Monday, August 8, 2016

A Neoliberal Manifesto

Sam Bowman is a proud neoliberal. To him this means that he is pro-market, pro-welfare, and against dogma. Let me focus on three points from his manifesto:
We like markets — a lot. We think that markets are by far the best way of organising most human affairs that involve scarce resources, because they align people’s incentives in ways that communicate where resources can be be used most efficiently, and give people reasons to come up with new ways of using existing resources. This means that markets and market-like systems are desirable in many, many places they’re not present at the moment — healthcare, education, environmental policy, organ allocations, traffic congestion, land-use planning.

We are liberal consequentialists. A system is justified if it is the one that best allows people to live the lives that they want to live, or makes them happiest or more satisfied than any other. There are no inherent rights that override this. People’s wellbeing is all that matters, and generally individuals are best at defining what is best for themselves.

We care about the poor. Caring about people’s wellbeing leads us to caring about the worst off people. Usually an extra £100 makes a pauper better off than it makes a millionaire. This diminishing marginal utility means that poor people’s lives are the easiest to improve for a given amount of time, energy and money.
I agree with much of this, especially the middle paragraph. To me the only standard that counts in political economy is enabling people to live good lives. I also think capitalism works great in many areas, and I care about the poor.

But the devil is in the details. It's one thing to say that you believe in free markets and helping the poor, but how do you do those things together? High taxes, I suppose, although Bowman never comes out and says so. Consider health care. Bowman is British, and many pro-capitalist Brits love to complain about their socialist health care system. But it works every bit as well as the pro-market US system at around half the cost, so why would anybody want to mess with that? Using markets to improve education is an idea that has been around for my whole lifetime, but making it work has proved extremely difficult. Even where it does work (in the sense of raising test scores) it undermines the community solidarity that comes from having everybody going to the same school, which for many people cuts into that sense of wellbeing that Bowman says should be the overriding goal.

I would also quibble with this claim:
We base our beliefs on empirics, not principles. There is an unlimited number of stories that you can tell about the world, but only a few are true. You find out which are true by comparing the stories to reality with experiments and throwing away the ones that don’t fit. It doesn’t matter if a theory appears to be internally coherent — if it can’t stand up to experimentation, it’s wrong. In particular, quantitative empirical research is what we look for.
Sure, everybody likes empirical data. But what time scale are we talking about? Should we be focused on things that seem to work over a five-year time frame? Or should we be thinking in terms of decades, or even centuries? This, after all, is the moral conservative's response to all the social changes that have happened since 1960: they may seem like fun for a while but the long-term consequences will be dire. How can we possibly have the data to determine whether something genuinely new (widespread sex change operations, say) will have good or bad effects over fifty years? We can't, so on this one as on hundreds of other major changes we are just going with our guts. Or the question I raised yesterday, about banning robot trucks; how can we predict the long-term effects, or weigh improved efficiency vs. the blow that will fall on a million men?

A broad-brush sketch of my politics would look much like Bowman's: markets when they work, government intervention when they don't, a focus on helping the mass of people lead decent lives. But I haven't published any manifestos because I am not nearly so confident that I have any particular answers to the hard problems of our world.

7 comments:

G. Verloren said...

"We like markets — a lot. We think that markets are by far the best way of organising most human affairs that involve scarce resources, because they align people’s incentives in ways that communicate where resources can be be used most efficiently, and give people reasons to come up with new ways of using existing resources."

Markets are chaotic, unguided things that respond less to logic and practical needs, and more to emotions, greed, and stacking the odds or rigging the system. They're workable, but they're certainly not ideal, and the absolutely require careful regulation and external manipulation. Left to their own devices, they are a recipe for disaster.

The absolute last thing I want for education, healthcare, the environment, organ donations, traffic congestion, and land use (among many other topics besides) is for us to rely on market forces to manage such endeavors. Markets are inherently and fundamentally about competition, not about fairness or justice.

