Big Business: Recasting the Anti-Hero

Tyler Cowen’s previous book, Stubborn Attachments, is right in general, but wrong on particulars.  His latest book, in contrast, is largely right on both.  The world needed a new book to be pro-market and pro-business at the same time, and Tyler’s Big Business delivers the package.  I’m almost tempted to quote Keynes:

In my opinion it is a grand book … Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.

Highlights include:

1. A popularization of Bloom and van Reenen’s work on the power of management:

We must take a moment to appreciate the particular character of American business. By global standards, its overall performance is remarkably impressive. Stanford economist Nicholas Bloom and a group of co-authors studied and compared management practices in some of the major economies, including the United States. Their survey assessed how well a workplace uses incentives, the quality of performance measures and reviews, whether top management aims at long-term goals, whether top creators are well rewarded, and whether the firm attracts and retains quality employees, among other relevant metrics…

So at the end of all of these measurements of management quality, which country comes out on top? The United States is a clear first…

Management really matters. Let’s say we take two American plants producing comparable wares, but one of those plants is in the 90th percentile in terms of productivity, while the other is in the 10th percentile. The former plant will have a productivity level four times higher than the latter plant, due to superior management practices. It has been estimated that Chinese firms could increase their productivity by 30–50 percent and Indian firms could do so by 40–60 percent merely by improving their management practices up to an American level of quality.

2. Business practices and promotes good manners and civility.  Despite modern political hysteria…

the world of American business has never been more productive, more tolerant, and more cooperative. It is not just a source of GDP and prosperity; it is a ray of normalcy and predictability in its steady focus on producing what can be profitably sold to customers. Successful businesses grow dynamically, but they also try to create oases of stability and tolerance in which they can perfect their production methods and which help to attract and retain talent…

American big business in particular has led the way toward making America more socially inclusive. McDonald’s, General Electric, Procter & Gamble, and many of the major tech companies, among many others, were defining health and other legal benefits for same-sex partners before the Supreme Court legalized gay marriage… This push for tolerance shouldn’t come as any surprise. Big business has lots of customers and relies on the value of brand names. It doesn’t want any group of those customers to feel put out or discriminated against or to have cause for complaint…

3. Some deliberate (?) understatement on fraud:

Most of all, business is criticized for being fraudulent and ripping us off. While there is plenty of fraud in business, the commercial sector isn’t any more fraudulent than individuals in other capacities, and it may even be somewhat less fraudulent.

I’d say there’s no “may even be somewhat less fraudulent” about it!  Who wouldn’t trust Amazon or Uber or Airbnb over a random American who promised to provide the same product?

4. Business thinks long-term, usually:

It can be very difficult to distinguish between short-termism and an inability to see into the future. The failed Netflix competitors were mainly not venal rip-off artists; rather, most of them genuinely did not see that providing massive amounts of streaming content would prove to be a winning strategy. If half of the time businesses think too short-term and the other half of the

time too long-term, there will be thousands of valid examples and anecdotes about excessive short-term thinking and planning, and they aren’t necessarily related to CEO dishonesty.

And:

Of course, markets also think long-term when it comes to successes, and that long-term mentality is encouraged through CEO pay structures. Consider Amazon, which has a stratospherically high share price, even though the quarterly earnings reports usually fail to show a sizable profit. Whether you think that valuation has been justified or not, it is a clear example of how markets can consider the broader, longer-term picture. Circa 2018, Jeff Bezos ended up as the richest man in the world, and he achieved that status by sticking with some long-run goals.

5. Employment may not be fun, but it’s meaningful and prevents misery:

Another way to think about the non-pay-related benefits of having a job is to consider the well-known and indeed sky-high personal costs of unemployment. Not having a job when you want to be working damages happiness and health well beyond what the lost income alone would account for. For instance, the unemployed are more likely to have mental health problems, are more likely to commit suicide, and are significantly less happy. Sometimes there is a causality problem behind any inference—for instance, do people kill themselves because they are unemployed, or are they unemployed because possible suicidal tendencies make them less well suited to do well in a job interview? Still, as best we can tell, unemployment makes a lot of individual lives much, much worse. In the well-known study by economists Andrew E. Clark and Andrew J. Oswald, involuntary unemployment is worse for individual happiness than is marital divorce or separation.

