supporting small regions where competition of this sort occurs is anti-democratic, though I certainly agree with it.
I think that falsely labeling anti-democratic policies like this as being pro-democratic is dangerous in the longer term.
To go back to schools. In the UK it happens quite often that rich areas have good state schools that are no more expensive to run than bad schools elsewhere. The citizens of those areas pay more through redistributive taxation. If local control of schools were implemented then these good areas would no longer have to subsidize the rest of the country. Taxes would fall in good areas and rise elsewhere. The immediate effect of that would be that a minority would benefit at the expense of the majority. I certainly agree with doing this because of the beneficial long-term effects, but it’s not a democratic policy.
16. September 2009 at 03:19
Current, You said;
“Democracy doesn’t mean decentralization though. It means everyone in a group doing what the majority and their representatives say. It means the electorate consider everything within the state to be “their own affairs”.”
I think we are wasting our time debating what democracy really means. I don’t care what it means, I have been very clear that what I support is Swiss-style democracy. If that is not really democracy, then so be it. Call it what you like. But most of your arguments don’t address the claim I am making, which is that voters should decide the local issues they face. Not national governments, even if run through direct democracy, and not representative democracy, even at the local level. I support direct democracy at the local level. That’s what Swiss-style democracy means. And it certainly can work as well in Anglo-Saxon cultures as it works in German, French and Italian cultures, all within the borders of Switzerland. Do you really think that the British are so inferior to the Italians, that they can’t run their counties as effectively as the Italians in Lugano run their canton?
You claim that voters don’t know as much as elites. So I presume that means the NYC school board runs their high schools better than the voters in towns in New Hampshire run their high schools? After all, I’m sure the members of the NYC school board have more training in education. Is that your argument?
And don’t say local elites would be better than either, small towns in NH don’t have elites.
16. September 2009 at 07:29
Fair enough. I’ll come back to this though.
I agree that local people are closer to local issues, and better able to make decisions. That’s one of the chief arguments for markets and property too. Schools like the one you mention would not get built for such huge cost.
The problems I pointed out though are to do with non-local decisions being made by direct democracy, and decisions to do with law. Even local areas can make decisions that aren’t only local in scope.
This is my problem with promoting “more democracy”. Surely if we support the view of direct democracy at the local level that is a stepping-stone towards direct democracy at the national level?
I suppose supporting “swiss-style democracy” isn’t the same as supporting more democracy though.
I’m not saying that Brits are necessarily inferior in some general sense. I’m talking about the political opinions of many of them, which are very illiberal in both the classical and American sense of the world liberal. As I pointed out earlier surveys often show this. I don’t think it’s only true of Brits, I think it’s the general rule.
Now, the current UK government are illiberal and socialist enough. The have recently introduced vetting for every person who comes into the same room as children for a particular number of days per year, even for a relatively small part of their job. Such vetting can be based on hearsay and innuendo.
See:- http://charlottegore.com/2009/09/13/britain-is-turning-into-a-totaliarian-state.html
Although this may be bad, can you imagine what it would be like if local democracy were involved?
A few months ago I was at a meeting between the local police (the Garda) and the local residents of the place I live. There were plenty of complaints about local crime, which is understandable. But, the older residents even complained about young people standing around in the street doing nothing. They wanted the police to move them somewhere else, even if they weren’t committing any crime.
Now, Swiss people may be better than others in this regard. That doesn’t mean that people elsewhere will change, or that the Swiss won’t change.
I’m not saying either that elites know better about these things. I’m saying that through impersonal effects of society they are force to act in different ways, in some circumstances. That was the point I was making about prohibition of emigration and immigration.
16. September 2009 at 10:38
Also,
Why do you think that changes in government have an effect in the same time frame as changes in economic policy.
I think the case with government is that things are much slower. The US only got benefit from it’s consititution several decades after it was written. After the consensus that put the constitution in place had been challenged by other opinions.
17. September 2009 at 17:14
Current, Some of the issues you raise are almost unanswerable. If both the British voters and the British government are illiberal, and want all these petty controls on everything, then what hope is there? Neither system would work.
In America we have had local and state referenda for centuries, and there has never been even the slightest indication that it would go to the national level. So I think the Brits could try it at the local level, without too much risk.
Current #2, The Danish strength is basically honesty, or idealism, not politics, and that is probably the least controversal. For Singapore the issue is economics, so I do think enough time has gone by to tell how its working.
You make a good point about politics. But the one system I extolled (Switzerland) had been around for a long time, so I think we can draw some conclusions.
26. September 2009 at 20:49
Scott, I am not an Oakeshott expert, but his view was society should be thought of as a civil association. A framework in which people can pursue their goals. Not as a common enterprise with goals to which all must be directed.