A market based system is inevitably biased in favor of the rich and the ruthless, and punishes the meek and the unfortunate. People shouldn't be doomed to lives of ignorance, sickness, and misery just because they aren't able to compete at a given level. The poor shouldn't be restricted to congested roadways while the rich are given exclusive access to alternate routes; land usage should be determined by societal benefit rather than the size of a bank account; a person shouldn't be left to die of organ failure simply because someone else was able to outbid them.

Wealth is not merit, and resources shouldn't be distributed in a way that favors those who already possess the greatest reserves of such. And yet, the very foundation of Capitalism and market forces is the expectation that those who already possess capital use it to amass even greater wealth by extracting it from those who lack capital. The rich get richer, the poor get poorer.

In 1776, when Smith wrote his Wealth of Nations, this worldview made sense - society in the West was oriented around Nationalistic competition, Imperialist conquest, and Colonialist extraction of wealth from lesser developed regions of the world. Capitalistic competition made sense from the tribalistic standpoint of working against rival national powers and cultures. It was certainly a better way to go about things than the old feudal system of serfs and levies - it was more efficient, more flexible, more robust, and went hand in hand with emergent Industrialization.

But it was still a system rooted firmly in the spirit of the times, and it was created to reflect and to work within that established framework. In a world where power had previously been vested in arbitrary hereditary lords who may or may not possess any real merit, giving said power to successful entrepreneurs and capitalists was actually a step up. Likewise, in a world where the vast majority of people spent their entire lives illiterate, ignorant, and superstitious, choosing to vest power in successful businessmen meant that you were ensuring it went to intelligent, pragmatic individuals of at least some degree of personal merit, which again was something of a step up.

But the world no longer exists as it did in the 18th century. What was a great improvement then is today woefully insufficient given our needs and capabilities. Colonialism is dead, Imperialism has failed, and Nationalism is slowly cracking and eroding away. The edges of the map have been filled in, the frontiers have disappeared, and the common lot of humanity has improved drastically. We're reaching the point today where we stand to gain far more from cooperation than we ever could from competition.

pithom said...

"Even where it does work (in the sense of raising test scores) it undermines the community solidarity that comes from having everybody going to the same school, which for many people cuts into that sense of wellbeing that Bowman says should be the overriding goal."

-[citation needed].

"Nationalism is slowly cracking and eroding away."

-Not seeing it.

"and the common lot of humanity has improved drastically."

-You're contradicting yourself from less than a week ago.

"Likewise, in a world where the vast majority of people spent their entire lives illiterate, ignorant, and superstitious, choosing to vest power in successful businessmen meant that you were ensuring it went to intelligent, pragmatic individuals of at least some degree of personal merit, which again was something of a step up."

-This explains the politics of either Vermonters or Jews. Possibly, both.

"Left to their own devices, they are a recipe for disaster."

-I'm not seeing it.

"The absolute last thing I want for education, healthcare, the environment, organ donations, traffic congestion, and land use (among many other topics besides) is for us to rely on market forces to manage such endeavors."

-Why? It is abundantly clear that in all these, government in the United States has failed, and the market has often succeeded. Look at San Francisco, the EPA spill, the American healthcare system, the organ shortage, Los Angeles traffic -all of this is due to government intervention and it mostly works poorly.

"And yet, the very foundation of Capitalism and market forces is the expectation that those who already possess capital use it to amass even greater wealth by extracting it from those who lack capital."

-Which is why lottery winners grow to become billionaires in the long run, eh?

G. Verloren said...

@pithom

"Not seeing it."

Well as the saying goes, you can lead a horse to water, but you can't make it drink.

"You're contradicting yourself from less than a week ago."

Contradicting myself? On what topic? Are you perhaps thinking of my recent commentary on how modern day wages have remained stagnant for the past few decades? Because that's completely and utterly unrelated to the fact that the average person of today is indescribably better off than the average person of more than two centuries ago. And I don't recall commenting on anything else remotely like this topic at all recently, so I can't imagine what else you might be thinking of...

