Triple Standards: The Dollar, the Throne, and the Altar

The last chapter of Tyler’s Big Business is called “If Business Is So Good, Why Is It So Disliked?”  At risk of seeming narcissistic, this passage put a big grin on my face:

Perhaps in part because we cannot do without business, so many people hate or resent business, and they love to criticize it, mock it, and lower its status. Business just bugs them. After I explained the premise of this book to one of my colleagues, Bryan Caplan, he shrieked to me: “But, but . . . how can people be ungrateful toward corporations? Corporations give us everything! Corporations do everything for us!” Of course, he was joking, as he understood full well that people are often pretty critical of corporations. And they are critical precisely because corporations do so much for us. And do so much to us.

Does my colleague’s outburst remind you of anything? Well, immediately he followed up with this: “Hating corporations is like hating your parents.”

Hmm. Your parents too (usually) have done lots and lots for you, but—especially in America—large numbers of people are unhappy with how that all turned out, or at least some parts of it. For all of their gratefulness, they resent what their parents have done to them.

On reflection, though, my “Hating corporations is like hating your parents” quip misses a crucial point.  Namely: In the absence of extreme abuse or neglect, virtually every society condemns hating your parents!  When you retrospectively rate your parents, you’re supposed to forgive even serious character flaws and obvious cruelty with, “Well, mom did her best” or “Well, dad loved us in his way.”  When you rate a business, however, almost no one expects you to give it the benefit of the doubt.

You could object, “Well, we hold large impersonal organizations to higher standards than familiar individuals.”  But that’s utterly wrong.  Governments are large impersonal organizations, and people hold them to absurdly low standards.  They’re even willing to brush mass murder under the rug.  Churches, too, are large impersonal organizations, and people also hold them to shockingly low standards.  Many Catholics briefly punished their Church after massive sexual abuse scandals, but virtually none cried, “These child molesters can go to hell; I’m finding a new religion!”  Note, moreover, that government and organized religion aren’t two itsy-bitsy counter-examples.  They are by most measures the oldest and largest kinds of large impersonal organizations.

Tyler spends many pages developing a specific version of the “higher standards for large impersonal organizations” story:

[P]eople tend to anthropomorphize even when such attributions are inappropriate. Along these lines, we tend to think of corporations as being like people and we tend to judge them by the same standards that we use to judge people, whether we seek to do so consciously or not. To some extent we are bound to talk that way, but we need to understand that it can mislead us, and it is a kind of shorthand that has pitfalls and hazards if we take the metaphors too literally or allow them to drag around our emotions too much. It is simply very hard for most people to think about corporations without investing them with the personal attributes of human beings or at least the attributes of those small groups of social allies and enemies we evolved to obsess over.

Since the general story is utterly wrong, however, there’s no hope for Tyler’s specific version.  If he were right, people would also anthropomorphize governments and churches, leading to unfairly harsh judgment.  In fact, however, governments and churches enjoy overwhelming deference even when they’re engaged in vile crimes.  We damn the dollar, yet honor both throne and altar.

What’s really going on?  I’ve spent many years highlighting mankind’s anti-market bias: our irrational pessimism about the social benefits of markets.  I’ve even argued that this bias provides the common core of leftist ideology.  Scapegoating business and the rich comes naturally to psychologically normal humans – and big (≈ “rich”) business is one of the best scapegoats of all.  The only better scapegoat, really, is foreign big business – those beastly multinational corporations you keep hearing about.

Why do human beings have this corrupt emotional make-up?  I sincerely don’t know.  While I’ve heard Darwinian explanations, most seem like shaky just-so stories to me.  All I know is that human beings do have this corrupt emotional make-up.  And that’s why we I hope Big Business inspires a chorus of imitators – because our emotional corruption is not going to fix itself.

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Could Such a Man Care?

Nicolas Maduro now rules a land of chronic hunger, horrific crime, terrible fear, and mass exodus.  How does he maintain his dictatorship?  With a pact of steel between his ruling party, the military, the secret police, and on-site foreign allies – especially Cubans.  You would have to be mad to think that Maduro’s doing all this for the good of his people, or the good of the world.  His only credible motivation is power-lust gone wild.  Maduro is a pervert for power.

