Category: Political Science
Paul Romer, ask and ye shall receive
For a man who likes the Kentucky Colonels, is that not how it ought to be? Reality now brings Caribbean Charter Islands:
The UK has resumed day-to-day control of the Turks and Caicos
islands amid ongoing allegations of widespread corruption in the
British overseas territory, the Foreign Office said tonight.
Local
government in the islands, which lie 500 miles south-east of Florida in
the Atlantic, will be suspended for up to two years while their affairs
are put back in "good order", according to the FCO.
The Islanders themselves are divided over the idea.
Charter Cities
Paul Romer's TED talk on charter cities is up and Romer is now writing more about the idea at his Charter Cities Blog. In the TED talk and on the blog Romer gives a "fanciful" example of how a charter city might work:
Imagine
that the United States and Cuba agree to disengage by closing the
military base and transferring local administrative control to Canada…
To
help the city flourish, the Canadians encourage immigration. It is a
place with Canadian judges and Mounties that happily accepts millions
of immigrants. Some of the new residents could be Cuban émigrés who
return from North America. Others might be Haitians who come work in
garment factories that firms no longer feel safe bringing into Haiti…
Initially,
the government of Cuba lets some of its citizens participate by
migrating to the new city. Over time, it encourages citizens to move
instead to a new city that it creates in a special economic zone
located right outside the charter city, just as the Mainland Chinese
let its citizens move into Shenzhen next to Hong Kong.
With
clear rules spelled out in the charter and enforced by the Canadian
judicial system, all the infrastructure for the new city is financed by
private investment. The Canadians pay for the government services they
provide (the legal, judicial, and regulatory systems, education, basic
health care) out of the gains in the value of the land in the
administrative zone. This, of course, creates the right incentives to
invest in education and health. Growth in human capital makes income
grow very rapidly, which makes the land in the zone even more valuable.
It's interesting to compare charter cities to Patri Friedman's concept of seasteading (Alex, Tyler).
Both charter cities and seasteading are motivated by the desire to
break out of conventional political arrangements and create a system
with much greater scope for innovation in rules.
Romer wants
charter cities built on uninhabited land (of which there is plenty),
seasteading is cities built on the sea (even more plentiful). Aside
from the obvious advantage of building on land, charter cities allow
current elites to buy-in and gain from the charter city (ala Shenzhen and in other ways)
and thus probably have a better chance of getting "on the ground."
Charter cities also address a key question about seasteading – will
governments regulate or takeover a successful seastead? A charter city
is an agreement between governments – Cuba agrees to let Canada
import Canadian rules onto a small portion of Cuban property. Cuba
could renege on the deal but it's going to be much harder for Cuba to
renege on Canada than for the U.S. government to regulate or otherwise
control seasteading.
By the way, the fact that Romer wants charter cities built on uninhabitated land with plenty of immigration from the charter nation goes some way to reducing the problem of nationalism that concerns Tyler and also the problem of transplanting legal institutions that concerns Arnold Kling.
We don't have many examples of charter cities in action but Hong Kong is a promising example. Despite nationalism, the agreement with Britain was accepted for over 100 years and it worked. Contra Tyler, we shouldn't think of what happened in 1997 as China
taking over Hong Kong but rather as the final element of Hong Kong taking
over China.
Seasteading does have one big advantage over charter
cities. Seasteading is more radical but it is more open, less
tied to elites, and more flexible so, if it works, it is a better design for what Romer
calls innovation in rules formation.
Matt Yglesias outlines an intelligent version of libertarianism
Picking up my previous request, Matt responds:
I think libertarianism is best understood as a kind of esoteric
doctrine. There’s strong evidence to believe that people who
overestimate their own efficacy in life wind up doing better than those
with more accurate perceptions. It follows that it’s strongly desirable
for society to be organized so as to bolster myths of meritocracy. This
will lead to individual instances of injustice and to a lot of
apparently preventable suffering, but over the long-term the aggregate
impact of growth (which, of course, compounds) on human welfare will
swamp this as long as we can maintain the spirit of capitalism.
A separate issue is the welfare of the world’s poorest. Progressive
internationalists have this kind of dopey vision of trying to make
trade and immigration policy win-win-win for everyone by using
redistributive taxation to ensure that everyone shares in the benefits.
That sounds nice, but it means that in addition to trying to conquer
people’s racist and nationalistic instincts you’re also
engaged in a fight to pry wealth out of the hands of the wealthy and
powerful. As a political strategy, it doesn’t really make much sense.
Why not simply join forces with the wealthy and powerful so
as to create a political coalition that’s plausibly capable of
overwhelming xenophobia and creating borders that are relatively open
to the flow of goods and labor?
