Friday, November 12, 2010

Folk activism

Patri writes, if not eloquently, then at least graphically about the perils of folk activism:
She’s complaining about a policy that does exactly what we expect democratic policies to do, and advocating for a different policy that would be against the goals of special interests (“Want to get corporate money out of politics?”) and better for society as a whole. As I said in a Students For Liberty talk this past weekend, for all the good this approach does, McArdle might as well have called a press conference and farted into the microphone.
My metaphor is deliberately provocative because I find this pattern so appalling, and it seems absurd that economists so often ignore these basic results in their own field. It moves me to shout: We do not live in a world that mainly suffers bad policies due to lack of ideas about better ones, or lack of elegant explanations supporting good policies, but one that suffers bad policies due to system and meta-system level incentives. In the real world, if you want to have any chance at any effect on changing bad policies, you must take this into account, frustrating and difficult though it is. Vaguely assuming that the problem is not enough eloquent blog posts or op eds is like finance professors actively investing in individual stocks (ignoring both efficient markets & diversification), or nutrition experts living on Twinkies – experts behaving directly contrary to the most basic results in their own fields.
Ouch.

Here's my best counterargument to Patri, coloured by that I spend a reasonable amount of time arguing about stupid policy and dishonest statistics.

First, policy outcomes, on the whole, reflect voter preferences. All the special interest stuff matters, but in the details of policy rather than in its broad sweep. Why do we have lots of transfers to the middle class? Because the median voter likes that. Why do we get crazy ag support programs (at least in the US, EU, Canada... everywhere but NZ)? Because the median voter has vague fears about losing control of "our food" and has some idea of the programmes' supporting bucolic countrysides. How much goes to dairy and how much goes to peanuts? That's special interest lobbying.

Why are we getting all this nanny state nonsense? I'd argue it's because voters are reckoning that costs of others' behaviour are now being borne by them, via public health systems. And they've overestimated those costs due to biased cost studies. And so I reckon it worthwhile to spend time punching holes in dishonest cost studies. It might not move the median voter a lot, but we're all part of the equilibrium.

Second, we'd also want to worry about excessive optimism about the prospects for institutional change. If public choice says we need to change the incentives to change political outcomes, why would we expect those who profit by current arrangements not to fight against such changes? Is it more futile to argue against policy X or against the institution that generates policy X?

Big picture, Patri's right: the only way to get transformative change is by increasing competition in government. Seasteading. But isn't a division of labour optimal? If Patri's work pans out, the whole world gets a lot better in the long run. The rest of us help make the current world a little less sucky by making it incrementally harder to pass bad legislation.

Again, we're all part of the equilibrium. Efficient markets hold because some finance profs (and others) do go in and correct prices when their research identifies a firm the valuation of which is out of whack.  Voter opinion gets further out of step with reality when public choice folks withdraw from policy debate.

And sometimes the nutrition experts do eat Twinkies.

5 comments:

  1. The rest of us help make the current world a little less sucky by making it incrementally harder to pass bad legislation.

    But for that you would need to i- convince people of the value of your arguments and ii- vote. This is somewhat inconsistent with your previous stance on the latter.

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  2. I've said it's irrational to vote. That doesn't make it irrational to change the content of other folks' votes.

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  3. But you are expecting to convince us with your arguments over a range of issues AND one of your arguments is that voting is irrational. This sounds self-defeating to me.

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  4. @Luis: Voting is irrational IF you don't enjoy voting for its own sake (pure Econ). If you do, then voting is still a bad idea IF you share my strange libertarian (totally value-ridden, non Econ) worries about legitimizing the state; if you don't, then enjoy yourself! I think that's a different form of argument.

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