The Madness of Crowds
The topic of democracy has been batted around by several of us over the past couple of weeks, and with the “Occupy ____” movement building momentum (There was even an “Occupy Auckland” protest here in New Zealand today, with more protests planned), it seems that the popular politics is going to have a higher profile for a while at least. So I thought it might be a good time to go over the book that most strongly affects my perceptions of democracy – The Myth of the Rational Voter: Why Democracies Choose Bad Policies
The most interesting thing about Caplan’s book (at least interesting to incorrigible econ nerds like me) is that it is the first attempt to marry Public Choice Theory (the theory of why political systems choose bad policies) with Behavioural Economics (the branch of economics that tries to account for the myriad ways in which people are irrational in their decision-making). Most applications of Behavioural Econ (such as Thaler and Sunstein’s Nudge
Caplan starts by looking at the conventional Public Choice Theory explanation for bad democratic policy-making: special interests. The logic goes that a bad policy (take import barriers, a classic example) gets voted in because while society as a whole loses out from it being implemented, the losses are thinly distributed across the whole population so no one has an incentive to spend any effort fighting them. By contrast the gains are concentrated, so the beneficiaries have every incentive to fight for the bad policy. This is a plausible-sounding argument, but it doesn’t explain why bad policies are often very popular: Public Choice Theory predicts that the public should be basically indifferent to tariffs, but instead they are often enthusiastic supporters.
Caplan starts from a different premise – that voters are interested in voting for policies they perceive as good for the economy, and that democracies are pretty responsive to public sentiment (he delivers some empirical support for this). In Caplan’s theory the fault lies not in our stars, but in ourselves – it is the voting public that demands bad policies mistakenly thinking them good. When the government obliges we get bad outcomes, all nice and democratic.
Caplan’s methodology for supporting this with evidence was to compare the views of economists with those of the general public when it came to economic questions (he focuses on economics, not because he thinks voters are especially irrational about economics, but because he felt unqualified to address expert opinion in other domains of knowledge). As it happens there’s a survey of economic questions that separately samples PhD economists and the general public. The questions are neither abstruse theory, nor normative questions like BDP vs. environmental quality. Instead the questions are about whether a range of possible causes (such as too many immigrants or too much offshoring of jobs by corporations) are a major impedance to economic growth, a minor one or not at all. The survey also collected a range of control data about each respondent (including age, education, ethnicity, income, education and stated ideology), so Caplan could construct an “enlightened public” estimate, basically how the general public would answer if they had the economics knowledge of an Econ PhD. The reason for doing this is to check how much of the difference between economists and the general public is due to superior knowledge and how much is due to economists being richer, or having more secure jobs, or being ideologically biased. It turns out a full 80% of the difference is due to the economist’s knowledge.
By itself an ignorant public is not a problem. In large samples errors tend to cancel out, this is the principle underlying the Wisdom of Crowds. Unfortunately the public doesn’t display random errors, instead Caplan identified 4 ways in which the public was biased relative to economists:
- Antimarket Bias – a tendency to underestimate the economic benefits of the market mechanism.
- Antiforeign Bias – a tendency to underestimate the economic benefits of interacting with foreigners.
- Make-Work Bias – a tendency to underestimate the economic benefits of conserving labour.
- Pessimistic Bias – a tendency to overestimate the severity of economic problems and underestimate the (recent) past, present and future performance of the economy.
Caplan explains this bias with a concept paradoxically named “rational irrationality”. The theory goes that thinking is hard work, and none of us do more of it than necessary except when it’s something we are interested in. The effect any one voter has on the outcome of an election is negligible, so as a practical matter there’s little point in collecting a lot of information and thinking carefully about the outcome of your vote. This means that people fall back on whatever feels good to them, whether that’s tribal affiliation, picking a candidate with good hair or just falling back on “common sense” to decide what policies are best. By contrast when making a decision in the market you bear to costs of a bad decision, and the benefits of a good one, so while people will still be less than perfectly rational they will probably do a better job (most of the time) of making decisions in the marketplace than in the polling booth. This means that the fact people are irrational may justify less government intervention, and not more.
And that’s why I’m not optimistic about “Occupy _____”. I’m not denying that there are real problems driving these folks onto the streets, but I have no confidence that popular sentiment will permit the sober analysis of what is going on that we really need. Instead I expect to hear a lot of complaints about jobs being “shipped overseas”, and exploitation-based narratives when I strongly suspect the reality is a lot more complicated than that.
I hope I’m wrong, but I have a bad feeling about this.
Great post JamesK,
I especially agree with the following.
There is one thing that worries me about the four biases.
1.Antimarket Bias – a tendency to underestimate the economic benefits of the market mechanism.
2.Antiforeign Bias – a tendency to underestimate the economic benefits of interacting with foreigners.
3.Make-Work Bias – a tendency to underestimate the economic benefits of conserving labour.
4.Pessimistic Bias – a tendency to overestimate the severity of economic problems and underestimate the (recent) past, present and future performance of the economy.
I am generally inclined to agree with Caplan on this, but the economy is not a single thing, the improvement of which would benefit everyone. The growth of the economy might mean that everyone benefits on average, but its not exactly clear, at least from Caplan’s analysis that the worst off benefit as well.
To the extent that Caplan uses metrics like GDP, this has some utilitarian normative assumptions which do not take into account distributional effects.
Now, there are other surveys about economic policy and poverty reduction that do show a good relation between ffree market policies and poverty reduction over time, but my nitpick is that Caplan does not show that.Report
The thing is that people tend to get distributional effects wrong too. Take free trade for example. I often hear people say that even if they concede that lowering trade barriers is a net positive, it still ends up being a transfer from poor to rich. But that’s not really true, the people most likely to lose from liberalising trade in a good are people who have capital or skills that won’t translate well into producing other goods. That means capital owners and skilled workers in import-substituting industries are the most likely losers, while low-skilled labour and the unemployed will tend to win since the cost of the goods they buy has fallen.
Caplan’s not making a narrow point about GDP, he’s talking about the fact most people have profoundly misguided causal models when it comes to identifying the effects of economic policy.Report
Most people do have misguied models. Its just deeply counter-intuitive.Report
Mr. K, If you think that minimum wages and unemployment compensation have kept up with inflation then I think that it would be a good thing for you to do a little more research.Report
I’m sorry, but what if anything does that have to do with what I wrote?Report
“while low skilled labour and the unemployed will tend to win since the cost of the goods they buy has fallen”.Report
What I’m talking about the the effect a specific policy (trade liberalisation) would have on the fortunes of low income people. Whatever the broad trends have been for such people in the US, what I am saying is that liberalising trade will not make it worse, and will in all likelihood make it at least a little better.Report
Mr. K, I am not trying to be snarky but how does it make things better when the wages of the unskilled do not keep up with inflation? Prices for necessities have gone up much, much faster than wages, especially fuel and medicine.Report
There have many, many things that have changed in our economy over the last forty years besides for the liberalization of trade. You can’t just pick out two things that you don’t like and say that one caused the other. It’s entirely possible that without trade liberalization, unskilled wages would have fallen further.