That is exactly the kind of response I was hoping for and both points make sense to me. Here is a related Matt post on progressivism and America.
I would add that Matt's description is consistent with my belief that the United States should be less progressive than the polities of north and western Europe. For better or worse, most Europeans are more skeptical of claims of capitalist meritocracy and thus it is harder for them to realize gains by internalizing such an ethic. Furthermore the non-progressive nature of many aspects of America — by encouraging economic dynamism — helps Europe to be as progressive as it is. That's an argument for American capitalism that both libertarians and progressives ought to feel slightly uncomfortable with, yet in my view it is compelling.
What is progressivism?
Arnold Kling asks this question, so I thought I'd try a stab at it, but trying to cast progressivism in the best possible light. Of course my answer is not exclusive to Arnold's, as we might both be right about the elephant. From an outsider's perspective, here is my take on what progressives believe or perhaps should believe:
1. There exists a better way and that is shown by the very successful polities of northwestern Europe and near-Europe. We know that way can work, even if it is sometimes hard to implement.
2. Progressive policies offer more scope for individualism and some kinds of freedom. Greater security gives people a greater chance to develop themselves as individuals in important spheres of life, not just money-making and risk protection and winning relative status games.
3. Determinism holds and tales of capitalist meritocracy are an illusion, to be kept only insofar as they are useful.
4. The needs of the neediest ought to be our top priority, as variations in the well-being of other individuals are usually small by comparison, at least in the United States.
5. U.S. policy is not generally controlled by egalitarian interests, So it is doing "God's work" to push for such an egalitarian emphasis at the margin. At the very least it will improve the quality of discourse, even if the U.S. never actually arrives in "progressive-land."
6. Limiting inequality will do more to check bad governance than will the quixotic libertarian attempt to limit the size of government.
7. Skepticism about the public sector is by no means altogether unwarranted, yet true redistributive programs are possible and they can work and be politically popular; we even have some here in the United States.
8. We should support free trade, more immigration, and more foreign aid, but the nation-state will remain the fundamental locus for redistribution. That means helping the poor at home more than abroad; a decision to do otherwise would destroy political equilibrium and make everyone worse off.
9. State and local governments are fundamentally to be mistrusted (recall segregation) and thus we should transfer more power to the federal government, which tends to be bluntly and grossly egalitarian, when it manages to be egalitarian at all. That is OK.
10. The United States has to struggle mightily to meet the progressive standards of western Europe and we should not equate the two regions in terms of their operation or capabilities. Yet there is an alternative strand in American history, if not always a dominant one, showing that progressive change is possible. Think Upton Sinclair and Martin Luther King and the organizers of early labor unions.
11. The evidence on economic growth is murky and so it is not clear that doing any of this carries much of a penalty in terms of future growth. In some regards it will enhance the especially beneficial sides of economic growth, even if it does not boost growth overall.
In due time I'll be writing more systematically about why those views are not, on the whole, my own. But not today!
It would be interesting to see a progressive try to sum up an intelligent version of libertarianism.
Department of Unintended Consequences, installment #539
We show that these types of international action on child labor tend to
lower domestic political support within developing countries for
banning child labor.
Here is much more.
Should Bernanke be reappointed?
Mark Thoma says yes (with links to a debate) and I think his analysis is on the mark. Nonetheless he is leaving out one very strong point in favor of his view. The Obama administration has done plenty of interfering with the car companies and also with executive compensation. These episodes make me nervous. Reappointing Bernanke, who is from an opposing party, is a signal that such meddling won't be applied to the Fed and that the Fed will be allowed to regain some of its autonomy vis-a-vis Treasury. Not reappointing Bernanke would make the markets very nervous about the future autonomy of the Fed. (Even if Alex is right more generally about central bank independence, I don't want the current Fed to resemble General Motors or Chrysler.) There's lots of talent in the current White House, but given how much policy has been run from the White House, it would be a bad signal to look to the White House for a Fed pick. Many of the other possible picks seem to be largely untested at a major league level. You can complain about Bernanke all you want but his likely successors probably have the same list of drawbacks that perhaps you are ascribing to him.
So yes, Bernanke should be reappointed.
Don’t take this the wrong way
The prospects for health care reform seem to be dimming. If I were a progressive I would be wondering right now whether Medicare was a tactical mistake. The passage of Medicare meant that most old people get government-provided health care coverage. Yet the way to get things done in this country, politically, is to get old people behind them. Further health care reform doesn't now seem to promise much to old people, except spending cuts on them. Given their limited time horizons, old people don't so much value system-wide improvements, which invariably take some while to pay off.
If Medicare had not been passed, might this country have instituted universal health care coverage sometime in the 1970s?
