It does feel like events in Europe, with the decision to Leave and the rise of nationalist, right-wing movements, are similar to what is happening in the US with the almost inconceivable rise of Trump. What is happening?
Lots of media response to that question. Here is something I think we need to consider.
Globalization is a “net” benefit
Globalization may be a net benefit for modern industrialized societies. We are usually told that open markets around the globe add one or two percent to the net wealth of people in America. That is a good thing.
But note that that is “net” wealth. Some of us benefit a lot, and many of us bear the burden of those benefits. To see more on this argument, check out my posting on “Thinking carefully about free trade.” If many people make scads of money, that might outweigh the widespread problems that globalization causes, when everything gets added up. But just because there is a positive sum doesn’t mean that there isn’t a lot of pain happening. Here is that discussion:
http://danswartzman.blogspot.com/2015/07/thinking-carefully-about-free-trade.html
The elusive “good living”
So, the last three or four decades of globalization have made fortunes for the wealthy and a good return for the upper-middle class. But middle and working class people in the US whose jobs were imported are suffering from their losses. The “good living” that could be had with skills, hard work and a high school diploma is not remotely as available as it was 50 years ago.
No wonder that people paying this price for other folks’ increase in wealth are angry, frustrated, scared, susceptible to demagoguery, following a huckster with no credibility, but who offers them promise and hope. Less educated white men are demonstrating their despair in the most flagrant way possible, by killing themselves, by drinking themselves to death, by succumbing to drug overdoses.
A “rising tide” does not appear to lift all boats; it seems to be swamping too many of our neighbors. If the country is going to continue to promote globalization because it makes us, as a whole, more wealthy, we have to share that wealth with those who know only the pain.
But, I have heard pundits say, what can we do about this? Retraining? Maybe, but not the easiest prescription for 50-something laborers with little education. Increasing programs like the Earned Income Credit, paying for it with taxes on those who benefit from more trade? Might work, but difficult to pass in today’s political climate.
The obvious answer, to me, is government works programs. Fifty years of Republican efforts to “starve the beast” have resulted in a crumbling infrastructure in need of trillions of dollars of maintenance, repair and rebuilding. Just the sort of thing that skilled laborers and craftspeople could do to earn a living, doing something useful for their communities.
Folie de beaucoup
Ah, but we can’t do that because the entire community of industrialized countries is suffering from a “folie de beaucoup” called Austerity. We have to limit government spending, we are told by “serious people,” because we have to keep down the national debt. This is a largely unchallenged shibboleth held sacredly among the right, the center-right, the center-left, and the mainstream media.
Pick at random any column by Paul Krugman, our most consistent and erudite spokesperson for modern Keynesianism, and you are likely to read a thorough refutation of this position. At a time when the US government can sell bonds at virtually no interest, this must be the moment to start a program to rebuild our infrastructure and to promise work to those who are paying the price of globalization.
Hillary has proposed a $275 billion program, but that is too timid and insufficient. Sanders proposed $1 trillion over the next five years. Still not thinking big enough.
The American Society of Civil Engineers, in their 2013 report card on American infrastructure, estimated the need at $3.6 trillion by 2020. No wonder they rated the US infrastructure gap at a D+.
How much and how soon?
OK, I don’t know how much we can afford and over what time period. But I believe that as long as we ignore the real pain and hopelessness caused by globalization, and as long as we continue to pay homage to the gods of Austerity, we are not going to address the growing anger and disaffection of tens of millions of Americans and hundreds of millions of Europeans.
If we want the millions of people who voted for Leave and who are promising to vote for Trump to rejoin the rest of us in working towards common and reasonable goals, if we want to keep them alive, we have to promise them hope, a way forward, a job and a way to make a respectable contribution to the good of the whole.
Globalization, but no more Austerity. Let’s make global plans, but let’s also make sure that everyone benefits by making big plans that stir faith and trust. And let’s keep our bridges from falling down on our heads.
Wednesday, June 29, 2016
Monday, June 13, 2016
Vouching for healthcare, Part 5
Vouching for healthcare, Part 5
Many years ago, when Calabresi and Bobbitt wrote Tragic Choices, they said that whether you allocate resources in a market or through political means, you run into “fundamental flaws.” This blog thread on vouchers for healthcare benefits is based somewhat upon this notion.
Markets have flaws
As we demonstrated earlier, ideally markets have two benefits, liberty and efficiency. They allow everyone to decide which trades to make, and they create more happiness without having to increase inputs.
Markets also have three fundamental flaws:
1. They overweight the prevailing distribution of resources. If you are poor to begin with, you won’t be able to bargain your way to prosperity.
