For the first time in eleven months there is a paved road running in front of my house. My wife’s reaction to the development was to announce that she planned to wash our front windows. It seemed hardly worth it when every passing car or truck stirred up clouds of dust.
It all began when a storm sewer project began on our street in late October 2017. That continued until winter set in and then sat, partially completed, until the weather was good enough to finish the job. When the workers returned in the spring they completed the project, inexplicably sealing the storm drains on the west side of the street in the process.
Following numerous complaints by just about everybody on the street of flooding where there had never been flooding before, the city decided to pull forward another sewer project that was in the plans, do that, and use the opportunity to correct the previous error.
That project started a couple of months ago and yesterday they finished resurfacing our street and we’re no longer living on a gravel road.
The editors of The Economist, in celebration of the publication’s 175th anniversary, urge a revitalization of liberalism. The infographic at the top of this post is the editors’ depiction of world economic history over The Economist’s lifespan.
By a revitalization of liberalism they apparently mean a reconfirmation of the “Washington consensus”, a packet of policies they characterize as “individual freedom, free trade, and free markets”. They argue against the concentration of power in the hands of wealthy individuals or big companies, alluding to the past but failing to recognize how the steps taken in the past translate to the present, e.g. a 19th century land tax based on market value translates into a wealth tax today that taxes all of the assets held at present market values.
They continue by dipping their toe in the water of immigration control, arguing against it in principle but in favor of employer-based controls, e.g. E-Verify.
They argue against utopianism:
Unlike Marxists, liberals do not see progress in terms of some Utopian telos: their respect for individuals, with their inevitable conflicts, forbids it. But unlike conservatives, whose emphasis is on stability and tradition, they strive for progress, both in material terms and in terms of character and ethics. Thus liberals have typically been reformers, agitating for social change. Today liberalism needs to escape its identification with elites and the status quo and rekindle that reforming spirit.
a characterization that I think applies better to the rigidly statist “social democrats” of the present day United States. IMO their stated positions are purely instrumental, cf. the Mencken quote in my last post.
Although they argue for a “new social contract”, most of what they have to say sounds like a defense of the status quo, at least in the United Kingdom and the United States:
OTTO VON BISMARCK—no one’s idea of a liberal—started Germany down the road to a welfare state in the 19th century. Trade unionists across the world fought for them in the 20th. Benito Mussolini built a fascist one. And James Wilson would have hated the idea. But from Lloyd George’s People’s Budget of 1909 to FDR’s New Deal in the 1930s to Ludwig Erhard’s soziale Marktwirtschaft in post-war West Germany, there was a distinctive liberal cast to the creation of modern welfare states. William Beveridge, the architect of the post-war British welfare state, was a liberal and Liberal politician. (He was also a trustee of The Economist.)
Some liberals, as well as most conservatives, grudgingly accepted these reforms as the lesser of two evils. By sharing the benefits of free enterprise more evenly welfare states could stave off the more radical, and damaging, redistributive promises of fascism and, for rather longer, socialism. But their creation was more than just a way to maintain the conditions in which liberalism could flourish. At their best and most liberal, welfare states cushion people from the rougher edges of capitalism while still putting a distinctive liberal stress on individual responsibility. They enhance freedom, enable free enterprise and bring about a broader embrace of progress. Or at least that is what their liberal creators believed—and what today’s liberals need to make sure of.
Giving governments responsibility for the education of the young, pensions for the old, financial support for the indigent, disabled and jobless, and health care for at least some, and occasionally all, required massive reforms, the details and ambition of which varied in different places. Since their creation, though, welfare states have changed rather little. Some countries have added benefits. America, even before Obamacare, was incrementally expanding the government’s role in health. Others, especially in Europe, have trimmed them: less generous assistance for the unemployed, extra conditions for welfare. But Beveridge would recognise today’s NHS, and FDR would recognise America’s unemployment insurance.
I think they’re speaking too soon. The Nordic states have been trimming their generous welfare states as has France even as the U. S. has moved to expand its own. Whether we are converging to some happy medium or the U. S. is simply behind the curve is too early to tell. I’m skeptical that any European or North American welfare state can survive in a world where 14% of the world’s population (a billion people) want to move to Europe or the United States. That would double the present population of Europe and the United States.
I also fail to see how a society stratified between newcomers and natives promotes liberal values. As Milton Friedman pointed out a generation ago, you can’t have free immigration and a welfare state.
They argue against a universal basic income in favor of income subsidies:
Right-wing UBI supporters like it because an unconditional payment does not affect people’s incentives to work; an extra job, or an extra hour at work, does not reduce benefits. They also see it as removing various distortions in today’s welfare states, slashing bureaucracy and government snooping. Supporters on the left are keen because they see UBIs as redistributive, egalitarian, welfare enhancing and liberating. Enthusiasm for UBIs has spawned pressure groups, public campaigns and randomised trials.
