Brutus on the Optimal Size of Nations

In a republic, the manners, sentiments, and interests of the people should be similar. If this be not the case, there will be a constant clashing of opinions; and the representatives of one part will be continually striving against those of the other. This will retard the operations of government, and prevent such conclusions as will promote the public good. If we apply this remark to the condition of the United States, we shall be convinced that it forbids that we should be one government. The United States includes a variety of climates. The productions of the different parts of the union are very variant, and their interests, of consequence, diverse. Their manners and habits differ as much as their climates and productions; and their sentiments are by no means coincident. The laws and customs of the several states are, in many respects, very diverse, and in some opposite; each would be in favor of its own interests and customs, and, of consequence, a legislature, formed of representatives from the respective parts, would not only be too numerous to act with any care or decision, but would be composed of such heterogenous and discordant principles, as would constantly be contending with each other.

That’s from Brutus #1. He has half (and by far the most important half) of Alesina and Spolaore’s model of the optimal size of government. Speaking of which, you should go check out today’s secession week topic at LaTNB!

When I first read the Federalist Papers, I remember being struck by the subtlety of Madison’s public choice theorising. Now that I’m reading the Anti-Federalist Papers, I’m far more impressed with them and inclined to see Madison as naive in comparison. Sadly, I suspect he remains more realistic about politics than any politician who has come since.

Reasonable Homunculi Can Disagree: The Impossibility of Welfare Economics

I’ve just uploaded a new working paper, which is a slightly edited version of a chapter from my thesis, to SSRN. Here’s the abstract:

This paper draws on the “preference reversal” literature in psychology and behavioural economics to argue for the impossibility of welfare economics. The effect of normatively-irrelevant contextual factors shows that humans do not have a coherent preference function which pre-exists and informs choice. Every choice is a constructive act which forces us to choose among incommensurable values: choice creates preference. This rules out the possibility of a value-free welfare economics and forces social scientists wishing to make normative conclusions to engage in indeterminate moral reasoning.

Democraphobia Goes Mainstream (Sort of)

This op-ed from Tapu Misa contains an odd mix of democraphobia (yay!) and statophilia (boo!). First the good:

The catalyst for the march was the Government daring to ignore the result of the recent ambiguously worded citizens-initiated referendum on the child discipline law.

Which means the Government is clearly undemocratic. “The people are the boss and the Government has to listen to them,” said Craig.

Well, yes and no.

The trouble with the might-is-right, majority rules brand of democracy has always been painfully obvious for those of us accustomed to occupying minority perches.

As Benjamin Franklin put it: “Democracy is two wolves and a lamb voting on what to have for lunch.” In a straight-out numbers game, the lamb always loses.

I couldn’t agree more. She goes on, however, to defend a utopian version of representative democracy:

But representative democracy, as advanced by 18th century British MP Edmund Burke, promotes a higher ideal built on notions of the common good.

Burke felt MPs weren’t just delegates, elected to do their constituents’ every bidding. While “their wishes ought to have great weight”, he argued that an MP’s “unbiased opinion, his mature judgment, his enlightened conscience” ought not to be sacrificed in the process.

“Your representative owes you, not his industry only, but his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.”

True to his convictions, Burke backed several unpopular causes during his time in Parliament, knowing that it would probably cost him his seat (which it did), but determined to show “that one man at least had dared to resist the desires of his constituents when his judgment assured him they were wrong”.

He was right. Sometimes, the people can get it badly wrong.

Yes, they can. But so can those representatives they elect to lead. Afterall, they are elected by those same people who sometimes get it badly wrong. Representative democracy does have the capacity to mitigate the effects of moral panics and other short-term fluctuations in preferences. It does this by introducing some inefficiency into the transmission of preferences into policy, however, rather than by electing noble leaders.

There’s simply no justification for the assumption that politicians will be better than the rest of us. Sometimes politicians will make better decisions than the majority; sometimes worse. Representative democracy is still two wolves and a lamb voting on what to have for lunch, but with some slack in decision-making that may occasionally save the lamb when the wolves have only a fleeting craving.