Intrade vs. MSM: Sotomayor Nomination
What tells you more about the Sotomayor nomination, all of the chatter and debate in the MSM over her "controversial" remarks or the single number from intrade: bids at 98,5, i.e. an estimated probability of confirmation of 98.5% (as of July 14, 11:12 pm EST)?
Loyal-reader Jim Ward writes:
Do reporters and news Agencies even know to check the betting markets? Or do they just ignore it, because “X sure to happen, nothing to see” is not a story?
Or they don’t want to seem biased, and have to provide 2 sides to every story…Why not just throw Intrade odds into every story as an addendum?
I'm actually amazed at how far prediciton markets have come. In Entrepreneurial Economics I wrote:
…perhaps one day, instead of quoting an expert, the
New York Times editorial section will refer to the latest quote on "health
care plan A" available in the business pages.
At the time, I didn't think that day would be just a few years in the future. Admittedly, we are not quite there yet but during the last election it was common for media outlets to refer to the prediction markets. I think this trend will continue. Can futarchy be far behind?
My Spanish article on Obama
Barack Obama has grown into a small industry. Some people are convinced
that he is a radical left-winger, while others claim he absorbed free
market economics during his time as a law professor at the University
of Chicago. Obama’s voting record in the Senate is left-wing, but
since he’s been planning on pursuing the Presidency for years, maybe
those votes were for public consumption.
My view of Obama’s economics is
straightforward one and it is consistent with his public
pronouncements. I view Barack Obama as an economic pragmatist who is
willing to borrow good ideas from many different sources. He stands
further to the left than do most Americans (myself included) but he has
lined up the very best centrist economic talent to advise him.
What’s
the reason for thinking that Obama is such a pragmatist? If you read’s
Obama first memoir (Dreams from My Father: A Memoir of Race and Inheritance),
which he wrote before he was famous, issues of identity dominate He is
acutely aware of being a mixed-race person in a community of largely
white American leaders. Most of all, I think Obama wants to do a good
job as President and he wants to be seen as having done a good job. That
would pave the way for improved race relations and, although Obama
would not use these words, it would bring higher status to
African-Americans. When it comes to his
subconscious, I see Obama as more attached to the notion of
excelling than to any particular view of economic policy. Keep in mind
that Obama was raised by a white mother (the father was absent) and he
“decided to be black,” and decided to marry a black woman and attend a
black church, only later in his life. Oddly, his hopes for improved
race relations are the hopes that would be held by a utopian white
liberal rather than the vision held by most African-Americans. That is
one reason why African-Americans were initially so slow to support him
and why so many educated white elites feel so at home with him.
Obama is also famously detached and
it seems he never loses his cool. He does not fixate on economic
ideology but instead he is focused on creating his own personal success. That implies a very strong ego but also it again leads to an economic and also a foreign policy pragmatism.
If Obama is elected, I expect the
major economic storyline to be Obama pushing policies in the national
interest (as he perceives it) and Congress pushing back with earmarked
expenditures and privileges for special interest groups. It won’t be about Democrat vs. Republican.
There is plenty of talk about Obama
being half-black but perhaps the more important fact is that Obama is
from Hawaii. Many Hawaiians barely think of themselves as North
Americans and they live thousands of miles from the continent. The
Hawaiian background is part of where Obama’s cosmopolitanism – which is
strong and sincere – comes from.
My description may sound like a very
favorable portrait of Obama on economics but he will likely encounter
serious problems if he wins the election. The
important American Presidents are those like Reagan who “know a few big
things” and push them unceasingly, without much regard for the
pragmatic or even the reasonable. Obama is not
used to connecting with mainstream America and if he wins it is because
the country is fed up with Republicans, not because the voters have
absolute confidence in him. Congress will test him. The chance that he makes big mistakes will be small, and that’s all for the better. But the best prediction is that he will be ineffective in tackling most of America’s biggest problems.
“Markets” in everything
The deal with doctors could come at a steep price: a $250 billion
fix to a 12-year-old provision in federal law intended to limit the
growth of Medicare reimbursements. The American Medical Association
and other doctors’ groups have sought to change or repeal the
provision, and they are likely to try to extract that as their price
for boarding the Obama train, people tracking the negotiations said.
Wal-Mart, the nation’s largest private-sector employer, agreed recently
to support requiring all big companies to insure their workers. In
exchange, Wal-Mart said it wanted a guarantee that the bill would not
“create barriers to hiring entry-level employees” – in effect, code
words to insist that lawmakers abandon the idea of requiring employers
to pay part of the cost for workers covered by Medicaid, the government
insurance plan for the poor.
