Category: Political Science

*10% Less Democracy*

The author is Garett Jones and the subtitle is Why You Should Trust Elites a Little More and the Masses A Little Less, coming soon to a theater near you, early 2020.

If you believe in judicial independence, you do not believe in complete democracy.

If you do not think we should elect judges, sheriffs, and dog catchers, you do not believe in complete democracy.

If you believe in those European proportional representation systems, with post-election bargaining, you do not believe in complete democracy.

If you are a fan of the EU…etc.

Here is an excerpt from Garett’s excellent book:

Some cities in California appoint their treasurers and others elect their treasurers.  Cities can have elections to decide whether the city treasurer should be appointed by the city government; the default is that they’re elected.  Whalley checks to see which kinds of cities have lower borrowing costs: ones with appointed treasurers or elected ones.  The interest rate paid on a city’s debt is a useful index of how well the city is running its finances…So Whalley’s overall question is this: Do cities with appointed treasurers pay lower interest rates on their debt?

…Over the period Whalley examined, 1992 to 2008, forty-three cities held referenda to ask whether they should switch to appointed treasurers.  He’s therefore able to look at the before-and-after differences of these elections…

[there is] an even bigger benefit of appointed treasurers: seven-tenths of a percent lower interest rates every year.  The average city has $30 million in debt, so that comes out to a savings of $210,000 per year.

Do I hear eleven percent anybody?  Though twenty percent I do not wish to hazard, not at all.

You can pre-order the book here.

*The Enchantments of Mammon*

The author is Eugene McCarraher, and the subtitle of this Belknap Press book is How Capitalism Became the Religion of Modernity.  Here is one excerpt:

The world does not need to be re-enchanted, because it was never disenchanted in the first place.  Attending primarily to the history of the United States, I hope to demonstrate that capitalism has been, as Benjamin perceived, a religion of modernity, one that addresses the same hopes and anxieties formerly entrusted to traditional religion.  But this does not mean only that capitalism has been and continues to be “beguiling” or “fetishized,” and that rigorous analysis will expose the phantoms as the projections they really are.  These enchantments draw their power, not simply from our capacity for delusion., but from our deepest and truest desires — desires that are consonant and tragically out of touch with the dearest freshness of the universe.  The world can never be disenchanted, not because our emotional or political or cultural needs compel us to find enchantments — though they do — but because the world itself, as Hopkins realized, is charged with the grandeur of God…

However significant theology is for this book, I have relied on a sizable body of historical literature on the symbolic universe of capitalism.  Much of this work suggests that capitalist cultural authority cannot be fully understood without regard to the psychic, moral, and spiritual longings inscribed in the imagery of business culture.

I remain wedded to the traditional Weberian view that capitalism represents a discrete break away from such modes of thought, and I believe this perspective supported by the work of Joe Henrich and co-authors on WEIRD.  Nonetheless, this is a book of note, and it has a clearly stated thesis on matters of direct relevance to what is explored on Marginal Revolution.  Due out in November, pre-order at the link above.

How deregulatory is the Trump administration?

Here is an email from a loyal, anonymous MR reader:

Critics of the administration’s much-ballyhooed deregulatory efforts argue that there’s not really that much there; they contend the White House and agencies have been tinkering around the margins (and helping out special interest groups), but not really addressing regulation’s economic cost. They argue there’s been virtually nothing done to address the bloated corpus of 100 years of accumulated federal regulation, and there’s been no legislative action to change regulatory processes.

The administration’s defenders and their fiercest critics alike argue that Trump has taken a machete to the regulatory state. But aside from naming a few rule changes here or there, they don’t offer much concrete support for their claim.

What’s the steel man case that Trump has broken the back of the administrative state? Some hypothes

1. They haven’t made things worse. After eight years of an administration that was seen (fairly or not) as hostile to business, just taking the boot off the throat of entrepreneurs is a major step forward. Small-business optimism is at pre-crisis levels. The last two years have seen the fewest economically significant final rules promulgated since 1990. Beyond formal rules, the administration has ended the abuse of “dear colleague” letters, guidance documents, and sue-and-settle.

2. Related to #1, there’s been no new legislation along the lines of Sarbanes-Oxley or Dodd-Frank that will take as long as a decade to get regulations worked out. That takes a lot of the uncertainty out of the system.

3. Enforcement has been curtailed. The administrative state is a threat because its enforcement is so capricious and subject to questionable extralegal adjudication. The Trump administration has responded by simply not enforcing many regulations. EPA inspections are down by half; CFPB is asleep at the switch. Enforcement heads are basically emulating Ron Swanson, for the better.