2. They overweight individual preferences over preferences of the community. There is no “we” in the marketplace, so what we want is subordinated to what “I” want.
3. They overweight the instrumental over the intrinsic. Since markets are based on voluntary exchange, they give weight to that which is exchangeable, like instrumentalities, rather than what is valuable in and of itself, like intrinsic values.
Political allocation systems may avoid the market’s flaws
Turns out, we can avoid some of these problems by using political means to distribute resources, but we run into another set of fundamental problems.
But first, what do we mean by political allocations? Any allocation system that uses power is a political allocation system. So, back to our “hats” example, if you get a particular hat because that is what the king decrees, or if you get a hat because that is what you were able to take and hold through force, these are political distributions. As are distributions through the actions of committees or a hat commissar. The same if we had a direct democracy, and allocated hats through a town meeting.
The political allocation system we discuss most in the US is our representative (at least on paper) democracy. If a legislature or a regulatory agency determines who gets which hats, this is a political allocation.
Note that political allocations can change the prevailing distribution of resources. The decision maker can simply choose to overcome an inequitable distribution, and give the poor more. Simply? Well, apparently not so much.
And politics can overcome the will of the individual. Politics enables the community, which can tell the individual what the community desires him or her to do.
And if the community is set on a particular intrinsic value, like equity or impartiality, it can superordinate that value above any transactional benefits.
But political allocations have their own flaws
The one benefit of political allocation is that it is directable. Politics includes the potential to choose. (We will see in subsequent blogs that our current governmental actors are systematically avoiding the making of choices, but that is for a future discussion.)
However, political allocation systems, such as government decisions, have three fundamental flaws:
1. They overweight the community over the individual.
2. They are inherently inefficient.
3. They carry the “Burden of Explicitness.”
Danger to individual liberty
Let’s look at the first of these. The community, through its agent, the government, can coerce the behavior of individuals. What “we” want becomes enforceable against “me.” We know this because we are all forced to pay taxes, we are all forced to hire people without using our prejudices, we are all forced to bend our property rights to the will of the zoning board. Governments can, of course, make me do things and prohibit me from doing others.
One of the problems with empowering the community is that it can too easily overcome the will of the individual. If you go down this route too far, you can enter a Stalinist nightmare, where the will of the community (as expressed by the elite in power, of course) justifies extreme, even deadly sanctions against the individual. Think Mao’s Cultural Revolution of the 60's.
This is the essential fear of Libertarians. “We must have as little government as possible, because too much government is a danger to our liberty.”
When I heard Calabresi discuss these ideas forty years ago, he argued that this concern about the danger of unbridled governmental power was what tipped him towards market-based solutions to as many problems as possible. I imagine that such concerns are at the base of much “Neo-liberalism.”
If we allocate bicycles through government, we need to set up a bicycle commissariat, and which bicycle I get will be a function of that bureaucracy’s decisions. I don’t get to choose which I want. I buy the bicycle that is made available by the government.
That loss of liberty is regrettable, but under certain circumstances, probably acceptable. Many of us would support a government ban on the sale and ownership of assault weapons. That is a threat to the liberty of those who want them. But so is a ban on tanks and missiles. So, too, are speed limits, and requirements to immunize, and the need for nutrition labeling, and zoning ordinances. All of these are restrictions on the will of the individual that we, as a community, are relatively comfortable with. (Well, not all of us. Strict libertarians would consider many of these restrictions odious. OK, maybe not a prohibition on tanks.)
What “I” want versus what “we” want
So, we want to empower the community and its values, and we know that doing so is a potential threat to the values of each individual. If the threat to the individual is too great, as with reproductive rights or a universal right to be married, we choose to let the individual decide.
Sometimes, “we” win. And sometimes “I” win. That is one of the most difficult tasks of democracy, making exactly these choices between the public will and the private will. If we let markets decide on healthcare, things that the group wants (prevention, equitable distribution of healthcare resources) may be subordinated to what the individual is willing to pay for with his or her voucher. If we use government, we run the risk of infringing on liberties (like choosing my own doctor or deciding what medicine I am willing to pay for) that are important to some people.
We are starting to see that there is no such thing as a perfect allocation system. Markets have their problems. And governmental allocations have their problems. We will have to choose which set of problems we prefer.
But political resource allocations are inherently inefficient. Is that acceptable? We will discuss that next.
Many years ago, when Calabresi and Bobbitt wrote Tragic Choices, they said that whether you allocate resources in a market or through political means, you run into “fundamental flaws.” This blog thread on vouchers for healthcare benefits is based somewhat upon this notion.