Furthermore, most minimum-wage jobs are in the service industry and can’t be outsourced. If you want to blame immigration for this, there’s a plausible if not necessarily correct argument to be made there. There’s no reason at all to think that free trade had anything to do with it.
Also, minimum wage is set by legislative fiat, not by market forces. The minimum wage has not kept up with inflation because Congress has chosen not to adjust it for inflation. Consequently, the percentage of workers making minimum wage or less has fallen from 13.9% in 1979 to 6% in 2010. The fall in the real value of the minimum wage (which goes mostly to young and part-time workers, not necessarily poor ones) doesn’t really tell us much about the standard of living of the poor.
And the real value of the minimum wage is now at a 30-year high, FYI.Report
The minimum wage has not kept up with inflation
The fall in the real value of the minimum wage […] doesn’t really tell us much
And the real value of the minimum wage is now at a 30-year high
These cannot all be accurate.Report
They’re all true for different endpoints. A 25-year decline in the real value of the minimum wage was reversed by a 40% increase phased in over the last couple of years.Report
We’re having two different conversations I think.
I’m saying “Liberalising trade doesn’t hurt the poor”.
You’re saying “But the poor are worse off.”
These are not mutually exclusive.Report
Note: liberalizing trade can have the best benefit for poor that are elsewhere.
That doesn’t mean the benefit doesn’t exist (or, even, that our poor don’t benefit from it in other ways).Report
Very true.Report
low-skilled labour and the unemployed will tend to win since the cost of the goods they buy has fallen.
They don’t win if they lose their jobs or stay unemployed longer. Slightly cheaper good don’t begin to make up for those.Report
That would be a problem if trade liberalisation increased unemployment, but it doesn’t.Report
That means capital owners and skilled workers in import-substituting industries are the most likely losers, while low-skilled labour and the unemployed will tend to win
You said it: Skilled workers lose, the low-skilled and unemployed win. This is not a recipe for increasing productive employment.Report
OK, what I said above is a little simplified. I’m trying to cram a postgraduate education into blog posts, it’s difficult to figure out what I can gloss over.
Here’s how the liberalisation of trade in a particular good should affect the economy, and the people in that economy. I’ll start at the micro level first:
1) If your income is not derived from producing the good then you’re a winner – the good is now cheaper to buy, which makes you a little richer. Unemployed people will therefore definitely win. If you don’t buy the good then you’re not affected at all.
2) if your income is derived from producing the good (either you work in the industry or have invested a lot of money in the industry) then you may or may not be better off. On the one hand, you may lose your job, or at least some of your income, on the other hand the good is now cheaper for you and trade liberalisation creates opportunities as well as destroying them. So the key question is, how easily can you turn your hand (or your cash) to another line of work? If your skills are easily transferable to another job (or your capital can be repurposed without losing too much value) then you’ll still probably gain. The people most likely to lose out are the ones with skills and investments that are very specific to producing one kind of good, but that tends not to be lowed-skilled workers, but instead highly specialised workers and very rich investors with poorly diversified portfolios.
So that’s at the individual level, but what about the macroeconomy?
3) The overall gains from liberalising trade will exceed the losses, so while there may be people who lose in absolute terms, it should be possible to provide some kind of transitional assistance while still making trade liberalisation a good idea.
4) There will be a shift in the industries within the country. A country with no trade at all has to produce goods based on what its own people demand. But a country that trades readily with the rest of the world can focus more on producing goods that it is good at making. This increases the country’s productivity overall, meaning not only are new jobs created, but those jobs will be on average more productive than the old ones. Productivity and pay are positively associated so the new jobs should be better paid on average than the old ones.
It is true that some people will lose out from trade liberalisation, but those people will be a minority, and the more goods you liberalise trade in at once, the fewer losers there will be.
Does that help?Report
3 is an assertion; it may be true over time but that doesn’t mean it’s true during a delta of time.
4 is tricky.
Not saying that I necessarily disagree with ’em as policy, but there are transition problems with both.Report
Sure, there can be transition problems and some from of interim government assistance may be warranted.Report
but what happens when no one wants to sell to you anymore?
Also, I see trade liberalization as being used as an excuse to crappify our stuff, without raising prices,l thus allowing our steadily sliding into working class middle class to pretend that they’re still middle class.Report
but what happens when no one wants to sell to you anymore?
And when does this ever happen? Speculative possibilities that aren’t supported by empirical observation are a lousy basis for making policy.Report
… this is the long term business plan for many companies. Americans are way too picky (and already have a lot of stuff), so they raise the cost of manufacturing for them. In contrast, most chinese don’t have a dishwasher, and they’d settle for a cheap one.Report
Kimmi – the reason stuff seems crappier now is because there is more stuff for one thing. For another, the only things that last tend to be nice things – heirloom quality stuff. Our crappy breakable stuff pales in comparison, but that doesn’t mean no heirloom stuff is being made now.Report
Can you still buy heartwood? anywhere?
Houses in my area are heartwood, through and through. In the ‘burbs, they’re sapwood.
Also, Mr. Kain, You can look at the clothing in this country and do a basically empirical “how fast does this fall apart” test. For an ordinary cotton t-shirt, the quality has dropped significantly over the years. This is not saying that they’ve survived, however (flannelly things that guys won’t give up notwithstanding).
Of course there is more stuff now than then. But if we look at “normal, didn’t change” things… Knives fall apart quicker now than earlier knives did (switch to stainless steel, mind). So too do desks (which, granted, cost a lot back then).
And, at least where I live, stuff falls apart less fast now than before, because of a decrease in air pollution. (particularly gumbands)Report
Also, you have to look at how prices have changed with quality. A $6 T-shirt from Target bought today might not last more than a year or so. 20+ years ago, that $6 T-shirt might last 3-5 years, but $6 was a lot more money back then, so the equivalent durable shirt today might cost $25.
Also, how much of that $6 is due to import tariffs? Maybe if trade was more liberal, that crappy T-shirt from China might sell for $2. That would be a win for, say, house painters, who are going to ruin that shirt the next time they wear it to work.Report
And to add to E.D. Kain’s point, sometimes it makes sense to buy crappy stuff. Not everything needs to be heirloom quality.
As to heartwood, if you advocate making everything of very high quality wood, you’re (I am sure inadvertently) arguing for further destruction of old growth forest. Soft, fast-growing, wood is far more environmentally sustainable.
As to clothing, you can buy high quality clothing that will last for years. Many people don’t want to, because they have more interest in keeping up with fashion. They prefer to pay less for clothing they plan to discard in the forseeable future anyway, than to pay more for clothing they won’t want to wear three years from now. (Of course if you’re rich enough, you can afford to pay a premium for clothing you won’t want to wear six months from now, but I’m thinking of average consumers here.)
If you want to buy clothing that will last forever, go to your local farm supply store and buy Carhartt clothing. The only place you’ll be in style will be at the rodeo or the ag barns at the county fair, but the clothes last a long long time. That’s what that particular niche market demands.Report
The problem with building houses to last for 10 years is that most people buy them with 30-year mortgages.Report
1.Antimarket Bias – a tendency to underestimate the economic benefits of the market mechanism.
