Political Economy

I’ve been waiting for this paper to drop, ever since Suresh told me about it last year. It’s groundbreaking. What it does is to take Steve Teles’ qualitative work on the conservative legal movement, and then ask a simple question: if we start with the qualitative evidence about the program’s intentions, then FOIA the hell out of George Mason University to find out which judges attended the Manne seminars, and then apply cutting edge econometrics and natural language processing to their decisions, what are we going to find out?

Some selected quotes (as well as one quote that isn’t in the current version, but will likely be in the next) under the fold, for those who are interested in the headline findings. [click to continue…]

Paul Sagar has [a very nice piece at Aeon about Adam Smith](https://aeon.co/essays/we-should-look-closely-at-what-adam-smith-actually-believed), his legacy, and his contemporary relevance. Towards the end of his essay, he quotes a famous passage from Smith’s Theory of the Moral Sentiments:

> [The man of system] seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard. He does not consider that the pieces upon the chessboard have no other principle of motion besides that which the hand impresses upon them; but that, in the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

An arresting passage when considered against the background of the nativist immigration policies of countries like the United Kingdom and the United States and one that underlines the utopian (in a bad way) nature of natonalist projects. At present our governments are conducting a war against migrants. In the UK, “foreign criminals” (who may or may not have been convicted of actual crimes) are deported to countries they may be utterly unfamiliar with, landlords and employers are threatened with fines if they house or employ people without the right of residency (and deprive many others of opportunities because they look or sound as if they might be “foreign”), asylum seekers are deported to war zones like Afghanistan (a “safe country”) and thousands of people are separated from partners or children because they don’t earn enough for a spousal visa. Brexit Britain has now cast this shroud of insecurity over EU nationals too. In the United States, Trump is still going on about his wall, thousands of young people who are functionally Americans can’t rest secure because politicians can’t agree how to regularize their status, whilst others who came as children are ripped from their families and deported.

And yet we will win. The “game” is going on “miserably” and human beings who have principles of motion of their own, altogether different from those that polticians seek to impress on them, will carry on moving, fleeing, working, associating, trading with, and loving those of nationalities other than their own, because human beings always have and always will. When we talk of freer movement, of more open borders, of a global order that works for everyone and isn’t just in hock to nativist anxieties in wealthy countries, the conventional wisdom is that this is unrealistic and utopian. Yet the true unrealism and utopianism is the project of keeping human beings in self-contained political orders with others “like them”.

My book, [Does the State Have the Right to Exclude Immigrants](http://politybooks.com/bookdetail/?isbn=9781509521951), comes out with Polity on May 25th.

So, folks, here it is, my book on the capability approach that has been in the works for a very long time. I’m very happy that it is finally published, I am happy that you can download the PDF for free at the publisher’s website, and that the paperback version is also about half the price of what a book with a university press would cost (and a fraction of the price it would cost if published by one of the supercommercial academic presses whose names shall not be mentioned here).

I am not going to sell you my book – in a literal sense there is no need to sell you anything since you can download the book (as a PDF) for free from Open Books Publishers’ website (and I have no material interest in selling you hardcopies since I will not receive any royalties). And in a non-literal sense I should not sell this book either, since it is not up to me to judge the quality of the book. So I’ll only make three meta-comments. [click to continue…]

Max Sawicky has a piece in _Jacobin_, giving grief to Brink Lindsey and Steve Teles’ new book on rent seeking, _The Captured Economy_, and arguing that Dean Baker’s work presents a “left-facing” response to rent-seeking, while Lindsey and Teles’ book, instead, is “right facing.” It’s a little awkward to wade into this fight, since I’ve been around long enough that I’m friendly with Max, Brink and Steve (and, for that matter, Dean), but I think that Max is basically wrong. What Lindsey and Teles are doing, as Max says, is to set out their pitch for liberaltarianism, a fusion of liberalism and libertarianism that John Q. has written about here in the past. But even if liberaltarianism isn’t, and shouldn’t be mistaken for e.g. social democracy, it’s much more congenial to useful argument with the left than Max allows, or than old-style libertarianism ever was. [click to continue…]

I tend to post about relatively frivolous stuff. But today is shaping up pretty serious. Global warming report. North Korea and Trump rattling sabers. I’m a pessimist at heart, which makes these headlines so alarming I have trouble thinking clearly. What do I think the really important, consequential issues are for humanity for the next hundred years?  Climate change and environmental destruction generally; the threat of some catastrophic, global war and/or the use, somewhere, of weapons of mass destruction. I guess number three would be: inequality and the threat it poses for the stability of societies and political orders, long-term. Everything else bad looks a lot smaller – more super-structural – than these three. I don’t have a lot of bright thoughts about any of the three. My poor brain likes to think about smaller, nicer things.