4. The 14 uses of the Congressional Review Act in early 2017 should in fact count as highly deregulatory; it was of course more than had ever been done with this tool in the past. Okay, so the regs in question weren’t yet final or hadn’t been in effect for very long. That’s just playing a baselines game; the bottom line is tens of billions of dollars of costs were cut over what would have been.

5. The record-breaking number of appellate judges appointed by the president and confirmed by the Senate will shift the judiciary to be more skeptical of regulators’ self-aggrandized power. Justice Gorsuch is champing at the bit to eliminate Auer and Chevron deference; overruling these precedents would be game-changing.

6. There’s been more taking place than you think. No, there hasn’t been a huge shakeup of federal departments, but those kinds of things are mostly for show anyway; federal power remains more or less constant, responsibilities just get shifted around. Benefit-cost analyses and regulatory impact analyses done by most agencies are sloppy at best and mostly just a Soviet-style effort to justify what’s already been decided, so they don’t capture the magnitude of what’s happening.

What has happened? The president has appointed people who take regulatory analysis seriously and understand opportunity cost. Some of the deregulation has been in areas most sensitive to the costs of regulation, like labor and energy. ACA individual mandate? Gone. HUD is taking steps to push housing deregulation at the local level; this has gotten almost no attention.

7. There’s more that would have been done but for the “deep state.” It’s a matter of public choice economics, not AM radio conspiracies, that regulators may not be enthusiastic about deregulating. For instance, Trump’s much-trumpeted two-out-one-in executive order for federal regulations was largely kneecapped by OMB so that over 90% of new regulations are deemed exempt from the order. Given inherent resistance to change (again, for perfectly understandable reasons, this is not a conspiracy), it’s amazing that anything has been done at all!

Has monetary policy lost its power?

No, says my latest Bloomberg column.  Here is one of the opening bits:

The most striking fact about the current situation is that not one of the world’s major central banks has announced that it would like to see a higher rate of price inflation. Have you heard support for a 3% inflation rate lately from the heads of the European Central Bank, the Bank of Japan or the U.S. Federal Reserve? It is therefore no surprise that central banks don’t seem to matter much.

In essence, central banks would like to make marginal contributions to stimulating the economy, without incurring the political wrath from a higher rate of price increase. The powers they have lost are political, not economic.

On these and related questions, I am grateful to the writings of Scott Sumner over the years.  And in sum:

In fact, when it comes to macroeconomics, the current malaise is not just political but also cultural: It is a paralysis of the spirit to achieve and excel. Conventional economic theory has not been proved wrong, at least not yet. There is just a fading willingness to apply it.

Boris Johnson’s suspension of Parliament

The betting markets have stayed in the 48-55 range for Brexit by year’s end, even after the suspension announcement.  That to me does not sound like “hard Brexit hell or high water.”

I would sooner think that Boris Johnson wishes to see through a relabeled version of the Teresa May deal, perhaps with an extra concession from the EU tacked on.  His dramatic precommitment raises the costs to the Tories of not supporting such a deal, and it also may induce slight additional EU concessions.  The narrower time window forces the recalcitrants who would not sign the May deal to get their act together and fall into line, more or less now.

Uncertainty is high, but the smart money says the Parliamentary suspension is more of a stage play, and a move toward an actual deal, than a leap to authoritarian government.

That said, I still do not like either Brexit or the suspension.

Latitude

Are there systematic trends around the world in levels of creativity, aggressiveness, life satisfaction, individualism, trust, and suicidality? This article suggests a new field, latitudinal psychology, that delineates differences in such culturally shared features along northern and southern rather than eastern and western locations. In addition to geographical, ecological, and other explanations, we offer three metric foundations of latitudinal variations: replicability (latitudinal gradient repeatability across hemispheres), reversibility (north-south gradient reversal near the equator), and gradient strength (degree of replicability and reversibility). We show that aggressiveness decreases whereas creativity, life satisfaction, and individualism increase as one moves closer to either the North or South Pole. We also discuss the replicability, reversibility, and gradient strength of (a) temperatures and rainfall as remote predictors and (b) pathogen prevalence, national wealth, population density, and income inequality as more proximate predictors of latitudinal gradients in human functioning. Preliminary analyses suggest that cultural and psychological diversity often need to be partially understood in terms of latitudinal variations in integrated exposure to climate-induced demands and wealth-based resources. We conclude with broader implications, emphasizing the importance of north-south replications in samples that are not from Western, educated, industrialized, rich, and democratic (WEIRD) societies.