And why is this an irrational bias, when the “market mechanism” has proven to be broken and unbalanced, producing a society in which the rich get richer, the poor get poorer, and the middle class shrinks into irrelevance and nonexistence?
2.Antiforeign Bias – a tendency to underestimate the economic benefits of interacting with foreigners.
And when you have countries like China who engage in unfair trade practices and currency manipulation, I submit that it is fools like you who overestimate the “benefits” of interacting with same under the pretense of “open trade.”
3.Make-Work Bias – a tendency to underestimate the economic benefits of conserving labour.
On the contrary again – constant insistence on “increased productivity” has destroyed the ability of the workforce to meet goals, and further is responsible for much of the decline in health (both mental and physical) of workers in the US.
4.Pessimistic Bias – a tendency to overestimate the severity of economic problems and underestimate the (recent) past, present and future performance of the economy.
This is an interesting comment. When you look at the past – whether you compare the past 3 decades, or 4, or 5, or even go to 100 – you see the same patterns of wealth accumulation along with the same patterns of class warfare from the so-called “conservative” front. The fact that the standard-bearer is that fatass racist druggie Rush Limbaugh today instead of McCarthy or Buckley is irrelevant, because the “southern strategy” and lies-as-policy motif is the exact same.Report
typo: “3 decades, or 4, or 5, or 10”, not 100.Report
This is almost like a parody writing itself.Report
James and Murali,
Caplan is correct.
I would add two biases that grossly affect democratic effectiveness:
1) The top down bias — That the most effective way to solve most problems is top down, centralized and coercive rather than bottoms up, decentralized and voluntary.
2) The zero sum bias — That for every winner there is a loser.
I believe these 6 biases explain a lot of the problems with democracy and with fundamental misunderstandings of economics.Report
The zero sum bias — That for every winner there is a loser
i.e. the bias is that people perceive a lot more zero sum games than there tend to be. Yet, whether or not there are a lot of zero sum games depends on certain institutional factors. In early Jamestown, New England, without private property, failure to properly internalise the benefits of labour resulted in a lot of zero-sum games. The end result was massive poverty and starvation as was seen in the early years of the Jamestown commune.Report
how in particular did this differ from kibbutzim? merely cultural?Report
Culture and institutions. The Mormons early on tried a form of communal living, and it failed due to poorly designed institutions that didn’t provide good incentives for everyone to contribute. The Hutterites, by contrast, have lived communally for hundreds of years, succeeding both as a consequence of their cultural (including their religious beliefs) and institutions that punish those who fail to contribute (e.g., ostracism from the community and other means).
Don’t know enough about kibbutzim to speak to their case exactly, but the general lesson is that successful communal living is not actually impossible, but is difficult and consequently only rarely achieved.Report
… seems about right. Communism seems to be possible for communities, but not for larger systems.Report
Communism works great up until people are allowed to opt out but not allowed to starve.Report
“Allowed to starve but not allowed to opt out” has proven unsustainable.
So far.Report
These are kind of covered by antimarket bias, but it doesn’t hurt to call them out separately.Report
Brandon, James and Murali,
Yeah, I agree that as you drill into anti-market bias, the zero sum and top down fallacies are contributing factors to people not getting what markets do. To James’ point, I do think spelling out these two added biases helps to understand some of the more extreme versions of silliness of these types of movements.
Humans have cognitive biases. In large, complex social settings these can self amplify into some destructive actions. The worst kind of poison is the one we think is medicine.Report
The worst kind of poison is the death from 1000 cuts. at least with the poison labeled as medicine, you’re well aware that you’re taking it.
Open Jaw ring a bell?Report
(I got the links.)Report
Thanks.Report
You touched on the biases of economists, but is there any attempt in this book to square that up with the 4 biases of the general public? It seems to me you could just as easily reverse these as reflecting the biases of economists:
Pro-market Bias – a tendency to overestimate the economic benefits of the market mechanism.
Pro-foreign Bias – a tendency to overestimate the economic benefits of interacting with foreigners.
Save-Work Bias – a tendency to overestimate the economic benefits of conserving labour.
Optimistic Bias – a tendency to underestimate the severity of economic problems and underestimate the (recent) past, present and future performance of the economy.
Especially that last one. Certainly, economists have not been lacking in irrational and totally misguided optimism over the last three decades or so. Who can do more damage with misguided, rigid ideological exuberance: economists or the general public? I mean, it’s fascinating that an economist has written a book on why the general public is not as smart as economists, but his profession hasn’t given a hell of a lot of cause for general esteem in the last several years. He must know that, right? Probably I’m too critical here, but in the description this book sounds like, “Only an Economist-King can save us!”Report
his profession hasn’t given a hell of a lot of cause for general esteem in the last several years
But the economic crises of the past few years is not the thing that economists can be really sure about. The items on Caplan’s list are things economists ranging from Paul Krugman to Arnold Kling would agree on. i.e. these are not things that are controversial even in light of the recent crisis. There is a fact of the matter, and it is epistemically irresponsible to not take seriously the overwhelming consensus of those who best understand the subject matter.
If that seems to imply, counterintitively, that certain kinds of technocracies are better, we should discard our intuitions.Report
Stabilisation theory (the theory of recessions and the business style) is one of the weakest parts of economic knowledge. Macro has a problem because it’s so hard to get good data and control for the myriad variables that confound your analysis. I know that’s what everyone thinks of when they think of economics, but there are many areas where there is strong consensus in the profession, and its these that Caplan is more interested in. But even there, I would say that what little macroeconomists know is still more than what the general public knows.
The fundamental question here is, why would you expect the general public to have more accurate beliefs than people who have expertise in a given area? I mean it’s possible that climatologists have a unreasonably biased view about the effect of CO2 on global temperatures, but that isn’t the way I’d bet.
Caplan’s book was written before the recent recession, so he doesn’t address it directly, but he’s not saying that economists are infallible. For one thing, the theories of financial market behaviour suggest financial markets are inherently unpredictable without insider information, so accusing economists of being unable to predict what happened is hardly fair.
Caplan doesn’t advocate technocracy either. He does think that economists should engage in more outreach with the public to share what we know, but he’s not talking about abolishing democracy. He’s also not claiming that economists have special insight outside their domain of expertise, he focuses on economics because he’s an economist. It would take an expert in other areas to evaluate the public’s knowledge in those areas.Report
Caplan might even take the seemingly-perverse view that what’s happening now is a good thing. Draining an abscess is painful and messy, but nobody would suggest that you should just leave it alone.
On the other hand, nobody thinks you should pick at the scab afterwards either.Report
Alternatively, you suffer from the biases originally identified and perceive those who do not as suffering from the opposite biases.
Nothing personal, but my money’s on the people who do this for a living.Report
Nothing personal, Brandon, but since you haven’t the foggiest notion what my opinions are on this topic, I’m going to ignore your imaginative conjectures about my biases.