He’ll never admit this, of course.  He still claims he’s doing it all for the people and the higher good.  Here’s Maduro in an interview this February:

Venezuela is a country with dignity. We are patriots, revolutionaries. We have an ideology, that of Simon Bolivar. Our movement came from the depths from the Venezuelan people. We’ve been governing democratically for 20 years. Everything that we are, everything that we have, we have because of the popular vote.

Which raises a deeper question.  Namely: Deep in his soul, when did Maduro stray from the path of decency?

For Maduro’s former fans, it’s tempting to sigh, “Power corrupts.”  Power turns a good man bad.  He – like his mentor Chavez – started out as an idealist.  Yet ironically, he ended up a tyrant.

On reflection, however, this “ironic” account is absurd.  Think about the nicest, sweetest person you personally know.  Can you seriously imagine that this person, given power, would forge a brutal police state, destroy the economy, and cling to power with fire and blood?  I can’t.

Indeed, think about the average person you know.  You can probably imagine that this person would go along with great evil out of cowardice.  Still, would the average person you know take the initiative to commit these horrors?  That doesn’t make sense to me.

The lesson: Maduro was never an idealist.  Indeed, he was never an average person.  The average person in his shoes would have done far less evil, and relinquished power long ago.  What Maduro has done reveals what Maduro has always been: insatiably hunger for power.

So what?  Well, while this is all clear in hindsight, Maduro used to have millions of fans all around the world.  Millions of fans who took his rhetoric at face value.  Millions of fans who thought he was a noble man.  And these fans would have called me paranoid and unfair for calling their idol a power-luster.

The fans’ error would have been understandable if Maduro were the first politician to start with idealistic rhetoric and end in savagery.  In fact, however, history provides countless examples of this pattern.  Which means two things.

First, while extreme power-lusters are a small fraction of humanity, they are a large fraction of successful politicians.

Second, regular human beings are awful at the detection of extreme power-lusters.  When humans hear flowery words, their impulse is to take them at face value, instead of reminding themselves, “That’s just what a power-luster would say – and politics is packed with power-lusters.”

You could object, “Well, popular gullibility is for the best.  If the man in the street assessed politicians realistically, political progress would be almost impossible.”  The tempting reply is, “Yes, but political disaster would be almost impossible too.”

This reply, however, gives gullibility too much credit.  Imagine a world where people were ever-mindful of politicians’ proclivity for power-lust.  What would happen?  Politicians would compete for popularity by promising and doing things that power-lusters hate to do.  Things like: Respecting individual freedom, welcoming dissent, defining crime narrowly, heeding international criticism, avoiding even the appearance of demagoguery, and yes – shrinking government and cutting regulation.  And given the documented dangers of politicians’ power-lust, that is just what anyone who cares about human welfare should be hoping for.

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The Gig Economy is What Yesterday’s Socialists Said They Wanted; Why do Today’s Socialists Hate it?

A February Harris poll finds that 49.6% of Millennial and Generation Z Americans would “prefer living in a socialist country.”

US Senator Bernie Sanders (I-VT) and US Representative Alexandria Ocasio-Cortez (D-NY), among other politicians, proclaim a message of “democratic socialism,” evoking an ideology last ascendant in the early 1900s when Eugene Debs and Norman Thomas moved the needle in US elections.

But the devil is, as always, in the details. The goals of today’s American “democratic socialism,” as laid out in Ocasio-Cortez’s Green New Deal resolution, in Sanders’s “Stop BEZOS Act,” etc. look a lot more like Franklin Delano Roosevelt’s effort to “save capitalism” through welfare statism than like the proposals of socialism’s last rise to prominence.

The essence of socialism as laid out by Proudhon and Marx and promoted by the International Workers of the World, et al., came down to destroying the wage system and building a classless society based on worker ownership of the means of production.

Those earlier socialists would almost certainly have lauded gig economy workers as examples of what socialism sought. Today’s socialists disdain them.

Consider gig economy drivers, once just called “gypsy cabbies.” In recent years many of them have chosen to affiliate with services like Uber and Lyft to get easier connections to people seeking rides.

Gig economy drivers own the means of production (their cars).

