Redistribution, Fairness, and Stability

Here’s my commentary on this morning’s Marketplace


It’s really terribly hard saying anything in 300 words. If I’d had more space I would draw out how there is no way to succeed in promoting a unifying “we’re all in it together” mood when massive government intervention has massive redistributive consequences that track basically NO ONE’s sense of fairness or desert. That’s sure to be divisive. When Obama said in the campaign he meant to “spread the wealth around,” I’m sure most people took that to mean downward redistribution meant to rectify either the unfairness of rising inequality, the unfairness of the fact that some people are struggling for no fault of their own, or both. But bailouts of all sorts–to banks, to car companies, to underwater homeowners–spreads the wealth around in an entirely different way. “Investment” in the “green economy” spreads the wealth around. Increasing the size of the military spreads the wealth around. And so on. None of this accords with any coherent notion of fairness. And the scale of Obama’s initiatives do badly unsettle the structure around which people build expectations, and that’s an independent source of unfairness. We desperately need better framework rules for both private and public finance. It would be silly to oppose serious structural reform. But what we’re getting is the kind of half-panicked, half-opportunistic myopic intervention that breeds future half-panicked, half-opportunistic intervention. That is the opposite of what we need.

Don't Wait for a Job to Come to You

That’s my advice in this morning’s Marketplace for the tens of thousands of Americans who have lost, or are about about to lose, their jobs. I knew this wouldn’t be very popular advice, and I was right. A number of commentators ask “What about the house?” Good question. The policies that subsidized homeownership for millions of Americans for whom it might not otherwise have made economic sense are the same ones that led to the massive misallocation of capital that contributed both to this recession and to the meltdown of the financial sector, which has made the recession worse. That is to say, a Fed policy of low interest rates, home mortgage deductions, the positive encouragement of sub-prime loans, etc., etc. have doubly or triply screwed over huge numbers of Americans. Lots of people are now losing their jobs in part because of stupid homeownership subsidies. The sensible thing to do when you can’t find work locally is to pick up and go where you can find a jobs (and, contrary to one commenter, the fact that unemployment is up in every state doesn’t begin to imply that no one is hiring anywhere.) But if you can’t sell the house at all, or if you have to sell it at a huge loss, that’s obviously going to make it hard to move.

That’s one reason why in the commentary I wanted to emphasize just how terrible it is to be unemployed. In terms of psychological well-being, it really is one of the worst things that can happen to a person. And I undrestand that there are lots of forces that hold people in place. But if we’re not even willing to consider painfully abandoning sunk costs, we can put ourselves in the way of even greater pain.

If government policy can help in these circumstances, it’s going to be policy that encourages mobility, not rootedness. The first thing government can do is to stop subsidizing homeownership in a way that anchors people at precisely the times when they most need to set sail.


We Don't Need No Stinkin' Czars

Such is the theme of this morning’s Marketplace commentary.


The beginning of my concluding paragraph was cut, which is too bad since I thought it was the most important part. It originally ended like this:

More importantly, a czarstruck public becomes all-too-willing to think that without a Hunger Czar, bellies will go unfilled, that without an Office of Homeland Happiness, there will be no mirth in the land. But government is not our source of sustenance and happiness. And Czars are more often than not a cosmetic response to problems government policy itself has created. Politicians promise much, but government too rarely delivers. In the end, it is the innovation and enterprise of private citizens, not a swarm of pint-sized Caesars, that delivers the goods.

One Night of Romance

On Marketplace this morning, here’s some economic advice to Barack Obama, recorded before he actually won.

I’m glad Obama won. I am perhaps the world’s most lachrymose man, and I cried seeing Jesse Jackson cry. I have always thought that the symbolic or cultural value of an Obama victory would be enormous. The dramatic reaction last night confirmed that. I understand why so many people are elated, and part of me is elated, too. I find it hard to see how you could not be. There is no denying that an election can be culturally transformative. It means something profound that a black man was elected to the most visible, high-status position our society offers. The mere fact that Obama won truly does make our society a better place.

That said, every four years, I find myself deeply disturbed by the fact that the office of chief executive of the national public goods administration agency is in fact, according to most people’s sense of things, the highest peak, the top of the heap. And the quadrennial reflex of vesting in a single powerful man so much hope for the future seems to me a truly depressing failure to internalize the spirit of American democracy. Last night’s celebratory catharsis was a long time coming. We needed it. But, frankly, I hope never to see again streets thronging with people chanting the victorious leader’s name.