Markets have flaws
As we demonstrated earlier, ideally markets have two benefits, liberty and efficiency. They allow everyone to decide which trades to make, and they create more happiness without having to increase inputs.
Markets also have three fundamental flaws:
1. They overweight the prevailing distribution of resources. If you are poor to begin with, you won’t be able to bargain your way to prosperity.
2. They overweight individual preferences over preferences of the community. There is no “we” in the marketplace, so what we want is subordinated to what “I” want.
3. They overweight the instrumental over the intrinsic. Since markets are based on voluntary exchange, they give weight to that which is exchangeable, like instrumentalities, rather than what is valuable in and of itself, like intrinsic values.
Political allocation systems may avoid the market’s flaws
Turns out, we can avoid some of these problems by using political means to distribute resources, but we run into another set of fundamental problems.
But first, what do we mean by political allocations? Any allocation system that uses power is a political allocation system. So, back to our “hats” example, if you get a particular hat because that is what the king decrees, or if you get a hat because that is what you were able to take and hold through force, these are political distributions. As are distributions through the actions of committees or a hat commissar. The same if we had a direct democracy, and allocated hats through a town meeting.
The political allocation system we discuss most in the US is our representative (at least on paper) democracy. If a legislature or a regulatory agency determines who gets which hats, this is a political allocation.
Note that political allocations can change the prevailing distribution of resources. The decision maker can simply choose to overcome an inequitable distribution, and give the poor more. Simply? Well, apparently not so much.
And politics can overcome the will of the individual. Politics enables the community, which can tell the individual what the community desires him or her to do.
And if the community is set on a particular intrinsic value, like equity or impartiality, it can superordinate that value above any transactional benefits.
But political allocations have their own flaws
The one benefit of political allocation is that it is directable. Politics includes the potential to choose. (We will see in subsequent blogs that our current governmental actors are systematically avoiding the making of choices, but that is for a future discussion.)
However, political allocation systems, such as government decisions, have three fundamental flaws:
1. They overweight the community over the individual.
2. They are inherently inefficient.
3. They carry the “Burden of Explicitness.”
Danger to individual liberty
Let’s look at the first of these. The community, through its agent, the government, can coerce the behavior of individuals. What “we” want becomes enforceable against “me.” We know this because we are all forced to pay taxes, we are all forced to hire people without using our prejudices, we are all forced to bend our property rights to the will of the zoning board. Governments can, of course, make me do things and prohibit me from doing others.
One of the problems with empowering the community is that it can too easily overcome the will of the individual. If you go down this route too far, you can enter a Stalinist nightmare, where the will of the community (as expressed by the elite in power, of course) justifies extreme, even deadly sanctions against the individual. Think Mao’s Cultural Revolution of the 60's.
This is the essential fear of Libertarians. “We must have as little government as possible, because too much government is a danger to our liberty.”
When I heard Calabresi discuss these ideas forty years ago, he argued that this concern about the danger of unbridled governmental power was what tipped him towards market-based solutions to as many problems as possible. I imagine that such concerns are at the base of much “Neo-liberalism.”
If we allocate bicycles through government, we need to set up a bicycle commissariat, and which bicycle I get will be a function of that bureaucracy’s decisions. I don’t get to choose which I want. I buy the bicycle that is made available by the government.
That loss of liberty is regrettable, but under certain circumstances, probably acceptable. Many of us would support a government ban on the sale and ownership of assault weapons. That is a threat to the liberty of those who want them. But so is a ban on tanks and missiles. So, too, are speed limits, and requirements to immunize, and the need for nutrition labeling, and zoning ordinances. All of these are restrictions on the will of the individual that we, as a community, are relatively comfortable with. (Well, not all of us. Strict libertarians would consider many of these restrictions odious. OK, maybe not a prohibition on tanks.)
What “I” want versus what “we” want
So, we want to empower the community and its values, and we know that doing so is a potential threat to the values of each individual. If the threat to the individual is too great, as with reproductive rights or a universal right to be married, we choose to let the individual decide.
Sometimes, “we” win. And sometimes “I” win. That is one of the most difficult tasks of democracy, making exactly these choices between the public will and the private will. If we let markets decide on healthcare, things that the group wants (prevention, equitable distribution of healthcare resources) may be subordinated to what the individual is willing to pay for with his or her voucher. If we use government, we run the risk of infringing on liberties (like choosing my own doctor or deciding what medicine I am willing to pay for) that are important to some people.
We are starting to see that there is no such thing as a perfect allocation system. Markets have their problems. And governmental allocations have their problems. We will have to choose which set of problems we prefer.
But political resource allocations are inherently inefficient. Is that acceptable? We will discuss that next.
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