Here is the article, via several MR readers.

A countercultural take on China

That is what I serve up in my Bloomberg column, note it is a reminder more than a modal prediction.  Here is one excerpt:

Is the rest of the world getting China wrong yet again? Maybe the country is not doomed to live out unending top-down rule. What is history, after all, but the realization of the wills of countless unpredictable human beings.

Past mistakes about China are too numerous to mention.

A list then follows.  And:

But has China suddenly become so predictable? Are events there now no longer contingent on the exercise of human will? Modern China is one of the most unusual and surprising societies humankind has created. There are no good models for it, nor are there data from comparable historical situations.

There is, unfortunately, a tendency for Westerners to impose superficial narratives on China and the Chinese, often based on scant observation.

To close:

For myself, I don’t have a coherent story about how the Chinese might move to greater liberty in the next 10 to 15 years. But I do think the actions of the current regime can be read as signs of vulnerability rather than entrenchment. Taiwan and Hong Kong, despite its current crisis, remain strong examples of the benefits of liberalization. Meanwhile, the notion of the internet — even with censorship — as a liberalizing force has been too quickly dismissed, especially in an America that has fallen out of love with Big Tech.

Which leads to a reality even deeper than China’s unpredictability: people’s continuing capacity to respond to current events and shape their futures for the better. As you listen, watch and read about China, keep in mind this essential human quality.

There is much more at the link.

Singapore and China, in history

Chinese national identity has long been considered to have been an obstacle to Singapore’s nation-building efforts. This is mainly because China was suspected of using its ethnic links to encourage Singapore’s communist rebellions during the 1950s and 1960s as Lee Kuan Yew was working towards establishing the city state. This study reviews Lee’s exchanges with Beijing and argues that he gave China the impression that he was building an anticolonial, pro-China nation. Beijing therefore responded positively to Lee’s requests for support. Reiterating its overseas Chinese policy to Lee, Beijing sided with him against his political rivals and even acquiesced in his suppression of Chinese-speaking “communists.” In addition, China boosted Lee’s position against Tunku Abdul Rahman, supported Singapore’s independence and lobbied Indonesia to recognize the territory as a separate state. China thus actually played a helpful role in Singapore’s nation building.

That is from Philip Hsiaopong Liu, via the excellent Kevin Lewis.

The importance of economic growth for Italy

That is the topic of my latest Bloomberg column, they chose an appropriate image, here is one excerpt:

Decay is another problem faced by Italy, including decay of its natural and cultural heritage. The city of Venice — a wonder of mankind and also a big money-maker as a tourist destination — is threatened by rising water levels. The Roman Coliseum is endangered by traffic fumes and exhaust. Solving those problems requires (again) extra money. As it stands, Italy has some of the worst-maintained cultural heritage in the Western world, and further decay could cut into Italy’s tourist income, producing another dangerous downward spiral.

There is much more at the link.

My Conversation with Masha Gessen

Here is the transcript and audio, here is the summary:

Masha joined Tyler in New York City to answer his many questions about Russia: why was Soviet mathematics so good? What was it like meeting with Putin? Why are Russian friendships so intense? Are Russian women as strong as the stereotype suggests — and why do they all have the same few names? Is Russia more hostile to LGBT rights than other autocracies? Why did Garry Kasparov fail to make a dent in Russian politics? What did The Americans get right that Chernobyl missed? And what’s a good place to eat Russian food in Manhattan?

Here is excerpt:

COWEN: Why has Russia basically never been a free country?

GESSEN: Most countries have a history of never having been free countries until they become free countries.

[laughter]

COWEN: But Russia has been next to some semifree countries. It’s a European nation, right? It’s been a part of European intellectual life for many centuries, and yet, with the possible exception of parts of the ’90s, it seems it’s never come very close to being an ongoing democracy with some version of free speech. Why isn’t it like, say, Sweden?

GESSEN: [laughs] Why isn’t Russia like . . . I tend to read Russian history a little bit differently in the sense that I don’t think it’s a continuous history of unfreedom. I think that Russia was like a lot of other countries, a lot of empires, in being a tyranny up until the early 20th century. Then Russia had something that no other country has had, which is the longest totalitarian experiment in history. That’s a 20th-century phenomenon that has a very specific set of conditions.

I don’t read Russian history as this history of Russians always want a strong hand, which is a very traditional way of looking at it. I think that Russia, at breaking points when it could have developed a democracy or a semidemocracy, actually started this totalitarian experiment. And what we’re looking at now is the aftermath of the totalitarian experiment.

