Category: Political Science

Public choice theory and Haiti

by  Tyler Cowen in

Why is Haiti such a mess? How might a public choice economist think about the Haitian system of government?

Before Papa Doc Duvalier, Haitian leaders were lucky to last a few years. Look at this list of constitutions. Hegel suggested that voodoo religion would not lead to political liberty; so far Haiti has not disproved this thesis. Here is a comprehensive page on Haitian history, replete with useful links.

Haitian government appears to have no “core,” to use the economist’s term for instability. Most of the population is illiterate but extremely smart and distrusting of their governments. The distrust is so strong as to become a self-fulfilling prophecy. No leader can command lasting popular support or form a stable political coalition. One alternative is to rule with complete tyranny; alternatively, you can be more moderate and govern with a shorter-term perspective. In other words, you loot the country, while telling yourself, correctly, that the people who will follow your reign will be even worse.

The Haitian voodoo gods are intransitive in their power relations, and so has been the Haitian government, at least in the absence of massive oppression or outside interference.

The Duvalier years represented a watershed in the ongoing 150-year collapse that we call Haitian politics. At first it seemed like an acceptable bargain for the elites. Accept a charismatic dictator in return for public order and protection of investments. But it turned out that Papa Doc was crazy and he waged an ongoing campaign to destroy Haitian intermediary institutions. Soon there were more Haitian nurses in Montreal than in Haiti. By the time the reign of his son Baby Doc ended in the mid-1980s, the country was in tatters.

According to one account, Haitian politics is run by about ten families, many of them of Lebanese descent. In this view no leader can challenge their commercial interests. The only question is how oppressive that leader must be to rule the country and constrain a potential coup d’etat. But I view this account as too simplistic. Haiti is not a story of “the poor get poorer, the rich get richer.” The rich get poorer too. Perhaps Haitian “social capital” is a wasting asset, and we are in an equilibrium where everyone is willing to erode it further, knowing that a downward spiral cannot be prevented. The collective result of this behavior is to hasten the corrosion of order.

Drug money has been the big story for the last fifteen to twenty years. The poverty, corruption, and coastline of Haiti make it easy prey for drug smugglers. And of course it is close to the United States. As the older wealthy families lose ground, drug money has become the dominant political force. It can be argued how directly Aristide has been linked to the drug trade. But ultimately a Haitian politician must at least acquiesce in massive drug smuggling. A leading Haitian politician with no links to the drug trade would be like a Saudi prince with no connection to oil money — in other words, don’t believe it.

The other key player, of course, is the United States government. Aristide returned because Clinton reinstalled him. Aristide left when Bush told him to get lost. The U.S. can use force, withhold foreign aid, or use proclamations to make a leader focal or not. You might recall that Aristide did not allow legitimate elections to occur, which led to a crippling freeze on foreign aid. Aristide also proved no friend of democracy. In his “defense,” probably no Haitian incumbent could have survived fair elections, which brings us back to either tyranny or ever-circulating regime, short-time horizons, and political looting. Aristide chose a mix of these options.

So let’s say I was the president of Haiti. I have to keep the leading families happy or at least on board. I have to stop the drug smugglers from killing me or mobilizing opposition. I have to acquiesce in the drug trade, recognizing that most of those around me are on the take. I have to deal with the warlords who rule the local neighborhoods. I have to keep the U.S. President happy or at least neutralize him. I have to keep the population from starving. I have no resources and no tax base. Most of my public servants live from corruption. My country has virtually no foreign investment or infrastructure. I don’t even rule or physically control most of the country. In case of a revolt, I have only a few thousand policeman to draw upon.

Get the picture?

The bottom line: Don’t expect things to get better.

Does free trade lead to insufficient diversification?

by  Tyler Cowen in

The theory of comparative advantage, and the theory of increasing returns, both predict that free trade brings specialization. Michigan and Tennessee produce automobiles, but Delaware does not. I have heard free trade critics suggest that regions end up especially vulnerable and overspecialized.

Yes in economics virtually everything is possible, once you recognize that Giffen goods and upward-sloping demand curves cannot be ruled out. But I am not so worried about free trade leading to excess specialization.

First, individuals can buy equities from multiple regions or countries. There does appear to be an inefficient “home bias” when it comes to investing, but surely free trade is not at fault here. If anything, free trade should encourage investors to think more globally and to diversify more.

Second, individuals specialize, in response to trade, because specializing brings higher returns. When investors expand a firm or line of business they internalize risk-return trade-offs.

Third, we must consider global risk. Let us say that protectionism helps a country avoid a declining industry. The world as a whole does not gain. Those economic problems are simply shouldered by another country, and in a less efficient way, relative to free trade.