Many of the idea’s attributes appeal to liberals too. A UBI would reduce the state’s interference in people’s lives. But from the liberal point of view such gains must be set against two big disadvantages, one a matter of principle, one of practicality. The principle is that the 20th-century social contract from which the welfare state was born was that the state would help people help themselves, rather than just give them stuff: it should provide a safety-net, not a platform scattered with silk divans. Liberals tend to believe that people will be happiest if they can achieve self-reliance. And, in practical terms, UBIs would mean either eye-popping increases in tax or cuts in support for the genuinely needy, particularly in countries where welfare spending is already relatively targeted on the poor. In America a UBI of $10,000 a year would require a tax take of at least 33% of GDP—less than the level in many countries, but some $1.5trn more than the current 26%.
A more modest, but still radical, alternative is to replace today’s welfare schemes with an expanded commitment to guaranteeing minimum income through negative income taxes. First championed by Milton Friedman, such taxes mean that the state tops up the income of anyone earning less than a guaranteed minimum. Both Britain and America have tax credits to top up wages along these lines.
Because they avoid transfers to the rich, such schemes are inherently cheaper than UBIs. A great deal could be achieved by simultaneously overhauling payroll taxes (the form of tax that has the greatest impact on low-income earners) so that the path from receiving a top-up to paying taxes is much smoother, and perhaps by broadening the eligibility criteria for the negative tax. There are various forms of currently unpaid labour, most notably in caring, that some societies might wish to support in such a way.
I don’t think either a UBI or income subsidies do much to counter the problems we actually have here in the United States at least. An increase in income inequality is inevitable when tens of millions of Mexicans move to the United States and you subsidize the wealthy. It’s like the old Henny Youngman joke. “Doctor, it hurts when I do this. Then don’t do that.”
They also have some advice about taxes:
Labour, particularly low-skilled labour, should be taxed less. Folding payroll and other employment taxes into the income-tax system would ease the squeeze for low-skilled workers. Shrinking the gap between taxes on capital and taxes on labour would counter the skew towards capital; and if capital investment were written off against corporation tax, this would not need to deter investment. Moderate inheritance taxes—a liberal invention, stemming in part from a healthy distrust of the concentration of wealth and power—should be maintained or reinstated, not least because they are fairly efficient. Loopholes used to avoid them should be tightened up. Property taxes should be reformed into land taxes. Taxes on carbon and other negative externalities, though not a universal panacea for the problems of climate change, would be a reform in the right direction, too.
I’m skeptical about a carbon tax because it’s regressive while carbon emissions are steeply progressive. In other words it’s an inefficient tax.
I endorse this proposal:
But when it comes to tech, something fresher and rooted in individual action and competitive markets would be best. One approach is to consider the data that users generate as a good they own or a service they provide for fees.
I don’t share the editors’ enthusiasm for the League of Nations or its successor the United Nations. World government requires a much greater degree of shared values than presently exists in the world. For liberal values, free trade, free movement of capital, free movement of people to prevail we must have a greater degree of shared values than presently exists. That’s why China is such a challenge. That is the lesson of the last 30 years and IMO the editors of The Economist haven ‘t learned it.
The modern world requires a different approach to the promotion of liberal values than was required for the 19th century. Advocates should deal more with empirical results than ideological purity. The gauge used for any particular measure should be will it actually promote freedom rather than would it theoretically promote freedom under perfect conditions.
I thought that most of the risks listed in David Robertson’s catalogue of woes, “What is Mankind’s greatest peril?” at The Moderate Voice were pretty far-fetched. Yes, I think that the death of the sun, the sun getting too hot or bright to sustain life on earth, or a life-obliterating asteroid strike are all inevitable but they are of so low a probability within a human timeframe that they’re not worth worrying about. I think that others of the risks he identifies, e.g. running out of resources, are even less likely and are born from an ignorance of history, economics, and technology.
However, it did make me start thinking. Are there some near-term higher probability risks about which we should be concerned? I immediately thought of at least two.
