Category: Political Science
Sentences to ponder
Felix Salmon writes:
Remember too that when you have a progressive tax system, especially when there are surcharges on people making seven-figure incomes, you also have a system where for any given level of national income, the greater the inequality, the greater the government’s tax revenues. And indeed federal revenues have been rising faster than median wages for decades now, thanks to the rich getting ever richer.
Given the government’s insatiable appetite for cash, it’s only natural that it would prefer to tax plutocrats, spending some of that money on poorer Americans, rather than move to a world where poorer Americans earn more (but still don’t pay that much in taxes), and the plutocrats earn less, depriving the national fisc of untold billions in revenue.
The government’s interests, then, are naturally aligned with those of the plutocrats – and when that happens, the chances of change naturally drop to zero.
Whenever there's an MR post categorized under both "economics" and "political science," it's usually pretty brutal.
The future of Africa?
I'm still thinking about this fascinating article from the NYT magazine last week, titled "Is There Such a Thing as Agro-Imperialism?". Here are two excerpts:
…one of the earth’s last large reserves of underused land is the billion-acre Guinea Savannah zone, a crescent-shaped swath that runs east across Africa all the way to Ethiopia, and southward to Congo and Angola.
And:
…as of earlier this year, the Ethiopian government had approved deals totaling around 1.5 million acres, while the country’s investment agency reports that it has approved 815 foreign-financed agricultural projects since 2007, nearly doubling the number registered in the entire previous decade. But that’s far from a complete picture. While the details of a few arrangements have leaked out, like one Saudi consortium’s plans to spend $100 million to grow wheat, barley and rice, many others remain undisclosed, and Addis Ababa has been awash in rumors of Arab moneymen who supposedly rent planes, pick out fertile tracts and cut deals.
Foreign investment can do wonders but the interaction between such investment and corrupt foreign governments can also be negative if workers and citizens are not granted adequate rights. This article caused me to revaluate possible paths for some African futures. The Coase theorem is finally kicking in. I see corrupt politicians deciding it is more profitable, and also more secure, to "sell off" their countries than to oppress them in the traditional manner. I see a new kind of tax farming, based on the extraction and exploitation of resources and raw materials, with African labor along for the ride. It will mean higher living standards and better infrastructure, but probably not along a path that will look very appealing to most Western observers.
*Unchecked and Unbalanced*
This book represents an attempt to explore the problem of the discrepancy between the trends in two phenomena: knowledge is becoming more diffuse, while political power is becoming more concentrated.
That's the first sentence of Arnold Kling's second new book; in another context I might have called it "Words of Wisdom." My blurb on the back was:
This is essential reading on the political dangers facing us today and the risk of excess centralization. Arnold Kling is one of my favorite commentators.
Here Arnold explains his two books.
How worried should we be about the deficit?
There have been many posts on this topic lately, start with Paul Krugman and Brad DeLong if you need to catch up. Today I have a few simple points:
1. Even if "it is fine to borrow more" is the most likely scenario, it is not the only scenario. Let's take a page from Marty Weitzman on climate change. The worst-case scenarios matter too, because they can be very, very bad. We need to think probabilistically about this issue.
2. Are there current intelligent discussions of the implied interest rate volatility embedded in current options prices? If we are looking for market tests, why not start there? Focusing on the point estimate of the market interest rate(s) discourages you from thinking probabilistically.
3. I know less about Belgium but I am not reassured by Krugman's point that "Italy can do it." I and many other observers consider Italy's economy to be a basket case which will only get worse. Nor is Japan in a satisfactory place, economically speaking.
4. Krugman writes: "Belgium is politically weak because of the linguistic divide; Italy is
politically weak because it’s Italy. If these countries can run up
debts of more than 100 percent of GDP without being destroyed by bond
vigilantes, so can we."
I would interpret this evidence differently. A high deficit often is an unfavorable symptom of bad politics, even if you think the high deficit is economically OK on its own terms. It's a sign that you have dysfunctional institutions and decision-making procedures, as indeed they do in Belgium and Italy. I believe that the not-always-swift American voter in fact understands high deficits — correctly — in this light. They don't hold theories about "crowding out," rather they sense something in the house must be rotten. And so they rail against deficits, as do some of their elected representatives. It's a more justified reaction than the pure economics alone can illuminate.
When water regularly overflows from your toilet, you want the toilet fixed, whether or not the water is doing harm.
Monitoring the bureaucracy in Dubai
Sheikh Mohammed oversees a cadre of undercover mystery shoppers…They pose as prickly members of the public seeking the government's help. Their reports are instrumental in firings and promotions. No bureaucrat can be sure the demanding customer across the counter isn't secretly reporting to the boss. Once in a while, Sheikh Mohammed turns up at 7:30 on surprise inspections. He's been known to fire late-arriving managers on the spot.