Both of you missed my point here. I don’t assume the general public has a better understanding of economics than economists do. Nor do I doubt that people in the public have those biases. I’ve met plenty of them. I don’t dispute Caplan’s list. However, I haven’t yet caught the fear that seems to be going around here lately that suddenly the US government is going to let public opinion set economic policies. That hasn’t happened in my lifetime and I don’t see things changing. Public manias might encourage politicians to promise to build walls across the southern border, but as far as I can tell, the two areas where they care not a whit about public opinion are when it comes to economic policies and wars. So, I’m not particularly worried about the average intelligence level of the Occupy Wall Street people- their protests will amount to nothing as far as governmental policy is concerned.
In general, what I worry about are two things: that the average politician might well be dumber than the general public; and that the experts who actually have a say in economic policies might, you know, have some biases of their own that have led them, at times, to come up with some theories about the health and future health of the US economy that didn’t quite pan out, to say the least. It’s amazing to me that I suggest that some of their predictions have been a bit, let’s say, overly optimistic at times during the last decade (really two decades) and that this might have been more influential in a negative way with policy makers than what Joe Citizen thought about trade with Japan and everyone is shocked. Two areas where expert opinion has been hugely influential in setting US policy in the last few decades have been in terms of economic policies and war, and I just think it’s funny that anyone would think the experts are batting a thousand there. As for the unfairness of blaming them for inaccurately predicting the meltdown, well, maybe so, but they really could have helped themselves by not making a lot statements about the health of certain markets that seem really, really funny in retrospect.
So, yes, I take them with a grain of salt. If it helps, I actually know plenty of them and they’re okay with that in my experience. Whether or not it’s “epistemologically irresponsible” to take the words of experts with a grain of salt at this point, it’s a tad hubristic to assume that none of us will out of respect for their pay or where they got their degrees or their overwhelming consensus. If it helps, I take the protesters with a huge grain of salt too, but since the people in power don’t give a shit about what the protesters are saying, I’m less worried about them.Report
Some scepticism is always warranted when considering expert opinion, but I find the notion that economists have much influence of government policy bizarre. I assure you if economists had much say on government policy then government policy would look a lot different.Report
This is getting confusing. It sounds as if, by your telling, an agreement like NAFTA, which was highly unpopular with the public- due exactly to the biases Caplan lists, incidentally- but very popular with economists, never got passed back in 94, since economists have no influence. In fact, all of the trade liberalization of the last three decades or so- unpopular with the biased public, but popular with totally unbiased economists- never happened, since economists have hardly any say when it comes to economic policy. Moreover, bailing out the auto industry? Never happened. TARP? Nope. I retract my “bizarre” comment since it seems like, when you use the word “economist” you’re referring to a profession that has, in the first place, done nothing particularly foolish in our lifetimes, and has been unable to influence governmental polices. I’m referring to the other ones.Report
If economists had more influence, there would be unilateral abolishment of all trade barriers. (except pigouvian taxes levied on all goods which may incidentally include imports)Report
So, if they ran the governments basically. The fact that they don’t doesn’t establish the argument that their influence has been minimal.Report
The US has had minimal trade liberalisation in the past decade, your country’s “free trade agreements” are so larded with exceptions they are almost meaningless, their primary function is to impose your government’s view of Intellectual Property onto other countries.
There was no economic justification for bailing out the auto industry, but I imagine it was very popular with the public in Michigan.
TARP I’ll give you, but it actually took a pretty serious situation before listening to the experts rose to the top of the agenda.
And what particularly foolish thing are you talking about?Report
Not Really Free is just No True Scotsman in a different kilt. Look under the kilt and it’s the same hairy problem.Report
Okay, I quit.
If we’re at the point that you’re claiming the auto industry got bailed out because the American public was strongly in support of doing so, while mainstream economists were resolutely opposed to doing so- and that the exact same dynamic is true of the 90s free trade agreements!- than it’s pretty clear to me that any argument I offer at this point you’ll, in all likelihood, blithely dismiss as more of the bizarre superstitions of the general public.
For the record, I have got some ideas about why economists and libertarians are not more influential with the general public, if you’d ever like to hear those.Report
If we’re at the point that you’re claiming the auto industry got bailed out because the American public was strongly in support of doing so, while mainstream economists were resolutely opposed to doing so- and that the exact same dynamic is true of the 90s free trade agreements!- than it’s pretty clear to me that any argument I offer at this point you’ll, in all likelihood, blithely dismiss as more of the bizarre superstitions of the general public.
There’s a certain fairness to this objection. For the most part, the bailout of GM didn’t occur because of widespread public pressure, but because of localized public pressure on certain members of Congress. And because of the geographically-based representation in the U.S. Congress these issues are almost always about local public pressure, rather than wide-spread public pressure. And that local public pressure includes bucketloads of business pressure–when you’ve got a local businessman saying “House bill X will cost a thousand jobs in your district,” and a thousand constituents saying, “House bill X will destroy my job,” it doesn’t matter much either what economists are saying or what the public in the rest of the country is saying.
But this also explains JamesK’s point about U.S. “free” trade agreements. They’re all larded up with exceptions not because the general public as a whole said, “we want this set of exceptions,” but because a whole bunch of local publics each demanded their own exceptions, and that was the price of getting enough congressmembers’ votes for the bills.
But it’s absolutely true that our free trade bills are not at all what economists would recommend. Yes, they recommend free trade; no, they don’t recommend the particular forms that our free trade bills take. There’s a big gap between the ideal and the reality, and the most you’ll get from economists in general is, “well, the bills are better than nothing.”
And of course the U.S. economy is chock full of things like milk, orange, and raisin cartels, or subsidies for producers of corn sweeteners and ethanol, etc., etc., that nearly every economist will condemn. So when a close look is taken at the reality of U.S. economic regulation, it really does reflect the desires of multitudes of local publics, if not necessarily a coherent general public, and really does not reflect what pro-market economists would recommend.Report
Pro-market economists? Are there any anti-market economists left in this century? Look, maybe I am mistaken here. What I heard, at the time, from the economists I know socially was something like, “Bailing out Detroit might not be preferable, but we have no choice because the results of not doing so would be catastrophic on the overall economy”. When I told my father-in-law that the libertarians I know were against bailing out the auto industry, he looked at me with a mix of horror and disgust at that idea- I’d imagine the same look if I exposed myself at a family reunion. And, when I read the Economist at the time, I’m pretty sure there was more than one article in there saying that bailing out Detroit wasn’t pretty but it had to be done.
So, when you guys say that economists were opposed to the auto bailouts because there was no economic justification for them, that just doesn’t square with what I remember hearing from them at the time. Maybe you mean a specific school of economists. But I find it really difficult to believe that the mainstream consensus among economists was that there was no justification for bailing out Detroit.Report
I retract the tone of the above comment. Or, at least, I hope I wasn’t enough of a hothead or dick about this discussion to have put you off the site for the last few days, James K. I did find it worthwhile, alas.Report
Don’t worry about it, I’ve just been otherwise occupied for a few days. In any event I do have a much better idea about the nature of our disagreement now.Report
There was no economic justification for bailing out the auto industry, but I imagine it was very popular with the public in Michigan.
