Neoliberalism Link Roundup

The past week or so saw a number of pieces on neoliberalism, many in reaction to this Jonathan Chait piece. Like ‘hipster’, neoliberalism has become a term thrown about with such abandon that for many (like Chait) it’s become almost meaningless. But that may speak more to how the ideas in neoliberalism have become so commonplace, particularly among the elite, that they are now the ‘default’ view of how to organize society. This is one of the most active fault lines in the Democratic Party; while both parties once embraced neoliberalism, the Republican Party under Trump is retreating into reactionary territory.

One of the better reactions was this by Karl Smith at the Niskanen Center, the libertarianish think tank whose brand of politics I’ve become increasingly enamored with.

Further left was this response from Corey Robin at Jacobin, and this Vox piece from Mike Konczal of the Roosevelt Institute, both of which are also good perspectives.

Finally, on the more academic side is this excellent bibliographic review of neoliberalism.

In general, it’s hard to find defenders of neoliberalism these days (though there is this reddit community). Most of the enthusiasm in the Democratic Party is further on the left, and again the Republicans are becoming a party that rejects many of the basic principles of the (classical) liberal consensus. Neoliberalism is (fairly or not) associated with the entrenched political class and associated policies that led to the Great Recession.

While I can’t say exactly where I stand in all of this as yet, I can say that I am concerned with the possibility that both parties end up rejecting liberalism (again, classically; the American political use of liberal and conservative is often not helpful). Even if neoliberalism, however properly understood, has problems, it shouldn’t follow that the broader ideas of liberalism are rejected as well.

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Immigration and Integration in Canada

While most of the Western world has seen a backlash against immigrants (and diversity more broadly) in recent years, one country stands apart in maintaining robust national support for immigration: Canada. Yes, Canada, that mild mannered nation we Americans love to poke fun at, has somehow discovered the secret to integration that the rest of the West lacks. What’s the story?

One attempt at explanation can be found in this excellent article here (alas, I can’t remember how I came across it). I’ll run through the arguments, but first, some stage setting.

Most of us have heard the analogy of America as a ‘melting pot’ of peoples. This is supposed to conjure a vision of many diverse peoples coming together and becoming something altogether new. We’ve probably also heard that this is a bad analogy, at least for the short term, because it implies a cultural homogeneity that simply isn’t the case. Something like a salad bowl or a mosaic is more accurate analogy, because immigrants retain many aspects of their prior identity for at least a few generations, but we’re all in the same ‘bowl’. The question is, how mixed are the ingredients? If all the tomatoes and cucumbers are clustered at the bottom of the bowl, that’s not much of a salad.

In the US we do a far better job of integrating our immigrants than, say, France, where immigrants remain cloistered in ethnic enclaves for generations and have poor labor market integration; a contributing factor, no doubt, to the recent spate of terror attacks. Still, the election of Trump partly on a campaign of demonizing immigrants, and the increasing number of Republicans with hardline positions on immigration suggests a growing problem.

Canada, by comparison, manages to bring in a greater fraction of its population from across the world with no political backlash.  In the main, the author argues that “what Canada has been very successful at doing is integrating immigrants into the basic institutional structure of society”, without requiring them to integrate culturally as well. What does this mean?

In Western society, we generally can separate out the rules of governance from cultural norms. The process of filing a tax return or registering a vehicle is neutral with respect to culture (unless you happen to be a sovereign citizen). This is part of our liberal political tradition (not to be confused with the current American meaning of liberal), where the ideal government respects the beliefs and practices of the individual. In a theocratic society, compliance with the law is synonymous with adherence to religious law.  

Despite this ideal, it’s quite difficult to achieve in practice. Even our laws against violence and killing have cultural bias; in a number of countries, honor killings and such are culturally and legally acceptable. Obeying our laws around violence is potentially an instance of requiring cultural assimilation while integrating into our institutional structure (though thankfully in this instance, probably very minor). To take France as an example again, they have laws prohibiting face coverings or headscarves in public spaces, which means that Muslims are required to assimilate culturally to integrate institutionally. (For an exploration of what a truly neutral liberal society might look like, check out this SlateStarCodex post).