That is from Jim Krane's fascinating City of Gold: Dubai and the Dream of Capitalism. This is pretty clearly the best book on Dubai. It has an insider's perspective but is also analytical. Recommended
Political vs economic competition, or why a two-party system can be OK
Max Kaehn, an occasional MR commentator, expressed a common sentiment when he wrote:
You think a voting system that sticks us with a two-party cartel instead of a diverse market in political representatives isn’t a major problem? Are you sure you’re an economist?
Here are a few reasons why political competition isn't the same as economic competition:
1. Economic competition lowers costs. For the average worker, it cost a month's wages to buy a book in eighteenth century England and today it might cost well under an hour's wage. The competitive incentive to use and introduce new technologies drove that change. Political competition may support cost-reduction enterprises in an indirect manner, by providing good policy and spurring the private sector, but the mere ability to supply candidates and parties at lower cost is no great gain.
2. Having lots of parties means you get coalition government. This works fine in many countries but again it is not to be confused with economic competition. Coalition government means that say 39 percent of the electorate gets its way on many issues, while 13 percent of the electorate — as represented by the minor partner in the coalition — gets its way on a small number of issues. Whatever benefits that arrangement may have, they do not especially resemble the virtues of economic competition.
3. Many people think that greater inter-party competition, and/or more political parties, will help their favored proposals. Usually they are wrong and they would do better to realize that their ideas simply aren't very popular or persuasive.
4. Often the U.S. system is best understood as a "no-party" system, albeit not at the current moment, not yet at least. The bigger a party gets, often the less disciplined it will be.
5. Stronger electoral competition, in many cases, brings outcomes closer to "the median voter or whatever else is your theory of political equilibrium." That's better than autocracy, but again there are limits on how beneficial that process can be. It's not like economic competition where you get ongoing cost reductions in a manner which saves lives, brings fun, and enriches millions.
The bottom line: Political competition is better than autocracy, but its benefits are not well understood by a comparison with economic competition.
Range voting
A few readers asked me to discuss range voting. Wikipedia defines it as following:
Range voting (also called ratings summation, average voting, cardinal ratings, score voting, 0–99 voting, or the score system or point system) is a voting system for one-seat elections under which voters score each candidate, the scores are added up, and the candidate with the highest score wins. Range voting was used in all public elections in Ancient Sparta in the form of measuring how loud the crowd shouted for different candidates.[1] Approval voting can be considered to be range voting with only 2 levels (approved (1) and disapproved (0)).
The main question to get out of your head is whether or not range voting satisfies Arrow's Impossibility Theorem. (In fact it doesn't, most forms of range voting violate the independence of irrelevant alternatives, but don't worry about that!). There's no major reason why a democratic system should follow all of Arrow's axioms as defined across universal domain, which means you have to rule out the very possibility of paradoxes. Can anyone do that? No, not even when you're deciding which book to read next. (But should you stop reading? No.) We do, however, care if the system can:
1. Deliver decent economic growth and an acceptable level of civil liberties.
2. Build consensus and legitimacy going forward, and
3. Toss out the truly bad politicians.
Ideally, we'd even like:
4. The democratic process itself educates people, raises the level of discourse, and makes for a better society.
On those counts, it is not clear what advantage range voting brings over either a two-party winner-take-all system or some form of proportional representation. Do we really need to count the preference intensity of voters? That could sooner be harmful in extreme situations. Do we really need to teach voters complicated aggregation systems? The relatively well-educated Germans used a "vote twice but ultimately only the party vote counts" form of PR and for decades most of them never understood it and now they are changing it, finally.
Most countries don't use range voting. Ireland and Tasmania have had some experience with the Single Transferable Vote (STV) system. What happens is that a bunch of candidates run for each post, party identification is weak, and reps emphasize constituency service. That's probably the major dominant effect, namely that most systems of range voting weaken political parties.
The bottom line: Range voting is a solution in search of a problem. The main problems with democracy include poorly informed, irrational, and short-term voters and politicians. Range voting doesn't cure any of those and arguably by weakening party affiliation it makes some of them worse.
A public choice theory of the filibuster
Senators like the filibuster. It keeps them relevant when they're in the minority. It makes their chamber a lot more powerful than in the House, and ensures that the leadership has to listen to their concerns more closely.
That's Ezra Klein, here is more.
Whoops!
If you believed all the talk from Chrysler about how our tax dollars would help finance its fast-track electric-vehicle future, you're in for a big disappointment.
Chrysler has disbanded the engineering team that was trying to bring three electric models to market as a rush job, Automotive News reports today. Chrysler cited its devotion to electric vehicles as one of the key reasons why the Obama administration and Congress needed to give it $12.5 billion in bailout money, the News points out.