More than that. Initially Congress refused to bail out the auto industry, and the cry in Michigan was “they bailed out the bankers but they won’t bail out us!?”
There’s also the “cash for clunkers” program, which was mocked by most economists I read as being a classic example of the broken windows fallacy. But with all their supposed dominance of economic fallacy, they lost that battle, too.Report
But Rufus, are you talking about taking experts’ advice with a grain of salt, or massively discounting whatever they say. Maybe you are coming on stronger than you intend to, but you dont sound like you are just taking what they say with just a pinch of salt (or even a few ounces for that matter)Report
No, seriously, I really do know plenty of these people. My father-in-law, in fact, is an uber-economist, so many of our weekends are spent at social gatherings with these guys. I do trust them more than Joe Blow when it comes to understanding the economy. It’s not a matter of massively dismissing what they say.
But you guys have to have some sense of how hubristic you’re coming across here, right? I mean, my American side of the family has been fished really hard by the economic trends of the last decade or so, and so, understandably, they’re upset. I know people who owned businesses that were the pillars of their community and are now living in trailers or their kids’ basements. My father, a hard working, small businessman in an industry that has never been “risky” before in human history, is hanging on by a thread. None of those people I know, incidentally, are going to be out protesting with the Occupy people, as they’re far too Republican. But, they’re pissed.
And one reason they’re pissed is because they heard a lot of pie in the sky prognostications about how the rising tide was lifting all boats before, during, and after the time that their boats were dragged down underwater. They’re still hearing those sorts of things. Me too. I listen to these guys talk about how the economy is picking up and turning a corner and coming to the light at the end of the tunnel; and I ask them to call my father, a small businessman, and talk about it with him. He’d love to hear from the experts, I’m sure.
This is, for me, the context within which you guys are posting here about your fears that the political system is going to start listening to the protesters and the average people on economic policies, instead of continuing to listen to economists and monied lobbying interests like they’ve done for most of my lifetime. I mean, instead of expressing any humility whatsoever about your profession and its limitations, you’re wringing your hands about the possibility that politicians won’t listen to the technocrats in the near future, when they’re the ones with the degrees! I just don’t share your fears.Report
But Rufus, I just dont see america as much of a technocracy, not as compared with some place like singapore. Singapore weathers economic crises very well even though we are to a higher degree than almost every where else dependent on global trade flows.
Regarding humility, I’m willing to grant a lot about what economists might be mistaken in, but things like the law of comparative advantage have to be granted to the economists. Same with the effects of minimum-wage laws. I know you do grant these (or hope yo do), but even these, the public is divided on even though this comes as close to economic consensus as can exist.Report
Bloody hell. The republicans in congress nearly committed an act of economic terrorism that America would never recover from. And you’re worried about the General Public setting what we should do???? I’m worried about the 20% who only listen to their priest. And I don’t mean general public.Report
Did anyone here say they weren’t worried about what the Republicans were doing? Concern about their ignorance doesn’t have any bearing on whether we should also be concerned about the ignorance of others.Report
People who vote Republican are a subset of the general public.Report
True, but she did specify the Republicans in Congress. Whether congressmen should be considered a subset of the general public for analytical purposes is debatable; I’d be inclined to say no.Report
Yes, but I believe the behaviour of congressional Republicans is caused by the preferences of Republican voters.Report
I believe the behaviour of congressional Republicans is caused by the preferences of Republican voters
At any rate, it’s a pretty good proxy measure.Report
See, I think this was part of my disagreement. I get the sense that the picture we’re painting here is one in which the public servants in Washington wait to see what their constituents want and do that basically. So, in that case, the knowledge level of the public is important. Maybe I’m either too optimistic or too cynical here, but I get the sense that the real problem is the elected officials have their own ideas about economic matters and are actually dumber than the general public. I don’t get the sense that they care much at all about the middle majority of their constituents unless pushed very hard by a few of them, usually in the base. So, for me, yeah, it’s actually more important that they have good economic advisers than smart voters. I mean, I could be wrong about the US political process altogether, but that’s where I’m coming from on some of this.Report
Yeah, you see the reason I think politicians say dumb things about economics is less because they believe them, and more because they expect to get more votes for saying them (i.e. their constituents believe them).
I do agree about the importance of economic advisers though (admittedly that’s a little self-serving in my case).Report
It seems to me you could just as easily reverse these as reflecting the biases of economists
Each of those “biases,” has a couple of centuries of theory and data to support them. When the same can be said for the biases of the general public, let my ghost know.Report
Fine. Economists are unbiased and infallible. I retract my original statements to the contrary and hope it pleases the echo chamber.Report
Also, for the fourth time now: I’m not disputing that the general public is seriously biased and knows far less about economics than economists. I’ve just said that I don’t see the general public and their biases having much impact on policy in the future.Report
I don’t see the general public and their biases having much impact on policy in the future.
Then why is Congress seriously debating imposing trade sanctions on China?Report
Would you care to place a small wager?Report
Pat,
No, because I’m not saying they’ll pass it. I’m just saying there’s serious talk about it.
Then again, John Boehner’s against it, and he’s such an incompetent Speaker of the House, I probably ought to wager it’ll pass just because he’s agin it.Report
No, because I’m not saying they’ll pass it. I’m just saying there’s serious talk about it.
Look, over there, shiny!
So it’s a sop to the people who know they’ll never be part of the power structure. In short, this makes his point, it doesn’t debunk it.Report
Eh, no, it’s representatives who are serious about the issue, because they seriously think their constituents are being harmed. Just because a group of congressmembers can’t form a majority to support their issue doesn’t mean they’re simply engaged in theater. Often they’re engaged in sincere efforts at persuasion.Report
… or crafting a bill so that it’s ready when they do manage to persuade people.Report
Fine. Economists are unbiased and infallible.
Yep, that’s exactly what I said.
Wait, no, I didn’t. I just said that the economists’ position on those 4 biases Caplan identified is actually supported by well developed theory and serious evidence. Turns out that’s not remotely the same thing as saying economists are necessarily lacking any biases and are infallible. For one thing, when looked at closely, not one of those issues relates well to the issue of “what caused our current economic crisis and what should government do about the economy right now.” So on that matter, which doesn’t relate well to those 4 areas where there are centuries of sound theory and empirical evidence, it wouldn’t be surprising to find bias and error among economists.Report
Sorry, I confused your position with those taken above.
Look, you’re going to have to either walk me through this or just agree to disagree because I tried to make the same case I’ve been making here with the CFO of Deloitte Canada tonight at a dinner and he laughed heartily at the notion I was saying anything remotely controversial. But everyone here is saying that I’m flying in the face of centuries of economic wisdom.
