The American Scene

An ongoing review of politics and culture

Articles filed under Politics

PEG Leads, The Economist Follows

Patent edition.

Previous editions: swashbuckling French entrepreneurs and pensions.

Hey, just sayin’.

Rick Perry's 'Fed Up'

I have a review at The Daily Beast of Fed Up!, Rick Perry’s policy book from last year. I argue that he seems to identify more with the anti-federalists, and the anti-federalist-placating bits of the federalists, than he does with actual federalism. You can check it out here if you feel inclined.

Media Bias

I don’t usually watch network news in France. I get most of my news from the internet and, in case of the TV, the business news channels.

Being on vacation with my parents and grandparents, I watch the morning news shows with them.

This morning, two news items shocked me.

The first was on global population trends. World population will reach 7 billion this year, we’re told. And over the next decades, population in emerging countries, especially Africa, will grow a lot.

Cue concern on the stretch on natural resources, and more generally a dramatic spin with a strong Malthusian subtext.

It seems to me that population growth is very positive news for the world. Each new human is a world of richness and a wonderful thing to celebrate.

And from the point of view of economics, population growth is positive. As Mao once said, for every mouth to feed there are two arms to work. Each new person is a potential future lawyer, doctor, engineer, inventor or entrepreneur. I always worry that the nth child who is population-controlled away would have been the one to come up with the cure for cancer or the common cold.

Economists talk about the lump-of-labor fallacy, but it is equally true that there is an even more pernicious and destructive lump-of-resources fallacy.

It’s just not true, as we’re told, that the Earth’s resources are finite. Throughout history man has not just consumed resources, he has invented new ways to turn the existing world into resources. For most of our history, coal and uranium were worthless rock. Then we discovered how to harness them to produce energy. One day certainly we will figure out cost-effective ways to harness the near-infinite power of the sun, or wind (or the seas, or cold fusion, or God-knows-what). Unless, possibly, that is, we don’t make enough humans and thus reduce our odds to accomplish these breakthroughs.

Just like more workers create more labor, more humans create more inventive ways to harness the world’s resources and create ways to overcome our problems.

From Malthus to the Club of Rome, these guys have been wrong and dangerous, impeding progress for Medieval reasons. And yet the lump-of-resources fallacy proceeds, and is probably the most false-and-dangerous idea that is accepted in polite, erudite society.

The second report was even more shocking.

Right now is World Youth Day, a global gathering of young Catholics with the Pope, in Madrid. And the news report informed me that a bunch of hooligans and thugs had attacked the young Catholics.

But—and here’s the kicker—the report described these thugs as “defenders of secularism.”

The cognitive dissonance with video footage rioting hooligans throwing rocks on peaceful pilgrims and the narration describing these hoodlums as “defenders of secularism” was… something, I’ll tell you that. “Travesty” doesn’t quite capture it.

Since I should probably make a political point, this got me thinking about media bias. (Disclosure: I’m a member of The Media.)

It would be easy to call this liberal bias, and indeed Malthusianism and “aggressive” (ahem) secularism are coeval with the political left. But this is a more subtle ideological bias than you would find in, say, a positive story on rent control.

And it is bias in the proper sense, because I’m almost certainly convinced that the authors of these reports were not trying to advance a political point, overtly or covertly. It’s just that they live and breathe in a milieu where some things are taken for granted. And they probably operate under a system of tight deadlines where there isn’t much time for reflection on how utterly STUPID a phrase like “defenders of secularism” is in that context. But while news reports like that are probably more attributable to sloppiness than malice, it’s precisely that sloppiness that affords such a stark window on the worldview of the people who make (some of) our news.

Christianism redux

In Andrew's measured reply to my recent post he sticks to his guns, in one sense — he still thinks the term "Christianism" useful — but in another sense concedes some of my key points: that there can be Left and Right, good and bad, versions of a Christianity that seeks to intervene in the political arena. But if that's true that Andrew needs to use more adjectives when discussing these issues.

I think he could escape some of the problems I'm noting if he changes his definition of Christianism. He writes, "Christianism, in my definition, is the fusion of politics and religion for the advancement of political goals." This is problematic in several senses, first of all in its failure to acknowledge that such a fusion is also concerned to further religious goals. But the chief distinction Andrew needs to make involves how this advancement is sought. As our own Noah Millman put it in an email to me yesterday — I'm paraphrasing and adding some content of my own, so Noah may want to correct me or dissent from me later — there's a big difference between a Christianity that seeks to bear prophetic witness in the political sphere and a Christianity that seeks to rule. For me — and for me specifically as a Christian — what's most disturbing about conservative (or "conservative") Christian politics over the past thirty years is its frank eagerness for worldly power, its cheerful indifference to the spiritual dangers of that power, its ignorance of the long sad history of Constantinianism and Erastianism.

Indeed, I think this is precisely what Andrew is getting at when he writes of King, "He didn't just preach his faith as politics, but he practised it in a way very close to Christ's, seeking punishment, enduring imprisonment, and risking death, to bear witness to a deep moral truth about the dignity of every person. This submission to violence, rather than its gun-totin' celebration, is what distinguishes King's Christianism from so much of today's." I would just encourage him to add this "desire to rule" to his actual definition of Christianism. If he does that, then he gets out of the problems created by his willingness to define King as "a left-wing Christianist." If the desire to rule is intrinsic to Christianism, then King isn't a Christianist at all. He wanted to see justice flow down like waters, but he wasn't interested in being the Man in Charge.

So I think it's clear even from Andrew's response that he was wrong to say that what we need is "a more private, less political Christianity"; what we need, rather, is a Christianity that's political in a humble and non-coercive way, and that separates itself quite clearly from nationalism. If Andrew wants to criticize a heedlessly confident, power-hungry, jingoistic group of Christian politicians and their followers, I'm ready to hear and often (usually) to join in — heck, I've done it on this site. But please don't call it Christianism. That needlessly sullies the name of Christ. Give it a better name. How about American Constantinianism? Doesn't exactly roll off the tongue, I agree, but sometimes euphony must be sacrificed to accuracy.

Ryan Lizza's Michele Bachmann "Smear"

Sarah Pulliam Bailey has a list of complaints with Ryan Lizza’s buzz-gathering profile of Michele Bachmann in this week’s New Yorker. Overall, the long report is a pretty impressive piece of work that blends colorful campaign diary with a deeper exploration of Bachmann’s political formation and intellectual influences. As usual, there are certain details that strike people who grew up in the evangelical movement as oversimplifications. I concur with a couple of Sarah’s nitpicks, but I’m afraid that in general she has quite seriously mischaracterized Lizza’s reporting, both by reading in implications and criticisms of Bachmann that are not in the piece, and by overlooking how often Bachmann still references many of the thinkers cited as influences. Referring to the piece as a “smear” is particularly unfortunate. Even the New Yorker‘s investigative pieces on subjects to which it is clearly ideologically opposed can never be called smears; its efforts to present the most reliable picture based on facts has earned my full respect, and are as clear in this story as any other.

First, Sarah takes issue with where Lizza places Bachmann’s views on the American political-theological spectrum. Lizza writes that Bachmann, “belongs to a generation of Christian conservatives whose views have been shaped by institutions, tracts, and leaders not commonly known to secular Americans, or even to most Christians,“ and that, “Her campaign is going to be a conversation about a set of beliefs more extreme than those of any American politician of her stature, including Sarah Palin.” (Sarah’s emphasis.)