"Why? It is abundantly clear that in all these, government in the United States has failed, and the market has often succeeded. Look at San Francisco, the EPA spill, the American healthcare system, the organ shortage, Los Angeles traffic -all of this is due to government intervention and it mostly works poorly."

You seem to inhabit a very different world than the one I do.

For example, you admit that American healthcare is poor, yet somehow blame that on government intervention rather than our profit driven system which is largely unique among developed nations? How do you reconcile that notion with the fact that the world's best healthcare systems are all essentialy social welfare programs that treat medical care not as a commodity to be bought and sold, but as a basic human right and government provided service?

In the same vein, you point to the EPA waste water spill as a supposed government failure, yet fail to realize that the existence of said waste water in the first place was the direct product of private industry operating without sufficient government oversight. The fact that a private company was allowed to create the wastewater and simply leave it in an abandoned mine as an ecological timebomb which would eventually have to be dealt with is exactly what precipitated this entire chain of events. The whole scenario never would have happened if the mine had been more heavily regulated or even forbidden by the government in the first place. This is a textbook case of market failure, not government failure.

Similarly, you point to Los Angeles traffic congestion as a governmental failure, seemingly ignorant of the history of the city's development. Los Angeles got off the ground as a frontier boom town for oil, and all its growth and expansion since has been the product not of governmental action, but of market forces allowed to run rampant. LA wasn't a planned city designed and constructed by the government - it was a collective private enterprise that grew up organically, fueled directly by economic factors. Present day congestion and air pollution in the city isn't the fault of the government, but rather of over a century of insufficiently regulated capitalist enterprise. Once again, your understanding of reality is completely backwards.

"Which is why lottery winners grow to become billionaires in the long run, eh?"

The plural of "ancedote" is not "statistics". Whether or not certain specific individuals succeed or fail at investing their capital properly isn't relevant. The underlying foundation of capitalism is still the same - use capital to secure more capital by extracting value from others, chiefly those who lack comparable capital of their own.

That said, if you want to talk about lotteries, the only truly pertinent parties involved are the people running them. Most US lottos are operated as non-profit government-benefit associations, and the proceeds go to the state. Which is the exact opposite of governmental failure and private market success.

pithom said...

"How do you reconcile that notion with the fact that the world's best healthcare systems are all essentialy social welfare programs that treat medical care not as a commodity to be bought and sold, but as a basic human right and government provided service?"

-U.S. government spending on healthcare per capita is among the highest in the world and constitutes nearly half of U.S. healthcare expenditures. America has a huge and unique problem with healthcare costs. I don't think the market can be blamed for that.

"This is a textbook case of market failure, not government failure."

-The water sat around. It didn't pollute any rivers. The EPA failed here, as the mine was long-abandoned and its intervention did lead to massive water pollution.

"LA wasn't a planned city designed and constructed by the government - it was a collective private enterprise that grew up organically, fueled directly by economic factors."

-Then riddle me this, Verloren: why is Los Angeles stupidly filled up with single-story houses? Market forces make skyscraper development highly profitable there -yet, it isn't done!

"Whether or not certain specific individuals succeed or fail at investing their capital properly isn't relevant."

-So a little thing like the verifiability and reality of your claim isn't relevant?

"The underlying foundation of capitalism is still the same - use capital to secure more capital by extracting value from others, chiefly those who lack comparable capital of their own."

-Uh, no. That's called taxation. Capitalism is about cooperation, not exploitation.

Yup, Verloren, you are a fact-free individual.

G. Verloren said...

"The water sat around. It didn't pollute any rivers."

It was going to pollute the river. The fact that it hadn't yet done so was sheer luck. If the EPA had done nothing at all and just left it alone, a spill would have happened eventually on its own. The mine owners are the ones who created the polluted water, and they're the ones who left it as a ticking timebomb that the EPA would eventually be forced to try to deal with.