As Crampton has argued, government implies a trade-off between the costs of populist democracy and self-serving politicians. When we give politicians more power in an attempt to reduce the mob-rule nature of democracy, we enable them to take advantage of the rest of us. As long as we have government, we can only ever strike a balance between these problems, never avoid both (unless we can elect wise and benevolent philosopher kings, of course, which seems to be the preferred option of many).

Still, it’s nice to see something other than democratic cheerleading from the MSM. I particularly like Misa’s conclusion:

As the philosopher and writer Ayn Rand observed, “Individual rights are not subject to a public vote; a majority has no right to vote away the rights of a minority; the political function of rights is precisely to protect minorities from oppression by the majority (and the smallest minority on earth is the individual).”

I find her proposed solution (and Rand’s, for that matter) hopelessly utopian, however. As long as we have government, there’s no way to navigate between the problems of mob rule and arbitrary power and have an acceptable degree of freedom.

Sounds like a good reason not to have government to me.

Bailouts and Capitalism

The G-20 protesters in Pittsburgh seem to have some interesting political views:

The marchers included small groups of self-described anarchists, some wearing dark clothes and bandanas and carrying black flags. Others wore helmets and safety goggles.

One banner read, “No borders, no banks,” another, “No hope in capitalism.” A few minutes into the march, protesters unfurled a large banner reading “NO BAILOUT NO CAPITALISM” with an encircled “A,” a recognized sign of anarchists.

The “NO BAILOUT NO CAPITALISM” sign raises some interesting questions about the word “capitalism.” Many self-described leftists (some of whom I come very close to agreeing with) see bailouts and other forms of corporate privilege as part and parcel of capitalism. Many non-left libertarians see bailouts as antithetical to capitalism. Both groups are wrong.

The only useful definition of capitalism in line with its historical and contemporary usage is a system which allows the private ownership and alienation of property. This definition can accommodate a wide variety of institutional arrangements, from a market-anarchism to fascism: there are both good and bad forms of capitalism (full book here!).

By that definition, I am completely and utterly pro-capitalist in the sense that I think any system without private property would be irredeemably awful. History hasn’t exhausted the design-space of propertyless social systems (and I, for one, hope it never does), but it teaches some valuable lessons.  At the same time, I’m completely and utterly opposed to some forms of capitalism. Government funds lining the pockets of well-connecting firms is neither essential to nor inconsistent with capitalism. It is essential to some kinds of capitalism and inconsistent with others.

Where my Georgists at?

Many libertarians accept that government, and therefore taxation, is necessary. If taxation is unavoidable, the economically literate libertarian should prefer a tax system with minimal distortionary effect and injustice. I think the Georgist idea of a single tax on the unimproved value of land is clearly the best tax on both counts, but is seldom discussed by economists or policy wonks.

Taxation distorts economic activity by discouraging the taxed activity. If we tax income, people will work less. That’s bad. Given that (almost) all the land there’s ever going to be is already in existence and can’t be destroyed, a tax on the unimproved value of land wouldn’t have these distortionary effects. Of course, there’s really no such thing as the unimproved value of land: the value of a particular piece of land depends on improvements made in neighbouring areas. Still, such a tax would surely be less distortionary than other forms of taxation.

Many libertarians will object that efficient theft is still theft, and therefore wrong. I’ve never completely bought in to the taxation is theft line, since I think property rights are themselves morally problematic. I really like property rights, and I think it’s pretty indisputable that we’d all be poor and miserable in a world without them.

I don’t like the quasi-mystical overtones of the “mixing one’s labour” metaphor, but I think some version of homesteading principle is the only way to think about just and reasonable acquisition. The Lockean proviso that we leave enough and as good for others, though, is never completely met in reality. Even if there’s an abundance of unclaimed land, location remains important. If I claim exclusive right to a piece of land, I am reducing the options available to everyone else.

