The Neoliberal Conspiracy

My name is Chris, and I’m a neoliberal. Well, at least I think I am. One can never be quite sure. The question of what defines a neoliberal and the significance of the term itself consistently drums up a somewhat bizarre debate with various points of view ranging from the idea that neoliberalism has dominated the world for the last 40 years (and literally the root of all our problems) to claims that neoliberalism is a completely meaningless term.

I don’t have any real stake in this debate – deciding what label should be used to describe people is almost always a fruitless exercise. It seems to me that neoliberal has been used primarily as an insult used by the Left to disparage people who think free markets are generally good, a point made in a recent article by Jonathan Chait. It is important to point out that neoliberal does not only refer to the hardcore libertarian end of the political spectrum. Clinton and Obama are lumped into the same label as Reagan and Bush. However, I think most people agree that the source of the so-called neoliberal movement comes from the strongest supporters of laissez-faire, market-oriented economics. Hayek, Friedman, and other big names in the libertarian community were the ones who set the neoliberal train in motion.

But as soon as they acknowledge the founding fathers of neoliberalism, many analyses of neoliberal thought tend to go off the rails. Perhaps the best example of the kind of thinking I am talking about is a 2014 article by Philip Mirowski entitled “The Political Movement that Dared not Speak its own Name: The Neoliberal Thought Collective Under Erasure.” Mirowski has dedicated much of his career to explaining the expansion of neoliberal thought. It is immediately clear that he opposes essentially all of its primary tenets, but of course anybody can be fascinated by a philosophy without agreeing with it. Unfortunately, Mirowski’s work paints (in my admittedly biased point of view) an incredibly misleading picture of not only what neoliberals believe, but also what their ultimate goals are.

Mirowski states his favored definition of neoliberal as “the dependence upon the strong state to pursue the disenchantment of politics by economics.” Hmm. Is that unintelligible to everybody or just me? Luckily, he also provides a longer list of principles he believes neoliberals adhere to (which he takes from Ben Fink):

(1) “Free” markets do not occur naturally. They must be actively constructed through political organizing. (2) “The market” is an information processor, and the most efficient one possible—more efficient than any government or any single human ever could be. (3) Market society is, and therefore should be, the natural and inexorable state of humankind. (4) The political goal of neoliberals is not to destroy the state, but to take control of it, and to redefine its structure and function, in order to create and maintain the market-friendly culture. (5) There is no contradiction between public/politics/citizenship and private/ market/entrepreneur-and- consumerism—because the latter does and should eclipse the former. (6) The most important virtue—more important than justice, or anything else—is freedom, defined “negatively” as “freedom to choose”, and most importantly, defined as the freedom of corporations to act as they please. (7) Capital has a natural right to flow freely across national boundaries—labor, not so much. (8) Inequality—of resources, income, wealth, and even political rights—is a good thing; it prompts productivity, because people envy the rich and emulate them; people who complain about inequality are either sore losers or old fogies, who need to get hip to the way things work nowadays. (9) Corporations can do no wrong—by definition. (10) The market, engineered and promoted by neoliberal experts, can always provide solutions to problems seemingly caused by the market in the first place: there’s always “an app for that.” (11) There is no difference between is and should be: “free” markets both should be (normatively) and are (positively) most the efficient economic system, and the most just way of doing politics, and the most empirically true description of human behavior, and the most ethical and moral way to live—which in turn explains, and justifies, why their versions of “free” markets should be, and as neoliberals build more and more power, increasingly are, universal.

So how many people would agree to all of the points above? I haven’t taken a survey, but if I did I can almost guarantee the result would be zero. The above description is not even a strawman of the philosophy of people like Friedman and Hayek (or me). On some points, it’s probably not too far off, but on others it’s either misleading or just blatantly false (I take particular issue with 1, 5, 7, 9, 10, and 11). Both the tone (of course all neoliberals regard people who complain about inequality as “sore losers or old fogies”) and the content are apparently designed to position neoliberalism as a front for the elites in society to retain their power. It is the unholy alliance of state and corporate power that drives the neoliberal doctrine.

Now, if you’ve ever read Friedman or Hayek (or my blog) and gotten a very different picture of what it means to be a neoliberal I don’t blame you at all (Note: I prefer to label myself libertarian, but again I’m not concerned about labels here – if Friedman and Hayek are neoliberal then so am I). While the state is certainly necessary to provide some of the features that neoliberals deem conducive to a prosperous society (property rights certainly seem to be a necessary condition), to claim that they “explicitly proposed policies to strengthen the state” is disingenuous. Mirowski gives two examples of such policies from Friedman: his plan to have the central bank grow the money supply at a constant rate and to replace public schools with vouchers. It’s certainly true that both of these policies require a state, but Mirowski chooses to avoid the fact that each requires significantly less state intervention than the current setup. Does he mean to argue that the state providing vouchers to attend private schools requires more state power than the government actually running the schools themselves? I can’t imagine.

Even Mirowski admits that the rhetoric of the neoliberal movement is aimed at promoting the freedom of the individual and limiting the power of the state. But here’s where it gets interesting. Instead of taking neoliberals at their word, Mirowski claims that all of this talk of liberty and freedom is really just a way to “postpone the truth as long as possible when it comes to the nature of the society they are dedicated to bring about.” All of those videos on Youtube of Milton Friedman exquisitely extolling the virtues of a free society? Yeah he doesn’t really believe any of that. The only reason you think he does is because you haven’t “devoted years of their lives to reading the neoliberals, as I [Mirowski] have.”

I think a more accurate statement might be that you haven’t spent years reading the neoliberals and doing everything in your power to find ways to make them look bad. As another person who has spent years reading the neoliberals, I’m almost sure that Milton Friedman believed every word of what he said in those Youtube videos. Mirowski continues in a footnote:

I am always shocked to find the infrastructure of the Neoliberal Thought Collective is always far more developed than any of my private paranoid fantasies. Not only is Free to Choose available on the ubiquitous YouTube, but there is also a slick dedicated website called FreetoChoose.tv, with extended unedited tape from the series…It also includes video lectures from many other neoliberal figures

This comment confuses me. The “infrastructure” of the neoliberal conspiracy is so highly developed that it even has videos on Youtube and *GASP* even a website?! There are two explanations. Either Mirowski has been so engulfed in his study of neoliberalism that he doesn’t realize we are in the 21st century, or he hasn’t had time to look at literally any other topic in the world. I don’t know what his “private paranoid fantasies” consist of, but if you can’t find a website dedicated to them, they must be pretty darn weird.