So, take Caplan’s #4: “Pessimistic Bias – a tendency to overestimate the severity of economic problems and underestimate the (recent) past, present and future performance of the economy.” Okay, let’s just agree that much of the general public shares this bias, and I do agree with that. The inverse of this, which I attributed to plenty of economists, would be something like: “Optimistic Bias – a tendency to underestimate the severity of economic problems and overestimate the (recent) past, present and future performance of the economy.” As far as I can tell- honestly- you’re saying that economists don’t have any bias along those lines because they have centuries of sound theory and empirical evidence on their side; nor that such a bias, if it did exist among them, would relate well to the current economic crisis.
But, surely, you can see where economists made some statements about certain markets back before the crisis that, in retrospect, give the rest of us the impression that they were being overly optimistic, right? If you want to say that’s not what caused the crash, well okay. But I thought you guys were asking why the general public might take the expert opinions of economists with a grain of salt.Report
Rufus,
Certainly I can see that the impression of over-optimism was given. My argument in response would be that underlying all that, economists have been fretting for quite some time about the structure of some of those markets, particularly the extent to which certain businesses are given particular privileges by government. I think their optimism is about markets that are not perverted by protective regulations and other perverse incentives, not markets as they actually exist in the current regulatory system.
And, yes, if you start looking around, there were plenty of economists criticizing the “too big to fail” mentality underlying the bailing out of large companies. They recognize the pain not bailing them out would cause, and while they may have been unwilling to foist on the public the pain of letting them all fail at once, they also routinely pointed out that bailing them out simply reinforces the incentives to continue engaging in overly-risky corporate decision-making.
I guess the big point of divergence here is whether you see the current economic meltdown as a problem caused by the degree of freedom that existed in markets or by the badly designed regulatory structure of the market–including the near certainty of bailouts based on past example. I think it’s the latter. That’s why I think economists aren’t really overly optimistic about what markets can accomplish.
And even if we set that aside; even if we recognize this meltdown as the consequence of freedom in the market and a lack of appropriate government regulation, the current crisis pales in comparison to the benefits that markets have brought to us. Compare the market systems of western and westernized states to the non-market systems in other states. Even if, as critics believe, markets are susceptible to periodic crises such as these, there is still great reason to be quite optimistic about them because nearly all the great increases in standard of living, in creature comforts, in health care, are the product of markets.
Even if we can’t avoid being bitch-slapped hard once a generation or so, it’s worth it to get those benefits. That’s the real source of optimism about markets, not an optimism that they’ll always carry on peacefully, calmly, and without any occasional pains.
As to the general public taking the expert opinions of economists with a grain of salt, that’s ok. But I think the barrels of salt that some use come from a misunderstanding of just what economists are really so optimistic about.Report
We are chinese if you please…
We are chinese if you don’t please…Report
James, I think we’re coming closer to agreeing here. The first problem I had in this conversation was with the idea that the knowledge level of the general public plays a dominant role in setting public policy. In terms of the auto bailouts, I think it is quite possible to show that, at the national level, there was a great deal of public opposition to the bailouts that ultimately did not sway President Obama. Saying that there was great popular support in Michigan is fairly irrelevant- a national politician who alienates a large part of the national public to win votes from auto workers in one state would be a fool.
So there had to be something else convincing him than just how many votes he’d get in Michigan. I am willing to concede the likelihood of what you’re talking about above, which is that there was pressure coming from the auto companies, their lobbyists, and the unions. No doubt. And, granted, that is a third category outside either “the American public” and “economists”.
However, there was another reason he bailed the auto companies out, if we’re going to be charitable: he thought it was a good idea. More specifically, he believed that the bad outcomes that came with doing so were outweighed by the bad outcomes of not doing so. I don’t dispute at all that there were plenty of economists criticizing the “too big to fail” mentality, but it was a dispute– there were also plenty of economists who supported that idea. Most definitely there were ones making the “lesser of two evils” argument. But when we say that “there was no economic justification” for bailing out Detroit, it gives the impression that there was no dispute- economists-as-such were opposed to the idea, since there was clearly no economic justification for it, and the public or politicians or someone else was in support, and Obama just didn’t listen to the economists.
The problem with that is that I remember plenty of economists arguing against the bailouts and plenty of them arguing for them- and, you know, claiming there was a very good economic justification for them- and clearly the politicians went with the “expert” opinion that agreed with what they wanted to do. They probably found it more convincing too. No doubt they have their own biases there.
Now, you can say that the economists who said there was a very good economic justification for bailing out the auto industry were wrong, that you totally disagree with them, or that their underlying biases and presuppositions are ones you reject- quite so. But you can’t say that economists were of one mind about the bailouts and Washington was of another mind and it’s as simple as that.
Moreover, as the Deloitte fellow said last night, “If economists weren’t biased, they wouldn’t disagree all the time about nearly everything!” You’re right about the divergence of opinions- but saying that “economists” basically agree with the one argument that you agree with, and “the uninformed public” are the ones who agree with the other argument- well, I don’t get the feeling that it’s that clear cut.Report
Moreover, as the Deloitte fellow said last night, “If economists weren’t biased, they wouldn’t disagree all the time about nearly everything!”
But that’s an inaccurate perception of the discipline. Economists agree about a great many things–people just don’t see that because they don’t have vigorous disputations about the things they agree on. As I was reading in the book Beyond Politics: Markets, Welfare, and the Failure of Bureaucracy just this very morning,
As to the public influencing economic policy, it’s easy enough to point to a handful of specific policies and say the public opposed them (the nature of democracy–nobody wins all the time, so we can choose any set of policies and point to how group X didn’t win on that one; I’m sure I’ve done that often enough myself) . But if you look at the U.S.’s overall economic policies, they look a lot more like what a public uneducated about economics would vote for than what a vote of the American Economic Association would produce.Report
Look, maybe if you phrase that as, “they look a lot more like what a group of politicians uneducated by economics and easily swayed by industry lobbying groups would vote for”, I’d be likely to agree with you.Report
Well, I can go along with that, as long as it’s understood that all those industry lobbying groups are often advancing the interests of their employees as well. Bailing out GM meant bailing out lots of autoworkers. Creating tariffs on sugar benefits not only the corporate honchos at ADM but all their employees and tens of thousands of farmers. So where do we draw that line between the corporate interest in these policies and the interest of disparate publics who also support those policies?
Kimmi–Straight up, I think the national security argument is wrong. The U.S. already produces too much national security, the U.S. is not remotely at risk of invasion, most of that overproduction of national security material is already handled quite well outside of Detroit, and the bankruptcy of GM would not have led to the shuttering of all its factories but the selling off of its valuable assets and the closing down of its least valuable ones–pretty much what has happened with the bailout. Finally, in the exceptionally unlikely chance we had to ramp up production of national security materials, we have the capacity to do so pretty quickly, with or without GM.
So, no, I can’t think of any compelling national security interest in keeping Detroit busy, and it’s an issue I’ve actually pondered quite a bit. I know what other people think of as compelling national security interests in keeping Detroit busy, and I have concluded they’re all incorrect.Report
Of course we can agree that industry lobbying groups are advancing the interests of their employees as well. That’s fine. As for this: “So where do we draw that line between the corporate interest in these policies and the interest of disparate publics who also support those policies?” It seems more like a question for the protesters to answer.Report
Actually, I saw it as a question to be answered by anyone who wants to draw such lines. The protestors, sure. But also a fair number of folks here. And in fact a question for me to wrestle with as well.Report
… because we can’t think of ANY compelling national security interest in keeping Detroit busy?
