Two Perspectives on Supercapitalism

Lawrence Lessig, one of my heroes, has decided that Robert Reich’s Supercapitalism is brilliant. But I fear Lessig’s enthusiasm for the book reflects a misguided optimism about our ability to “solve” the agency problems that plague virtually all governments.

It is government’s job to set the appropriate limits on corporations (and individuals) so that when corporations and individuals pursue their self-interest, they will not harm a public interest. If government were doing that sensibly, it would force carbon producers to internalize the negative externality of carbon (something our current government doesn’t do), just as it would force those who benefit from creative work to internalize the positive externality of creativity (something our current government is obsessed with doing).

And this leads to the link with the work on corruption: for notice (surprise!, surprise!), government is pretty good at forcing internalization when it benefits strong special interests (again, copyright), and not when it harms strong special interests (again, carbon).

This is a familiar lament, and with good reason.

Nothing gets fixed till we fix these corruptions, powerfully identified in this very clearly and beautifully written book.

Implicit in all this is the belief that we can “fix” these corruptions through some kind of institutional reform. I’m most sympathetic tothe view advanced by Jonathan Rauch in Government’s End, that the tendency towards Olsonian sclerosis needs to be fought constantly as though it were a cancer — but it can never be “fixed,” not in a stable society.

The Economist‘s Free Exchange offers a related perspective on Reich’s prescriptions.

Mr Reich’s big fresh idea? Campaign finance reform! That’s the truce, I guess. But if corporations can’t jockey for the billions regulatory and fiscal discretion puts on the table, then they’ll do what? Sigh and send money to the March of Dimes instead? Legislators will do what? Mutate into sober Solons who don’t look for new ways to extort support from the interests they can make or break? Mr Frank seems to think new restrictions on who can support whom politically is a very fine idea. But isn’t this just one more way to lodge the hope that the government will, someday, finally, catch its own tail?

I fear that Free Exchange is right. Of course, if anyone can square the circle, it is Lessig. I wish him the best of luck.