Gig economy drivers set their own hours and choose their own workplaces instead of slaving away on  someone else’s terms.

Gig economy drivers can use customer discovery services like Uber/Lyft, or they can go their own ways (many Uber drivers give me their cards, telling me to call them directly next time and cut out the capitalist middleman).

But today’s “democratic socialists” fought tooth and nail to preserve the capitalist “medallion cab” monopoly, and having lost that fight they’ve re-oriented their struggle toward roping the drivers, and the companies they choose to work with, into the old-style capitalist “wage employee” system.

Even the most virulent revolutionary Marxism posited that the state would wither away as workers seized the means of production, got rid of the bosses, and started working for themselves. That didn’t work out — the socialist parties ended up substituting themselves for the old ruling class, operating in the name of, but not as true proxies for, “the workers” — but that was the goal.

In the US, the same kind of substitutism came about “democratically” and incrementally as “progressives” co-opted pieces of socialist-sounding reforms. But just like the Marxist-Leninist parties in the old Soviet orbit, today’s “democratic socialists” are … well, conservative.

They don’t want the wage system to go away. They just want to run it.

They don’t want the workers to own the means of production. They just want to tax and regulate it.

They don’t want a classless society. They just want to be the new ruling class.

US president Donald Trump is already touting the 2020 presidential election as a referendum on “socialism.” Are any real socialists going to show up for that fight?

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Why I’m an Economic Optimist but Happiness Pessimist

Seven years ago, my mentor Tyler Cowen did an interview with The Atlantic entitled, “Why I’m a Happiness Optimist but Economic Pessimist.”  His point: Though GDP growth has been disappointing low for decades, the internet does give us tons of free, fun stuff.  The more I reflect on the Paasche price index, though, the more I’m convinced that Tyler’s picture is exactly upside-down.  At least in the First World, the sensible position is economic optimism combined with happiness pessimism.

How so?  To repeat, we shouldn’t take the ultra-optimistic Paasche calculations of GDP at face value, but neither should we dismiss them.  The judicious position is that U.S. growth has been excellent, though not astronomical.  Even so, we’re way richer than we were in 1990. Yet sadly, Americans’ measured happiness has barely changed.  We have abundance, but not bliss.

What’s going on?  Well, we already knew that income has a very modest effect on happiness.  But when you upwardly revise your estimate of prosperity, you automatically downwardly revise your estimate of the effect of prosperity on happiness.  Such is life.

When I insist that standard measures sharply underestimate economic growth, it’s easy to accuse me of motivated reasoning.  Before you make this accusation, however, consider the whole picture.  What possible agenda could I advance by simultaneously claiming that GDP has greatly increased, but brought us little joy?

So what’s the real story?  Simple: I look at the world and see great economic growth.  I take a second look at the world and see that money doesn’t buy happiness.  Then I report my observations.  This picture isn’t ideologically convenient for me.  But when I put ideology aside and stare at the world, this picture is what I see.

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I Win My European Unemployment Bet

In 2009, the U.S. unemployment rate exceeded Europe’s for the first time in decades.  Apologists for European labor market regulation rejoiced, so I publicly bet that European unemployment would exceed U.S. unemployment over the next decade.  The original authors I targeted turned me down, even after I offered a 1 percentage-point spread.  But noted economist John Quiggin took the bait.  Our final terms:

The stake is $US100 and the agreed criterion is that, for Bryan to win, the average Eurostat harmonised unemployment rate for the EU-15 over the period 2009-18 inclusive should exceed that for the US by at least 1.5 percentage points.

Ten years later, the bet’s results are now in.  The average U.S. unemployment rate during this decade was 6.8%.  The EU-19 (the original EU-15 plus the Baltics and Slovakia) was 10.3%.  Since the EU-15 is no longer widely available, Quiggin would have been within his rights to hold out for slightly adjusted numbers, but via email he has nobly decided to concede.   Since the Baltics and Slovakia have low populations, they couldn’t sway the final figure much – and in any case, unemployment rates for the Baltics and Slovakia aren’t major outliers.  The upshot is that I won the European unemployment bet by an enormous margin of 2 full percentage-points (on top of the original 1.5 percentage-point edge).