Fourth, risk is borne by individuals, not by countries per se. Having many different industries in a country does not by itself create safety for individual investors or workers. Who cares if France has its own movie industry, if you are losing your job in computer software? Contrary to what Dana Rodrik suggests, it is not necessarily economically safer to live in a large country.

I can see a potential political version of the argument. Free trade, by inducing specialization, might make tax revenue more volatile in a country. Still, tax revenue should be higher in absolute terms. And if revenue volatility is a problem, I would prefer fiscal responsibility over protectionism as the proper medicine.

I am indebted to Randall Parker and Arnold Kling for sharing some of their email correspondence on this topic with me.

The Illusions of Egalitarianism

by  Tyler Cowen in

Here is a consequence of egalitarianism. According to the Statistical Abstract of the United States, men’s life expectancy is on the average about 7 years less than women’s. There is thus an inequality between men and women….Egalitarians, thus must see it as a requirement of justice to equalize the life expectancy of men and women. This can be done, for instance, by men having more and better health care than women; by employing fewer men and more women in stressful or hazardous jobs; and by men having shorter work days and longer vacations than women…There remains the question of how to compensate the present generation of men for the injustice of having shorter lives than women. No compensation can undo the damage, but it may make it easier to bear. The obvious policy is to set up preferential treatment programs designed to provide for men at least some of the benefits they would have enjoyed had their life expectancy been equal to women’s. There is a lot of pleasure that could be had in those 7 years that men are not going to have. And since those years would have come at the end of their lives, when they are more likely to know their minds, their loss affects not only the quantity but also the quality of their not-to-be-had pleasures. One efficient way of compensating them for their loss is to set up government sponsored pleasure centers in which men may spend the hours and days gained from having shorter working days and longer vacations.

Read the whole post, taken from John Kekes’s new book The Illusions of Egalitarianism. I have long felt that egalitarianism makes no sense. I can understand assigning a priority to the interests of the poor. Donate a dollar to an orphan, not to Bill Gates. But the plight of the orphan is not worse because Gates exists (in practical terms quite the contrary). Nor do we worry about the “inequality” between the millionaires and the billionaires in Beverly Hills. Let’s not confuse egalitarianism with benevolence toward the needy.

Are blogs now hurting Howard Dean’s chances?

by  Tyler Cowen in

Dean did poorly because not enough people voted for him, and the usual explanations — potential voters changed their minds because of his character or whatever — seem inadequate to explain the Iowa results. What I wonder is whether Dean has accidentally created a movement (where what counts is believing) instead of a campaign (where what counts is voting.)…

…participation in online communities often provides a sense of satisfaction that actually dampens a willingness to interact with the real world. When you’re communing with like-minded souls, you feel like you’re accomplishing something by arguing out the smallest details of your perfect future world, while the imperfect and actual world takes no notice, as is its custom.

There are many reasons for this, but the main one seems to be that the pleasures of life online are precisely the way they provide a respite from the vagaries of the real world. Both the way the online environment flattens interaction and the way everything gets arranged for the convenience of the user makes the threshold between talking about changing the world and changing the world even steeper than usual.

The bottom line:

“Would you vote for Howard Dean?” and “Will you vote for Howard Dean?” are two different questions…

Not to mention “Did you vote for Howard Dean?”

The quotations are from Clay Shirky, here is the permalink. Shirky concludes: “Voting, the heart of the matter, is both dull and depressing.”

Fact of the day

by  Tyler Cowen in

The States and Puerto Rico, combined, spent $24,875,170 on lobbying the federal government, in the 1998-2002 period. About four-fifths of this money – $19,804,609, was spent by Puerto Rico. Much of the lobbying is directed at either statehood or greater federal benefits. One (partisan) source estimates that Puerto Rican statehood would involve a $3 billion welfare tab, in addition to food stamps for half of the island’s population. Here is the full story.

Live – from Dubuque, Iowa!!

by  Fabio Rojas in

Readers with XM radio are encouraged to tune to channel 132 – C-Span radio! There is a live democratic caucus in Dubuque, Iowa. If you have ever wondered what it’s like in a famed Iowa caucus, this is your chance. It’s noisy and chaotic – people argue over the rules and the candidates and it’s hard to decipher what’s happening. People wander from group to group looking for enough people to give their guy a delegate. People are trying to pull each other from group to group.

People just clapped when a Kucinich person migrated to a Dean group… followed by a football fan style “EDWARDS!! EDWARDS!! EDWARDS!!” chant… heady stuff… tune in before you miss it!

