19.6.19

THE PRETTY PIG PROBLEM.

Michael Munger contemplates the advantages and disadvantages of various forms of social organization.  It's a variation on the old introductory economics taxonomy of resource allocation by custom and tradition, or by market exchange, or by electoral politics of some sort.  That's not always as easy as it looks, as anything in practice is going to come off poorly compared to an ideal alternative on a blackboard.  "We all want to compare the actual form, and pathologies, of systems we dislike with the ideal form, as we can imagine it, of systems we admire."  It's easy enough: the Creation Myth is the blackboard version of Optimal Custom and Tradition; General Equilibrium the blackboard version of Optimal Market Allocation, and Withering Away of the State a blackboard version of democratic allocation of resources.  I have to specify "a" rather than "the" as exactly what that democratic alternative is varies with who you talk to.

The challenge confronting advocates of democratic allocation is simple.  "Every flaw in consumers is worse in voters," notes Professor Munger, where "flaw" refers to acting on incomplete information or adhering to poor heuristics or anything else you can assume away at the blackboard.  He elaborates,
If you think we can use democracy as a replacement for prices, deciding what the “true” value of wages, commodities, and assets should be, you would have to explain that voters are smarter than consumers. Not only are they the same people, but the institution of democracy provides less information and gives less responsibility to the individual.

After all, if I buy a bad car, I have to drive a bad car and I’m likely to think about it more next time. But my vote for President, or a referendum such as Brexit, has no impact on the outcome, and I am free, as Bryan Caplan has pointed out, to have no connection to rationality at all.
Thus, unfortunately, the Wise Experts manifest themselves.
Of course, many people who advocate for socialism don’t really think voters are capable of making such choices, and would entrust power to a secular priesthood of experts and bureaucrats. But such a “solution” would have to pursue its own logic to the conclusion that the power of experts must be placed beyond the control of voters. That is simply a recipe for authoritarianism, an unelected and unaccountable oligarchy that rules for its own purposes and with its own goals.
The actually existing administrative state, which enjoys a great deal of latitude despite presidential appointments at the secretarial level and Congressional oversight, already looks pretty bad.  You don't have to invoke the Department of Motor Vehicles, or the Soviet bureaucracy, either.
Unsurprisingly, it has been exactly that outcome that all real experiments in socialism have ended up reaching. If you accept that democracy is no better, and is often much worse, in solving problems of information and incentives than markets, than you recognize that democratic socialism is not desirable. If your solution is to suspend democratic accountability, you are conceding that democratic socialism is not possible.
That doesn't stop Joseph Stiglitz from attempting to square the circle.
Governments have a duty to limit and shape markets through environmental, health, occupational-safety, and other types of regulation. It is also the government’s job to do what the market cannot or will not do, like actively investing in basic research, technology, education, and the health of its constituents.
That's the canonical Welfare Economics Paradigm, and Professor Stiglitz established his reputation with a number of papers dealing with information problems, more than a few of which I fear assumed too much knowledge on the part of a social planner.  That, though, might not be the fatal flaw in his argument.  Rather, it's this.  "Progressive-capitalist reforms thus have to begin by curtailing the influence of money in politics and reducing wealth inequality."  The duties he lists for government, though, generate rents, and rents generate rent-seekers.

Richard Ebeling isn't impressed.
When Professor Stiglitz says at the end of his article that his neo-socialism (oh, excuse me, his “progressive capitalism”) is the only alternative to the failed neo-liberalism of our time, he is merely saying: let me impose upon you the economic planning schemes that I consider the good, fair, and just ones for you, in place of those other command-economy coercers who want to take you down “wrong” collectivist paths compared to mine.
Perhaps. I fear, though, that there are fewer voters who remember the triumphs of technocracy we refer to today as the Great Society, and whatever came after through the Carter presidency. Some things, people might just have to experience.

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