6. Even much-maligned low-skilled jobs have unsung psychological benefits:

In contemporary American society, poorer individuals are more likely to have problems with divorce, spousal abuse, drug addiction in the family, children dropping out of school, and a variety of other fairly common social problems. These problems plague rich and poor alike, but they are more frequent in poorer families and, furthermore, very often wreak greater devastation on poorer families, which have fewer resources to cope with them. The workplace, however, is a partial equalizer here. At least in this sample, the poorer individuals found relatively greater solace in the workplace than did the richer individuals.

7. Employers’ alleged mistreatment of individual workers is often for the greater good of their whole team:

Along these lines, I hear so many criticisms that companies do not give workers enough personal or intellectual freedom. For instance, many critics have noted that companies have the right to fire workers for their Facebook or other social media postings. Surely that sounds like an unjustified infringement on freedom of speech. But on closer inspection, the stance of the companies is often quite defensible. Unfortunately, a lot of workers put racist, sexist, or otherwise discomforting comments and photos on their Facebook pages, on Twitter, or elsewhere. When employers fire them, very often it is to protect the freedom of the other workers—namely, the ability of those other workers to enjoy the workplace environment free of harassment and threats. It’s not always or even usually a question of the employer versus the workers, or the old story of a struggle between worker and boss struggle. Rather, the boss is trying, sometimes in vain, to adjudicate conflicting notions of workplace freedom among the workers. In other words, the firings are in part an employer attempt to take the overall preferences of the workers into account.

8. Big business is often the cure for monopoly rather than the disease:

[Y]ou can think of Amazon and Walmart as two big reasons a lot of collusive and price-fixing schemes don’t work anymore or don’t have a major impact on consumers. Amazon and Walmart are the two biggest retailers in America, and both compete by keeping prices low—permanently, it seems. Their goal is to become dominant platforms for a wide variety of goods and to use low prices to boost their reputation and their focal status as the place to go shopping. By now both companies are old news, and it is increasingly difficult to argue that their strategies are eventual market domination and then someday super-high monopoly prices. Instead, their strategies seem to be perpetually low prices, followed by taking in insanely large amounts of business and using data collection to outcompete their rivals on the basis of cost and quality service.

My main criticism: Tyler is so pro-business that he often forgets (at least rhetorically) to be pro-market.  He spends minimal time calling for moderate deregulation – and even less calling for radical deregulation.  So while he effectively calls attention to everything business does for us, he barely shows readers how much business could do for us if government got out of the way.  Above all, Tyler mentions the following only in passing – or not at all:

1. The evils of housing regulation.  Business is ready, willing, and able to build mega-cities worth of affordable housing in the most desirable places in the country – the moment land-use regulations permit.

2. The evils of immigration restriction.  Perhaps to broaden his audience, Tyler fails to mention the eagerness of business to provide international workers with the opportunity to use their talents for the enrichment of mankind.  If I were him, I would have highlighted (a) how much business has done to increase immigration, and (b) how much business has engaged in righteous civil disobedience by hiring workers despite our unjust immigration laws.

3. The evils of labor market regulation.  Tyler barely mentions the many awful side effects of much-loved labor market regulations.  This was a mighty missed opportunity to lambast the horrors of European labor market regulationBig Business was also a great opportunity to explain why discrimination is usually bad for profitability, making anti-discrimination regulations superfluous at best.  Indeed, Tyler could have used the ubiquitous employment of illegal immigrants to illustrate these truths.

Fortunately, it’s not too late for Tyler to correct his unfortunate omissions on his blog.  Big business has been miscast as an anti-hero, but populist regulation is a Thanos-level supervillain.

P.S. Exercise for the reader: Name a better book cover than Tyler’s!