What is the most corrupt state?

by  Tyler Cowen in

In a recent study Louisiana only comes in third, Mississippi takes top honors, followed by North Dakota. The District of Columbia has a disproportionate share of convictions, but it does not count as a state. Nebraska is measured as the least corrupt state, Oregon, New Hampshire, and Iowa are also near the bottom. Here is the story, here is the source account and study.

A Baton Rouge headline reads “La. not No.1 in Corruption.” Former governor Edwin Edwards received ten years in prison for corruption-related charges, one case of many in Louisiana history. The last three insurance commissioners have gone to jail for corruption.

Is it better to be a small nation?

by  Tyler Cowen in

Of the ten richest countries in the world in terms of GDP per head, only two have more than 5m people: the United States…and Switzerland, with 7m. A further two have populations over 1m: Norway, with 4m and Singapore, with 3m. The remaining half-dozen have fewer than 1m people.

The Size of Nations, a new book by Alberto Alesina and Enrico Spolaore, addresses why some small countries have done so well. Here is a related working paper by Alesina, here are some related working papers by Spolaore. As some of the larger empires of the past break up, questions of national size increase in importance. More than half the world’s countries have fewer than six million people, roughly the population of the state of Massachusetts.

The Economist offers the following summary:

The book argues that the best size for countries is the result of a trade-off between the benefits of scale and the costs of heterogeneity; and that openness to trade alters this trade-off. The gains from being big are considerable. Large countries can afford proportionately smaller government (although they often don’t). Essential running costs can be spread over many taxpayers. Embassies, armies and road networks are all likely to cost less per head in populous countries. Defence in particular is cheaper for giants. “It is only safe to be small in a peaceful world,” say the authors (who, unusually for economists, offer two stimulating chapters on conflict, war and the size of nations).

Large countries are able not only to spend more efficiently; they can also raise taxes in more cost-effective ways. Income taxes are more efficient than customs duties, but require a bigger initial bureaucracy. Large countries have bigger internal markets, allowing more specialisation and returns to scale. And they can redistribute resources geographically, providing insurance when one part of the country is hit by disaster or recession and shifting income from rich regions to poor ones.

So why don’t all countries merge into one large superstate? Well, smallness has its benefits too:

…large countries are also likely to have a diverse population whose varying preferences and demands a government may find hard to meet: America, Brazil and India are cases in point. A study of local government in the United States suggests that Americans are willing to put up with the higher running costs of small municipalities and school districts in exchange for living in communities with little variation in income, race or ethnicity. This could imply that people also prefer to live in more homogeneous countries. With the main exception of America, successful big countries (such as Japan) have relatively homogeneous populations.

The authors argue that a worldwide regime of free trade will make the optimal size of nations smaller. If you can trade with other nations, there is no need to be large to ensure an open internal marketplace. So rising globalization should make secession easier to endure, which indeed seems to be the case.

My take: I am less convinced of the benefits of smallness. Think of small countries as having greater scope for experimentation, and thus a higher variance of outcomes. They also pop in and out of existence at a higher rate. Brazil will always be Brazil, but the fortunes of Croatia have varied over the years. If we look at the small countries that continue to exist, there is positive selection bias. We should expect them to do better than average, as the failures disappear, unlike with the less politically fluid larger countries. The observed superior performance of small countries does not mean that ex ante you should prefer to live in San Marino. In a small country, you face some very real chance that your system will fail, and that you will cease to exist, possibly under unfavorable terms. Especially if you are risk-averse, there is much to be said for the security of living in a larger nation.

Is deliberative democracy a good idea?

by  Tyler Cowen in

Richard Posner says no. The deliberative democracy idea is pushed by such scholars as Bruce Ackerman and James Fishkin. They call for the following:

In our soon-to-be-released book, we offer a new way of thinking about democratic reform, proposing a new national holiday–Deliberation Day. It would replace Presidents’ Day, which does no service to the memories of Washington and Lincoln, and would be held two weeks before major national elections. Registered voters would be called together in neighborhood meeting places, in small groups of 15 and larger groups of 500, to discuss the central issues raised by the campaign. Each deliberator would be paid $150 for the day’s work of citizenship. To allow the business of the world to carry on and as many as possible to participate, the holiday would be a two-day affair. If Deliberation Day succeeded, everything else would change: the candidates, the media, the activists, the interest groups, the spin doctors, the advertisers, the pollsters, the fundraisers, the lobbyists, and the political parties. All would have no choice but to adapt to a more attentive and informed public. When the election arrived, the people would speak with a better chance of knowing what they wanted and which candidates were more likely to pursue the popular mandate.