What does this all mean?  To me, this bet is just a small extra piece of evidence in favor of the orthodox and blindingly obvious theory that Europe has higher unemployment than the U.S. because it has stricter labor market regulation.  Flexible labor markets respond more sharply to shocks, but yield lower unemployment rates overall.  As I originally explained:

During the dot-com bust, U.S. unemployment remained below Europe’s, but it clearly rose faster.  Isn’t this further evidence that the mainstream case against European labor market regulation is overstated?

On the contrary, this is precisely what the mainstream case predicts!  Europe makes it harder to get rid of workers, so it’s only natural that when a big shock hits, U.S. unemployment rises more.  However, precisely because it is easier for American wages to adjust and American employers to change their minds, our labor market is also relatively quick to recover.

Disclosure: From the outset, Quiggin argued that the U.S. unemployment rates were artificially suppressed by high incarceration.  This has always seemed crazy to me, as I explained back in the day:

From a labor market perspective, though, Quiggin’s incarceration adjustment would only make sense if you thought that most or all of the people in jail would be unemployed if they were released.  That doesn’t make sense to me – while the people currently in American prisons might not be model workers, most of them could easily be gainfully employed on the outside.

Notice: Even if you think that the people in jail have no desire to work, you’d expect this to show up in labor force participation, not unemployment.  After all, to keep counting as unemployed, you have to keep trying – and failing – to find a job.

That said, I heartily commend Quiggin for actually making our bet.  He towers above all of the apologists for European labor market regulation who refuse to put their money where their mouths are.

Stepping back: Isn’t it possible that European-style labor regulation still helps workers, because the extra wages outweigh the lost hours of employment?  To be fair, this optimistic story is consistent with standard estimates of labor demand elasticity.  However, the optimistic story overlooks a pessimistic truth: Most of the harm of unemployment is psychological, not material.  Holding income constant, the employed are much happier than the unemployed.  Hence, no sensible person would want to see U.S. workers’ wages rise by 10% if the unemployment rate rose 3.5% as a result.  And psychology aside, remember that the welfare state forces active workers to support the idle.  So when regulation forces wages up, even the lucky workers who keep their jobs ultimately forfeit much of what they gain.

What did I learn from this bet?  Back in 2009, I was unaware that Germany had seriously liberalized its labor markets a few years earlier.  Since then, German unemployment has fallen from a peak of over 11% in 2005 to 3.3%.  The Great Recession barely happened in Germany; unemployment inched up from 7.1% in late 2008 to 7.9% in mid-2009, then continued its free fall.  There’s no reason all of the other high-unemployment countries in Europe can’t swallow their pride and follow Germany’s path to progress.  Well, unless “We’re too busy debating populism versus socialism” counts as a reason.

By my count, this betting victory brings my record to 19 wins, 0 losses.  Yes, perhaps I’ll see my first defeat later this month.  But even if I do, I’m not afraid to repeat that I have publicly demonstrated that my judgment is good.  And in my demonstrably good judgment, radical deregulation of Europe’s labor markets is long overdue.  I’m happy to make the Quiggin bet all over again with anyone who’s interested, but what’s the point?  My homeschooled sons understood all of this when they were 12.  Forget ideology.  Let’s all join hands, admit that labor market regulation is a scourge, and tear down these paper walls.

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Liberty is Not An “Ideology”

I saw a headline recently, which read in part, “Ideologies clash…”

It turns out one side simply wants to exercise liberty (open a brewery), while the opponents want to violate the first side’s liberty for “reasons”. The reasons include religion, fear of negative consequences of letting people control their own lives, and prohibitionism.

One side is an ideology, the other isn’t.

Liberty isn’t an ideology. It is the acceptance of the reality of self-ownership. From this acceptance flows certain principles. It doesn’t matter to the existence of liberty whether people accept it or not– it just is, to be respected or violated.

Yes, there will be consequences for exercising liberty. Everything has consequences. But slavery’s consequences are worse than liberty’s. And you’re the bad guy when you choose slavery over liberty, no matter what “reasons” you come up with.

This is why governing others is never a valid form of interpersonal interaction. It allows people to violate the liberty of others too easily, and without the risk which should come along with such anti-social behavior.

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