Jokes aside, Mirowski’s surprise at the lengths the neoliberal movement has gone to promote its message make more sense if we consider it in the context of his broad message. If the freedom rhetoric of the neoliberal movement is really just a front for its desire to strengthen the state and please the elites, his concern makes a lot more sense. For him, the tools of the “Neoliberal Thought Collective” are about as powerful and almost as terrifying as Nazi propaganda. Of course, there’s a far less pernicious reason why the reach of the free market movement extends so far: Its supporters truly care about its message and believe that it will lead to a better world.

And this point seems to be the one that those on the left have such a hard time grasping. They simply can’t believe that anybody honestly believes free markets would lead to a better society. The only explanation is that there is some grand neoliberal conspiracy driving it all. The elites (usually the Kochs take a starring role here) and their economist cronies put on a nice show. They bamboozle the public with nice words like freedom and liberty to draw support to their cause, but their real goal is to be the architects of the society they desire (and probably line their pockets while they’re at it).

Nancy Maclean’s recent book on James Buchanan is an excellent example of such a story. In her account, Buchanan carried out a “stealth plan” to destroy democracy and enact his own vision for the United States (which happened to include many racist policies). I haven’t read Maclean’s book, but I have read several interviews and I find her thesis very odd. Weren’t many of the civil rights victories only possible precisely because of limits on democracy? This post is already long and since I am not an expert on Buchanan and I haven’t read the book I don’t want to comment too much on Maclean’s point specifically (see here, here, and here for some reviews by people who do know what they’re talking about). But I think it does tie into exactly the same kind of thinking illustrated by Mirowski. Never is any probability given to the possibility that Buchanan actually just wanted to improve the system of government in the US. Since his methods were different than progressives, he must be racist and selfish. And since he can’t say those things outright, he had to hide them.

I can’t speak for Buchanan. I don’t know what was really going on in the brains of Friedman or Hayek. Maybe they are all just frauds. But I do know with certainty that there exists at least one person that supports free market policies because he actually thinks they are good (full disclosure: I have received Koch money to attend conferences at the Koch funded Institute for Humane Studies – but I got that money because I am libertarian, not the other way around). I’ve met many other people who are either great actors or are genuinely convinced that markets work well and are beneficial for the vast majority of society. They aren’t hiding those beliefs. They aren’t huddled behind closed doors trying to devise ways to lead everyone else into a trap. There is no hidden meaning behind their words. There is no neoliberal conspiracy.

Equality, Value, and Merit

A common argument against absolute equality is that individuals should be paid based on merit. Should somebody who works 80 hours a week earn the same amount as somebody who sits on their couch and watches TV all week? Even the most ardent supporter of redistribution would have a hard time answering yes. One of the alleged benefits of a free market economy is that it does a pretty good job allocating resources to those who work for them. Reading Hayek, however, I find it interesting that his defense of unequal outcomes explicitly denounces the idea of meritocracy. Value, not merit, is what should determine a person’s reward.

Some clarifications are in order. “Value” and “merit” are not well defined concepts. Let’s take an example to see the distinction between these two concepts. Imagine 2 students are studying for a math exam. One student studies 8 hours per day all week for the exam, but math has never been his strength and he ends up with a hard earned B+ on the exam. For the other student math has always come easy. He takes a quick look at his notes for a couple hours the night before and breezes through with an easy A. We might say that the first student deserves a higher grade than the second. If we graded based on merit we would want to give the higher grade to the student who worked the hardest. Of course, this grading system makes no sense when we consider that a grade is meant to represent a student’s knowledge of the material. Even though he didn’t work as hard, the second student knows math better and therefore deserves a higher grade.

The same arguments can be applied to an economic context. If two entrepreneurs each develop a product, a meritocratic society might suggest paying each based on how much work they each put into its creation. However, this criteria doesn’t consider the fact that consumers might place different values on the two products. If we want to maximize the benefits to society, we don’t actually care whether a product was created by a team of people and 2 years of strenuous research and development or by a guy coming up with ideas in the shower. All we care about is the value of the two products to the consumer. In Hayek’s words, “it is neither desirable nor practicable that material rewards should be made generally to correspond to what men recognize as merit…we do not wish people to earn a maximum of merit but to achieve a maximum of usefulness at a minimum of pain and sacrifice and therefore a minimum of merit” (The Constitution of Liberty, 157, 160).

It might seem unfair that talented people tend to earn more than the less talented. The handsome actor already gets good looks and fame. How is it fair that he also gets a big paycheck? And it’s not fair. But that doesn’t mean it’s not desirable. Because without that paycheck, without that incentive, maybe he wouldn’t have become an actor at all, and the opportunity to create a product that millions would have enjoyed is gone. It’s not fair that Tom Brady gets paid so much to play a game, but the only reason he does is because so many love watching him play. The alternative might not be that he gets paid less and still plays, but that he doesn’t play at all because his incentives to work hard and become a great player are diminished.

Another problem with a meritocratic society is that merit is hard to measure. Going back to the math example, I said that one student studied more than the other. But maybe his studying was not as efficient. Maybe he was actually on Facebook half the time, or didn’t focus on the right problems. And there are other factors. Maybe the second student paid better attention in class or had worked harder in previous classes and therefore didn’t need to work as hard now. Even if we wanted to reward the students’ merit, doing so would be a challenge. Similarly, looking at two products tells us little about how much work and how much effort went into the creation. What we can see is how much people like each product (by looking at how much they pay for it).

One of the greatest benefits of a market economy is that it pushes people towards the tasks that other people actually want them to do. In Hayek’s words, “If in their pursuit of uncertain goals people are to use their own knowledge and capacities, they must be guided, not by what other people think they ought to do, but by the value others attach to the result at which they aim” (The Constitution of Liberty, 159). By rewarding value over merit we ensure that people can only earn money by offering something that others desire. Everybody acts in their own self-interest, but the market usually ensures that that interest also aligns with the interests of others. Potential earnings act as a signal that shows what society values and attempts to regulate the market will almost certainly mess with these signals.