Sarah suggests that Lizza has no basis for these claims, but I find her scorn somewhat inexplicable. True, it can be difficult for people who grew up in the evangelical world to imagine that other Christians have not heard of Francis Schaeffer. But conservative evangelicals are a fraction of American Christians, and not even all of them are very familiar with Schaeffer. I grew up with other home-schooled evangelicals who never read him, and neither had most people who attended my large, conservative Southern Baptist church. And it is indisputable that only a fraction of Christians have heard of R.J. Rushdoony, David Noebel, and John Eidsmoe. Lizza’s claim is precisely correct: Bachmann has been shaped by institutions and leaders with whom even many Christians are unfamiliar. And because her conservative evangelical education—her complete immersion in the alternative universe from the ground up—is so much deeper than that of other candidates who ostensibly share her ideas, it is absolutely fair to say that her beliefs are more extreme than those of Sarah Palin, Newt Gingrich, et al, no matter what unhinged things the others may say.

One of Sarah’s major contentions is that Lizza is maliciously attempting to link Bachmann with the fringe thinkers she has read, recommended and worked for in the past. Sarah calls them “attempts to prove guilt by association,” that Lizza used to “take shots.” Based on what the piece actually says and what Lizza said today on NPR, I have to say I think that’s a false charge. In his interview on NPR yesterday, Lizza repeatedly—I mean, with nearly every other breath—said that it was unfair to assume Bachmann believes everything her former mentions and influences do. He even observed that he had wacky professors he wouldn’t want to be associated with. But he correctly observes that Bachmann still references most of the people he investigated. She still says on the stump that Shaeffer’s How Shall We Then Live? changed her life, and still recommends Nancy Pearcey’s Total Truth as a “wonderful book.” She has talked about Eidsmoe, who she worked for at Oral Roberts, on the campaign trail this very year, saying her taught her “foundational” things. She was his researcher while his law school published Rushdoony, and her website recommended a pro-slavery revisionist Civil War history by J. Steven Wilkins while she was running for public office. Except for an in my opinion quite justified spike of alarm at the Wilkins book, Lizza lays all of this out quite neutrally, with scarcely a noticeable judgment. I read the blocks of his prose in question over several times, and the supposed malice and unfair suggestion is just not there.

The Francis Schaeffer part of the piece will obviously be the most controversial, and here I think Sarah may be more on the right track. First off, Lizza portrays Schaeffer as fringe because he was in fact fringe. By any measure, against the Western philosophical spectrum or the American religious one, Schaeffer cannot accurately be portrayed otherwise. I’m not sure why Sarah objects there. But she may be right that Lizza’s cursory treatment makes him sound more bizarre and extreme than he was. He spent most of his decades writing dense works of theological philosophy that, while they used as intellectual building blocks by many a modern fundamentalist, are not adequately captured by Lizza’s drive-by description of the How Shall We Then Live video series. As I’ve written before, it’s pretty clear Schaeffer became a political crackpot toward the end of his life. But I’m not sure it’s accurate to characterize A Christian Manifesto as promoting “the violent overthrow of the U.S. government,” as Lizza does, rather than recommending more garden-variety civil disobedience. (I can’t really say; I never read the copy my evangelical college gave me as a gift.) But the other Shaeffer quotes Sarah mentions that contest his support for violence, and my general sense of Schaeffer’s beliefs, suggests “violent overthrow” is an exaggeration. Coupled with a few crazy lines from How Shall We Then Live, it far from gives an adequate picture of who Schaeffer was and why Bachmann likely found him attractive.

I’m all for improving the generally overblown quality of mainstream media coverage of evangelicals. But it’s a mistake to take the inevitable condensations that are a part of journalism, or even a few genuine misunderstandings, as malice. The profoundly religious character of Bachmann’s campaigns, past and present, make it unthinkable for journalists not to explore her intellectual formation. I don’t expect them all to suddenly understand decades of evangelical culture and literature, and I respect serious, evenhanded-as-possible attempts to produce information the public needs to know. They can be critiqued, and their errors corrected, without unwarranted attacks on their motives.

the cause of all the trouble

Andrew Sullivan writes in his usual vein about "Christianism":

Imagine a libertarian Christianity, which urged individuals to give away as much of their property as possible to the poor, to forget about the sex lives of their neighbors and focus on their own, to pray more than politic and to forgive more than to judge. Imagine, in other words, Christianity, and remind yourself how alien Christianism is to it.

And then later:

At one point, Christians will look back on this period, I believe, with horror. The desire to control others' lives and souls through politics is so anathema to the Gospels it will one day have to be exposed and ended. Until then, we just have to keep our spirits up and attend to our own failures as Christians, which, of course, are many.

I think Andrew has finally convinced me. And as I have thought more about this I have finally realized whose fault all this is: Martin Luther King. He could have stayed in his prayer closet instead of politicking; he could have attended to his own failures as a Christian, which of course were many; he could have forgiven white Southerners instead of judging them. But no. He became an "outside agitator," marching into ordinary American communities and telling them that their local laws, and indeed in some cases federal laws, were not to be obeyed — and why? Because they conflicted with the law of God! Notice the arrogance with which he associates his cause with God Himself. He even asserts that "human progress" only happens when "men [are] willing to be co-workers with God." His whole vision for America is Christian and Biblical through and through: in his most famous speech he simply identifies the American situation with that of the Biblical Israel: "I have a dream that one day every valley shall be exalted, and every hill and mountain shall be made low, the rough places will be made plain, and the crooked places will be made straight; 'and the glory of the Lord shall be revealed and all flesh shall see it together.'" Talk about "the desire to control other people's lives and souls"!

It's hard to imagine a vision for this country that's farther from a "libertarian Christianity" that minds its own very private business and politely declines to have anything to say about the public realm. So if you too are convinced by Andrew's denunciations of "Christianism," it's past time to point your critique at the source of all this trouble: Martin Luther King, more than anyone else, is responsible for bringing an explicitly Christian and Biblical critique of America into the mainstream of modern politics.

(And if you don't happen to be interested in denouncing Dr. King, then maybe your problem is not with anyone and everyone who brings Christian convictions into the public sphere, but rather with some particular convictions that some Christians emphasize. After all, Dr. King's faith commitments were at least as encompassing in their scope, as universal in their claims, as publicly political as Rick Perry's — and make no mistake, it was that faith that drove and anchored Dr. King, and Fannie Lou Hamer, and John Perkins, and many of the other heroes of the Civil Rights movement. So maybe, just maybe, it's not an utterly privatized and "libertarian" Christianity that we need but rather one that reads the Bible better. But if that's true then the term "Christianism" is vacuous and misleading, and Andrew needs to step back and start over.)

What Part Of China You From?

I’m trying to understand, per this post by Matt Yglesias, why when China asks us to reduce our indebtedness that reflects “confusion” on their part (since their currency policy depends on there being lots of American debt to purchase) while when we ask China to reduce their trade surplus we’re just being clear and honest (even though we’re dependent on Chinese debt purchases to keep long-term rates as low as they are).

It seems to me both countries are dependent on a policy that has risks and unpleasant side effects for both countries. I happen to think the short-term costs are more serious for the Chinese while the long-term risks are new serious for us – but it’s pretty clear that both countries manifest a high degree of policy confusion, at least with respect to our public statements. I see no reason to single out the Chinese for talking “nonsense.”

One Man's Ceiling Is Another Man's Floor

By the way, I do have one modest proposal for debt ceiling reform.