It’s times like these that I wonder what libertarians think they’re advocating.Report
Well we’ve missed the deadline for the first Mark I Bolos to roll off the lines at GM so I don’t know what else we need them for…Report
The M1A is pretty close to a Mark 1 Bolo. But, you are right, a lack of the Bolo Division at GM is worrisome.Report
Well, I learn something new everyday. Pretty funny.Report
James,
Ever read Keith Laumer’s Bolo short stories?Report
No, not really my genre. But I just put the Complete Bolo onto my Amazon wish list.Report
It’s excellent storytelling.Report
This is a very good post, James. I do think much of this conversation has steered toward the question of democracy, however, when my intent originally was to push back on the concept of coercion. Yes, democracy is the crux of that question, but it is the coercive necessity of any more-libertarian or more-anarchist state that interests me. Democracy should not go unfettered and I doubt many think the opposite.
In any case, I do think that a generally free market as unimpeded by the state as possible is by and large a good thing and something liberals should embrace. Markets are disruptive of old entrenched power structures if they’re allowed to function.
However, I still believe that alongside a free market we should have a public sphere, including some form of state-based universal healthcare.
Here’s one question: is Caplan’s sample all-American? I recall reading somewhere that most of the northern European social democratic states have much higher support for free markets. I wonder if having a strong safety net actually improves the bias toward things like markets, etc. since there is less risk of catastrophe for individuals in these societies. Something to think about.Report
Yes, the sample was all-American, I wonder how opinions would vary elsewhere?
Healthcare is a thorny issue, especially in the US. I do keep meaning to write up my thoughts on it at some point.Report
Trying to think through why this post sits uneasily to me, and Rufus at 11:23 and 11:42 may have already gotten to it, the thing that came to mind was Einstein’s comment, “Not everything that counts can be counted, and not everything that can be counted counts.” That is to say, PhD economists have a shared set of assumptions and observations to make about the world and the way it works. But that system of knowing comes freighted with values that sometimes go unacknowledged. The wider public may not be as good at attempting to systematically tease out causal pathways, formally model them and such, but represents the operation of a much broader mix of value systems brought to bear on a particular question.
Take the issue of trade liberalization discussed in this thread. Competing values include preserving a way of life and expressing disapproval at exploitative working conditions in developing countries. Specific values issues that might come up: What cultural value does agricultural work provide for the broader society? What do quotas on English language films insulate a less dominant language from? What does it mean to ask someone to shift from one job to another? To what extent should poor working conditions in the developing world impact how we consume a particular product?
I’m not saying competing expressions of values ought to be decisive, to the exclusion of economic insights, but I’m not sure a consensus of economists says X ought to be controlling either – particularly when the subject is values. For instance, this from a Caplan Reason piece discussion of anti-market bias,
Economists are on firmer ground when they say, “Here is a trade-off. Choosing X means giving up Y.” When it comes to unpacking the societal meanings of X and Y however – what does greed mean? how much can we trust corporations? – I think economists move from the domain of facts to the domain of values. And contesting values is precisely what recent protests, Tea Party and Occupy Wall Street alike, are about.Report
Creon Critic, James K’s post concerns the public’s conceptions about *the economic effects* of various policies (as does Caplan’s research). Of course the decisions of politicians and the electorate don’t have to be based on the economics alone, but I suspect that a better understanding the economic consequences in and of themselves would make for better decisions overall.Report
KenB, first off, I agree, more education would be good. To be clear, I’m not arguing inaccurate facts or poorly constructed arguments are ok because they serve an expressive purpose and get at underlying values. I am arguing the values arguments matter in and of themselves, and economists can make only a limited contribution to that wider policy discussion – that limited contribution goes understated when economists too freely use the label “bad policies” for alternative outlooks. A more educated public does not cut through the Gordian Knot competing values present, the social consequences of trade liberalization for instance, or whether or not greed is good.
Even if economists can tell us “On balance, trade liberalization is a good idea”, there are still line drawing exercises that must take place beyond this catchall pro-free trade stance, what about child labor, what about environmental standards, what about working conditions, and so forth. To what extent can we buy that product, produced under these conditions, in good conscience? Economics can only tell us so much about arguments revolving around morality. The kind of information economists can provide fits only one axis of evaluating a policy choice, beyond that axis are a host of normative questions like how we ought live together as a community. What I’m trying to flag is whether or not Caplan’s conceptualization of good versus bad policies sneaks some things by, under the cover of an economist’s seal of approval, especially given policies have more than economic effects.
(To be fair, I haven’t read Caplan’s book. He could have dealt with these issues and I’m just unaware of it. But the Reason piece and the quoted paragraph felt like there was a bait and switch element, here’s a scholarly economics lens and have a heavy dose of contested values too.)Report
CC, I don’t disagree with any of that — I was just questioning whether James K was actively going beyond “economically optimal” policy to “good” policy. But on a second read of the original post, I see that there is some conflation between the two going on– I had been focussing just on the four biases, which explicitly mention economic benefit.Report
Part of the reason I may have been a bit unclear is that Caplan’s thesis is that voters choose bad policies generally, but uses economics as an example, because that’s what he’s familiar with.Report
Competing values include preserving a way of life and expressing disapproval at exploitative working conditions in developing countries.
Creon, this comment is not directed as an attack on you, since I think the way you have expressed your thoughts in your comment is quite fair and thoughtful. But in general I find those particular values to be elitist claims masquerading as humane concern.
I find these things expressed often among fairly comfortable white Americans as “people in third world countries don’t have a choice but to take those jobs with terrible working conditions” and “their culture is being destroyed.” But among those people themselves we find an eagerness to take those jobs because they do in fact have a choice, and that is the best option available to them, and we find that they can manage the changes in their culture quite well without our assistance, as they adopt the bits of western culture they like and keep the bits of their own culture that they particularly value.
I am emphatically not saying that these concerns are just a smokescreen for a desire to keep third-world people down (as I have heard some right-wingers claim), but I am saying that they tend to be based on romanticized versions of these people’s lives absent western industrial influence, and functionally, albeit unintentionally, would work to keep them down.
I even have a colleague who admits that people take those jobs because it’s the best alternative they have, but argues that the jobs shouldn’t be offered to them because it’s not a good enough alternative. That in the absence of an ideal alternative he would condemn them to their least preferred alternative doesn’t bother him at all. Undoubtedly that’s an alternative value, but when the alternative value essentially denies other individuals self-determination, I think we can safely disregard those values just as much as we can, in arguing for markets, disregard the values of those who prefer to make their money through fraud.Report
James, I think John Ruggie’s “protect, respect, and remedy” human rights framework for corporations gets at the kinds of broader values working conditions advocates are trying to promote – putting the corporate responsibility to respect human rights on par with current corporate responsibilities not to misbehave, defrauding customers, misleading advertising, etc. (formally, Ruggie’s Guiding Principles on Business and Human Rights). And in terms of working conditions, even prior to Ruggie’s work there have been a number of ILO conventions on various aspects of working conditions.