With this perspective, it is difficult to find a reason to care about others’ wealth. Steve Jobs, Bill Gates, and Mark Zuckerberg only got rich by offering a service that other people valued. Their contribution to society is likely far greater than any monetary compensation they received. Encouraging others to continue in their footsteps, to innovate and invent, is more important to the welfare of society as a whole than any attempts to redistribute their existing wealth. In fact, attempts to accomplish the latter discourage the former. I disagree with Ayn Rand on many points, but I think the overall theme in Atlas Shrugged is about right. When society feels like it can take anything it wants from the producers, they might decide that it’s simply not worth it any more, leaving no wealth left to redistribute at all.

 

Interesting Paper on Inequality and Fairness

As a followup to my recent post on inequality, I wanted to highlight some recent research by Christina Starmans, Mark Sheskin, and Paul Bloom on fairness and inequality. Based on a survey of lab experiments and evidence from the real world, the paper argues that people don’t actually care about unequal outcomes as long as they are perceived as fair.

They highlight several studies that show that in laboratory settings people (even children) are likely to distribute resources equally. However, in many of these settings, equality and fairness are indistinguishable. Since none of the participants did anything to deserve a larger portion, participants could simply be attempting to create a fair distribution rather than an equal one. And experiments that explicitly distinguish between fairness and equality do find that people care more about the former. For example, people were not unhappy with allocations that were determined randomly even if the outcome ended up being unequal as long as everybody began with an equal opportunity. Children who were asked to allocate erasers as a reward for cleaning their rooms were more likely to give the erasers to those who did a good job.

In reality people also seem to prefer an unequal distribution of income as long as it is perceived to be fair. In surveys, while people’s perception of the true income distribution is often highly skewed, their ideal distribution is not one of perfect equality. Of course, looking at these surveys does not necessarily tell us much about what the “best” income distribution would be, but rather the one people (think they) prefer. As I argued in my last post, I think too much weight has been placed on income or wealth inequality when really all that matters are differences in people’s happiness or utility. The evidence presented here does not go that far, but it does suggest that people realize that different behavior should lead to different rewards in some cases.

One reason that I think the debate has focused mostly on income or wealth inequality rather than on fairness or another measure of inequity is due to issues with measurement. Everybody has different ideas about what is fair so it’s easier to frame the question in terms of something that can be easily reported numerically. We may want to reconsider our acceptance of those statistics as a meaningful representation of a social problem. The whole paper is well worth reading and it opens up some interesting questions about human behavior. I will have at least one more post related to inequality coming in the next week or so.

What Kind of Inequality Matters?

Thomas Piketty’s book, Capital in the Twenty-First Century, a thorough analysis of the causes and effects of inequality, recently became an international best-seller. It’s not often that thousand page economic treatises attract popular attention, so clearly there’s something important to discuss here. Looking at some of the data on inequality, it’s not hard to see why many people are concerned. Here’s a chart showing the share of income held by the top 10% in the United States since 1910:

Notice where the two peaks occur – 1929 and 2009. I seem to recall something important happening in each of those years. Whether inequality was a symptom or a cause of the broader problems that led to the Great Depression and the Great Recession is an interesting question and definitely deserves scrutiny. For the purposes of this post, however, I want to address a simpler topic. Should we care about inequality on its own? And, more specifically, what kind of inequality should we care about?

For the first question, let’s do a simple thought experiment. You can choose to live in one of two societies. In Society A, everybody makes $50,000 per year no matter what their profession is. LeBron James and a janitor get paid the same amount. In Society B, average income is the same $50,000 per year, but it is now dispersed, so that some people earn less than average and some earn far more. Now assume that you are guaranteed to begin at average income (to avoid questions of risk aversion). Which society would you rather live in?

The answer to the hypothetical depends in part on whether you care about absolute or relative income. Does it matter if you are rich, or does it only matter if you are richer than others? In Society A everybody is on the same level, which might seem to be an appealing feature.

Except as soon as we start to think a bit harder, we realize that people in Society A aren’t equal at all. At least to some extent, differences in income do come from differences in effort. Some people work harder than others. Should people get paid the same regardless of effort?

Of course, this reasoning attacks a bit of a straw man. Hardly anybody would argue for full equality of income. But that doesn’t mean that there aren’t some situations where reducing income inequality could be helpful. I don’t believe in free will, which means that I think that where you are today is determined by circumstances you had no control over. But even with free will, it’s impossible to deny that some people are luckier than others. Some people are born into families with higher incomes or better connections. Some people are just smarter, or more talented. Two people can put in the same amount of effort and come out with wildly different outcomes. Isn’t there some justification for correcting these kinds of inequalities?

Now we need to bring in the second question: what kind of inequality matters? To this point, I have focused entirely on income inequality, but money is only as good as what you can buy with it. Somebody who earns $1,000,000 per year but saves $950,000 is no better off than someone who earns $50,000 per year (until they start spending those savings of course). We also need to consider a dynamic component to inequality. The chart above shows only a snapshot of inequality at one point in time, but there is large variation in earnings over a person’s lifetime. So a better measure of the kind of inequality that actually matters would be total lifetime consumption inequality (due to measurement difficulties, the question of whether consumption and income inequality move together is still under debate – see a nice survey here).

But we’re still not quite there. Why do we consume anything? Presumably because it makes us happy, or, in the words of an economist, because it gives us utility. Simply giving people more stuff might not actually help them at all unless it’s stuff they actually want. So shouldn’t we actually care about total lifetime utility? And as soon as we jump into the world of utility, the problem gets much more difficult.

Consider an extremely wealthy person. Incredibly talented and smart, he excelled in school, founded a business, and became one of the most successful CEOs in the world. He has a beautiful house, ten expensive cars, flat screen TVs, season tickets to the Patriots. He can buy anything you could ever want. Except he works all the time, hates his job, and has no time for his family or friends. Despite his money, despite his consumption, he is miserable.

Another individual earns far less. She isn’t poor, but she earns right around median income. She doesn’t have a luxurious life, but she can afford the basics. More importantly, she’s happy. She has a loving family, great friends, a job she likes. Would she be happier with more income? Probably. But she doesn’t need luxuries to live a good life.