We’re all agreed that the big driver of future deficits is the growth in Medicare, which in turn is driven primarily by the growth in the cost of medical services (secondarily by demographic factors).

Both parties agree with this, but there is stark disagreement about how to restrain the growth of Medicare: whether by greater government control of the medical system or by less (or by a combination thereof – Obamacare plus the voucherization of Medicare would be such a combination).

We’re also all agreed (everyone who’s actually paying attention, anyway), that the debt ceiling serves no rational purpose. Congress approves both taxes and spending; if Congress refuses to approve borrowing the difference, then Congress isn’t making a policy statement – it’s simply refusing to do its job. Even if the purpose of the debt ceiling is symbolic – forcing the legislature to acknowledge how much borrowing it has caused to be necessary – it fails to achieve this goal effectively, as it mainly serves as a vehicle for political posturing to the effect that its the other party that’s to blame.

So: my modest proposal:

Replace the debt ceiling with a Medicare ceiling.

Right now, spending on Medicare is automatic, the result of a set of formulas enacted by the legislature. But it doesn’t have to work that way. It could be subject to a statutory spending limit. A budget, if you will, that the legislature would have to approve, annually. And if spending was projected to exceed the budget, HHS would have to go back to Congress either to get supplemental spending approved – a revision to the budget; a raise in the ceiling – or changes to the formulas that would bring projected spending down below the ceiling.

Obviously, simply adopting a budget isn’t a solution to the growth of Medicare (though that is the essence of the Ryan Plan’s solution: hand out vouchers and limit the amount of money you spend on the vouchers, counting on the private sector to provide at least some insurance package for the amount of the voucher). But if we’re going to have some kind of symbolic provision to try to drive spending restraint, it makes a whole lot more sense to me to have that limit relate directly to spending – and, more specifically, to the spending that is actually driving the scary projections that you see for mountains of debt in the future.

And there’s at least some precedent for adopting a budget for Medicare, since I believe this is the way it’s done in other countries that have government-provided health care services or insurance.

Alternatives to Neoliberalism

Henry Farrell, as quoted criticizing Matt Yglesias:

To put it more succinctly – even if left-leaning neo-liberals are right to claim that technocratic solutions and market mechanisms can work to relieve disparities etc, it’s hard for me to see how left-leaning neo-liberalism can generate any self-sustaining politics.

Kevin Drum agrees:

If the left ever wants to regain the vigor that powered earlier eras of liberal reform, it needs to rebuild the infrastructure of economic populism that we’ve ignored for too long. Figuring out how to do that is the central task of the new decade.

But Matt Yglesias responds:

So I really, strongly, profoundly agree with this. The moment someone comes up with a workable idea on this front, please sign me up. But if there’s no idea to debate, then there’s no idea to debate. Debating the desirability of devising some hypothetical future good idea seems kind of pointless to me.

But this completely misses the point. Neither of his critics are primarily saying that neoliberal policy ideas are bad. They are saying that neoliberalism is bad politics – not because it can’t win an election, but because it is based on running on good ideas, winning elections, and then implementing those good ideas. And that’s not a self-sustaining politics. From a more traditional left-wing perspective, you don’t start with good ideas – you start with ideas for how to establish enduring power bases.

Broadly speaking, the alternatives to liberalism reject the goal of finding the best policy, meaning the policy that will benefit the most people, in favor of promoting policies that may hurt more people than they help, but that shift the balance of power in favor of the group you’re seeking to represent.

I think what both Matt and his critics are talking about is how to make things better for working-class Americans. If I were starting from that premise – how can I reliably improve conditions for working-class Americans – and I accepted a critique of liberals (neo or not) as naive about policy, I’d say: working-class Americans will be unable to secure a better economic deal until they wield more power. And what strengthens the hand of labor more than anything is tighter labor markets.

Now, Matt might well agree with this, and say that the best way to get to tighter labor markets is to have looser monetary policy. But you can get to tighter labor markets either of two ways: you can increase the number of jobs, or you can restrain the growth of the labor force. Historically, all sorts of legislative initiatives had as at least part of their purpose the goal of restraining the growth of the labor force – child labor laws and mandatory public schooling (no labor competition from underage workers) and immigration restriction (no competition from immigrants from lower-wage countries) are some obvious examples, but Jim Crow laws and pervasive discrimination against women also worked to restrain the growth of the (white male) labor force.

I hope nobody would seriously argue today for driving women out of the workforce as a way of reducing the labor pool and increasing the clout of working-class men (by, among other things, reducing women to a state of abject dependence on said men). But that feminism – which yielded huge benefits for women and substantial net benefits for society as a whole – didn’t involve tradeoffs in the past with other goals. One could certainly argue that the same is true today when it comes to trade or immigration. Liberal policies could authentically be more beneficial for humanity in general – they could even be more beneficial for Americans in general – while also having consequences that are negative for the power of organizations devoted to advancing the economic interests of working-class Americans specifically.

Looking at the other side of the ledger – increasing the number of jobs – may be more ideologically congenial. Matt may be right that the single thing that would most efficiently improve the jobs picture is looser monetary policy. (As I’ve written many times, I think our status as a substantial debtor nation and sponsor of the world’s reserve currency raises questions about whether this is true or not; Japan, by contrast, whose monetary policy Ben Bernanke criticized in his academic work, was a massive foreign creditor all through their “lost decade” of the 1990s.) But viewed from the perspective of power, the question to ask isn’t whether looser monetary policy is a good idea in general but whose interests are served by tighter versus looser monetary policy. Clearly, up to a point (nobody benefits from a depression), tighter monetary policy is in the interests of creditors, just as, up to a point (nobody benefits from an inflationary spiral), looser monetary policy is in the interests of debtors. So the question then becomes: why is the Fed more responsive to creditor interests than to debtor interests, and how could that balance be changed? Allow me to suggest that the communications problem alone involved in making monetary policy as such – rather than the more obvious manifestations of clout by large financial institutions – is a pretty serious one. It may well be that efforts to combat unemployment directly – by employing people – while substantially less-efficient, would both garner more public support and create a base of support for the continuance of such programs (as in: people who don’t want to be laid off). This is the same kind of argument Matt himself makes when it comes to the stimulus bill and fear of “waste” – sometimes there are higher priorities than efficiency.

Playing politics means making choices, setting priorities. Yglesias’s priority for the incoming Obama Administration was a carbon-pricing scheme that (he hoped) would at least slow the progress of climate change. The priority of the Democratic Party was passing health-care legislation establishing, in principle, a right to health care (and, hence, an individual obligation to purchase it – individual rights are just the obverse of individual obligations, after all). That choice didn’t reflect any analysis of which problem – health care or climate change – was more important; it reflected some combination of a calculus about what could be accomplished (the votes were never there for a carbon-pricing law) and a calculus about what would enduringly improve the balance of power between labor and capital (a carbon tax would be vastly easier to repeal than the health care law, for one thing; for another, the health care legislation would give the government an enduring lever to bend American health care in the direction of more economically equal outcomes; for a third, battles over benefits for legacy employees arguably have derailed the American labor movement for a generation; I could go on). Someone to Yglesias’ left might say that EFCA was more important than the health-care bill, and should have been a higher Administration priority.

The broad point is: alternatives to neoliberalism won’t be as liberal. They be less-likely to prioritize efficiency. They will also be less-likely to prioritize positive-sum solutions. They will also be less-likely to prioritize basic fairness or democratic principles or whatever else. They will assign a higher priority to increasing the economic and political power of the people they are trying to represent (or their designated representatives). That’s not Matt’s starting point, and that’s why he comes to different conclusions.