Posner responds with his usual aplomb:

Reform does not well out of deliberation, but reflects passions and interests. Abolitionism, the suffrage movement, the civil rights movement, the opposition to the war in Vietnam, the rise of free-market ideology, welfare reform, and the gay-rights movement were not the product of discussion among voters debating on the model of the academic seminar (the implicit model, naturally, of academic reflection on the political process by the proponents of deliberative democracy, academics all). They were the product of moral and political entrepreneurs tapping into wells of discontent among minorities and eventually getting the attention of the politicians…

I have difficulty suppressing the uncharitable thought that there may be an element of bad faith in the deliberative-democracy movement generally (I do not mean in Ackerman and Fishkin particularly). I think that what motivates many deliberative democrats is not a love of democracy or a faith in the people, but a desire to change specific political outcomes, which they believe they could do through argument, if only anyone could be persuaded to listen, because they are masters of argumentation. I infer this secret agenda from the fact that most proponents of deliberative democracy advocate aggressive judicial review, which removes many issues from democratic control; are coy about indicating what policies they dislike but would accept; and are uncommonly fond of subjecting U.S. citizens to control by international organizations of questionable, and often of no, democratic pedigree. I sense a power grab by the articulate class whose comparative advantage is–deliberation.

My take: I would expect deliberative democracy to lead to greater conformity and a less efficient aggregation of information. Crowds can talk themselves into bad ideas very readily. The main purpose of democracy is to prevent very bad ideas and very bad leaders. We are more likely to resist such dangers in private, and through periodic and gradual evaluations, rather than in open public forums. I award the debate to Posner.

Thanks to www.politicaltheory.info for the link.

The economics of capturing Saddam

by  Tyler Cowen in

Eugene Volokh draws our attention to the following article about Iraq. Here is a snippet from the abstract:

The capture of Saddam Hussein…demonstrates that poor intelligence is not inherent in U.S. guerrilla war-fighting; the United States overcame it by identifying the central weaknesses of its opponents. In this case, the central weakness was money — and this was not only a financial weakness, but also a cultural one.

Here is some more of the substance:

The guerrillas did have one major vulnerability: money. The Baathist regime long ago lost its ideological — and idealistic — foundations. It was an institution of self-interest in which the leadership systematically enriched itself. It was a culture of money and power, and that culture permeated the entire structure of the Iraqi military, including the guerrilla forces that continued to operate after the conventional force was defeated. Indeed, the guerrillas substituted money for recruitment. In many cases, they would pay people outside their ranks to carry out attacks on U.S. troops as a supplement to attacks by the main guerrilla force.

The culture of money made the guerrillas vulnerable in two ways. First, they relied on support from an infrastructure fueled by money. Whatever their ideology, they purchased cooperation with money and intimidation. Second, much of the money the guerrillas had was currency taken from Iraqi banks prior to the fall of Baghdad. A great deal of it was in U.S. dollars, which continued to have value, but most of it was in the currency of the old regime. One of the earliest actions of the U.S. occupation forces was to replace that currency. Over time, therefore, the resources available to the guerrillas contracted.

The United States brought its financial resources into play, purchasing information. As U.S. money surged into the system and guerrilla money began to recede, the flow of information to the United States increased dramatically. Obviously, much of the information was useless or false, and it took U.S. intelligence several months to tune the system sufficiently that operatives could evaluate and act upon the intelligence. Over time, the very corruption of the Baathist system was turned against it.

Mistaken predictions about this war have not been in short supply. But let’s hope they are right.

The soul of classical liberalism

by  Tyler Cowen in

Here is one of my favorite essays by my colleague James Buchanan, The Soul of Classical Liberalism. Buchanan starts this essay by noting that we have lost the “soul” of classical liberalism in the twentieth century. A new political vision is needed desperately if we are to build that “shining city on the hill.” I have long maintained that Buchanan is one of the last romantic economists, in the spirit of his mentor Frank Knight. By romantic I mean an economist whose work is driven by an intensely personal vision, and driven by an intense desire to root out the truth. Buchanan, perhaps more than any other economist, understands the tension between the objective and the subjective in economic science. Given our commitment to improving the real world, we cannot avoid objective standards for good outcomes. But at the same time economic values and costs are deeply subjective as expressed in neoclassical or Austrian economics. Buchanan’s critics, who do not generally understand this tension, think he is working on pseudo-problems or engaged in mere taxonomy. In contrast, I think Buchanan is far ahead of his time. We are not yet at the point where we can understand the full import of what he is up to. This essay is one good place to get started on his central problems.