The government of the state is profoundly important. And I think American voters picked a competent, decent, and sober executive officer. But this is not, headline writers, Barack Obama’s America. He is not your leader, any more than the mayor of your town is your leader. We are free people. We lead ourselves. He is set to be a high-ranking public administrator. Sure, there is romance in fame. But romance in politics is dangerous, misplaced, and beneath intelligent people. Were we more fully civilized, we would tolerate the yearnings projected on our leaders. Our tribal nature is not so easily escaped, after all. But we would try to escape it. We would discourage and condemn as irresponsible a romantic politics that tells us that if we all come together and want it hard enough, we’ll get it. We would spot the dangerous fallacy in condemning as “cynicism” all serious attempts to critically evaluate the content of political hopes.

I don’t say this to pick on Obama in particular. He’s a politican. Romance and elevation are crucial to winning a ruling coalition. They are tools. But smart people ought to be able to see through romance and elevation to the point of it all: the power to compel. McCain’s even worse with the “fight cynicism through glorious collective commitment” crap, which is one reason I’m glad he lost. The point is, Obama’s a politician, and politics is what it is: a ritualized and contained conflict over power. That’s not something to romanticize.

I’m glad Barack Obama is going to be president. And I’m glad that the Republicans held enough Senate seats to offer significant opposition. Mostly, I’m really really glad to have a change. The public debate’s been stale for a good while now, and I’d like to see it develop. I’m looking forward to seeing some hacks become interesting again, and I’ll be sad to see some interesting minds become hacks. Politics is what it is. Rarely, like last night, it can be a stage for a proud cultural moment. Day to day, year to year, it’s a gussied-up power grab that makes smart people stupid.

An Amalgam Enmeshed in a Thicket

300 word commentaries on complicated topics are bound to be superficial. The challenge is to say something interesting without being too superficial, while realizing that no matter how well you do, you will get scornful emails accusing you of willfully ignoring the six most important things. Anyway, this morning on Marketplace, I discuss regulation and the financial crisis. Here’s the core:

One lesson of the crisis is that ours is hardly a “free” market system. The American economy is a byzantine amalgam of market and state institutions enmeshed in a thicket of regulation. When part of it goes bust, it’s too easy to pin the whole blame on market failure. A market is only as stable as the regulations that define it.

We don’t need more regulation or less. We need better regulation. But who will give it to us? Technocrats, like Ben Bernanke and Henry Paulson? Congress? Our fearless lawmakers on Capitol Hill did very little to alter Paulson’s initial two and a half-page plan — other than to add 450 pages of pork.

Yeah, I recycle lines from the blog.

More Canuckophilia

This morning on Marketplace, I praise Canada and lament the U.S.’s increasingly pathetic support for freedom.

I’ve become interested in writing a longer essay on the freest country in the world. That’s a deeply ideologically freighted question, and that’s part of what interests me. What would it mean for someplace to be freer than another overall? On the account of freedom, and the weighting of various forms of freedom, that I think is most appealing, I guess Canada or New Zealand would take the top spot. I think it is important for Americans to recognize why the U.S. wouldn’t. Anyone want to publish that?

No Bailout for Detroit!

Here’s this morning’s Marketplace commentary.

It comes as no surprise that some people in Michigan didn’t like it much. It bears emphasizing that the failure of the iconic American auto firms would be very very far from the demise of the American auto industry. As I mention in the piece, they make Toyota Camrys in Kentucky. Honda, Nissan, Toyota, and other carmakers have major production lines all around the U.S. “MOPAR or no car” has never been further from the truth, and what’s bad for GM is probably good for carmaking in America.

I think my general point is important, so here it is:

The alternative to creative destruction is not stable prosperity. Propping up yesteryear’s winners leads to stagnation at best, plain old uncreative destruction at worst. The best defense is often no defense.

I believe this year’s season of bailouts is creating conditions that seriously threaten the dynamism of the American economy and the future of American prosperity.  If “too big to fail” comes to dominate our thinking, we will fail big.

Eat Local, Yokel

My Marketplace commentary this morning briefly discusses “food miles” and the “eat local” movement.

One commenter writes, “Eating locally and seasonally keeps more of the food dollar in the local economy.” But it is not the comparative advantage of some localities to grow anything. In that case, refusal to trade beyond local bounds will leave the local economy poorer. That is, you’ll succeed in keeping food dollars in the local economy only at the price of fewer total dollars for food and everything else. Please read Paul Krugman and Art Carden.

The study I mention “out of Carnegie Mellon University” is “Food-Miles and the Relative Climate Impacts of Food Choices in the United States” by  Christopher L. Weber and H. Scott Matthews.

It’s pretty mysterious to me why the miles traveled by food in particular is thought to matter more than, say, the miles traveled by my Chinese laptop. Rootedness? Purity? How are your laptop miles, America?

Should we minimize our “music miles” and boycott bands on tour? Thankfully, our next-door neighbors have a band, Dead Larry. We don’t have to go anywhere to hear them.