How do we make this society more equal? Simply looking at income would suggest a transfer from the wealthy man to the average income woman. This transfer would of course reduce income inequality, but it would increase utility inequality. The woman is already pretty happy and the man is not. Taking money from him and giving it to her would only increase the happiness gap. Is this outcome desirable? I don’t think so.

Then maybe we should try to minimize utility inequality. But how? Taking money from the woman would probably reduce the woman’s utility and eventually it would be as low as the man’s, but giving it to the man would probably do little to increase the man’s utility unless he takes comfort in the fact that others are as miserable as he is. The woman’s happiness comes from pieces of her life that can’t be transferred to others. Despite being born with all the skills necessary to succeed, the man would likely view the woman as the more fortunate one.

In general, trying to equalize utility gives some strange implications. Let give a few more examples.

Two people work in the exact same job and get paid the same wage. Seems perfectly fair. But what if one of them enjoys working and the other hates it? In dollars per hour, they are equal. In utility per hour, one receives more than the other. Reducing utility inequality would require that people who enjoy their jobs be paid less for the same work.

Some people prefer living in cities while others would prefer to live in smaller towns. Houses in cities are usually much more expensive, which means to achieve the same utility, a city lover will have to pay far more. In this case, income equality greatly benefits people who hate cities. Utility equality would suggest transfers from people who love rural areas to those who love cities.

Consumption equality could also generate large utility inequality. If one person places a lot of meaning on material goods while another values other aspects of their life, they would need different levels of consumption in order to achieve the same utility. Should we give more to the materialist than the ascetic simply because giving to the latter wouldn’t help them anyway?

And even these examples ignore the largest problem with trying to achieve equality in utility – it’s difficult to measure and impossible to compare across individuals. I have trouble defining my own preferences and determining what makes me the happiest, I certainly don’t trust others to do that for me.

So utility equality is probably not an option even if it were desirable. But income equality almost certainly worsens the problem of utility inequality. The people who make a lot of money are much more likely to also be people who place a high value on money. Those who earn less are more likely to enjoy a simpler life. In fact, there is little evidence that the rich are any happier than the rest of us. Taking their money makes them even worse off while helping those who are already pretty happy despite their relatively low income. The happy get happier while the miserable get more miserable.

Notice that I have deliberately avoided using examples with truly poor people. I can certainly see an argument for redistributing income to the poorest. Nobody should have to live at subsistence levels if they are willing to work. But being concerned about poverty and being concerned about inequality are not the same. It is possible for a society to have zero poor people and still be incredibly unequal and also possible to be almost perfectly equal with everybody poor (as it was for most of the history of human existence).

Have we gotten any closer to answering the original question? What kind of inequality should we care about? If you’ve made it this far, it should be clear that there isn’t an easy answer. We often use the term “less fortunate” as a euphemism for poor people and that almost exclusively refers to poverty in a monetary context. We view income as if it came from a lottery and then aim to use redistribution to correct for discrepancies. Why is that? Aren’t people that can be happy despite low income really the most fortunate? Isn’t money just one of many factors that matter for a person’s happiness? And aren’t many of these other factors difficult to measure and even more difficult to redistribute?

If we answer yes to the above questions, reducing the kind of inequality we care about becomes a much harder task. Can we really correct the deeper inequalities that arise due to people’s preferences and talents – some of which will lead to higher incomes and some not? Or should we accept that inequality is an essential part of society, accept that treating everyone equally necessarily produces inequality in outcomes, that differences in wealth don’t necessarily lead to differences in happiness, and that correcting differences in happiness is almost impossible?

What’s So Bad About Feeling Good? A discussion of altruism, selfishness, and morality

I think most people believe that the world would be a better place if more people acted altruistically. Rather than focusing on trying to improve their own life, people should think about what they can do to help others. But the more I think about it, the less confident I am that an altruistic society is really something we should strive for.

Let’s take an example. Two people are contemplating volunteering at a center for homeless children. Person A absolutely hates their time there, but they know that the kids benefit, so they reduce their own well being out of a sense of moral duty and do it anyway. For person B, spending time with the kids is the highlight of their week. They know that they are helping the kids, but their primary motivation comes from having fun themselves.

Two questions come out of this example. First, can we really say that either person is acting selflessly? Although initially it would appear that at least person A is selfless, are they really acting against their own interest? Sure they don’t enjoy the time they spend volunteering, but if it makes them feel better about themselves, isn’t that as selfish a motivation as any other? As I discussed in my post on rationality, to an economist selfishness means nothing more than choosing the path that maximizes total (expected) happiness for a person. Person A values being a moral person and even if it comes with a short-term cost, they are willing to bear that cost because the benefit (being free of guilt, reputation, getting into heaven, the knowledge that they did something good, etc.) is even higher.

An even more interesting question comes when we try to evaluate which of the two people is more altruistic. I think it is natural to assume that altruism requires some amount of sacrifice. Even though the end result in the above example is the same – the kids are happy in either case – person B is just satisfying their own desires. How can they be altruistic? And I think that intuition is correct. If we want to make a meaningful distinction between altruism and selfishness, altruism needs to include some kind of sacrifice. If I act without thinking of others, my actions cannot be altruistic even if they coincidentally end up helping others. An entrepreneur that invents a cure for cancer in order to sell it isn’t altruistic even though they save the lives of millions of people. On the other hand, if I actively try to improve the lives of others even when I know it will hurt my happiness in the short run, we can call those truly altruistic actions.

But this definition of altruism makes it difficult to see the appeal of an altruistic society. Is a society where people help others only out of some sense of obligation, where I give only to satisfy some moral code, truly better than one where people love to give away? Would you want to live in a world full of people who act altruistically, constantly sacrificing their own well-being in order to improve the well-being of others? Or would you rather live somewhere where people act to make themselves happy, but their happiness comes directly from helping others?

Of course, the above dichotomy excludes a third outcome, one where everybody acts for themselves at the expense of others. Most would agree that this is by far the worst of the three societies. I definitely agree that our goal should be to avoid this result. The way to do that, however, doesn’t have to come from laws. It doesn’t have to come from religion. It doesn’t have to come from duty or obligation. Forcing people to do good might be effective, but wouldn’t it be a better society when people want to do good?