The link is here and I thank John Nye for the pointer.
China claim of the day
If China remains culturally closed, the Chinese Century will never come to pass. Instead, the United States–a country that has struggled with race and racism for centuries, and in the process has become more culturally open and resilient–will dominate this century as it did the last.
That's from Reihan Salaam, who discusses how far the problem of Asian racism is from being solved.
How to run a successful blog
…They understand that public opinion matters…they understand that it’s a little harder to criticize someone after you’ve met him and he’s given you free cookies…they couldn't possibly have expected to change anybody’s mind, they understand that it’s better to talk to your critics than to avoid them. Waldman talks about some of the techniques used to make the attendees [readers] feel like they were being treated as special guests.
Whoops! That's not advice for running a successful blog. Those are James Kwak's comments on how Treasury tries to trick visiting bloggers. We bloggers should know. We give away lots of free stuff too, more than cookies even if it is sometimes sour rather than sweet.
Impressions from Treasury
I will enumerate a few (you can trace other accounts here):
1. Tim Geithner is very smart and he was conceptually stronger than one might have expected.
2. I believe that the long, L-shaped hallways encourage "visits to offices" rather than hallway conversations; this is a speculation and perhaps some reader can confirm or deny it.
3. The quality of the painted portraits of Treasury Secretaries declines as time passes.
4. The free cookies were good and fresh, with a warm, fluid chocolate interior. There was water to drink, but no mineral water.
5. For all their talk about outreach, etc. I believe at least a few of them wanted to hear from an outside source whether we think they are totally ****ed or not. They heard.
6. I worry less than did some of the other bloggers about the Treasury awareness of major economic problems going forward. As governmental institutions go, Treasury has a real incentive to a) worry about the fiscal future, and b) worry about worst-case scenarios, including for financial institutions. Their daily interaction with the bond market gives them a longer time horizon and a more economics-friendly perspective than most of their bureaucratic counterparts. The problem is Congress. For instance if someone at Treasury had a Yves Smith view of the banking system, they could not much act on it.
7. "You guys are a welcome change of pace," or something like that, remarked one senior Treasury official. Although this was flattery, I believe it was meant sincerely. They were also a welcome change of pace.
8. I asked one senior Treasury official which book, thinker, or economic theorist had most shaped his thinking about the financial crisis. In the ensuing discussion the book Lords of Finance was recommended, though I could not say whether it was intended as a totally direct answer to the question as stated.
I have a bad feeling about this
Here is the latest on Tysons redevelopment:
Remaking Tysons Corner
into the second city of Washington will take a lot more than a new
Metro line and a downtown of tightly clustered buildings designed for
walking. It will take almost $15 billion in new roads and public
transportation.
Even in this age of sticker shock, that's a lot of money for a local project. You'll recall my earlier prediction that Tysons will get the road widenings but not enough of the other changes needed to make it a walkable downtown; the road widenings will on net make things worse. Call me an apologist for suburbia if you wish, but I sooner view myself as an apologist for public choice theory. Some parts of the redesign will be more popular than others and we will get a very unbalanced mix of reforms. This is indeed what I predict:
The numbers also have prompted some proponents of dense development in
Tysons to argue that if the county pushes too many costly road
improvements and makes room for more cars, the vision could unravel.
To simply insist that it "should be different," or to charge that I do not spend enough time criticizing interstate highway subsidies, is to miss the public choice point. Now that the stimulus is up and running, you can see road widenings all over NoVa and they will be finished. Who will put up the money for the rest of Tysons reform?
For funding, Fairfax officials say, they will look to the Obama
administration, which is committed to subsidizing growth projects in
urban areas. They hold out little hope from the Virginia Department of
Transportation, which this year slashed the county allocation for
secondary roads to zero. Given the millions of dollars Northern
Virginia has gotten for big projects such as the HOT lanes and new
Woodrow Wilson Bridge, "More state funding is pretty much politically
doomed," said Kathy Ichter, the county's chief of transportation
planning.
Stay tuned…
Words of wisdom, from David Leonhardt
“If the long-term issue is entitlement reform,” says Joel Slemrod, a University of Michigan ist, “the fact that the political system cannot say no to $250 checks to elderly people is a bad sign.”
The full coverage is here.
Successful government bureaucracies
Jason asks:
What are some examples of successful government bureaucracies?
Wars aside, here is a short and very incomplete list: the NIH, the Manhattan Project, U.C. Berkeley, the University of Michigan, Fairfax County, the World Trade Organization, the urban planners of postwar Germany, some of the Victorian public works and public health commissions, most of what goes on in Singapore, anywhere that J.S. Bach worked.
The European Union has been very good for eastern Europe. I'll leave aside the health care issue because we've debated that plenty already. The real question is what all these examples have in common.