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Obsolescence

Nobody asked but …

One of the frictions that promotes change is obsolescence.  I have looked, this morning, at a drone photo of Hong Kong.  As a species blessed (cursed?) with rational problem solving skills, we seem at the same time to lack problem avoidance skills.  In Hong Kong the traditional problem solving algorithm will eventually kill Hong Kong.  There are too many people.  The solution that becomes a new problem is effected by people doing what Ludwig von Mises says they will do — seek to avoid unease.  Too many people in Hong Kong have an irrational need to remain in Hong Kong.  The unease they seek to avoid is the fear of living apart from Hong Kong.  The natural response, in any urbanization movement, is to act together in ways that will increase density.  Taller buildings increase the density of people who can live in them, while smaller compartments on each level increase the density of people who can live on each level.  Since the invention of multistory buildings, the answer to the problem of population has been to go up and to squeeze in.

Looking at Hong Kong, more than anyplace else, we can see a logical conclusion to the obsolecence algorithm.  Every available segment of verticality will be absorbed.  Horizontal shortcuts will enweb the complex, making it a hive.  Skyscrapers will approach the limits of structural capacity.  People will approach survival occupying only personal space-time.  But that’s enough speculation — we don’t want to gaze upon the Medusa.  The good news is as follows:

  • Misean behavior takes on infinite forms, paths, and interlocking consequences.
  • There are infinite mixtures of events and trends.
  • The requirement that human action arises from unease is not a stricture but an enabling prerequisite.  Anything, real or imaginary, that generates in any experience a feeling of unease will generate behavior hoped to reduce the unease.

Make no mistake.  This is not a description of a Leibnizian best-of-all-possible-worlds.  Hong Kong is a demonstration of the absurdity that will arise from a set of variables — the humanity in Hong Kong keeps fighting the battle of urbanization without asking do we need to change the pattern.  The pattern is obsolete.  A larger pattern applies — that which will end, will end.

— Kilgore Forelle

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Dan Moller’s Governing Least

Michael Huemer’s The Problem of Political Authority is definitely my favorite work of libertarian political philosophy.  Dan Moller’s new Governing Least, however, is definitely now my second-favorite work of libertarian political philosophy.  The two books have much in common: Both use common-sense ethics to argue for libertarian politics.  Both are calm, logical, and ever-mindful of potential criticisms.  Both strive to persuade reasonable people who don’t already agree with them.  Both are packed with broader insights.  And despite these parallels, both are deeply original.

So what’s most original about Moller’s position?  Instead of focusing on the rights of the victims of coercion, Moller emphasizes the effrontery of the advocates of coercion:

[I]n my account libertarianism emerges from everyday moral beliefs we have about when we are permitted to shift our burdens onto others. In fact, my account intentionally downplays the role of rights, and is motivated by doubts about what we may demand of others, rather than outrage about what others demand of us.

The effrontery is most blatant when you speak in the first person:

Imagine calling a town hall meeting and delivering the following speech:

My dear assembled citizens: I know most of us are strangers, but of late I have fallen on hard times through no fault of my own, by sheer bad luck. My savings are low, and I don’t have friends or family to help. Now as you know, I’ve previously asked for help from you as private citizens, as a matter of charity. But unfortunately that hasn’t been sufficient. Thus, I’m here now to insist that you (yes you, Emma, and you, John) owe me assistance as a matter of justice. It is a deep violation if you don’t work additional hours, take fewer vacations if need be, live in a smaller house, or send your kids to a worse school, in order to help me. Failing to do so is no less an injustice than failing to pay your debts.

Moreover, calling this an injustice means that it’s not enough that you comply with your obligations by working on my behalf. No, I insist that you help me to force your fellow citizens to assist me. It doesn’t matter if these others say to you that they need the money for their own purposes, that they prefer worthier causes, or if they’re just hard-hearted and don’t care. To the extent you care about justice, you must help me to force these others to assist me whether they wish to or not, since that is what is owed me in light of my recent bad luck.

Could you bring yourself to make this speech?