So what do you think? Am I right those are the big three? Are we screwed, long-term, because of them? Are you a pessimist or an optimist about the survival of humanity, the continuation of civilization in something like the form we know, past the next 100 years?

I read the same piece by Jacob Levy that Chris liked, but didn’t agree with the core argument. Below the fold, why: [click to continue…]

I got into a bit of a twitter fight with the always interesting Branko Milanovic yesterday. It was a second-hand fight, because he’d already been involved in one with Kate Raworth and had blogged about that. What was interesting to me was how Milanovic believed some things to be not only true, but obviously true, which I thought not just false but obviously false.

Milanovic’s claim is that [limitless economic growth is both necessary and desirable in today’s societies](http://glineq.blogspot.co.uk/2017/07/inevitability-of-need-for-economic.html). In fact, he puts the claim in the negative:

> De-emphasizing growth is not desirable, and perhaps more importantly, is utterly unrealizable in societies like our modern societies.

He may be right or wrong about that. If such growth implies increased consumption of resources, then that’s a pretty bleak prospect for anyone who believes in ecological limits, worries about heat death from climate change and the like.

Still, more interesting to me was his reasoning:

> the really important counter-argument to Kate is that her proposal fails to acknowledge the nature of today’s capitalist economies. They are built on two “fundaments”: (a) at the individual level, greed and the insatiable desire for more, and (b) on the collective level, competition as a means to achieve more. These are not necessarily most attractive ethical characteristics for either individuals or collectives but they are indispensable for capitalism to function—they provide the engine that pushes it ever further. … This extreme commodification is obviously linked with insatiability of our needs and by our desire to climb up in hierarchical rankings. Since today’s uber-capitalism accepts only one ranking criterion, money (and since all other possible ranking criteria can be, through commodification, converted into the money-metric), the desire for higher societal rank is almost entirely identified with the desire for higher income. And if everybody wants to have higher income, how can we then argue they our society should cease to place a premium on economic growth …. ?
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Jacob T. Levy [has written a really interesting piece](https://niskanencenter.org/blog/sovereign-myth/) for the Niskanen Center, which has at its centre the myth that the postwar era was one of sovereign and national democratic control and the fantasy that’s what we need to restore, a fantasy that fuels both the current wave of right-wing populism but is also present in *some* of the thinking around Jeremy Corbyn.

> The imagined Golden Age in these kinds of stories of the fall from democratic grace is the postwar era; it’s often referred to as les trente glorieuses, the thirty glorious years of high economic growth, broadly distributed, during which most Western market democracies built substantial welfare and regulative states after World War II. The chronology varies from one country to another, but roughly speaking the Golden Age is taken to have ended sometime around 1970-75, opening political space for a very different political-economic model to take hold — with the election of Thatcher and Reagan, and the reconciliation of Mitterrand’s Socialist government in France to the market. … The people [now] want to take back control of their economies and their societies. Thus, to critics of neoliberalism, the populist upsurge is a kind of dark morality play; we’re being punished for Margaret Thatcher’s sins.

In the lens of Levy’s piece, UKIP and Trump, Theresa May, David Goodhart and “Liberal” Brexiteers like Carswell and Hannan are on the same side of a key dividing line *together* with some left-Rawlsians in political philosophy, and other “relational egalitarians”, with people like David Miller, with Blue Labour, with the Furedites with their enthusiasm for national sovereignty, with Lexiters and national-sovereigntist socialism-in-one-country types like John McDonnell and Jean-Luc Mélenchon. On the other side of that line are cosmopolitans of various stripes and with seriously differing attitudes among themselves to “capitalism”, to property and markets. Sitting uncomfortably in the middle are some of the Labour “mainstream”, the US Democrats, and people like Macron, who want to hang onto the postwar international order but are nevertheless wedded to the nation state and the possibility of control in ways that foster the myth.