Fortunately, I think humans have evolved in such a way where we do feel good when we help others. Most of life’s best experiences come from our relationships with others. Love. Friendship. Family. Trust. Gratitude. Respect. Those feelings are some of the most valuable pieces of a happy life. They are impossible to achieve without other people. Someone might be able to get ahead in a purely materialistic sense by seeing their own well-being as their only concern. They’ll get more wealth. More fame. But not more happiness. The best way to get people to act selflessly is to make them aware of the fact that helping others is the best way to help themselves.

An altruistic society consists of a bunch of unhappy people doing their best to make other people feel happy. They help others despite the fact that it makes them feel bad. An ideal society, in my opinion, is one where people help others because it makes them feel good.

Why I’m a Libertarian

In a previous post I noted that libertarian ideas seem to be frequently misunderstood, that libertarians are sometimes labeled selfish, materialistic, and uncaring. In this post I hope to show that a libertarian worldview can come from a more virtuous principle: humility. Note that the title of this post is not “why you should be a libertarian.” I doubt it will convince anybody that is not already highly sympathetic to libertarian ideas, but I hope it can show that that (at least some) libertarians have good intentions. That I may be wrong, but I’m not evil.


A widely cited joke about Ayn Rand’s famous novel Atlas Shrugged goes something like this (I believe the original source was John Rogers here):

“There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.”

It’s a good joke, but I worry that many outside of libertarian circles take its message a bit too seriously. Libertarians live in a fantasy world where everyone shares our ideals and we never think about real issues, about real people. And it is perhaps unfortunate that Rand’s view, one which believes in an objectively correct morality, that aims to tell you that there is a right way to live and she knows it, has been associated so closely with libertarian thought more broadly.

I’m a libertarian because I don’t believe there’s a correct way to live.

Family is the most important part of my life. Others might place a higher weight on different relationships, with their friends, their students, their coworkers. Some may find their strongest bond comes from a higher being, so they let religion or spirituality take precedence over earthly concerns. Another priority could be helping those they don’t know, simply because they are less fortunate or in need of help. Devotion to their jobs, to their hobbies, to the pursuit of knowledge, to any other activity that they find fulfilling – each can also drive a person’s behavior. And of course, pure material pleasures occupy a place on everybody’s scale of value. All of these considerations play a part in deciding the actions that lead to a life worth living.

I’m a libertarian because I don’t want to tell you what’s most important.

A Harvard educated liberal from Massachusetts wants to convince you to support abortion because a woman has a right to her own body. An evangelical Christian from Texas says that killing a fetus is no different than killing a child. Neither can be proven right or wrong. Each wants to impose their values on the other. Drugs are immoral. Alcohol is immoral. Gay marriage is immoral. I disagree and I’ll try to convince anyone that believes otherwise to join my side. But I’ll respect your right to believe what you want as long as you recognize mine.

A person’s moral worth is determined by how much they produce for society. No, it’s determined by what percentage of their wealth they give to charity. Or maybe it’s how much they do for their family. How devout they are in their prayers. Everyone lives by a different code. How comfortable are you in saying that your code is the right one?

I’m a libertarian because you have as much right to your values as I have to mine.

In the 2012 Republican primary debates, the moderators asked Ron Paul if a libertarian society would let a person without insurance die (for the record, he said no). It seems like an easy question – of course we can’t let them die. Let’s ask a harder question. A cancer patient has six months to live. They can extend their life for an additional 5 years, but the procedure costs $5 million in addition to a significant amount of time from doctors who could be working on helping others. They don’t have insurance. Should they be allowed to die? What if they can only extend their life 6 months? 1 day? Where do we draw the line? And who draws it?

Global warming is real. It’s almost certainly caused by humans. It could very well cause catastrophic changes in the future. Our use of fossil fuels could be the source of substantial problems for future generations. But if we stopped using fossil fuels now, we definitely cause substantial problems for the current generation. How can we determine which is worse? How do we weigh the life of an individual against the lives of their descendants?

I’m a libertarian because everything is a tradeoff and I can’t value the costs and benefits.

We all want equality of opportunity. It’s a nice slogan. What does it mean? Some say it means education should be free for everyone – that it’s a basic human right. How much? What kind? Who pays? Some people excel in a standard classroom setup. They love to learn, they can sit down with a book and study. Others can’t. And that’s ok. To think that we can create equality of opportunity by placing everybody in the exact same environment may be pure in its intention, but it’s incredibly dangerous in its execution. We weren’t all created equal and that’s a great thing. Our differences are not something to be squashed out, but embraced.

I’m a libertarian because everybody has different strengths and weaknesses, because everybody has different needs.

Markets always fail. The conditions of perfect competition laid out in a standard economics textbook never hold in reality. Every firm has some monopoly power. Every good causes some externality. Collective action problems, public goods, asymmetric information – all pervasive issues that throw a wrench into the workings of a perfectly competitive economy. Couldn’t a government fix some of these problems? Doesn’t a planner have the ability to take a big picture approach and do what’s best for society instead of what’s best for each individual? It’s possible, but where does the knowledge come from? Where do we set the prices for the monopolist? How high is the optimal tax to prevent the externality? Can we design a mechanism to improve upon the free market outcome? Even in an economic model where everybody has identical preferences and production technologies are fixed the answers are not always clear. In the real world – good luck.

Someone made you king of the world. You want to make it better. So you call in teams of experts, the best from every field. You build supercomputers capable of running an unimaginable number of calculations every second. A coordinated, planned society led by the brightest minds available – how could the chaotic workings of the free market stand any chance? But soon you realize that even the simplest questions – like how much toilet paper to produce – turn out to be nearly impossible to answer. So you give up on your unified plan and try to just fix a few obvious problems. And yet each leak sealed opens up several more – the experts and their fancy computers do their best to predict people’s behavior, but there is simply too much left unknown. Without an overarching plan the ad hoc solutions continue to multiply and the end result is a convoluted, bureaucratic mess.

I’m a libertarian because knowledge is dispersed and I can’t think of a better way of collecting it than through the market process.