Canada’s comparative success lies in designing their institutions such that they are minimally obligatory towards cultural assimilation. The example given in the article is that of Canada altering the Mounty uniform so as to allow Sikhs to wear turbans. It’s a small thing, but as such Sikhs who wish to serve are allowed to maintain an important aspect of their cultural identity while also contributing to the larger nation.

Now that being said, there are some other factors that contribute to Canadian success; after all, I don’t think the United States places an especially heavy institutional burden towards cultural assimilation either. One striking difference is that Canada has basically no illegal immigration. To an extent, this is beyond their control; Canada lacks a long border with a considerably poorer nation, as we do here. But what is under their control is the policy of favoring permanent migration over temporary work visas; in the United States much illegal immigration is actually instances of overstaying visas, and not illegal border crossings. When people feel that the new people around them ‘deserve’ to be there, there’s more buy in than if there is a widespread sense that the immigration process is uncontrolled.

Another factor is that Canada deliberately selects its immigrants to be as diverse as possible, which means there is no single large minority group as in most other Western countries. If you’re at the wedding of a family member, you’ll probably spend most of your time talking to your own folks rather than seeking out the other family. But at the wedding of your spouse’s friend, with no in group fallback, you’ll be forced to engage with the wide variety of guests (or, if you’re like me, nobody at all…maybe not the best example but you get the idea).  A large concentrated minority group makes an ‘us vs. them’ mentality easy to come by.

And most interesting to me is the idea that Canada has institutionalized protection of the majority culture clear from the start, which stems from the Quebec situation. The argument goes like this: French Canadians are a minority nationally, but the majority in Quebec. Large scale immigration would dilute the power of French Canadians even within Quebec if most immigrants chose to integrate with the Anglophone majority.

“Because of this, the only way that it has been possible to have something resembling a national immigration policy has been to offer a set of very explicit protections for Quebec, and in particular, for the French language. These same protections, however, have been extended to the English majority as well. So, for instance, Canada is far more explicit with immigrants about the importance of language-learning than many other countries are, in part because we have an ‘official languages’ policy that sets out very clearly the privileged status of English and French.”

The result of this is that there needn’t be any anxiety about immigrants ‘taking over’, since the English language is protected. I think this is a really powerful insight. Language and culture have a powerful connection; being surrounded by people who look different but speak your language is considerably less threatening than the alternative.

So we can see how the United States fares comparatively on these counts. We have a large chunk of the immigrant population that’s ethnically homogeneous, often perceived as coming here without restraint, and who are linguistically apart from the rest of America. The rhetoric of fear coming from many anti-immigrant activists is directed towards Latin American peoples; you just know that people complaining about immigration don’t mean Slovenians. Problems around Mexican immigration end up clouding the broader issue of immigration for many Americans.

It’s possible that what we are going through right now in terms of immigrant backlash is the national version of what happened in California in the 90s (and with the Irish and Italians and Germans in the 19th century); if so, this sentiment will pass with time. Still, if we want to prevent such pain the in future, there are steps we should take.

One is to increase the perception of border control. The reality is right now illegal border crossings from Mexico are at historic lows, but many people are still stuck in 2000 (and the majority of those border crossings are actually people fleeing violence in Central America). I really don’t know the best way to do this; Trump’s wall is functionally a giant waste of money, but if it sets people at ease, maybe it’s worth it.

Most immigration to the US is centered around family reunification, which means that the immigrant populations already here tend to grow in size. We have a diversity visa (DV) program, which aims to bring in underrepresented countries, but the program is tiny in comparison to family reunification immigration. We could expand the size of the DV program considerably as to add more balance to our immigration mix.

And finally, we should consider making English an official language. As it stands, there is no official federal language, though obviously English is the working language. For some reason, proposals to codify English’s status are often viewed as anti-immigrant by the left. To me it just seems obvious that people should have some working knowledge of English; it’s a small price to pay. I’m staunchly pro-immigration, but having worked several years in retail in an urban area, it’s just annoying to have people you are simply unable to communicate with. (If you can’t communicate at a cash register, the most basic of social interactions, what are your chances of integration into society?) For those already disposed to be skeptical of immigration, the sensation that English is threatened is certainly not going to help any. I’m not saying English should be the only language, but we need something more than living in the same territory to bind us together.  