Whilst nation states may be unable to produce the level of control for democratic electorates that they falsely promise, they are rather good at classifying, organizing, excluding and generally bullying people, with miserable effects for the people and their families who don’t fit into the neat little containers of nationality and citizenship or who would challenge them. The people in the sovereigntist and middle groups have very different ideas about what they’d do with state power, of course, — some of them benign in aspiration — but they all want to bend state power to the production of their pet outcomes on behalf of democratic electorates within which the interests of the “national”, the ethnically dominant and the sedentary are over-represented compared to all the people who don’t fit. In my view, the renewed fostering of the “we” who want control and to take charge of “our” borders and “our” economy carries serious dangers for those others.

To misquote Benjamin Franklin and others, the only certainties in economic life are debt and taxes. Among the themes of political struggle, fights over debt (demands from creditors to be paid in the terms they expect, and from debtors to be relieved from unfair burdens) and taxes (who should pay them and how should the resulting revenue be spent) have always been central.

I mentioned in a comment recently, that Pro-debtor politics is always in competition with social democracy, and a couple of people asked for more explanation.
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This is the second in a series of projected posts that try to look at the Trump administration and right wing populism through the lens of different books (the first – on civil society – is here). The last post was mostly riffing on Ernest Gellner. Today, it’s another middle-European exile intellectual – Karl Polanyi. [click to continue…]

That’s the title of my latest piece in The Guardian. There are two key points

First, in terms of effective tax rates and tax paid, any means-tested Guaranteed Minimum Income can be replicated by a non-tested Universal Basic Income, and vice versa

Second, for a number of reasons, it would be better to begin by expanding access to an adequate Basic income (in Australia, the Age Pension is an obvious benchmark) rather than starting with a small universal payment and then increasing it to a level sufficient to live on.

This FT article is pretty interesting:

The classic example of industrial-era price fixing dates back to a series of dinners hosted amid the 1907 financial panic by Elbert Gary, then chairman of US Steel. In a narrow first-floor ballroom at New York’s Waldorf Astoria Hotel, men controlling 90 per cent of the nation’s steel output revealed to each other their respective wage rates, prices and “all information concerning their business”, one attendee recalled. Gary’s aim was to stabilise falling prices. The government later sued, saying that the dinner talks — the first of several over a four-year period — showed that US Steel was an illegal monopoly.

Algorithms render obsolete the need for such face-to-face plotting. Pricing tools scour the internet for competitors’ prices, prowl proprietary databases for relevant historical demand data, analyse digitised information and arrive at pricing solutions within milliseconds — far faster than any flesh-and-blood merchant could. That should, in theory, result in lower prices and wider consumer choice. Algorithms raise antitrust concerns only in certain circumstances, such as when they are designed explicitly to facilitate collusion or parallel pricing moves by competitors.

… a German software application that tracks petrol-pump prices. Preliminary results suggest that the app discourages price-cutting by retailers, keeping prices higher than they otherwise would have been. As the algorithm instantly detects a petrol station price cut, allowing competitors to match the new price before consumers can shift to the discounter, there is no incentive for any vendor to cut in the first place.

“Algorithms are sharing information so quickly that consumers are not aware of the competition,” says Mr Stucke. “Two gas stations that are across the street from each other are already familiar with this.” This episode suggests that the availability of perfect information, a hallmark of free market theory, might harm rather than empower consumers. If the concern is borne out, a central assumption of the digital economy — that technology lowers prices and expands choices — could be upended.

The argument here, if it is right, is twofold. One – that even without direct collusion, firms’ best strategy may be to act as if they are colluding by maintaining higher prices. Firms have a much weaker temptation to ‘defect’ from an entirely implicit bargain by lowering their prices so as to attract more customers, since there are unlikely to be significant gains from so doing, even in the short run. The plausible equilibrium is something that might be described as distributed oligopoly. Harrison White once defined a market as being a “tangible clique of producing firms, observing each other in the context of an aggregate set of buyers.” With super-cheap information, it doesn’t have to be a clique any more to be tangible.

