Category: Political Science

Authoritarianism

A loyal MR reader asks:

Is authoritarianism excusable or permissible – for any length of time – if it is justified by a need for economic growth/reform (e.g. Lee Kwan Yew, Pinochet, Park Chung Hee)?   

"Compared to what" is the first question.  At the margin, individuals favoring democratization did the right thing in opposing those dictators.  More democratic versions of those regimes would have been better.  That said, I don’t think absolute majoritarian democracy in Singapore, from day one, would have been better than the reign of Lee.  It would have led to ethnic voting and the quick end of democracy, in destabilizing fashion.  Yet now Singapore, a successful and well-established country, can and should become more democratic.  When it comes to Pinochet, we should condemn part of the regime and praise some of the parts concerning economic policy.  Viewing Pinochet purely as an individual moral agent, he was quite wrong to act the way he did.  If you ask "would I be willing to endanger the good economic reforms by eschewing torture to enforce the rule of the regime," the answer is yes I would want to immediately end the torture and take that risk.

#43 in a series of 50.

Expand the AMT!

We shouldn’t get rid of the AMT we should expand it.  The AMT is a flat tax, it’s broad-based (few loopholes), it doesn’t allow for deduction of state and local taxes (which only increases the incentive of states and localities to raise taxes) and it’s simple.  The AMT should be reformed along the edges e.g. by indexing it to inflation (after more people are covered!) but overall it’s a much better tax than the current income tax.

I assume that readers know that I am not in favor of raising taxes but let me be clear.  We should expand the AMT but get rid of the income tax.

Who do you want for the GOP ticket in ’08 Dr. Cowen?

So asks Chris in the comments.  Right now I don’t have favored candidates in any of the parties, either here or abroad.  Furthermore I will deliberately resist developing such favorites, and insofar as I can’t help having them, I won’t tell you who they are.  I don’t mean this in a libertarian "they are all crooks" sort of way, though that may be true.  It still really does matter who governs, and so we should take this process of candidate evaluation seriously.  It is just that I don’t want to be part of it.

As a blogger rather than decision-maker I am allowed my small space for protest.  I wish to protest our excessive tendency to choose sides with one group of people rather than another.  I wish to protest excess partisanship, and in particular excess partisanship motivated by the construction of "imaginary good" and "imaginary bad" political personalities.

As biological creatures we are programmed to respond to faces, voices, names, and identities.  We praise them, follow them, condemn them, figure out what side they are on, just like good ol’ East African Plains Apes.  Who is not excited to see a President of the United States attending a Wizards game in a nearby box?  I know I was, and I didn’t even vote for him.  Chimps will give up bananas, just to be able to gaze at photos of high-status other chimps.

I would like for my posts on MR to be one small space where these necessary but ignoble human tendencies toward personalization are resisted and sometimes even criticized.  I am biased, just as you are.  But for aesthetic reasons I would rather my biases be played out in the realm of ideas, rather than directed at people.  And at the margin, some of you should be just a little more like me.

Larry Kotlikoff’s plan to stabilize Iraq

Here goes:

The Iraqi government should institute a draft of all Iraqi men between the
ages of 18 and 35.  This is the demographic most responsible for the violence. 
The removal of these 3 million men from the cities and countryside to army
barracks would likely bring an immediate end to Iraq’s horrific nightmare.  Any
men older than 35 suspected of involvement in terrorist or insurgent acts would
also be enlisted…The role of the enlarged Iraqi army would not involve bearing arms or
training in the use of arms. Rather the role would be to reconstruct the
country.

Were the United States to pay 3 million Iraqi soldiers $10,000 yearly, the
bill would be $30 billion.  This is a small amount relative to the savings it
would accrue from leaving the country.  It would also make service in the Iraqi
army highly desirable…

It is called a draft, but I think of it as an allowance to go play in the sand, a’la Coase.  Here is more.

The Democratic party wants to help me

House Democratic leaders, in an effort to upstage Republicans on the issue of tax cuts, are preparing legislation that would permanently shield all but the very richest taxpayers from the alternative minimum tax, which is likely to affect tens of millions of families as early as next year if it is left unchanged.