“I just stay in bed if no one calls me”

Yesterday’s Wall Street Journal had an uplift piece on using gee-whiz data analytics to improve Chicago’s public schools. I found it incredibly depressing. Here is how the article opens:

At 7:15 on a chilly May morning, Marshall Metro High School attendance clerk Karin Henry punched numbers into a telephone, her red nails clacking as she dialed.

“Good morning, Miss MeMe,” she said to Barbara “MeMe” Diamond, a 17-year-old junior with a habit of oversleeping. “This is Ms. Henry, your stalker.

The timing of the call was key. Earlier in the year, Ms. Henry and a co-worker were spending nearly two hours a day calling every student who hadn’t checked into school by 9:30 a.m. But weekly data tracked by their office found that only about 9% of those students ever arrived. So they changed tactics, zeroing in on habitual latecomers like MeMe, and delivering wake-up calls starting at 6:30. On that May morning, 19 of the 26 students called showed up.

“I just stay in bed if no one calls me,” MeMe said. “That 6:30 call be bugging me, but it gets me here.”

Here is how the article ends:

Sharief Raines, an 18-year-old senior with a toddler at home, took the challenge after missing every school day in December. In January, she showed up 12 of 19 days. Ms. Calhoun even watched the baby one afternoon while Sharief did homework. “I saw Dean Calhoun was trying to help me,” she said. “I didn’t want to let her down.”

Sharief graduated June 11.

The attendance clerk sounds like somebody getting into the office early to get her job done, and I assume that both MeMe Diamond and Sharief Raines have faced enormous obstacles in their lives. I say this without malice, but no school is going to solve the problems of many students like this. This school exists within a sea of dysfunction that it cannot fix.

The implicit frame of reference that is normally used for these kinds of stories is the history of the communities and families in question, or the “good” suburban schools around them. Mine is different.

Globalization has created trans-national labor pools through a mix of literal outsourcing, immigration and importing labor content via shipped manufactured goods. We move the people, the jobs or the merchandise; but either way, workers in Illinois must increasingly compete with workers who live in Eurasia or have immigrated here from Latin America and elsewhere. These are no longer poor people “out there somewhere” for whom we should feel pity and give foreign aid, but people with whom, one way or another, our hourly pay is being compared by those who will decide where new jobs go. Today there are probably hundreds of millions of people on one side of the relevant labor pool who have such a different orientation toward school that the worry is that they’re working too hard, and hundreds of millions of low-skill competitors on the other who are prepared to work for wages much lower than those of even very poor Americans.

Within less than one year, MeMe and Sharief will have to compete in that environment. There is no fixed lump of labor. By specializing in what we do best, and then trading with ever-larger numbers of others who can afford to buy our output, we can become wealthier. What will MeMe and Sharief specialize in? Who in an open market will pay enough for their time to create sufficient income to support them (and Sharief’s child) in a humane manner? (It’s easy to read this as scornful, but I really just feel sympathetic, in that if dealt the same hand of cards, I think I would be in pretty much the same place.)

By extension, where are large chunks of the American labor force are headed? How much dysfunction can the productive economy carry on its back as the level of global competition rises ever higher?

The answers to all of these questions are, in my opinion, very troubling.

I don’t have any great solutions, but then again, I don’t think anybody else does either. “The Answer” is probably not there to be found. I doubt there are any silver bullets, just lots and lots of scut work in many areas, each of which can make a small contribution.

“Data-driven schooling,” if done with this perspective in mind, can certainly make an incremental positive contribution. But it’s easy to do it in a way that actually makes things worse.. If focused on short-term carrots-and-sticks that ignore character effects; if divorced from the right incentives for the participants; and if not focused on careful evaluation of the actual success or failure of interventions against validated outputs, it’s likely to be a huge waste of scare time and money.

(Cross-posted to The Corner)

The Missing Girls

If it’s possible for frequent Scene readers to miss a column by Distinguished Scene Alum Ross Douthat, I cannot urge you enough to read today’s column.

It’s on the topic of sex-selective abortion, one which is important to me and on which I have written before. Ross brings new (gruesome) facts to light and, of course, his excellent prose.

Again, please read.

One Small Victory For Representative Democracy

Just a very quick note (I’m on vacation) about this week’s news out of Albany. I’m gratified by the result, which I support. I’m pleased that Senators of both parties were permitted by their leadership to vote their consciences. But I’m particularly pleased that New York will be one of the few states to decide this matter in the proper democratic fashion.

The history so far of same-sex marriage in the United States consists mostly (though not exclusively) of courts ordering legislatures to pass equal marriage rights for same-sex couples, and plebiscites decreeing that no such rights shall be extended. Neither is the way representative democracy is supposed to work, because neither the courts nor the people themselves adequately combine deliberation with accountability.

So I am especially gratified that legislators in my home state were manly enough to do their job and secure for New York’s citizens the equal rights and privileges they concluded the citizenry deserved, rather than punt to the courts or to the people themselves.

I’ll probably have more to say when I return from vacation. But for now, I’m kind of proud to be a New Yorker.

A U.S. Manufacturing Strategy, Part 2

This continues from the prior post, which argued that the U.S. government ought to care a whole lot about absolute and relative American productivity growth.

Proposition 2: Not all kinds of productivity growth are created equal

I’ll illustrate two different kinds of productivity growth with practical examples from my experience in the manufacturing industry. I once invented a new production planning algorithm (essentially, the decision rules for which products to make when, and in what sequence) that improved the output of a specific factory by about 5 percent. This is pure gravy: the same people show up at the same factory and work the same number of hours, the same raw materials are purchased and so on, but the world just gets 5 per cent more widgets out of the other end. This is normally the kind of thing most people picture when they use the term “productivity growth” in normal speech. On another occasion, I figured out the financing that made it profitable to shut down an entire factory, and sell the land to a property developer. This is normally the kind of thing that most people mean in normal speech by “the locusts of private equity.” I’ll call the first example an improvement in “operational efficiency” and the second example an improvement in “allocative efficiency.” In fact, both are necessary for ongoing improvements in productivity and wealth for an advanced economy.

Let me describe the decisions around these kinds of changes from the point of view of a business owner or executive. In somewhat simplified terms, if I’m doing stuff that earns returns below my cost of capital, or if I can get someone else to do it for me at lower cost than I’m doing it, it makes sense to cut out the activity. These cut activities will tend to be those with lower productivity. Cutting activities for shareholder value reasons will therefore strongly tend to cut low-productivity activities, and increase my firm’s average productivity through pure “high-grading.” But this ignores at least a couple of important questions. First, did I fail to uncover economically achievable improvements in operational efficiency that would have allowed me to conduct these activities at higher returns and cheaper than alternatives? Second, are the cut activities linked in some non-obvious way, and potentially only over time, to the other more profitable activities, such that I have fooled myself into putting the profitable parts of the business at risk?

A business culture that ignores these questions can tend to get into a death spiral of endless high-grading against an ever-rising tide of competition that eats the business one bite at a time. The fear of many critics of American business (or “Anglo-Saxon financial capitalism”) has for a long time been that this is what is happening to the American economy on a grand scale.

And further, at the level of the entire society, while a firm can get more productive by high-grading, if the alternative employment for the people who used to work at the closed factory is collecting unemployment checks, can’t this become a society with an ever-shrinking base of people with high-paying jobs? This is the nightmare scenario of an ever shrinking number wealthy financiers, who are increasingly detached from a broader society all around them living off a combination of table scraps and handouts.