One risk is that presented by do-it-yourself biological weapons. This abstract from ScienceDirect should give you the general contours of the problem:
Biological weapons achieve their intended target effects through the infectivity of disease-causing infectious agents. The ability to use biological agents in warfare is prohibited by the Biological and Toxin Weapon Convention. Bioterrorism is defined as the deliberate release of viruses, bacteria or other agents used to cause illness or death in people, but also in animals or plants. It is aimed at creating casualties, terror, societal disruption, or economic loss, inspired by ideological, religious or political beliefs. The success of bioterroristic attempts is defined by the measure of societal disruption and panic, and not necessarily by the sheer number of casualties. Thus, making only a few individuals ill by the use of crude methods may be sufficient, as long as it creates the impact that is aimed for. The assessment of bioterrorism threats and motives have been described before. Biocrime implies the use of a biological agent to kill or make ill a single individual or small group of individuals, motivated by revenge or the desire for monetary gain by extortion, rather than by political, ideological, religious or other beliefs. The likelihood of a successful bioterrorist attack is not very large, given the technical difficulties and constraints. However, even if the number of casualties is likely to be limited, the impact of a bioterrorist attack can still be high. Measures aimed at enhancing diagnostic and therapeutic capabilities and capacities alongside training and education will improve the ability of society to combat ‘regular’ infectious diseases outbreaks, as well as mitigating the effects of bioterrorist attacks.
The technology to engage in bioterrorism or biocrime is already available and will only become smaller, cheaper, and easier to use. And there will always be people with grievances or other motives. This risk may be mitigated through the democratization of knowledge, decentralization, and debureaucratization. All three of those are deeply unpalatable to people who owe their livelihoods to the preservation of the status quo. Translation: we can’t rely on the CDC in Atlanta to protect us from this risk.
Another risk is authoritarianism, not just in far away countries in Asia and Africa but in Europe or North America. 30 years ago when Francis Fukuyama wrote “The End of History”, that seemed pretty far-fetched but it seems a lot less so now. It seemed as though the tide of history were flowing towards liberal values but now I’m not so sure. Should authoritarianism come to Europe (again) or North America, it will be clothed in liberal values and the good of the people. As H. L. Mencken put it
The urge to save humanity is almost always only a false-face for the urge to rule it. Power is what all messiahs really seek: not the chance to serve.
I presume some readers will consider my failure to list climate change as a significant near-term risk a serious omission. I consider climate change a risk but not as near-term a risk as appeared to be the case a decade ago. Mitigating that risk would be easier if so many of those highly concerned about it weren’t Chicken Littles, Neo-Malthusians, hucksters, or profiteers or were more interested in changing their own behavior rather than the behavior of others.
Another risk that doesn’t seem to be as pressing as it did a couple of decades ago is too many people. Prosperity seems to be an adequate way of mitigating that particular risk.
Are there any other high or medium probability near-term risks to the human species about which we should be concerned?
I honestly have no idea of how Matthew Winkler reached the conclusion that quantitative easing worked in his article at Bloomberg. More precisely, don’t you need to state what QE was trying to accomplish and whether it was worth accomplishing before deciding whether it worked? The “economy’s robust health” he points to as indication of QE’s efficacy only took place after QE ended in 2014. Does causality usually work that way?
I think good arguments can be made that quantitative easing produced headroom during which the economy could recover or that it satisfied public demand that something be done. I’m not sure either of those should be characterized as “working”.
He also completely ignores all of QE’s secondary effects and fails to quantify them. All of this sounds like reasoning from conclusion to evidence to me.
Taxpayers were repaid in full and even made a profit
No one went to jail because stupidity isn’t a crime
Borrowers were as blameworthy as lenders
Poor people caused the crisis
The Fed made a mistake by stepping in when Congress refused
Lehman could have been saved
I agree in particular with his remarks about #4
There were many other options, but they would have been very painful and required considerable foresight. I believed then (and still believe) that the best course of action would have been prepackaged bankruptcies for all the insolvent institutions instead of bailouts. I would have had the federal government provide debtor-in-possession financing, allowed qualified private institutional investors to bid on the assets thereby letting markets set the valuations, with the government picking up the rest. It would have been more difficult in the short term, but the economy would have rebounded much sooner.
and I said so at the time. Why didn’t we take that course of action? I think the only genuinely viable explanation is regulatory capture.
There will be a next time. The way we dealt with the last time practically insured there will be a next time. And we will deal with it the same way for the same reasons.
Have you ever noticed how one egregiously incorrect assertion can poison an entire article for you? In the case of this article by Paul Demko at Politico about “Medicare for All” it was this statement:
Some Democrats use “Medicare-for-all†as shorthand for a single-payer health care system, like the British National Health Service.
The problem is that British National Health isn’t just a single-payer system. It’s full-on socialized medicine in which the government is not only the primary disburser of payments for health care services it actually runs the system the way the Veteran’s Administration runs the system of VA hospitals.
The rest of the article is completely speculative. I won’t even comment on it.
I’m skeptical about M4A because I don’t think the conditions that would make such a system work prevail here. We are too large; we are too diverse; we don’t have enough social cohesion; we don’t have enough respect for authority. We aren’t willing to control costs so they would rise out of control, destroying everything else funded by the government in their path. That’s speculative, too, but at least it’s based on experience, cf. SGR.