Here is more.  Of course this rather non-egalitarian policy, very costly in terms of revenue, is the Democratic attempt to reward their wealthy urban and suburban supporters.  One response — common in the contemporary blogosphere — is to press the Democrats to become more and more "progressive."  Another response, more popular on MarginalRevolution.com, is to accept modest aspirations for politics and look to entrepreneurship, trade, and productivity growth for progressive gains.

It was ugly what years and years of power did to the Republican Party.  The particular interest groups will differ, but I do not understand why the progressives expect anything better from the Democrats.

Economic heterogeneity and Latin America

A loyal MR reader tries to stop me from reaching #50:

Economic Development for the heterogeneous Latin America.  Or how the social, economic and cultural heterogeneity between and within Latin American countries affect their development prospects and/or strategies.  You have mentioned that a stronger (not bigger) state seems necessary; but does that mean different things for Bolivia, Guatemala, Ecuador and Peru, versus Colombia, El Salvador, Costa Rica, Paraguay and Argentina?

In response (non-response?) I’ll quote Jeff Sachs (this link is also an excellent piece on him):

I’m optimistic about Brazil.  And if you look at a map, being
optimistic about Brazil takes you a long way to being optimistic about
the whole of Latin America.  I don’t lose huge sleep over Latin America
– it’s at peace, it’s not riven by terrorism, it’s democratic and it
has made huge strides in human development.  What have been hugely
unequal and divided societies are becoming slowly more equal, and even
very deep ethnic and racial divisions are being ameliorated through
democratic politics.

I’ll add that Latin American states are usually a disaster when it comes to collecting taxes.  This might sound good from a libertarian point of view, but those governments instead resort to distortionary monopolies and corruption to raise revenue or capture political rents.  The solution is not higher taxes per se (governance improvements are also needed), but rather a series of sideways squiggles into the "greater accountability, more tax-based" modes of government.  That doesn’t come easy, and that is also why the usual recipe of privatization so frequently disappoints or backfires.  These territories have yet to build well-functioning nation-states.

Western-style neoclassical economics was designed for settings where national institutions are already in place.  In most of the world, they are not.  The question is not "market vs. government," but how to strengthen the norms and institutions that will build both markets and governments at the same time and in the right directions.  Along that dimension, Latin America is making real strides ahead, and that includes all of the countries listed in the initial query, with the possible exception of Bolivia.

#38 in a series of 50.

Why are free trade agreements “contagious”?

In Venice I read how the Japanese are concerned about the U.S.-South Korea free trade agreement, and might seek their own trade deal with the United States.  The Japanese are afraid of being "left out in the cold."  I’ve also read speculation that a South Korean trade agreement might make Congress look more favorably upon free trade agreements with Latin America.  So why might one free trade agreement lead to others?  I can think of a few hypotheses:

1. Free trade agreements lead to considerable amounts of trade diversion, not just more trade.  The "left out" countries fear that trade diversion and thus wish to cut their own bilateral deals.

2. Free trade agreements show that other governments have found a commitment to greater trade worthwhile.  This may signal that either that benefits of trade are especially high, or that anti-trade interest groups are especially weak.

3. There is a big copycat effect in politics and public opinion, as evidenced by the historical clustering of revolutions and reforms.

4. A bilateral free trade agreement means that the U.S. will regard South Korea as a closer political ally than before, and Japan (and others) wish to keep in step.  In particular Japan wishes to keep "first dibs" on U.S. military protection and be the "go-to" country in international fora and joint endeavors.

What have I left out?

Note that under #1, bilateral trade agreements might lead to inefficient trade diversion, but the resulting spread of trade agreements will reverse many of those costs.

Here is John Nye on the historical tendency of free trade agreements to prove contagious.  Here is Mark Thoma on trade diversion.

The bottom line: I haven’t read the details of the U.S.-South Korea agreement, but I suspect that in this setting even a highly imperfect trade agreement is a net plus.