There is something to this fear. But on the other hand, the failure to allocate capital and labor from kinds of activities where there are inherent limitations to how productive they can be to those where they have greater inherent productivity will also hurt productivity growth in the long run. The key word in that sentence is “inherent.” The more we can take what is currently viewed as inherent productivity by analysts, economists and others, and improve it by unanticipated innovations, the more we can have allocative efficiency without giving up as many manufacturing jobs.

Think of operational efficiency as getting better at playing a given game, and allocative efficiency as deciding what games to play. We need both. We want to have an economic regime such that the people working a specific line in a given plant work as hard and as smart as possible to get that line to be as productive as possible; such that the management of that plant is allocating resources among the production lines, and thinking hard about the overall production process such that they make that plant as productive as possible; such that the company is doing the same thing at a yet-higher level for its collection of factories, warehouses and sales offices; and such that the economy as a whole is allocating resources across firms intelligently.

In fact, when we move from the level of the individual firm to the economy as a whole, the nature of the process of resource allocation should change. If, following Coase, we very crudely define the boundaries of the firm as the maximum extent of activity for which central planning can work effectively, then we need to use markets to allocate resources across firms. The unique virtue of markets is not so much in their allocative efficiency, as in what Douglas North termed their “adaptive efficiency”: basically, discovering entirely new ways of organizing resources. If allocative efficiency is deciding what game to play, adaptive efficiency is inventing entirely new games. Adaptive efficiency is not nearly as important for an economy in catch-up mode, but for an advanced economy, it is essential for productivity growth.

We can think of a hierarchy of kinds of productivity growth, with operational efficiency at the foundation, then allocative efficiency next, and finally adaptive efficiency as the master-allocator of resources. We then need to think about manufacturing strategy in the context of the need for the combination of operational efficiency, allocative efficiency and adaptive efficiency that will create rapid, continuing productivity growth in the economy as a whole. In effect, adaptive efficiency – which, all else equal, is likely to continue to squeeze out manufacturing jobs – needs to be the evolutionary principle by which the economy creates productivity growth, but efforts to improve operational efficiency within manufacturing will change the set of “givens” (for example., the relative profitability of in-sourcing versus outsourcing) that this evolutionary process will confront.

The next post in this series will try to sketch out some ideas for what I think is most likely to help do this.

(Cross-posted to The Corner)

A U.S. Manufacturing Strategy, Part 1

There has been an interesting ongoing blogosphere dialogue on the role of manufacturing in creating high-wage jobs in America, involving Paul Krugman, Reihan Salam, David Leonhardt, Karl Smith and Michael Mandel, among others.

This topic has been a fixation of mine for a very long time. Here is how I opened an article a couple of years ago in National Review:

I still remember the first time I walked into a working factory. In the foreground, innumerable machines whirred and clacked away in precise, interlocking dances. A massive vat shaped like a 50-foot-tall Campbell’s soup can loomed in the background. It was encased in a protective sheath of refractory bricks that glowed dusky pink with trapped heat. A crane arm dumped heavy sand continuously into the top at (literally) industrial volumes. Steaming, liquid glass gushed out of the business end at the bottom in a matching stream. I couldn’t see the heating element, but it was in there somewhere, and it was working. …

I was looking at concretized human ingenuity. In the auto industry, “car guy” is a slang term for an executive who doesn’t just view the business of a car company as making money, but loves the cars themselves. I’m a factory guy.

I spent the first few years of my career in the 1980s as one small part of a self-conscious movement to rescue American manufacturing from its projected obsolescence. I’ve worked in glass plants, assembly plants, oil refineries, and textile plants from Florida to Canada, and many points in between. I’ve carried a union card and walked a picket line.

I’ll put forward several propositions as being as being relevant to this discussion. (This would be a very long blog post, so I’ll break them up into several posts.)

Proposition 1: Competitiveness is productivity

Professional economists often pooh-pooh the importance of national competitiveness. To quote Krugman:

The growing obsession in most advanced nations with international competitiveness should be seen, not as a well-founded concern, but as a view held in the face of overwhelming contrary evidence.

They will point out that we all gain from trade, and as people in other places get richer, so can we. Countries, they say, are not like corporations.

Maybe so, but it’s still the case that some societies are populated by lots of people with high wage jobs, nice houses and good schools, and other societies are populated by lots of people hustling for tips from vacationers from the first kind of society. Over time, people who spend their working hours generating goods or services that they can sell for a big margin versus the costs of the required inputs will tend to live in the first kind of society. Nothing is forever in this world, but I want America to remain in that camp for a very long time.

This doesn’t occur by immiserating other societies – international economic competition is not zero-sum in that sense. But there are many paths open to us for how we react to the rise of non-Western economies, some of which lead to us being much better off than others, both in an absolute sense, and also in a relative sense.

Relative productivity is likely to matter a lot, because it will materially influence future absolute wealth by affecting the flow of global technology and innovation. But relative productivity and wealth also matter in and of themselves. First, they will impact the global prestige and success of the Western idea of the open society which we value independently of its economic benefits. Second, maintenance of a very large GDP per capita gap between the West and the rest of the world will be essential to maintaining relative Western aggregate GDP, and therefore, long-run military power.

In sum, we want the rest of the world to get richer, but we want to stay much richer than they get.

This demands that we sustain rapid productivity growth over many decades. Unfortunately for us, this is much harder to do for an advanced economy than for those in catch-up mode, and is likely to continue to create very tough social strains in America. Perhaps we’re just not up to it. This, and not some lets-all-succeed-equally-together happy talk, is the real meaning of globalization for America in 2011.

(Cross-posted to The Corner)

We Do It All The Time

Will Wilkinson wrote a nifty piece linked to this opinionator item from the NY Times about our “true” selves. In the latter, Joshua Knobe presents the following situation:

Mark Pierpont used to be an important figure in the evangelical Christian effort to help “cure” gay people of their homosexual desires. He started out just printing up tracts and handing them out in gay bars, but his ministry grew over time, and eventually he was traveling the world and speaking to crowds that sometimes numbered in the thousands. There was just one problem. Mark Pierpont himself was gay. He continued to feel sexual desires toward other men and was constantly engaged in an effort to suppress them. In the documentary film “Protagonist,” Pierpont movingly describes his inner conflict, saying that he sometimes felt an almost physical revulsion at his own desires and would then think: “Good. I hate this. I hate sin, just like God hates sin.”

Faced with a case like this one, we might be tempted to . . . tell him that what he really needs to do is just look deep within and be true to himself. . . Yet, though there is a great deal of consensus on the importance of this ideal, there is far less agreement about what it actually tells us to do in any concrete situation. Consider again the case of Mark Pierpont. One person might look at his predicament and say: “Deep down, he has always wanted to be with another man, but he somehow picked up from society the idea that this desire was immoral or forbidden. If he could only escape the shackles of his religious beliefs, he would be able to fully express the person he really is.”

But then another person could look at exactly the same case and arrive at the very opposite conclusion: “Fundamentally, Pierpont is a Christian who is struggling to pursue a Christian life, but these desires he has make it difficult for him to live by his own values. If he ever gives in to them and chooses to sleep with another man, he will be betraying what was is most essential to the person he really is.”

Each of these perspectives seems like a reasonable one, at least worthy of serious consideration. So it seems that we are faced with a difficult philosophical question. How is one to know which aspect of a person counts as that person’s true self?