Liberty is not magic. It’s not a solution to any of the problems I’ve touched on above. But that’s exactly the point. When the questions facing society are this challenging it would be incredibly arrogant to assume that any one mind or group of minds could divine an appropriate solution. A society of liberty sidesteps these questions entirely. It allows individuals – with their unique perspectives and values, with their knowledge of their own specific time and place – to attempt to find solutions for their own much smaller problems. Most of these attempts fail, but a free market rewards those that work, letting the best rise to the top, creating a better world for all.

Maybe I’m wrong. Maybe individuals making decisions for themselves results in outcomes that are worse for everybody. Maybe governments are better at weighing the total costs and benefits to society than individuals acting on their own. Maybe a coordinated plan can figure out better answers to the questions facing our society than the spontaneous order of a free market. Maybe. And I’m happy to have those debates. But never say that I haven’t thought about these issues. Never say that I’m not worried about poverty, or the environment, or the thousands of other important problems that affect this world every day. Never question my intentions.

And never say that I’m a libertarian because I don’t care.

I’m a libertarian because I don’t know.

 

Study Finds That Nobody Changes Their Mind After Reading Fake News

You'll Never Believe What Trump Said About It

The title, in case you didn’t already guess, is fake news. There was no study. But think about your reaction when you read it. Raise your hand if you said “wait a minute, I always thought fake news was a huge deal but I guess this study proved me wrong. I’ll just change my mind without thinking about it at all.” Anyone? Yeah I didn’t think so. And if you aren’t convinced by a headline on a reputable publication such as this one (OK maybe not so much), are you really buying the fake headlines that the Pope backed Trump or that Hillary actually didn’t win the popular vote?

Recently there has been an uproar surrounding these fake headlines. Germany wants Facebook to pay $500,000 for every fake news story that shows up. California (of course) wants to pass a law that will make sure every high school teaches its students how to spot fake news stories. I wish those stories were themselves fake news, but they appear to be all too real.

Now there probably are some people who do read these fake headlines and don’t do their research. Maybe they’ll store it somewhere in the back of their mind and use it as evidence to support their positions in debates with their friends. But I suspect that the only people who believe a fake headline are ones who were already inclined to believe it before they read it. No study has been done, but I’ll make the claim anyway: Nobody changes their mind because of fake news.

(One qualification to the above point is that it may break down if real news were censored. Here I am thinking about a case where the government restricts the media so that propaganda becomes the only source of information. Obviously that would be a major problem)

Perhaps more concerning is that people also don’t seem to change their mind because of real news either. They don’t let the facts guide their positions, but instead seek out the facts that support the positions they already held. Is believing a fake news story any worse than only believing the stories that confirm your preconceived inclinations?

In other words, the problem is not fake news. The problem is confirmation bias. Everyone’s guilty of it. I certainly am. How could you not be? With the internet at your fingertips, evidence supporting nearly any argument is freely available. And I don’t just mean op-eds or random blog posts. Even finding academic research to support almost anything has become incredibly easy.

Let’s say you want to take a stand on whether the government should provide stimulus to get out of a recession. Is government spending an effective way to restore growth? You want to let the facts guide you so you turn to the empirical literature. Maybe you start by looking at the work of Robert Barro, a Harvard scholar who has dedicated a significant portion of his research to the size of the fiscal multiplier. Based on his findings, he has argued that using government spending to combat a recession is “voodoo economics.” But then you see that Christina Romer, an equally respected economist, is much more optimistic about the effects of government spending. And then you realize that you could pick just about any number for the spending multiplier and find some paper that supports it.

So you’re left with two options. You can either spend a lifetime digging into these dense academic papers, learning the methods they use, weighing the pros and cons of each of their empirical strategies, and coming to a well-reasoned conclusion about which seems the most likely to be accurate. Or you can fall back on ideology. If you’re conservative, you share Barro’s findings all over your Facebook feed. Your conservative friends see the headline and think “I knew it all along, those Obama deficits were no good,” while the liberals come along and say, “You believe Barro? His findings have been debunked. The stimulus saved the economy.” And your noble fact finding mission ends in people digging in their heels even further.

That’s just one small topic in one field. There’s simply no way to have a qualified, fact-driven opinion on every topic. To take a position, you need to have a frame to view the world through. You need to be biased. And this reality means that it takes very little to convince us of things that we already want to believe. Changing your mind, even in the face of what could be considered contradictory evidence, becomes incredibly hard.

I don’t have a solution, but I do have a suggestion. Stop pretending to be so smart. On every issue, no matter what you believe, you’re very likely to either be on the wrong side or have a bad argument for being on the right side. What do the facts say, you ask? It would only be a slight exaggeration to say that they can show pretty much anything you want. I’ve spent most of my time the last 5 or so years trying to learn economics. Above all else, I’ve learned two things in that time. The first is that I’m pretty confident I have no idea how the economy works. The second is something I am even more confident about: you don’t know how it works either.

Free Will, Morality, and Libertarianism How can you be held responsible for something that wasn't your fault?

An astute reader sees an apparent contradiction between my last post and my post on free will, asking “how can a libertarian reconcile no real choice with the importance of being free to choose?”

It’s a great question. If free will doesn’t exist, if every single action is pre-determined, can we even have a consistent concept of morality? I made a distinction between actions made freely and those forced by the state, but isn’t that distinction meaningless in a deterministic world? When all actions are at some level outside an individual’s control, is there any difference between the direct coercion of government and more indirect factors influencing the decision (like genetics, education, religion, etc.) that are also completely removed from the realm of free choice? The answers to these questions are far from obvious and I certainly don’t pretend to have a perfect response, but I hope this post will clarify the way I think about the issue. My ideas here are heavily influenced by (who else) Hayek’s discussion of similar topics in chapter 5 of The Constitution of Liberty.

First, it is important to understand my earlier defense of determinism. The key point is that every action can be traced to a chain of previous events. Going back far enough in each person’s chain, some link will be the result of an event that is outside of their direct control. And if I know all of the links in this causal chain, if I know everything that has ever influenced an individual, I can predict with absolute certainty their next move. Their “choice” was determined long before they are required to make it.

If we accept this argument, then at the moment of a decision nothing can be done. There is no way that a given individual would have made any decision different than the one they made. We could replay the same history a million times and get the same result in every single trial.