The fundamental objection to Moller’s position, he thinks, is to claim that governments have “emergent moral powers.”  But Moller firmly denies this.  Governments are just groups of people, so they are morally obliged to follow the same moral principles as everyone else.  While this may seem like libertarian question-begging, there’s nothing uniquely libertarian about it:

It is notable that many who wish to block rights-based objections to state action are nevertheless eager to enter their own moral objections to what the state does. Many of those unsympathetic to attacks on taxation rooted in individual rights also portray the absence of welfare provisions or various immigration policies as “unconscionable.” There is nothing inconsistent about this; the one set of moral claims may be right and the other confused. But the objection then cannot be based on the emergent moral powers of the state. We cannot both reject appeals to individuals rights on the general grounds that morality has nothing to tell us about what may emerge from government institutions, and then do just that, substituting our own preferred brand of interpersonal morality. Once we notice this, support for emergence should shrink drastically, since it will only come from those who think there are no policies of the state that can be rejected on fundamental
moral grounds. The non- emergence assumption per se has no particular ideological leanings.

But doesn’t common-sense morality admit that rights to person and property are not absolute?  Of course; exceptions abound.  Moller sternly emphasizes, however, that these exceptions come with supplemental moral burdens attached.  In his “Emergency” hypothetical, for example, you steal $1000 under duress.  What then?

I propose the following non-exhaustive list of residual obligations for cases like Emergency:

Restitution: although I didn’t do wrong, I must repay the $1,000 if possible, perhaps in reasonable installments.

Compensation: to the extent you are otherwise harmed by my actions, I should attempt to compensate you. For instance, if I smashed your windows getting in or forced you to incur some loss because you had to come home at short notice, I must compensate you at some reasonable rate.

Sympathy: it is incumbent on me to convey, if not an apology for my (permissible) actions, at least sympathy for the harm I have caused you. (“I’m very sorry I had to do that” would be the natural if slightly misleading phrase.) I cannot offer a Gallic shrug at your distress and announce, “I did nothing wrong— it’s your problem” as you survey the wreckage of your home. To do so would exhibit a serious character flaw.

Responsibility: my obligations are not just backward looking, but forward looking. If I can reasonably foresee that some action of mine will put me in the position of facing an emergency that will then render it permissible to harm you, I must take responsibility to avoid such actions if possible. I should not think that I have less reason to take responsibility because I can avoid harms by transferring them to you instead. And failing to take responsibility weakens my claim to impose costs on others when the time comes.

A related principle is worth mentioning as well:

Need: my warrant for harming you depends on how bad my situation is. I cannot harm you if I am doing fine already merely in order to improve my position still further. I may be permitted to take your $1,000 to avert a physical threat, but not in order to make a lucrative investment in order to get even richer.

The political implications are expansive, starting with:

A welfare state justified in virtue of overriding reasons to promote the good of the beneficiaries incurs these residual obligations. Flouting them amounts to unfair burden- shifting. What would it look like actually to satisfy them? For starters, if I were the beneficiary of some emergency medical procedure that a third party compelled others to contribute to— say a state agency— I would be obligated to
repay those charged for my benefit, possibly with some compensatory surcharge. If unable to pay, I would be required to pay in installments, with the agency keeping track of my income and tax records to ensure that my repayment were in line with my means…

Moreover, in repaying, my attitude toward my fellow citizens ought to be one of gratitude for coming to my assistance, as opposed to viewing these services as entitlements due to me as a matter of citizenship. This may seem curious: by hypothesis, the services I received made it past the threshold, meaning that the wealth transfers involved were permissible, and since I am repaying, they won’t
even be net transfers in the long run, barring misfortune. Depending on how badly I needed aid, aiding may even have been obligatory on a third party. Why should I express gratitude for others fulfilling their duties? Consider the Gallic shrug— that supreme expression of indifference at someone else’s misfortunes, while disclaiming all responsibility for rectifying them, frequently encountered
in Parisian cafés. Why shouldn’t I shrug my Gallic shrug at the rich complaining about their tax bill, and point out I merely got what I was entitled to, as would they in a similar situation?

This complaint would be apt if appropriate moral responses were a function solely of whether our acts are required or permissible. But there are all kinds of inappropriate moral responses even when what we have done is permissible or when what the other has done was required. If we are to meet for lunch and an urgent business affair obtrudes itself, I may be permitted to skip our lunch, but
I shouldn’t treat putting you out lightly. What makes a Gallic shrug a vice here is that beneath the outer layer of permissibility there remains an inner structure whereby you have been harmed for my sake, which ought to be a source of concern, leading to some appropriate expression of regret if I am a decent person.  And the same is true in the case of welfare services. This is easy to ignore because
of the opaque veils of state bureaucracy. But behind the faceless agency lie people who are harmed for the sake of benefiting me.