Knobe goes on to argue that the answer to this question is inevitably ideological – people identify the “true” Mark Pierpont with the “side” in the conflict that they agree with. Liberals say he’s “really” gay and should chuck the religious repression. Conservatives say he’s “really” Christian and shouldn’t give in to temptation.

But those are the perspectives of outsiders. What do they know? I would wager anything that, from Mark Pierpont’s perspective, the “real” him is the one in conflict. That’s what makes his situation tragic. The desires don’t come from the devil and the repression doesn’t come from society. They both come from him.

And this is not a peculiarity to homosexuality. The woman who is a devoted mother who’s fallen out of love with her husband has a conflict. You could say that she “needs” to take care of her needs and leave him, or she’ll wind up dragging her kids down with her misery, or you could say that she “needs” to put her selfish needs aside and think of her children, and that if she does this she’ll find fulfillment within the life she has. But these aren’t advice – they are ways of making us feel better about the advice we’re giving. The reality is: she’s got a profound conflict. Her true self is divided.

My own hard-won wisdom on this matter is that, whatever way you wind up jumping in these sorts of conflicts, you first have to acknowledge that the conflict is real. It’s really easy to tell ourselves happy little lies to convince ourselves that the conflict doesn’t actually exist, but we’re not really fooling ourselves. We’re getting through the day, but at a cost of escalating levels of stress and alienation from ourselves. And, as a consequence, from those who care about us.

And I find that, once you acknowledge, openly, the conflict that exists, you’re generally most of the way toward the resolution that, in retrospect, is obviously right. When the woman tells her husband about her conflict, he’ll have to respond. That response, in turn, will help clarify for her what is and isn’t possible.

Wilkinson, meanwhile, sees all this “self” business in functional terms:

My own view is that the sense of a stable self is an evolutionary construction with a certain social function, which our intuitions about authenticity reflect. The primary human means of survival is social cooperation. But cooperation is fragile. We need to trust one another to follow through, to not take advantage. Coordinating on a common moral ideology facilitates cooperation, but only if we all stick to it. We cannot make others trust that we will stick to it if we cannot trust ourselves not to opportunistically change our stripes. So we build a sense of self upon the shared moral ideology of our local culture. We come to feel that to betray these values would be to betray the essential self. To prize integrity is to fear disintegration. To violate our constitutive values is to risk falling apart. This fear of falling apart—of losing one’s self, of standing for nothing—prods us to keep our oaths, to pull our weight, and thus to be truly trustworthy, even when it would be to our advantage, in some sense, to cheat. So the sense of self enables social cooperation. But what matters most is not so much the content of our moral ideology, but simply that we all stay pretty much the same over time, so that we can continue to trust ourselves and one another. This is not to say that the values upon which we build stable, cooperation-enabling senses of self can be anything at all. But anything that works works, and probably there are many moral ideologies that work reasonably well.

Well, okay, I’m down with the idea that one reason we don’t feel good about radically changing our personae is that we’ve evolved a desire to maintain others’ trust in us, which entails maintaining a consistent persona that can be trusted in. But what’s the evolution purpose of the self itself? That is to say, if we experience an internal conflict, such as Mark Pierpont’s, why, unless there is a reality to the self, can we not resolve that conflict by an act of will? Why are we so constituted that we can experience that kind of conflicted self, a self that needs two things that cannot be reconciled? I don’t see how you answer that question without accepting that the self has some reality. When you say “anything that works works” that means, presumably, anything that works for your real self. Because, given that you have a real self, not everything will.

Finally, both Wilkinson and Knobe spend much of their time thinking about how we perceive other people’s “true selves.” But it’s important to recognize that their examples pertain to situations where we are not experiencing these other selves directly, but rather mediated through mass communications. If we knew Mark Pierpont through his various changes, we would make an assessment of whether he seemed “more himself” before or after not only based on our ideology but based on our actual experience of him. If we are at all sensitive people, we’d know – whether we liked it or not – whether he seemed more “real” before or after.

That’s not an option we have with political and media figures, and it’s worth highlighting how our intuitions can serve us poorly when we experience people in a mediated form. I will argue – confidently – that Mitt Romney is an authentic person, someone with a strong sense of self. One piece of evidence for this is that he is an exceptionally poor panderer – he comes off as completely phony. And, since he panders all the time, this makes him seem – in a political context – completely inauthentic. Which he is. He is an exceptionally phony politician. But not because he panders more than most politicians – because he panders much less successfully than most politicians. He is, to invert a famous formulation, an exceptionally poor liar. Exceptionally poor.

That fact has real political consequences. A President Romney, precisely because of this lousy political persona, would not be trusted by any pressure group, and hence would be much more constrained by said groups. I’d compare him to another politician who was distinctly lousy at conveying political authenticity: George H.W. Bush. But this has essentially nothing to do with his “true self,” of which the elder Bush I have no doubt had a pretty darn robust sense.

My point is: when we talk about politics, the intuitions that we bring to the game from the world of small-scale interpersonal relations can easily betray us. The guy who “seems authentic” and “makes you want to trust him” is the guy to be nervous about – because he has a kind of charisma that is powerful. He is not earning your trust; almost by definition, he’s conning you. That doesn’t mean “don’t vote for that guy” – precisely because that guy has that power, he’s likely to be more effective. It means don’t trust that this “authenticity” means what it might mean in an interpersonal context of long and stable relationships. You don’t really know who any of these guys are. The one thing you can know for certain, though, is that they aren’t who they want you to believe they are. Because they want you to believe that they understand you, personally, and they want tens of millions of other people to believe the same thing about them. And that’s just not humanly possible.

The GM Bailout and Telepathic Dogs

Karl Smith at Modeled Behavior has a great reply to my post on the GM bailout that features “non-zero orthogonal information,” probability measures, and a hypothetical telepathic dog.

I think the essence of his first point is that no matter how strong one’s overall beliefs about government intervention in the market, that the results of the GM bailout still provide some information that should contribute to how he should see the world. I agree.

I further basically agree with Smith that “the real problem is that the information about GM qua GM is so low that there is a good chance that it is swamped by this bias.” The way I would put this is that we know only the state of the world as it actually exists in the presence of the GM bailout, but the “information” that I really care about is the causal attribution of effects to the bailout. Knowing these causal effects would require us to estimate what the counterfactual world without a GM bailout would look like. My argument is that since we are so poor at estimating this counterfactual world, therefore (to use Smith’s terms), the information is swamped by the bias. Or more precisely, that we are incapable of conducting analysis that should convince rational people who start with different biases to come to a common view of the effects of the bailout.

To be practical about this, Paul Krugman believes that “the auto industry…probably would have imploded if President Obama hadn’t stepped in to rescue General Motors and Chrysler.” I disagree. Until we agree even roughly about this counterfactual world, we can’t agree about the effects of the bailout. But there is no method of analysis that we both accept that can be used to even roughly estimate this counterfactual world, so we’re stuck just disagreeing.

Smith’s second point is that this recognition about of our ignorance calls for “dovishness”:

That is, it calls for being reluctant to accept near term harm for long term benefit. Things that are close up are easier to see. Entropy expands with the arrow of time.

This mediates in favor of being less hawkish on war, less hawkish on the deficit, less hawkish on climate, less hawkish on campaign finance reform, less hawkish on health care, etc.

I also agree with the basic thrust of this, though I would put it as “humility,” or in practical terms, hedging our bets whenever possible. And further, I think it is important to recognize that this applies only at the maximum level of the political hierarchy with which we identify. That is, I think the American government should hedge its bets whenever possible. But trial-and-error improvement within the American political economy calls for sub-entities (say, sates or individual companies) to commit to specific positions, sometimes without hedging.