But here’s the problem. Go back to the example I gave in the last post. A person is trying to decide whether to give money to the poor (let’s call him Bob). Note that I will consider giving to the poor to be a good thing. If for some reason you disagree with that assessment, replace “giving to the poor” with any action you consider moral and the argument should still go through.

Now assume Bob exists in two universes (A and B). In each universe, Bob has had almost the exact same experience. He has the same parents, the same teachers, read all the same books. As a result, in each universe he has developed a system of values which teaches him to care for his fellow human beings. Now introduce one difference between the two universes. Universe A has a government which forces Bob to give to the poor through taxation. In Universe B, Bob is free to do as he pleases. Of course, we know  that Bob is not really free to choose. If he chooses to give to the poor, it is only because he grew up in a society that taught him that that was the right thing to do, and only because of his upbringing that he has any desire to do the right thing at all. Universe B Bob doesn’t choose to give to the poor any more than Universe A Bob does. Both only give due to the influence of others. How can we say one is more moral?

Consider George. George also exists in both universes, but he has had a different experience than Bob. Where Bob was taught to live a life of compassion, George only cares about his own material well being. Help the poor? How does that help George? In Universe A, George still has to give to the poor. The government forces him to give against his wishes. And it makes him angry. He works hard to earn his money, why should he give to those who don’t? He sees Bob gives to the poor as well, but he believes it is only because the government forces him to do so.

In Universe B, George doesn’t give to the poor. His values tell him that you get exactly what you deserve in life and he acts on those values. There is no government to force him to do otherwise. And yet he sees Bob give to the poor anyway. Maybe he just dismisses Bob as too stupid to realize that his money won’t help them, that the poor need to help themselves. But maybe Bob’s actions give him pause. Maybe they form a new link in George’s causal chain. Maybe he questions his decision, and even though he could never have changed his choice at that moment, he might think about the situation differently next time. Maybe his system of values begins to change.

Phrased in this way, we begin to see a real distinction between the decision to give in each universe. It is true that in both universes Bob would have given to the poor. Our reason for calling Bob’s actions moral cannot be that he himself could have made another choice at the moment of his decision – without free will, he really couldn’t have. But we can compare Bob’s choices to those of another individual. If we replace Bob with George in Universe A, the result is the same – both give to the poor, and we can’t judge morality because nobody could have acted differently. In Universe B, however, Bob and George are allowed to act differently in the same situation. Their decision tree has two branches. Neither will choose any branch other than the one already pre-determined by their life experiences, but the existence of the branches matters because somebody else could have.

So now we can give an answer to the original question. If nobody can truly make choices of their own volition, why does choice matter for morality?

Because if a choice is available, even if each individual will always make the same choice, another might have acted differently.

But even if you buy the argument above, a question still remains. We might agree that Bob made a moral decision in the example above even though it wasn’t truly his choice, but does that mean that George is responsible for his actions? Can we blame George for not giving to the poor? After all, it’s not his fault that he didn’t have Bob’s life. Here I defer to Hayek:

Strictly speaking, it is nonsense to say, as is so often said, that “it is not a man’s fault that he is as he is,” for the aim of assigning responsibility is to make him different from what he is or might be. If we say that a person is responsible for the consequences of an action, this is not a statement of fact or an assertion about causation. The statement would, of course, not be justifiable if nothing he “might” have done or omitted could have altered the result. But when we use words like “might” or “could” in this connection, we do not mean that at the moment of his decision something in him acted otherwise than was the necessary effect of causal laws in the given circumstances. Rather, the statement that a person is responsible for what he does aims at making his actions different from what they would be if he did not believe it to be true.

We assign responsibility to a man, not in order to say that as he was he might have acted differently, but in order to make him different.The Constitution of Liberty, p. 137-138

What do we want from our society? Do we want to move from Universe B to Universe A, from a world where people are free to make their own value judgements to one where they are not given any choice, where we claim to know what is best for them? Or do we want to convert people from Georges to Bobs, to convince them to buy into the system, convince them that the ideals we aim for are ones worth striving to achieve? In my view, a free society gives us the best chance of achieving the latter goal. Only a free society allows us a choice, and even if our choice is set long before we make it, knowing that other individuals could have made another choice remains important.

Social Cooperation Is the free market argument in need of rebranding?

The standard free market analysis places the individual at its center. As Adam Smith famously noted in 1776, although they act in their own self interest, an individual in a free market is “led by an invisible hand to promote an end which was no part of his intention.” And it is generally argued that competition is the driving force behind the benefits of the market process. Entrepreneurs constantly search for new opportunities to make profit, and as a result they find more efficient ways to provide goods to consumers.

Phrased in this way, the free market argument tends to evoke images of Social Darwinism – the best rise to the top, and the weak are left behind. Competition implies a constant struggle between market participants to seek their own benefit at the expense of others. This vision often leads critics to argue that the free market ideal generates an uncaring society. If everybody acts only in their own self interest, there is no room for cooperative behavior that is essential for human interaction. Morality, emotion, personal connections – none of it matters. The free market places “profit over people.”

This critique stems from a wildly incorrect reading of the free market argument.

Go back to Adam Smith. At the center of his work is the idea of division of labor. A market economy thrives not because individuals work in isolation. Instead, it depends entirely on the relationships between individuals, focusing each person’s talents on an activity where they possess a comparative advantage.

Perhaps the best illustration of the role of cooperation in a market economy is Leonard Read’s famous essay I, Pencil (there is also an excellent video inspired by the essay). Read points out that no individual on their own knows how to make even something as simple as a pencil. The production process requires dozens of firms and hundreds of workers each performing specialized tasks with little knowledge of the final product. There is no planner describing how to make a pencil and yet through the actions of individuals as well as the interactions between individuals, the production process arises spontaneously. An individual acting alone would quickly fail in a market economy.