Your question is a good one. I take his view to have been that public policy should be directed to best assisting people to pursue their own goods but I would defer to anyone more knowledgeable in his thought. A ‘keeping things going’ approach but dubious about more encompassing projects.
Asking what the goals of public policy should be is not the same question as asking what the goals of society should be. Public policy requires goals, it is not at all clear that society does or that it a good idea to think it should.
27. September 2009 at 05:10
Apologies for not replying to this, I didn’t see it.
I see what you mean. But, my problem with this is that few see the systematic effects of illiberalism. We may but we’re not normal people.
Though I’m loath to praise representative democracy this really is one of it’s benefits. Since the government are held responsible for economic performance (quite wrongly in some cases) they cannot go as far as the people may want them too. When illiberalism starts affecting tax revenues a representative government is forced to rethink things.
But, how long will in last? Denmark reminds me of Britain in the 1970s when many sorts of welfare benefits had been enacted. The right said that these benefits would tempt people to reject work. At the time they were quite wrong, but in the longer run they were right.
Rather than having an immediate effect on society the effect was more long term. Early generations of long-term unemployed were often men who had worked in manufacturing industries that died out. They often refused to travel from the manufacturing towns to other parts of Britain for work because of family ties. Welfare allowed them to do that. Then, quite often their children would have problems finding work because they weren’t accustomed to what it entailed.
As unemployment and welfare dependency became more common they had knock-on effects. They became lifestyles. One of my friends once shared a house with three unemployed men. They had parties until the early hours of the morning on weekdays. She couldn’t get enough sleep to keep her job, so she quit.
In the beginning able people who seemed to choose not to work were looked down upon. But, in places they became so numerous that couldn’t be sustained. Then the same sort of thing happened to those who cheat welfare.
State pensions long ago meant that poorer people didn’t have to think much about saving. Many could pick up their pay packet on Friday or Saturday and spend it all. In the long term this meant that many forgot how to organize their personal finances, and couldn’t pass that knowledge to their children.
I think that Denmark will slowly go through this process. It’s just at an earlier stage than other parts of Europe.
Surely politics as well, since Singapore isn’t very democratic.
Ok, I didn’t know that.
27. September 2009 at 10:12
Current, I agree with you about the risks Denmark is running. Their prized culture may change if people start relying too much on welfare. That’s why I think the Singapore system works best in the long run. It teaches good values like thrift and self-reliance.
27. September 2009 at 10:45
Lorenzo, I am a utilitarian, but as a practical matter I think people are in the best position to know what is best for themselves. So I end up in a position close to Oakeshott. Public policies should be aimed at making it easier for people to maximize their own objectives.
27. September 2009 at 11:15
Oakeshott is making the same point Hayek often made.
In “The Constitution of Liberty” he makes the point several times. He also points out that Adam Smith made it in a limited fashion, he wrote: “What is the species of domestic industry which his capital can employ, and of which the product is likely to be of the greatest value, every individual, it is evident, can, _in his local situation_, judge better than any stateman or lawgiver can do for him.”
In one of Terry Pratchett’s books he puts well he has Lord Vetinari say “Pulling together is the aim of despotism and tyranny. Free men pull in all kinds of directions.”
28. September 2009 at 06:49
Current, I agree, but Smith also favored a role for government. People aren’t in a position to judge what type of pollution control device on their car is best. That’s because no pollution control device is best for the car owner. They will breath in only an infinitesimal share of the pollution they emit.
1. October 2009 at 02:57
Scott,
I don’t think Smith, Hayek or Oakeshott would disagree. I look at the situation rather differently.
In the case of pollution the car is utilizing a common resource, the air and polluting that common resource. The problem here is that a person making a decision about the pollution emitted by a car is not deciding how to use his own capital. He is deciding how to uses something that has no owner, a common resource.
To tackle the problem the state should set regulations on the permissible amount of pollution. How those regulations are obeyed though is a question for private enterprise.
In the US there were regulations on carburettor design for “emissions controls” reasons. In many cases these made cars much less efficient.
1. October 2009 at 10:15
Current, I agree, that would be a more efficient way of doing it. Tradable pollution rights.
1. October 2009 at 13:52
Yes, my point goes beyond that a bit though.
Pollution isn’t something special on it’s own. Rather it’s parts of idea of ownership and property. Person X can’t dump something on Person Y’s land. The difference with air is that it’s something nobody owns, a common resource. In this particular case it will probably always be a common resource. But we may possibly be able to bring about the situation where impacts on it are done in a way similar to how they would be were it private. Hence carbon credits and taxes.
3. October 2009 at 10:44
Current, I agree that so-called externalities are actually just property rights questions.