His third and final point is that while recognizing our ignorance, we need to remember that there is no such thing as “no policy,” saying by example:

One cannot have no tax policy. Even a policy of zero taxes is a tax policy. Even the policy of zero change in taxes is a tax policy.

This is true, of course. What I think recognition of our ignorance leads to, however, is the resulting recognition that what economists and others often call “status quo bias” should more appropriately be called “rational status quo preference.”

If we believe that the current state of a society represents, in part, the current state of an evolutionary process in which functional forms will tend to survive, and further, that various parts of the social organization interact in ways that we do not understand, then both of these observations should lead us to be open-mindedly skeptical of change. This doesn’t mean that all change is bad. In fact, as long we believe that social evolution is eternal, we should accept that any attempt to maintain stasis would be deadly to the society. Some change is essential. But acceptance of our ignorance calls for the burden of proof to be placed on those who advocate any specific change.

To take Smith’s example of tax rates, there is something special about the current tax rate as opposed to all others – it is one part of an organic society that has survived so far, and we don’t really understand what it is about the society that creates this success. Obviously, it’s never really this simple – for example, is the relevant “current state” of society today’s tax rate; or is the specific procedure by which we establish tax rates, which could lead to any given rate; or is the process by which we establish procedures for setting tax rates, and so on up the ladder of abstraction? But at the level of generality of Smith’s reply, this is a rough principle which I think derives from a stance of epistemic humility.

(Cross-posted to The Corner)

Putting the GM Bailout in Context: A Defense of Jim Manzi

Since we’re talking about it, I wanted to clarify my own views about the GM bailout.

I don’t believe this Administration, the prior one, or any likely future Administration thinks it’s a good idea for the government to be in the auto business. Higher education, maybe. Health care, perhaps. Mass transit, potentially. But I don’t know anyone making the case for socializing the auto industry.

I also don’t believe either this Administration, or the previous one, did anything resembling a serious cost-benefit analysis to arrive at the conclusion that te government should bail out GM. I think there’s value in that kind of analysis, but I don’t believe it can be done effectively on the fly – and anyway, I think it was very clear that all parties knew the political realities going in, and knew what result they wanted from any analysis.

The government simply was not going to let GM go bankrupt after bailing out the banks. Period. This was a political decision. That kind of decision happens all the time, and I don’t feel like very much is implicated by it philosophically. Each party doubtlessly has its debating points to make about how costly the bailout was (or how much less costly than expected) but they are just that: debating points. There is no great push to socialize American manufacturing generally, nor do I feel that anti-GM-bailout sentiment now will have any material bearing on whether the government acts similarly in the future under similar circumstances – such as an incipient global near-depression. In that sense, I really don’t see that GM “matters” all that much.

What matters a whole lot more than GM is learning something from the last decade’s financial debacle, as it was this debacle that both finally drove GM into bankruptcy and created the political climate in which a GM bailout was necessary. In that regard, it’s worth pointing out that Jim is far from a caricature of a right-wing ideologue. Rather, the lesson he takes from the crisis is that we need to restore something like Glass-Stegall: something that prevents banks that take insured deposits from taking certain kinds of risks. I’m skeptical that the G-S framework would actually achieve this, but I agree with the goal – but more to the point, this is a call, from a conservative, for fairly stringent and heavy-handed (albeit relatively uncomplicated) regulation of a major sector of the economy.

By way of putting GM in another context, how does the GM bailout compare, in terms of sheer dollars wasted on a venture undertaken with very little attempt to calculate an expected return, to the war in Iraq? In this regard as well, it’s worth pointing out that Jim has been consistently critical of the extremely forward nature of America’s defense posture. He’s not Ron Paul or Daniel Larison, but he is very far from a typical movement conservative on this score as well.

Finally, on many areas where Jim does line up on the “right” side of the debate, his perspective doesn’t always lead where you might think. For example, Jim has written a great deal about climate change, an about the difficulties with using the tax code to try to do anything meaningful about what he acknowledged could be a very serious problem. In my back-and-forth with him, it emerged that Jim agreed that a gas tax hike would be a more-optimal revenue-raiser from his perspective than a hike in income tax rates, or a carbon tax, or a VAT, or almost any other new tax. It might still be less-optimal from his perspective than, say, cutting the mortgage interest deduction or privatizing Medicare. But that conclusion – better than most other ta hikes! – is still a pretty significant one, and, if he were a legislator, the potential basis for fruitful negotiation.

Those are much more consequential debates than any debate about GM. However sympathetic or not I may be to Jim’s epistemic humility project, I defy regular readers of this blog to look at what Jim has written on these topics and conclude that his philosophical premises lead inexorably to predictable partisan conclusions.

The Inherently Ideological Evaluation of the GM Bailout

Megan McArdle has done consistently excellent reported pieces on the GM bailout, and her recent evaluation of its net effect on the U.S. Treasury is no exception. Her bottom line is that the deal caused U.S. taxpayers to:

burn $10-20 billion in order to give the company another shot at life. To put that in perspective, GM had about 75,000 hourly workers before the bankruptcy. We could have given each of them a cool $250,000 and still come out well ahead compared to the ultimate cost of the bailout including the tax breaks

This is in line with the Obama administration’s $14 billion estimate of the net cost to the Treasury, as reported in the Wall Street Journal. If anything, I think this understates the case on the direct costs, because it does not consider other direct transfers of economic value like the government support for Delphi that inflated the value of the asset that GM sold to create a big chunk of their headline profits this past quarter, green car development subsidies, and uncompensated interest costs on the government investment.

But no matter what realistic direct bailout costs you estimate, the objection of bailout defenders is that it is dwarfed by the other receipts or avoided expenditures created by the bailout. According to the Wall Street Journal, this is exactly the defense offered by the Obama administration:

The White House report said the money invested in GM and Chrysler ultimately saved the government tens of billions of dollars in direct and indirect costs, including the cost of unemployment insurance and lost tax receipts that the government would have incurred had the big Detroit auto makers collapsed.

There is a lot to this point, but it’s not really so simple. You can’t compare all of these net tax receipts (or more broadly, economic activity) to what would happen in “the world as it is today, minus GM.”

First, in the event of a bankruptcy, you don’t burn down the factories, erase all the source code on all the hard disks, make it illegal to use the brand name Chevrolet, and execute all of the employees. Others take ownership of the assets, and the employees go on with their lives. Some of these assets will be put to use generating revenues, profits and taxes, and some of these former employees will get jobs or start businesses, and generate revenues, profits and taxes. In order to measure the effect of the bailout over, say, five or ten years, you have to compare the actual taxes collected to what would happened over this same period in the counterfactual case where the bankruptcy was allowed to proceed. What owners would have bought the factories and IP assets, and what would they have done with them? What businesses would the former employees have started? Who would have moved to Arizona and retired? What new industry clusters will evolve in Arizona because of this transfer of people?

Second. some of the profit GM makes today would have been made by other companies that picked up some of the slack if the company lost market share after a bankruptcy. They would pay taxes on these profits, and as far as government receipts are concerned, money is money. How would auto industry structure evolve over time given whatever changes happened to the assets currently owned by the legal entity GM, or the employees currently paid by it?

Anybody who tells you they can answer these question reliably is full of it.

