Understanding Demonic Policies

Matt Yglesias has a good post on the UK’s Triple Lock, which requires that UK pensions rise in line with whichever is highest: wages, inflation, or 2.5 percent. Luis Garicano calls this “the single stupidest policy in the entire Western world” — and I’d be inclined to agree, if only the competition weren’t so fierce.

The triple lock guarantees that pensioner incomes grow at the expense of everything else, and the mechanism bites hardest when the economy is weakest. During the 2009 financial crisis wages fell and inflation declined, for example, yet pensioner incomes rose by 2.5 percent! (Technically this was under a double-lock period; the triple lock came slightly later — as if the lesson from the crisis was that the guarantee hadn’t been generous enough.)

Now, as Yglesias notes, if voters were actually happy with pensioner income growing at the expense of worker income, that would be one thing. But no one seems happy with the result. The same pattern is clear in the United States:

As I wrote in January, there is a pattern in American politics where per capita benefits for elderly people have gotten consistently more generous in the 21st century even as the ratio of retired people to working-age people has risen.

This keeps happening because it’s evidently what the voters want. Making public policy more generous to senior citizens enjoys both broad support among the mass public and it’s something that elites in the two parties find acceptable even if neither side is particularly enthusiastic about it. But what makes it a dark pattern in my view is that voters seem incredibly grumpy about the results.

Nobody’s saying things have been going great in America over the past quarter century.

Instead, the right is obsessed with the idea that mysterious forces of fraud have run off with all the money, while the left has convinced itself that billionaires aren’t paying any taxes.

But it’s not some huge secret why it seems like the government keeps spending and spending without us getting any amazing new public services — it’s transfers to the elderly.

The contradictions of “Elderism” are an example of rational irrationality. Individual voters bears essentially no cost for holding inconsistent political beliefs — wanting generous pensions and robust public services and low taxes is essentially free, since no single vote determines the outcome. The irrationality is individually rational and collectively ruinous. Voters are not necessarily confused about what they want; they simply face no price for wanting incompatible things. Arrow’s impossibility theorem adds another layer: even if each voter held perfectly coherent preferences, there is no reliable procedure for aggregating them into a coherent social choice. The grumpiness Yglesias documents may not reflect hypocrisy so much as the incoherence of demanding that collective choice makes sense — collective choice cannot be rationalized by coherent preferences and thus it’s perfectly possible that democracy can simultaneously “choose” generous pensions and “demand” better services for workers, with no mechanism to register the contradiction until the bill arrives.