It's like a doctor trying to save the life of a gunshot victim. If, despite their best efforts, the doctor can't manage to save the victim, that doesn't make them guilty of murder. The guilty party is the person who pulled the trigger.

"Then riddle me this, Verloren: why is Los Angeles stupidly filled up with single-story houses? Market forces make skyscraper development highly profitable there -yet, it isn't done!"

Los Angeles has plenty of skyscrapers, like any major city, and they're exactly where you'd expect those skyscrapers to be - downtown. The number of single-story houses present is also normal for such a population center, as they're where normal people and families live. No one builds skyscrapers in the suburbs, and it's not because the government is meddling - it's because that doesn't make any economic sense.

But none of that has anything at all to do with traffic congestion. The LA road system isn't the product of skyscrapers - it's the product of a century of largely unplanned growth occuring organically, motivated overwhelmingly by the choices and behaviors of private individuals. The roads are laid out chaotically, and traffic is high because the unplanned layout isn't designed to accomodate the extreme population of the area.

"So a little thing like the verifiability and reality of your claim isn't relevant?"

My claim is that the basic tenet of capitalism is using existing capital to amass more capital. Individuals who win the lottery and fail to invest it properly have absolutely no bearing on that whatsover.

If you want to verify the reality of my claim, go read a book on the philosophy of capitalism - I recommend the original work, Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations.

"Uh, no. That's called taxation. Capitalism is about cooperation, not exploitation."

Again, your understandings of things are completely backwards.

Taxation is the government collecting money for the state's use. In the modern day, taxes pay for our public services, for our roads, for our military, and for many other things besides which we collectively would not want to be controlled by private parties.

Capitalism is the private ownership of land and capital, as opposed to government or communal ownership. Private ownership of land and capital means that the private owner is the one who decides how to employ those resources. When private forces "tax" the people who make use of their land and capital, we call it "rent".

Left unchecked by outside forces (such as governments), private owners will often exploit their power to maximize rents and profits, often at terrible expense to others. If you need examples, read up on the Gilded Age, the Robber Barons, and the development of labor laws in response to atrocities like the Triangle Shirtwaist Factory fire.

Cooperation has never been a guiding principle of capitalism - competition is. Again, I direct you to Smith's Wealth of Nations for further reading on the subject.

pithom said...

"No one builds skyscrapers in the suburbs, and it's not because the government is meddling - it's because that doesn't make any economic sense."

-In a city like Los Angeles, where single-family homes can sell for over 1 million dollars, it does make economic sense. And yet, it isn't done, due to government intervention in housing dating back to the 1960s.

"If, despite their best efforts, the doctor can't manage to save the victim, that doesn't make them guilty of murder."

-If the doctor kills the victim with only a moderate flesh wound, that does make them guilty of manslaughter.

"My claim is that the basic tenet of capitalism is using existing capital to amass more capital. Individuals who win the lottery and fail to invest it properly have absolutely no bearing on that whatsover."

-Except they do. They have lots of existing capital, and typically fail to amass more of it.

"Triangle Shirtwaist Factory fire"

-Such things are best dealt with by insurance companies, which have both the manpower and the incentive to keep the places they're insuring safe.

Yes, competition is the guiding principle of capitalism. I direct you to Mises's Human Action.

pootrsox said...

Lottery winners are irrelevant to the discussion: their total number, in contrast to assorted business creators/owners, is so small as to be nonexistent.

And lots of business people fail to garner more capital with the capital they invest. However, many more succeed-- or else capitalism would be as failed a system as Mussolini's Italy-- where the trains did NOT run on time.

(British source from the 1990's:
http://www.independent.co.uk/voices/rear-window-making-italy-work-did-mussolini-really-get-the-trains-running-on-time-1367688.html )