I don’t like Nozick’s move of interpreting the Lockean proviso as being met if everybody is better off in a system of private property rights than the alternative. This neglects the intermediate possibility of attenuated property rights. It seems fairly plausible that everyone would prefer a system in which people could claim private ownership of land, but only on the condition that they compensate others – in Georgist terms, paying rent to the community. There are some problems in terms of justice, but, to me, there much less serious than the problems of current tax systems.

Milton Friedman once called it “the least-bad tax” (but to my knowledge never discussed the possibility in any depth). I’d go further and say it could be a positively good tax. If we could design a government and ensured it remained within predefined bounds, a nightwatchman state funded by a single land tax could be preferable (in expected value terms) to anarchism. (Constraining government in this way is impossible, though, which is why I’m an anarchist. Still, the “imagine a perfect government; wish really hard” approach is the dominant one in political discourse.)

Why, then, is the idea largely confined the certain portions of the left-libertarian fringe? With few exceptions, free market economists have neglected the possibility of replacing income or consumption taxes with land taxes. Fred Foldvary has done some great work, but that’s about it.

I don’t get it. Any ideas?

Philip Zimbardo Interview

Believer Magazine has a very interesting interview with Philip Zimbardo, the psychologist behind the Stanford prison experiment. There’s a lot of great stuff, but I particularly liked Zimbardo’s emphasis of the inertia of institutions:

Yes, even there, you know, what comes out of that is the guilt or innocence of each of the leaders. So tribunals say, “We have the power to put leaders on trial, even though they in fact—none of them actually killed anybody—it’s just they created a policy, they created a system.” But I would hope they would go to the next level and make explicit: “In punishing this person we are really publicly declaring that this ideology produced the crimes against humanity. And so we, as an international body of humanists, of jurists, decry the horrors of this kind of system.” So you’re really sending out a message: it’s the system that’s wrong, and these people helped create it. Hitler helped create it, and Pol Pot.… But once it’s created, once the Stanford Prison Experiment was created, I’m irrelevant. If I had died during the thing, it would have gone on. The guards would have been happier. If Hitler had been killed, the whole thing would have gone on only because it had already corrupted the legal system, the educational system, the business system. With all these mechanisms in place, he became irrelevant. In fact, he would have been a big martyr.

There’s also a lot of talk about the implications of Zimbardo’s situational theory of evil for moral responsibility, how Zimbardo was sucked into the situation and became evil himself, and the war on terror.

Read the whole thing, especially if you enjoy despair.

Minority Rights are Anti-Democratic

Robert Dahl knows his democratic theory, so we should take notice when he argues that the protection of minority interests conflicts with democratic ideals. Writing in 1957 [gated], he says:

One problem, which is essentially ideological in character, is the difficulty of reconciling such an interpretation [of the US Supreme Court as protecting minorities] with the existence of a democratic polity, for it is not at all difficult to show by appeals to authorities as various and imposing as Aristotle, Locke, Rousseau, Jefferson, and Lincoln that the term democracy means, among other things, that the power to rule resides in popular majorities and their representatives. Moreover, from entirely reasonable and traditional definitions of popular sovereignty and political equality, the principle of majority rule can be shown to follow by logical necessity. Thus to affirm that the Court supports minority preferences against majorities is to deny that popular sovereignty and political equality, at least in the traditional sense, exist in the United States; and to affirm that the Court ought to act in this way is to deny that popular sovereignty and political equality ought to prevail in this country. In a country that glories in its democratic tradition, this is not a happy state of affairs for the Court’s defenders; and it is no wonder that a great deal of effort has gone into the enterprise of proving that, even if the Court consistently defends minorities against majorities, nonetheless it is a thoroughly “democratic” institution. But no amount of tampering with democratic theory can conceal the fact that a system in which the policy preferences of minorities prevail over majorities is at odds with the traditional criteria for distinguishing a democracy from other political systems.

Why are so many unwilling to admit the conflict between liberalism and democracy? I’m bloody sick of “democracy” being used as a synonym for “good.”

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