And that doesn’t even start to get to the really long-run considerations of what effects this has on rule of law and moral hazard (or if you want to make the case for the bailout, social solidarity and degradation of the working class).

I hold the belief, quite strongly, that the net effect of the GM bailout will be negative. More precisely, I hold the belief that over a series of many such decisions, a mindset that would have been stringent enough not to have sanctioned the GM bailout is likely to lead to better overall economic outcomes for America. This belief is ideological – not in the sense that I just hold it for inexplicable reasons that cannot ever be changed by empirical analysis – but in the sense that I don’t believe that human beings currently have the capability to conduct the kind of analysis that should convince a rational observer to change his mind about the GM bailout in isolation from a more profound paradigm-shift-like change in his beliefs about the world.

The GM bailout is not an isolated case of this problem. And as I’ve argued many times, impressive-sounding empirical analysis is typically insufficient to measure the effect of important economic interventions like the stimulus program. If you can’t even measure what effect already-executed programs have had, how likely is it that you can predict the effects of future programs?

Acceptance of this degree of ignorance doesn’t cut equally against all ideological positions. It leads naturally to a call for decentralized decision-making, experiments, and entrepreneurial groping toward knowledge.

(Cross-posted to The Corner)

A Post About 2012

Had John McCain been chosen as Bob Dole’s running mate in 1996, he would have been substantially better positioned to compete for the nomination in 2000. He might well have won, and had he done so he would have won the subsequent general election more decisively than Bush did.

Similarly, had John McCain lost with Tim Pawlenty as his running mate in 2008 (and he would have), Pawlenty would have had at least as good a shot as Mitt Romney of taking the nomination this time around, his uninspiring persona notwithstanding.

As things stand, Tim Pawlenty seems like he would make a perfectly adequate running mate for Mitt Romney to lose with to Barack Obama. Which would give Pawlenty at least an outside chance of being competitive in 2016 against Rick Perry and Jeb Bush.

A Peace Without Peace?

Speaking of Israel, David Samuels has actually met with more of the key players on all sides in the Israeli-Palestinian conflict than anyone I know, so it behooves anyone with an interest in same, and in the latest Administration moves (and Israeli and Palestinian responses thereto) to check out his latest on the subject.

To refresh everyone’s memory: as of 1988, when Jordan ended all territorial claims to the West Bank, Israel faced a difficult strategic problem: the only way to get out of ruling millions of Palestinians, and thereby becoming a bi-national state, was to negotiate with the Palestinians directly, rather than with Jordan. As Israelis generally understood, there was a natural asymmetry between the two parties that would work to the Palestinians’ advantage in negotiations. Specifically, the Israelis needed an agreement. Establishing some national entity other than Israel as the home of the Palestinians was the key Israeli objective, and that could not be achieved without Palestinian assent. But the Palestinians didn’t need an agreement. A one-state “solution” was a perfectly viable alternative – indeed, in many ways a preferable one to partition, from a Palestinian perspective.

But, if you think about it, why did Israel need an agreement? Once Israel withdrew from the Palestinian population centers, and allowed them to establish a government, wouldn’t that foreclose the otherwise inevitable end in bi-nationalism? Even if a de-facto Palestinian state refused to recognize Israel – even if it were still at war with Israel – wouldn’t the mere existence of such a state change the character of the Israeli-Palestinian dispute, from one of “how do we share the territory between the river and the sea” to “how do we settle our border disputes/water use disputes/outstanding refugee claims/etc” – the kinds of disputes that are common between states.

Oslo was, arguably, the first phase of unilateralism, because even though there was an agreement and a handshake, what was agreed to was not peace or anything resembling peace. All that was agreed was a willingness to keep negotiating – the Palestinians conceded nothing fundamental. Except the most important thing: they conceded to the creation of an entity with whom Israel could negotiate, with territory under its control and a government of sorts. They agreed, in other words, to create the nucleus of a Palestinian sovereignty that was distinct from Israel.

Sharon’s withdrawal from Gaza was the next phase in the Israeli strategic retreat, more obviously unilateral in character. Leaving Gaza meant letting Hamas take over. Letting Hamas take over meant certain security risks – but it also meant creating the fact that Gaza had its own political destiny. It might reunite with the West Bank; it might not. But that fact that was established was that Gaza would decide which it would be. That’s another fact of sovereignty, and whether Israelis understood it or not it was the main thing they got out of the Gaza withdrawal.

I confidently believed at the time that, had Sharon not had a stroke, he planned to continue with a similar withdrawal from the West Bank, a withdrawal that would mean abandoning many settlements (though none of the large ones), leaving the Palestinians in the West Bank with a substantial contiguous territory. Israel would, in essence, have hung on to everything it wanted to achieve through negotiations – much more than they would actually be able to get at the table. The Palestinians would get their de-facto state: precisely the state that Israelis wanted them to get.

Whether such an outcome would have been just or not isn’t really the question I’m addressing; my point is that Israeli policy has been, since Oslo, aimed at creating a de facto Palestinian state to end Palestinian statelessness, which is the biggest threat to the legitimacy of the State of Israel, on terms that concede as little as possible in terms of Israel’s own territorial objectives. Peace has been a secondary goal at best – the goal has been to achieve a strategic retreat on the most favorable possible terms.

(Obviously not every Israeli has been pursuing these goals – there are genuine idealists on both the left and right, on the left aiming for something like a comprehensive peace, on the right aiming for something like an apartheid state. But I would argue that the broad center of the Israeli political spectrum has always been pursuing something like what I describe above.)

Returning to Samuels’s piece: what he argues, basically, is that Obama has left the door open for Israel to pursue something very like this objective, if Netanyahu has the sense to see it. The next phase of the so-called “peace process” would involve the following, according to President Obama:

Palestinians should know the territorial outlines of their state; Israelis should know that their basic security concerns will be met. I’m aware that these steps alone will not resolve the conflict, because two wrenching and emotional issues will remain: the future of Jerusalem, and the fate of Palestinian refugees. But moving forward now on the basis of territory and security provides a foundation to resolve those two issues in a way that is just and fair and that respects the rights and aspirations of both Israelis and Palestinians.

The Palestinians are not going to agree to permanent borders without settling Jerusalem or the refugee question – and neither are Israelis. So this “agreement” on the “territorial outlines” of Palestine just means another unilateral Israeli withdrawal, this time from the various settlements that nobody expects to be incorporated into Israel in the context of an agreement. The Palestinians would be agreeing merely to allow Israel to leave – and thereby achieve another Israeli diplomatic objective: the creation of a contiguous Palestinian entity in the West Bank, further entrenching the reality of the division of the land between two sovereignties, one Jewish, one Palestinian Arab.

All of that sounds very persuasive, and I have little doubt that Ariel Sharon would understand it – and act on it. But Netanyahu? I doubt it.

The most serious obstacle to achieving the above has a name, as it happens. And the name of that obstacle is Hebron. Hebron is an overwhelmingly Arab city in the heart of Judea. It’s also home to a substantial Jewish settlement, probably the most intensely ideological settlement in the entire West Bank. It’s also one of Judaism’s holiest cities, burial place of Abraham and his family – and is holy to Muslims for the same reason. If Israel does not withdraw from Hebron, then Israel will have to maintain a substantial military presence in the heart of any Palestinian entity – the occupation will not end and be transformed into a border dispute. But to withdraw from Hebron would be to declare, in a very literal sense, that nothing is sacred.

Which would be a good thing, in my humble opinion. But I can’t see Netanyahu doing it.

Newer articles ↑

Older articles ↓