The second is that where there is direct collusion, the information burden on regulators is much higher. For example, one may plausibly imagine that oligopoly-type outcomes might emerge as a second-order outcome of the aggregated behavior of automated agents. One might also imagine that it might be possible artfully to tweak these agents’ behavior in such a way that this will indeed be the most likely result. However, proving ex post that this was indeed the intent will likely at best require a ton of forensic resources, and at worst may be effectively impossible.

NB that both of these can happen entirely independently of traditional arguments about concentration and monopoly/oligopoly – even if Amazon, Google, Facebook, Uber etc suddenly and miraculously disappeared, these kinds of distributed or occulted oligopoly problems would be untouched. If you take this set of claims seriously (the evidence presented in the FT piece still looks tentative tentative), then the most fundamental problem that the Internet poses is not one of network advantage, increasing returns to scale and so on advantaging big players (since, with a non-supine anti-trust authority, these could in principle be addressed). It’s the problem of how radically cheaper communication makes new forms of implicit and explicit collusion possible at scale, squeezing consumers.

The other day, [an article by Chris Deerin](http://capx.co/its-official-western-politics-is-now-defunct/), a writer for the Scottish Daily Mail, appeared on my twitter timeline, retweeted and endorsed by several people I respect. The article argued Trump and Brexit mean that “liberal progressives” have lost and that “the model that has more or less dominated Western politics for the past three decades is defunct. It could not be more dead.” “We” misused that hegemony and are responsible for our own downfall:

> We used our hegemony to take down barriers and borders, to connect and build, to (yes) line our own pockets and smugly luxuriate in the goodness of our ideas and intentions. Meantime, we forgot about those who weren’t able to take part, who weren’t benefiting, to whom free trade and open borders meant greater hardship and uneasy cultural compromises. Or, let’s be honest, we didn’t forget – we just chose to conveniently ignore. We stopped asking for their permission, ploughed on through the warning signs, and fell off the end of the road.

Now “liberal” is a funny old word, mostly used as an insult these days by the Jacobin crowd on the one hand and conservatives on the other. Still, I can’t help but feel that my politics is being condemned here as infeasible and dead whilst wondering whether it is in fact true that I’ve enjoyed such “hegemony” for the past 30 years, because that certainly doesn’t gel with my experience.
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At the moment, I’m reading my way through David Miller’s new *Strangers in our Midst* and also getting very exercised about the UK’s Brexit referendum (to the point where I’m waking at night and worrying about it). My siblings and I have all benefited from the EU’s free movement rights, my children both have non-British EU partners, we think of ourselves as Europeans. So for me, the threat of Brexit is a threat of lost identity, of something that has been there all my adult life just disappearing overnight. And so I’m feeling pretty resentful towards my fellow citizens who might vote to cut that tie and thereby endanger the security and family life of millions of EU citizens in the UK and UK citizens elsewhere in the EU.

One of Miller’s arguments is a familiar one about social trust, about how welfare states depend for their stability on such trust and that the increasing diversity that immigration brings tends to undermine support for redistributive programmes. This lack of trust gets expressed in anger about stories that immigrants are ahead in the queue for social housing, that they are a drain on health and education services, that they are getting “something for nothing”, and so forth. Needless to say, most of such stories are false. Nevertheless, there may be elements in the design of the UK’s welfare state and its relatively non-contributory character that fuel such anxieties.

Here’s the thing. Those voting for Brexit out of resentment against immigration are disproportionately the elderly poor whites who don’t pay much in but who benefit from those public services. A predictable consequence of them getting what they want is that the fiscal base for those services will be eroded and that either they will have to be cut or taxes will have to be increased. This is because those EU immigrants are, in fact, paying more in taxes than they are taking in services. (Actually, the UK is free-riding in a big way, as it never paid for the cost of educating and training those workers.)

When I take those political affiliation surveys, I always say I’m willing to pay higher taxes. But now the devil on my shoulder is saying “why should you pay higher taxes to replace the taxes that were paid by EU migrants? Those idiots have brought it on themselves, let them now suffer the consequences”. An ugly thought, but I’m guessing that if I’m having it then I’m not alone. The UK’s EU referendum has eroded social trust more than immigration per se ever did. It poses the question of what citizens owe to one another in pretty stark terms. If people could mitigate the need for higher taxes by accepting immigrants and they choose not to do so, why should their wealthier fellow citizens bear the cost of their choices?