There’s an interesting article by Elliott Gue at Seeking Alpha on whether the dollar drives oil prices. Skipping to the last chapter, the answer is that the exchange rate is a factor but it’s not the most important factor. 90% of the changes in the price of oil are explained by factors other than the dollar.
That raises the question what does drive oil prices? I can only offer guesses. My guess would be that short term movements in oil prices are influenced (in descending order of importance) by supply and demand, speculation, cartel pricing, and the value of the dollar.
Unfortunately, Michael Barone’s post at RealClearPolitics on Chicago Mayor Rahm Emanuel’s decision not to seek re-election isn’t news for anyone who’s been following Chicago politics. It is remarkably lacking in insight.
As to his assertion that Rahm Emanuel has “done it all” the operative definition of “all” must be raising money and strategizing elections because otherwise his accomplishments are quite thin. He was a lackluster Congressman—the only Congressional representative I’ve ever had who sent me a form letter in response to a constituent letter. As mayor he’s been worse than lackluster.
Let me try to fill in some of the blanks. Illinoisans pay the highest property taxes in the country. Chicagoans pay the highest sales taxes in the country. The man likely to be Illinois’s next governor is running on a platform of increasing the state’s income tax and imposing a graduated income tax. That will require a constitutional amendment.
I challenge Mr. Pritzker to acquire commitments from state legislators to vote in favor of his amendment in anticipation of the upcoming elections. IMO there’s no chance of enacting such an amendment.
To understand the problem with increasing taxes as a strategy for pulling Illinois’s onions out of the fire, Illinois’s population is already decreasing and the median income of those leaving is notably higher than the median income of those remaining. I’d like to see some hard numbers and some credible projections from the Pritzker campaign. It’s not clear to me Illinois can actually derive an increase in tax revenues by increasing the income tax at this point. 4% of something is better than 6% of nothing.
Borrowing is no solution, either. We’re borrowing to pay operating expenses, always a desperation move, the more we borrow the more we pay to borrow and that debt will be serviced by fewer taxpayers than there are now.
Illinois’s basic problems are that the Democrats have complete control over the state government with or without the governor’s mansion, the Republicans are supine, our problems can’t be solved by increasing taxes, and Democratic legislators recognize that they can’t make the reforms the state needs without antagonizing the constituencies they need to win elections.
We’re caught in a vise and I don’t see how anything short of disaster will release it.
Real median household incomes ticked up 1.8% to $61,372 between 2016 and 2017 while the poverty rate dropped 0.4 percentage points to 12.3%, according to the Census Bureau. Income gains were strongest among Hispanic households (3.7%). The poverty rates for blacks and Hispanics fell to 21.2% and 18.3%, respectively, the lowest since at least 1972.
Incomes increased across the distribution range with the share of people earning less than $15,000 declining 0.3 percentage points to 10.7%, the lowest level since 2007. The proportion of households earning more than $150,000 increased by 0.7 percentage points to 14.7%.
describes things we should be able to agree are welcome developments. Rather than sniping and finger-pointing, why not try to figure out why it’s happening and whatever is causing it do more of it. IMO at the very least it tells us that jobs are better than no jobs. I actually ran across an economist arguing that jobs just weren’t important the other day if you can believe it.
We’ve been here before. Half a century ago, students were also shutting down speakers whose views they found deeply offensive. In 1974, William Shockley, the Nobel Prize-winning scientist who in many ways was the father of the computer revolution, was invited by Yale University students to defend his abhorrent view that blacks were a genetically inferior race who should be voluntarily sterilized. He was to debate Roy Innis, the African American leader of the Congress of Racial Equality. (The debate was Innis’s idea.) A campus uproar ensued, and the event was canceled. A later, rescheduled debate with another opponent was disrupted.
The difference from today is that Yale recognized that it had failed in not ensuring that Shockley could speak. It commissioned a report on free speech that remains a landmark declaration of the duty of universities to encourage debate and dissent. The report flatly states that a college “cannot make its primary and dominant value the fostering of friendship, solidarity, harmony, civility or mutual respect. . . . it will never let these values . . . override its central purpose. We value freedom of expression precisely because it provides a forum for the new, the provocative, the disturbing, and the unorthodox.â€
The report added: “We take a chance, as the First Amendment takes a chance, when we commit ourselves to the idea that the results of free expression are to the general benefit in the long run, however unpleasant they may appear at the time.†It is on this bet for the long run, a bet on freedom — of thought, belief, expression and action — that liberal democracy rests.
What is sad is that he feels that he needs to but a sort of folk Marcusism has caught hold that is very, very dangerous.
There is no single repository of truth. Not the DNC. Definitely not President Trump. Not the writers at Vox.com. And certainly not your Facebook friends. IMO the best strategy for understanding the world around us is by casting a wide net.