Governing Least manages to be at once readable and dense.  And though you can’t tell from the passages I just quoted, Moller also repeatedly appeals to and grapples with cutting-edge social science.  What, for example, should philosophers think about Greg Clark’s work on the long-run heritability of social status?  Moller’s take will surprise many of you.

Last question: Why do I still prefer Huemer to Moller?  Intellectually, because Huemer’s appeal to individual rights is just more clear-cut than Moller’s objection to “burden-shifting.”  Furthermore, Huemer focuses on the broader case for libertarianism, while Moller self-consciously focuses on opposition to the welfare state.*  And while Moller’s book is beautifully written and well-organized, Huemer’s is stellar on both counts.

Thus, if you’re only going to read one book of libertarian political philosophy, I still say you should read The Problem of Political Authority.  If you’re willing to read two such books, however, read Governing Least.  I loved it.

* Moller: “I also ignore the many noneconomic causes that libertarians have sometimes taken up, like free speech, gay marriage, and drug legalization. This is the fun part of libertarianism and requires little heroism to defend. Many disagree with such policies, but few think their sponsors cruel or ungenerous, while resistance to the welfare state and programs intended to foster economic equality evoke precisely that response.”

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Pangolins

Nobody asked but …

Once again, I have anecdotal evidence about humanity that is very dreary.  Mark Twain said, “Always do right.  This will gratify some, the rest will be astonished.”  The reason for astonishment seems to be that there are damned few who are compelled to do right — much fewer always to do right.

Take, for instance, the sad tale of the pangolin.  Statists will insist that we need states to prevent the illegal trade in pangolin scales, and consequently the extinction of the species.  I would ask, “How’s that working out for you?”

The thing is that it would be a long time before logic and order corrected the ills of the state — if ever.  But there is also the thing that statists are clueless about statism being necessary THOUGH evil.  Statism is useless AND evil.  Statism is wrong AND evil.  There is nothing that government does which non-government can’t do.

— Kilgore Forelle

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We’re Undecided Now, So What’re We Gonna Do?

Nobody asked but …

Reading, er listening to another audio book as written by James Bamford, Body of Secrets (subtitle: Anatomy of the Ultra-Secret National Security Agency, from the Cold War through the Dawn of a New Century).  This is a belated follow-through on a published citation from Radley Balko.  I recommend the book highly both for the content on the stated subject, but more importantly for me, the implications about the basic nature of the state and its bureaucracy.  Sometimes Bamford supplies a heavy load of detail, but I honestly could not omit any of them.

This is a paraphrasing of Bamford’s account of the NSA during Nixon’s years — Nixon issued a directive approving of the most aggressive delineation of the USA’s meddling powers.  Some such as the NSA were delighted because it reinforced what they were already doing, while others such as the FBI under J. Edgar Hoover were outraged because it revealed what they were already doing.  Five days later AG Mitchell talked Nixon into rescinding the directive as problematic under the Constitution.  Most in the cloak and dagger community were unaware of either directive.  Why?  Bureaucrats and their bureaus are born out of the spoils system, not out of concepts of good governance.  The ideation of any plan is to serve a special interest, to intervene where we have previously chosen, through logic or care or neglect, NOT to intervene.  Write it down!

The concern arises that 99 and 44/100ths% of the agenda of agencies are out of the control of anyone.  There is a “set it and forget it” syndrome with them all.  I have been in close proximity to the state, man and boy, for over 7 decades (haven’t we all, for varying lengths of time?), and I have never seen a bureau go out of existence.  Please tell me I am wrong, please, I beg you.  Though many instruments of the rulers are obsolete, they are no longer connected to their founding justification, and/or were never connected to their founding justification.

Obviously, the chief attribute of any society of human beings is to foul its own nest.

— Kilgore Forelle

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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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