And:

GESSEN: …I thought Americans were absurd. They will say hello to you in the street for no reason. Yeah, I found them very unreasonably friendly.

I think that there’s a kind of grumpy and dark culture in Russia. Russians certainly have a lot of discernment in the fine shades of misery. If you ask a Russian how they are, they will not cheerfully respond by saying they’re great. If they’re miserable, they might actually share that with you in some detail.

There’s no shame in being miserable in Russia. There’s, in fact, a lot of validation. Read a Russian novel. You’ll find it all in there. We really are connoisseurs of depression.

Finally there was the segment starting with this:

COWEN: I have so many questions about Russia proper. Let me start with one. Why is it that Russians seem to purge their own friends so often? The standing joke being the Russian word for “friend” is “future enemy.” There’s a sense of loyalty cycles, where you have to reach a certain bar of being loyal or otherwise you’re purged.

Highly recommended.

Brazil fact of the day

Brazil’s fiscal incontinence is legendary. The number of civil servants grew by 60% between 1995 and 2016, to 12m. Since public-sector workers cannot be fired or have their pay cut, they become a permanent expense once hired. Perks such as raises for seniority can even extend to widows’ pensions, producing the unique “post-mortem promotion”. Nearly 80% of government spending in Brazil goes on salaries and pensions, compared with a global average of 50-60%. “Instead of a state that serves the public, you have a state that serves the state,” says Samuel Pessôa of the Brazilian Institute of Economics at Fundação Getúlio Vargas, a university.

Here is the full article from The Economist, which focuses on fiscal sanity in the state of Espirito Santo.

Has anyone said this yet?

Consider the right-wing, conservative, and libertarian movements — is there a good word for them as a general collective?  For now I’ll use “conservative,” while recognizing that the lack of generally recognized standard bearers means that “conservative” and “radical” these days blur into each other, and furthermore conservative and libertarian views have areas of real and significant conflict.

Who is today the most influential conservative intellectual with other conservative and libertarian intellectuals?  (I once said Jordan Peterson is the most influential intellectuals with the general public.)

It seems obvious to me that this is Peter Thiel (admittedly I am a biased observer, for a number of reasons, one being that the Thiel Foundation is a supporter of Emergent Ventures).  Quite simply, if Peter gives a talk with new material in it, it gets discussed more than if anyone else does.

What else might his qualifications be for “most influential conservative intellectual”?

He has had a major hand in the tech revolution, and with his later view that technology is stagnating more generally.

He is the talent spotter par excellence, having had a hand in the rise of Mark Zuckerberg, Elon Musk, Reid Hoffman, Eric Weinstein, and others.

A major hand in Trump/populism/nationalism, or whatever it should be called.  I should note that Peter is often highly influential with those who disagree with him about Trump.

Spoke/wrote/co-authored a bestselling book — Zero to One — which also was a huge hit in China.  And the samizdat lecture notes, from Peter’s Stanford talks, were a big hit in advance of the book.

A major hand in the critique of political correctness, and the spread of that critique.

He foresaw that globalization might contract rather than keep on expanding.  The final answer isn’t in yet on this one, but so far Peter is looking prescient.

A major hand in causing people to rethink higher education, through his Thiel Fellows program.

A major hand in stimulating the interest of others in Girard and Strauss, and maybe someday Christianity?

This point has nothing to do with how much you agree with Peter or not.  It simply occurred to me that no one had said this before, or have they?

By the way, here is David Perell on Peter Thiel on Christianity.

Has the time come and passed for negative interest rates?

That is the topic of my latest Bloomberg column, here is one excerpt:

Step back and consider the cultural context. Germany is still scarred by the memories of two world wars, fascism, communism, deflation and hyperinflation: in general, huge instability. Since the end of World War II, however, personal savings and the banking system have been an oasis of predictability and a driver of growth. Many Germans treasure their frugality, perhaps excessively or irrationally, and it has become an important part of the narrative Germans tell themselves about the economic order they have built.

Now enter the ECB, in essence telling Germans (and others) that savings are a bad thing, to be taxed and penalized. The very word “negative,” as in “negative interest rate,” makes the policy hard to sell politically. The German word “Strafzinsen” refers to a penalty rate, but the root “Straf” also refers to punishment, and it was used effectively by Franz Kafka in his famous torture-laden short story “In the Penal Colony” (the German title is “In der Strafkolonie”). One German newspaper referred to the “final expropriation” of the German saver, noting that the ECB’s decision to deviate from its inflation target carries “grave consequences.”