“It’s kind of a give-and-take, quid pro quo kind of environment,” said Tom Daschle, President Obama‘s
first choice for health secretary, who remains in touch with the White
House on health care issues. “I think that the stakeholders wouldn’t do
this if they didn’t think there was something in it for them.”
…Over the past year, Mr. Baucus, Democrat of Montana, has
strong-armed industry groups, warning them not to publicly criticize
the process if they want to stay in negotiations.
Mr. Baucus, in
turn, has said little about his talks with industry players. On
Tuesday, he said only that he was “heartened” by how many groups were
supporting the health care overhaul.
That's the NYT reporting, not The Weekly Standard. Here is much more.
How should I feel if Obama, or maybe Congress, threatened to re-zone my neighborhood — unfavorably — unless I support an active Afghanistan plan on my blog? (Should it matter if I've incorporated the blog as a business? As an association? Even if there is no corporate right to freedom of speech, should there be "forced speech"?) Should it help much if the intimidation against freedom of speech is for a benevolent end? If Republican Presidents had done something similar?
Might it be correct to call this "evil"? I have seen "evil" defined as "morally bad or wrong."
Of course these deals are not unrelated to why health care reform — if we get it — won't in fact solve most of the major problems the sector faces.
Understanding politics
I was wondering why there had been so much talk recently of ramping up antitrust attacks on Google. Now I know. This is the way politics works. See my letter on antitrust protectionism (pdf) if you need more.
Symposium on Paul Collier
You will find a Collier essay on democracy and development along with numerous comments, including from Bill Easterly and Nancy Birdsall, all courtesy of Boston Review.
Easterly is not happy:
I have been troubled by Paul Collier’s research and policy advocacy for
some time. In this essay he goes even further in directions I argued
were dangerous in his previous work. Collier wants to de facto
recolonize the “bottom billion,” and he justifies his position with
research that is based on one logical fallacy, one mistaken assumption,
and a multitude of fatally flawed statistical exercises.
Nancy Birdsall suggests that donors support more investment in policing. She also notes:
The economy of sub-Saharan Africa–including Nigeria and South Africa–is smaller than the economy of New York City.
There is much more at the link.
Administrative costs, a simple point or two
Andrew Gelman serves up some links. Mankiw's addendum serves up some more.
Public sector programs usually have higher administrative costs — all relevant costs considered — than corresponding private sector programs. The public sector program is funded by taxation. That means the public sector doesn't have to worry so much about marketing or meeting payroll on commercial revenue alone. That will bring significant cost savings on administrative matters. But you can't stop counting there.
The deadweight loss from taxation is perhaps twenty percent or more. (It depends on which tax you consider as "the marginal tax" and there is not a simple factual answer to that question.) That should be factored into any comparison, even if you define that cost as "not an administrative cost."
The public sector also engages in less monitoring of who receives its services. If you're 67 and have worked a lifetime in this country, usually you can receive Medicare benefits. The "indiscriminate" nature of the program may be either a net social cost or a net social benefit but certainly it should not be counted as zero or ignored.
If you favor "indiscriminate" programs over targeted programs, OK. But the accompanying lesson is not one about the relative efficiency of the public sector at a comparable task. The lesson is that sometimes the public sector can be more effective when you don't wish to discriminate in supplying a particular kind of service.
TANSTAAFL.
Should “Fairfax County” become a city?
Should Fairfax County become a proper city? It has over a million people, many more than Washington, D.C. The bottom line seems to be this:
The basis for the idea is largely tactical — under state law, cities
have more taxing power and greater control over roads than counties do
— and it led to more than a few snickers about the thrilling nightlife
in downtown Fairfax (punch line: there isn't any).
Natasha could no longer say "We are from Washington":
If Fairfax does become a city, it would instantly become one of the largest in the nation, the size of San Antonio or San Jose.
It would also diverge dramatically from the stereotype of the gritty
metropolis. Fairfax enjoys many of the benefits — wealth and jobs —
and few of the detriments — crime, troubled schools — of a large
urban center. With a median household income of $105,000, it is the
wealthiest large county in the nation. Among large school systems, it
boasts the highest test scores. And it has the lowest murder rate among
the nation's 30 largest cities and counties.
One question is why this rather uncoordinated mix works so well. Federal dollars, diversity of immigration, and diversity of planning strategies all can be cited. The latter factor probably means we should not touch the status quo. And by the way, almost all of our nightlife is Korean but it does exist.
The value of personal experience
It's rare that I read something about Barack Obama which I had not already seen:
Barack Obama's last visit to Russia,
as a senator in 2005, did not end so well. He was detained by the
security services at an airport near Siberia for three hours, locked in
a lounge, his passport confiscated, like a scene from a John le Carré novel.
The Russians later called it a “misunderstanding.”