Convergences

How the Tech Surge Save Obamacare

Democracy in China (and the U.S.)

At the AEI's Enterprise blog, I discuss a recent article on democracy in China Daily. My underlying point is that we in the U.S. spend too little time thinking about the problems of making democracy work, and this gap in our thinking will trigger serious consequences in the not-so-long-run.

See, e.g., a recent statement by CBO Director Douglas Elmendorf:

The country faces a fundamental disconnect between the services that people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are prepared to send to the government to finance those services. That fundamental disconnect will have to be addressed in some way if the nation is to avoid serious long-term damage to the economy and to the well-being of the population.

Political incentives militate against any resolution. People are treating the Federal budget as a commons, and hastening to exploit it before others can do so. In such a situation, restraint is a bad strategy -- it leaves more for others and does no good over all.

So, the rising concern about the problem actually leads to an intensification of everyone's desire to get what they regard as their just due, and the rapacity increases. DC lobbyists just had their best year ever, and it was not for any efforts to solve the problem.

The Chinese are surely watching this dynamic with interest. According to legend, Zhou Enlai, when asked his view of the French Revolution, said "It's too early to tell." Similarly, they must be interested in seeing  how this novel U.S. idea of a constitutional democracy works out in practice -- at present, it is too early to tell.

Another Year Older, And Deeper in Debt

The collapse of the special interest state comes nearer. Coyote Blog points out that states are disabled from dealing with their budget problems by a combination of federal strings and judicial imperialism that prevent adjustments. He notes: "Just about everyone except for taxpayers have a set of lawyers in courts full time preventing budget changes that affect their special interests."

The end state is ineluctable: "The only way through this is going to be a massive string of state and local government bankruptcies."

A commenter finds a half-full glass in this:

At every level from state pensions to federal gov’t Treasury bonds, liabilities have been accumulated that cannot possibly be paid. It’s mathematically impossible.

The sooner they begin defaulting in earn[est], the sooner we can get through this Depression and the sooner we can begin rebuilding on a more stable basis.

Sure, the Depression will be painful. But the longer we postpone it, the more debt we rack up, the worse the pain will be when we are eventually forced to deal with it.

The Special Interest State

Law Prof Tom Smith at the Right Coast (who is consistently one of my favorite commentators) muses on the relevance of Ayn Rand's novels to the current political scene. Sample:

In my view, Rand has something very important going for her, and that is, she seems to be right about a very big thing.  There just is something about the state that causes it to surround and attach itself to productive and creative activity and to parasitize it.  This activity seems to emit, the way a squid emits ink, a kind of gas of moral arguments to obfuscate what it is really doing.  Many sincere people are pulled along thinking they are doing good, but there are also plenty of people, and I've met them in DC, who know or should know that they are not really helping anybody but themselves.  . . .

I don't think it's surprizing that Rand should be making a comeback at a time when the federal government is trying to, for want of a better phrase, take over health care, and that's just for starters.  . . .  What Rand seems to have gotten her head around is the opposition between the people who want to run things from above, the Will to Supervise, and those who oppose them, who believe in freedom and creation.  This is a very fundamental opposition and I don't think political philosophy understands it all that well.  Schumpeter obviously understood capitalism as creative destruction and the importance of entrepreneurs, but I'm not sure he grasped the importance of the anti-entrepreneurs.  But Rand alerts us to the danger to freedom posed by Progressives, which is probably as good a name as any for those who oppose freedom in the interests of their own power with the rationale of making things better for various clients groups that are supposed to have some moral claim or other on all of us. [Emphasis added.]

The people seem to be catching on, which is why both parties have low approval ratings, and quite a few supposed sophisticates are likely to get incinerated if the smoldering populist fire gets hotter, especially those businesses that chose to join anti-entrepreneurs.

Rhett Butler Comes to Washington . .

. . . is the title of a new article over at The American. It starts with some references to Prof. Luigi Zingales' fine "Capitalism After the Crisis" in the new journal National Affairs, in which he riffs on the distinction between "pro-business" and "pro-market," and goes on to discuss the increasingly destructive nature of Washington influence peddling.

Some excerpts:

Since business is business, companies can adopt the philosophy of Rhett Butler in “Gone with the Wind,” that as much money can be made from a civilization’s destruction as from its rise. Furthermore, while it might be thought to raise some problems of personal ethics, management can take the next step and say they owe it to the shareholders to help that destruction along if that is where the opportunities are.

However, it is unlikely that the increasingly mutinous middle class will understand such fine points of corporate and Washington ethics, or forgive a business culture that promotes destruction and stagnation.

  And:

[W]hile one cannot escape one’s time, and if destruction is at hand it is reasonable to go into the salvage business, it would be wiser for businesses to band together to defend free market culture and make their money from our civilization’s rise instead.

Yes - I know that Rhett was not actually a scoundrel. Parse his words carefully, and you note that he himself would not destroy, even if he would profit from destruction caused by others. Rhett was continually a builder and an admirer of builders, with a contempt for the vaporous upper classes of the Old South.

The Role of Emotion in Public Policy

For some time now, my economist friends have had to put up with my dabbling in economics. See, e.g.  They will be relieved to hear that I am presently more interested in psychology.

The role of emotion in policy (as opposed to politics) does not get much direct or systematic attention as such in the policy community. Perhaps we are all pretending that it is not there, because in one sense it ought not be there. One might say that people ought to decide among policy options objectively, and choose the best policy based on rational considerations and evidence. Of course this is not entirely possible. There is no point in asking people not to feel things. Since there is nothing to be done, perhaps there is nothing to be said, either?

My take is that this is in danger of becoming a self-fulfilling prophecy. To start, we certainly do not know for certain there is nothing to be done until after some sort of discussion or analysis is complete. let me set out a few personal observations to serve as a starting point.

Can Science Rule Society?

The Obama administration has been greeted with enthusiasm by scientists who see the potential for “research-based policy.” Reason, not ideology, will govern. The New Scientist, among other zines, headlines “Let Science Rule: the Rational Way to Run Societies.” (May 28, p. 40-43) This is part of a larger theme: Behavioral economics is taking off.

Beltway Birdwatching

As I sit at the window of my home office, I can hear and see small flocks of law professors passing overhead, going south in the hope of advising the new administration. Well feathered with footnotes, they are insulated against the chilly economic climate. Law professors are sometimes confused with a closely related species, lawyers. Adding to the confusion is the juvenile form of the law professor, the Supreme Court clerk, which closely resembles the lawyer. Lawyers may be readily identified by their sleek dark plumage, courtesy, and fancy cars, and they generally aggregate in large numbers at the break of day. Law professors may be distinguished by their drab plumage, solitary habits, abstracted air, and long monologues. Lawyers and economists readily share nesting and feeding grounds, but there may be some concern that the law professors will displace the economists from their favorite nesting sites, for they are a more aggressive and territorial species. All three species, lawyers, economist, and law professors, are distinguished by their large bills.