More generally, a significant segment of the German population is upset or outraged by the policy. There is even a claim that the revenue from the negative interest payments will be used to finance other EU countries.

Most economists and central bankers view negative interest rates as an acceptable tool of macroeconomic management. Maybe so. But in an era when trust, including trust among nations, is much lower than previously thought, it probably isn’t a good idea to place a punishing new tax on the German national virtue of saving. Central bankers must also be sensitive to public relations.

I find it striking how many people are responding to this column by insisting that Merkel should do more fiscal stimulus.  She should (though I don’t find “stimulus” to be the most instructive word here), as I suggest in the piece, because the Germans have been letting their infrastructure run down for a good while now — internet speeds anybody?  But at the end of the day, I don’t think that spending will eliminate the basic macroeconomic problem facing the EU, nor is most of that spending likely to land on the doorstep of the countries which most need it (though Huawei may benefit a good deal).  There is also this:

So if a policy of negative interest rates is just a Band-Aid, it is one that should be ripped off. And if monetary policy is insufficiently expansionary, that is going to require an increase in the ECB’s inflation target, or a move to nominal GDP targeting, not a jerry-rigged tax on deposits.

There is also an argument that Germans are saving too much. But by some measures, they have a level of national wealth relatively low for their per capita income, in part because Germans are less likely to own their own homes. According to the OECD, Germany’s near neighbors Sweden, Denmark, the Netherlands, and Switzerland all save more in percentage terms than Germany does.

German savers: underrated.

Identity Politics Versus Independent Thinking

Anthony Kronman, former Dean of the Yale Law school, writes in the WSJ:

The politically motivated and group-based form of diversity that dominates campus life today discourages students from breaking away, in thought or action, from the groups to which they belong. It invites them to think of themselves as representatives first and free agents second. And it makes heroes of those who put their individual interests aside for the sake of a larger cause. That is admirable in politics. It is antithetical to one of the signal goods of higher education.

…Grievance is the stuff of political life…Academic disagreements are different. Important ones are often inflamed by passion too. But the goal of those involved is to persuade their adversaries with better facts and arguments—not to bludgeon them into submission with complaints of abuse, injustice and disrespect to increase their share of power. Today, the spirit of grievance has been imported into the academy, where it undermines the common search for truth by permeating it with a sense of hurt and wrong on the part of minority students, and guilt on the part of those who are blamed for their suffering.

…For college students, the search for truth is important not because reaching it is guaranteed—there are no such guarantees—but as a discipline of character. It instills habits of self-criticism, modesty and objectivity. It strengthens their ability to subject their own opinions and feelings to higher and more durable measures of worth. It increases their self-reliance and their respect for the values and ideas of those far removed in time and circumstance. In all these ways, the search for truth promotes the habit of independent-mindedness that is a vital antidote to what Tocqueville called the “tyranny of majority opinion.”

…Tocqueville was an enthusiastic admirer of America’s democracy. He thought it the most just system of government the world had ever known. But he was also sensitive to its pathologies. Among these he identified the instinct to believe what others do in order to avoid the labor and risk of thinking for oneself. He worried that such conformism would itself become a breeding ground for despots.

As a partial antidote, Tocqueville stressed the importance of preserving, within the larger democratic order, islands of culture devoted to the undemocratic values of excellence and truth. These could be, he thought, enclaves for protecting the independence of mind that a democracy like ours especially needs.

Today our colleges and universities are doing a poor job of meeting this need, and the idea of diversity is at least partly to blame. It has become the basis of an illiberal and antirational academic cult—one that undermines the spirit of self-reliance and the commitment to truth on which not only higher education, but the whole of our democracy, depends.

The Venetian electoral college

For more than five centuries (from 1268 to 1797) the procedure to elect the doge (chief of state) did not change.

  1. Choose 30 members of the Great Council by lot.
  2. These 30 people are reduced by lot to 9.
  3. These 9 people choose 40 other people.
  4. These 40 are reduced by lot to 12.
  5. These 12 people choose 25 other people.
  6. These 25 people are reduced by lot to 9.
  7. These 9 people choose 45 other people.
  8. These 45 people are reduced by lot to 11.
  9. These 11 people choose 41 other people.
  10. These 41 people elect the doge.

Funny that many Americans blame their electoral system for being complicated. You may think what you want about the Venetian system but it guaranteed what was probably the most stable government in the history of mankind.

That is from Alexey Tereshchenko on Quora, cited in this excellent post on the success of Venice.