Why do businessmen run for public office?

In Italy, on my way back home, these are the papers one’s thoughts turn to:

In immature democracies, businessmen run for public office to gain direct control over policy; in mature democracies they typically rely on other means of influence.  We develop a simple model to show that businessmen run for office only when two conditions hold.  First, as in many immature democracies, institutions that make reneging on campaign promises costly must be poorly developed.  In such environments, office holders have monopoly power that can be used to extract rents, and businessmen run to capture those rents.  Second, the returns to businessmen from policy influence must not be too large, as otherwise high rents from holding office draw professional politicians into the race, crowding out businessmen candidates.  Analysis of data on Russian gubernatorial elections supports these predictions.  Businessman candidates are less likely 1) in regions with high media freedom and government transparency, institutions that raise the cost of reneging on campaign promises, and 2) in regions where returns to policy influence measured by regional resource abundance are large, but only where media are unfree and government nontransparent.

Here is the paper.  From the same seminar series, here is a Jim Fearon paper on how democracy minimizes the cost of rebellion.

A simple model of Europe and America

Dictatorships are generally most brutal when the fear of being overthrown is strongest.  The most benevolent dictatorships, in relative terms, tend to have strong roots in the country’s social and economic power centers.  This would help explain, for instance, why the minority Sunni Saddam Hussein was so tyrannical against his potential opponents.  Without extreme oppression, he would have lost power and his life.

The optimistic scenario for Iraq was (way back when) that a Shiite autocracy, with broad-based public support, would be considerably less brutal.  Once in power, the ruling clique would find it much easier to stay in power without extreme brutality.  At least that is how the theory went.

In this view, the critical U.S. mistake was not disbanding the (largely Sunni) army, which was in any case inconsistent with the best available power structure.  The critical mistake was creating a government that had no real unity and no real chance of having power on the ground.

The pessimistic scenario is that there are no broad-based constituencies left, or perhaps there never were any in the first place.  Under the former case American policy has been far more harmful, in net terms, than under the latter case.  It is possible that our handling of the transition disbanded whatever broad-based groups were in place to eventually rule.  Or perhaps Saddam had already destroyed them.

Partition has a certain logic in this model.  But there is no one to effectively oversee the process of division and allocation, either for the population or the oil.  I would expect a good million or half million lives to be lost from the resulting slaughter and the forced migrations of population.

To repeat, I am not claiming this model is true.  But if it is false, it is worth thinking about what further assumptions should be added or which current assumptions should be dropped.

Addendum: Modeling the current Iraq is difficult for a few reasons.  It is rare for an occupying power to set up a democracy, so historical data are scarce.  In any case this is not the world of MacArthur and postwar Japan.  Nor is it the democracy of Anthony Downs or Arendt Lijphart.  For many unusual governmental forms, I start with the implicit models of Gordon Tullock’s Autocracy and the problems of stability and cycling autocratic coalitions.  But Iraq seems too far from stability for cycling to be the major problem.  The instability seems radically overdetermined, and that makes comparative statics difficult.

The closest parallel I can think of is Yugoslavia in the early 1990s, when relative stability gave way to bloodshed.  Fear encouraged a mental overinvestment in strategies of ethnic solidarity and many groups started launching pre-emptive attacks, leading to widening circles of violence and then greater fear.

There are many smart writers on Iraq, with varying degrees of knowledge and information.  I wish more of them would seek to provide a simple model of what is going on.

If you do leave comments, please focus on public choice issues rather than attacking or defending the war itself.

The Liberty not to be Subordinate

I once asked a wise professor of mine what the best thing about being a professor was.  He replied, "The fact that I can go into the office of the department chair, tell him he’s an #*$!%! and there’s not a damn thing he can do about it."  Shocked, I said, "but you’re a level headed, nice guy, you would never want to do that."  He replied "yeah, I never would, but the thought that I could if wanted to is worth a huge amount."

The lesson?  Liberty is not always an instrumental value subordinate to positive capabilities.