Ludwig von Mises’s famous treatise Human Action, a comprehensive analysis of the working of the free market system, was almost given a different titleSocial Cooperation. Although Mises dropped this alternate title, the theme that markets depend as much on cooperation between individuals as they do on individual action itself runs throughout the book. Mises notes:

Within the frame of social cooperation there can emerge between members of society feelings of sympathy and friendship and a sense of belonging together. These feelings are the source of man’s most delightful and most sublime experiences. They are the most precious adornment of life; they lift the animal species man to the heights of a really human existence.
Human Action p. 144

A free market, in Mises’s view, doesn’t destroy relationships between individuals, but instead fosters these feelings. Even if we take the idea of “Social Darwinism” seriously, even if we admit that all individuals are driven by the desire to fight for their own survival, that doesn’t lead us to a world of selfishness (in a narrow sense) because “the most adequate means of improving his  condition is social cooperation and the division of labor” (Human Action, p. 176).

But the argument that markets and morals are inconsistent faces an even deeper flaw. In a market economy we have a choice. Of course we can choose to think only of ourselves, to put money over family, to value material goods over relationships. But that has absolutely nothing to do with the free market itself. Nothing in the market argument says that I should only care about wealth. If you want to put other priorities first, nobody in a free market has any right to stop you (the catch is that you also don’t have any right to make other people pay you).

A free market doesn’t place any moral judgement on the actions of individuals. It is perfectly consistent with both a savage society where everybody fights for their narrow self interest and ignores others as well as a responsible one where we care for our fellow humans. It is up to each of us as individuals to choose to live our lives morally (but of course, this choice is only an illusion).

What is the alternative? The only clear alternative I can see is to use the state to try to impose your morals on others. By enacting laws that force people to behave morally, maybe we can create a more caring society.

Such a system seems doomed to have the opposite effect. Let’s say you believe that redistribution of wealth is important. Poor people aren’t poor because they didn’t work hard. They just had bad luck. It’s the responsibility of the rich to help these people out. I am sympathetic to this reasoning. However, by forcing people to give up their wealth through taxation, we change the equation from one of responsibility to one of coercion. Rather than giving to the poor out of some sense of moral duty, I give because I don’t want to go to jail. Is attempting to legislate morality in this way more likely to generate a caring society or a resentful one? Respect between classes, or class warfare?

The free market argument should not marry itself to the individual. It is true that all actions must at their core come from individual decisions, but the market only works through the relationships between individuals. Human Action is only half of the story. Social Cooperation is equally important. By obscuring this fact, defenders of markets concede too much. Emphasizing efficiency and the incredible material progress society has made since adopting a market system is fine, but we can’t ignore the moral argument. Morality can’t be imposed. It has to be a choice. And only a free society offers that choice. “Liberty is an opportunity for doing good, but this is so only when it is also an opportunity for doing wrong” (Hayek, The Constitution of Liberty, p. 142).

Three More Reactions to Trump

This post will be the last on Trump for the foreseeable future, but I just wanted to highlight three excellent reactions to Trump’s victory.

First: An interview with Jon Stewart, who makes the current crop of late night political comedians look like amateurs. Two nice quotes:

I don’t believe we are a fundamentally different country today than we were two weeks ago. The same country with all its grace, and flaws, and volatility, and insecurity, and strength and resilience, exists today as existed two weeks ago.

I thought Donald Trump disqualified himself at numerous points, but there is now this idea that anyone who voted for him has to be defined by the worst of his rhetoric.

Second: A beautiful piece by Lyman Stone. Please read the whole thing, but here are a few highlights:

You did this. I did this. We showed politicians that vitriol and hatred were effective. In our Facebook rants, in our un-friending, in our mob-shaming, in our boycotting, in our isolation, in our chanting, in our occupying, in our insulting, in our violence and our counter-violence, in our preference for the shouted epithet over the whispered encouragement, in our love of charisma and wrath over decorum and respect: we did this.

The next time your activist friend tells you they’re renewing their passport because Trump is going to institute fascism, respond, “Oh, come on friend, you don’t know that. That’s just fear and paranoia speaking.”

When your friend angrily shares on Facebook about how Clinton is going to steal our guns, don’t click “Like.” Click the crying one, and leave a comment, “I worry about 2nd Amendment rights too: but dude, this is just fear and paranoia speaking. The President and Congress don’t even close to have enough legal power to take our guns even if they wanted to.”

every time I’ve successfully persuaded someone else of something meaningful, it’s because I took the time to listen, to communicate empathy, to assure them that I thought they were a valuable person.

And in the long run, it is only mutual sympathy and compassion that can save us from violent tyranny.

And finally: An essay (short book?) by Scott Alexander. As always with his essays, it’s long but worth it. A slice:

All this stuff about how he’s “the candidate of the KKK” and “the vanguard of a new white supremacist movement” is made up. It’s a catastrophic distraction from the dozens of other undeniable problems with Trump

So our different ways of defining “open white supremacist”, even for definitions of “open” so vague they include admitting it on anonymous surveys, suggest maybe 1-2%, 1-2%, 4-7%, 3-11%, and 1-3%.

But doesn’t this still mean there are some white supremacists? Isn’t this still really important?

I mean, kind of. But remember that 4% of Americans believe that lizardmen control all major governments. And 5% of Obama voters believe that Obama is the Antichrist. The white supremacist vote is about the same as the lizardmen-control-everything vote, or the Obama-is-the-Antichrist-but-I-support-him-anyway vote.

Politifact says that Hillary and Obama wanted a 700 mile fence but Trump wants a 1000 mile wall, so these are totally different. But really? Support a 700 mile fence, and you’re the champion of diversity and all that is right in the world; support a 1000 mile wall and there’s no possible explanation besides white nationalism?

Listen. Trump is going to be approximately as racist as every other American president. Maybe I’m wrong and he’ll be a bit more. Maybe he’ll surprise us and be a bit less. But most likely he’ll be about as racist as Ronald Reagan, who employed Holocaust denier Pat Buchanan as a senior advisor. Or about as racist as George Bush with his famous Willie Horton ad. Or about as racist as Bill “superpredator” Clinton, who took a photo op in front of a group of chained black men in the birthplace of the KKK. Or about as racist as Bush “doesn’t care about black people!” 43. He’ll have some scandals, people who want to see them as racist will see them as racist, people who don’t will dismiss them as meaningless, and nobody will end up in death camps.

Stop making people suicidal. Stop telling people they’re going to be killed. Stop terrifying children. Stop giving racism free advertising. Stop trying to convince Americans that all the other Americans hate them. Stop. Stop. Stop.