It’s true that there are complications in advocacy. The activist’s voice replacing the stated interest of those for whom they advocate is one danger. I think your colleague’s view deprives people of a choice they have reason to value, giving too little attention to the agency of the worker. I agree that saying “remain a subsistence farmer because sweatshops are unethical” is not the right course. And yet, I think it is a worthwhile use of the privileged position we possess to look at the broader structures that force workers to accept unsafe or inhumane conditions. I’d count students in the 1990’s successfully demanding school-branded products be produced under better conditions as a victory for instance.
Regarding cultural values, I had in mind cultural exemptions in free trade agreements. So the issue about activists displacing the views would not apply given that a country would be negotiating to put limits on how much access it would permit in culturally sensitive areas like film. Not that I endorse these policies altogether (I think France had a particularly strong non-French film quota), but it represents a point of view that can’t be discussed in purely economic terms. Gains from trade is theoretically great, but filmgoers getting access to more films isn’t the proposition being argued. The consequences for a domestic non-English language film industry are an aspect, but the cultural consequences are more at issue. Economists can make a limited contribution to that discussion (acting in their expert capacity, of course economists are free to make contributions like any other citizen as well).Report
Creon,
In the ’90s I was a student at one of the schools where there was lots of debate about whether it’s branded products were produced in sweatshops, Nike U…I mean University of Oregon. I always objected to those who wanted to insist that the products had to be produced only in approved factories. I thought there should be a consumer choice, as with “fair trade” coffee (which, of course, is quite a scam), so those who wanted that could support it with their dollars, without forcing others to do so.
And in fact I think it’s entirely legitimate for people to boycott products they think are produced in inappropriate conditions, and to pressure companies to engage in better practices. But of course in the long run, the only real solution is to enrich the workers enough that they make the demands themselves.
As to cultural exceptions to free trade, I think there’s an important question of who’s actually making those decisions. It’s nice to think that the government negotiating the agreement will be speaking for the country’s interests, but more likely they’ll be acting at the behest of a privileged special interest. And for an interesting take on the value of cultural free trade, I recommend Tyler Cowen’s very readable Creative Destruction: How Globalization is Changing the World’s Cultures.
And as an aside, merely because it occurred to me as a curious case, is something like French wine just a commodity, or is it a cultural good? (Not that tough cases like that should be the drivers of our policy decisions, one way or the other, but just because they’re fun to ponder.)Report
coffee beans make bullets. 😉
[Actual statement from African coffee farmer. Never had a cuppa in his life.]Report
These are fair points, and trade-offs are an ineradicable part of the policy process, but even in the cases you mentioned some policies are better than others at achieving the goal.
If preserving cultural heritage was your goal, then keeping a couple of old-style farms running just as salaried employees could work. But honestly, I think if people really value the old ways they’ll be willing to pay the premium for traditional goods over the cheaper modern ones.
As for sweatshop labour, I strongly believe that sweatshpos, as unpleasant as they are, are a necessary stepping stone to economic development, and I’m not alone on that either. If people feel compassion for 3rd world workers, the best thing to do is probably make sure to buy the goods they make.Report
ain’t that what Japan does with ricefarms?Report
I was under the impression that the main reason Japan’s rice farms persist is that they produce a strain of rice that is not especially popular in the rest of the world.Report
… as if china doesn’t have enough land to make rice tat the japanese like! Hell, America makes the best pasta for italy…Report
“If preserving cultural heritage was your goal, then keeping a couple of old-style farms running just as salaried employees could work.”
Although at this point it’s more of a tourist attraction than anything else.Report
Better a tourist trap than a sucking abdominal wound in the national economy.Report
I’m not as pessimistic on this front as you are, James K, and I’m very heartened by the oft-derided decision by the protesters to focus on raising awareness rather than settle on any specific policy prescriptions. They’re focusing on their strength, raising awareness for how bad things have gotten for certain sectors o the economy. If you’re a 50-something central banker, things are bad but not dire, which might lead one to underestimate the importance of stimulative monetary policy. Meanwhile, if you’re uneducated or educated but young and trying to launch a career now, you’re looking at unemployment in the 20% range. My hope is that the OWS guys keep themselves confined to displays of rage, enough for the central bank to actually get serious about fulfilling their dual mandate.Report
I’m very heartened by the oft-derided decision by the protesters to focus on raising awareness rather than settle on any specific policy prescriptions.
I was at a conference this weekend, and heard a number of academics agreeing to this statement. For myself, I am not at all heartened by their lack of coherence and agreement on what their issues and the solutions are. Like any incoherent group they leave themselves open to being co-opted by someone who can provide a persuasive storyline, at which point many of the original people will feel betrayed and bewildered by how their vague concerns became specified.
Ultimately, raising awareness is insufficient to accomplish anything as long as we can legitimately ask the question, “raising awareness of what?” Raising awareness of dissatisfaction with things in general is fundamentally different, less effective, than raising awareness of something very specific, such as breast cancer, AIDS, discrimination against homosexuals, mobility issues for the handicapped and so on.Report
See, if you’re “raising awareness”, then anything you do is a virtuous act.
If you actually try to have a message, or a meaning, or a motive, then you have to engage in conflict with people who aren’t Faceless Minions. You have to actually go over to the Support Palestine and the 9/11 Truth and the Breast Cancer and the AIDS Cure and the Abortion Rights people and tell them that they’re at the wrong protest.Report
*yawn* Bonus Army?
That’s my call on what the hell this protest is. Or at least the nearest analogue.Report
If more machine guns get installed, then the protesters have won? 😉Report
Getting out of the weeds of economics, another way of expressing James’ concern is that our ways of thinking evolved in a simpler world of hunter gatherers. In a complex and potentially positive sum world such instincts and intuitions can misfire.
I sometimes refer to them as “my mom’s intuitions.” I use her because I know she means well, but some of her ideas though intuitively appealing lead predictably to bad, counterintuitive results. I explain this to her, and she usually says, “well I guess so honey, but I still want to….”Report
An ex of mine asked me whether I’d want everyone in the world to be ten percent smarter or ten percent nicer. I answered that I’d rather have everyone be ten percent smarter, because then they could use their smarts to figure out how to make the world ten percent nicer. She did not agree with my line of reasoning.Report
I’m with you, Enlightenment institutions like democracy and free (or free-ish) markets requires little niceness to function well, but more smartness is always welcome.Report
Luckily there’s no such trade-off. No particular increase in smartness nor niceness is on offer from any deus ex machina, but equally, striving to increase our smarts doesn’t prevent us from also striving to increase our niceness. You have to make the argument for or against each on its merits, because the trade-off isn’t actually a thing.Report
Yes, it’s one of those questions whose answer means little, except for the insight it gives into the answerer.Report