Behavioral Bounds, Society, and the Economy

I’m currently reading The Great Upheaval, a history of the last decade of the 19th century in America, France, and Russia. The author, Jay Winik, has a writing style that does a really good job of conveying the the way events at the time must have felt to the participants. I’m generally skeptical of histories that focus too much on individuals at the expense of the wider social and economic context in explaining historical events, but I think there is real value in getting an emotional understanding of the past as long as it’s tempered with that big picture understanding.

[For example, the history of American conservatism series written by Rick Perlstein does a similarly excellent job of taking us inside the minds of of historical actors like Barry Goldwater and Richard Nixon, making the history more intelligible, but also risks leaving the reader with the impression that history is primarily driven by the psychology of individuals rather than broader forces.]

Now, one thing you notice when you read these personality based histories is that there are a lot of important people that we today would consider mentally ill in some way.

Take Grigory Potemkin, consort of Catherine the Great:

He cared little for social decorum: Famed throughout Europe for his palaces, his jewels, his parties, and his women, he wandered around the empress’s apartments naked under an open bareskin dressing gown, baring his hairy chest and munching on apples and raw vegetables, usually turnips or radishes, or obsessively chewing his nails…More often than not, he might look as though he had just woken up, or had been sleeping off a hangover, only suddenly then to burst into fits of manic activity…

From the moment he awoke, his every day was unpredictable. While still in bed, he received visitors in his dressing gown, then roused himself for a cool bath and a short morning prayer. But after that, his moods swung from unrestrained highs…to crippling lows… When he was depressed, he retreated into a near paralytic silence. He refused to sign papers, machinations of the state would grind to a halt, and a significant part of the Russian government would simply stop. Sometimes he sat along, like a catatonic Gulliver, soothing himself with music and pouring emeralds and rubies from hand to hand.

Such behavior would seem to be today called bipolar, yet Potemkin was one of the most powerful people in Russia at the time. Could we imagine such an individual in the same position today? I think not; if nothing else, the continuous scrutiny public figures face these days means he wouldn’t last long (although Donald Trump may be a strong counter example).

The particular example here isn’t so important though; what I want to explore is the proposition that the increased formalization of the economy leaves behind many people who are wired a little bit differently.

Continue reading “Behavioral Bounds, Society, and the Economy”

Federalism and Redistribution

Somewhat in honor of our national holiday (though perhaps more appropriate for Constitution Day), a recent article about federalism in National Affairs struck my interest.

I’ve been reading about federalism a fair amount lately, mostly from a political theory perspective. In my less thoughtful youth, I tended to disparage federalism as an outdated idea, a mere compromise for the times, and an obstacle to My Preferred Policy Program. But recently, mostly through the writings of political theorist Jacob T. Levy, I’ve come to a new appreciation for federalism as an impediment to centralized state power and a source of cross-cutting ‘tribal’ identity.

On the more grounded side, this article, ‘Federalism in Red and Blue’, also makes some points I hadn’t considered before. One fact often touted by the American left is that Blue states pay more into the federal system than they get back in benefits, and Red states pay less. In essence, Blue states subsidize many functions of Red states. Usually this fact is deployed as an example of the hypocrisy of the right, or in some way to make the reader feel that it’s unfair for Californians to be paying the way of Mississippians. That fact is never deployed to make one consider that there should be *more* transfers of wealth from rich states to poor states; yet, that’s exactly what this article does.

The argument here rests on fixed costs. Basic state services, like education, policing, and welfare, have some fixed costs regardless of the size of the state. Additionally, states all have different ‘fiscal capacities’, i.e. differing abilities to raise revenues. The example in the article is a comparison of Kansas and Massachusetts, both of which recently embarked on sizable shifts of their tax burden from income taxes to sales taxes. Kansas has been in the news for the disastrous impact of said restructuring, whereas Massachusetts has attracted no attention. Why? Well, Massachusetts has per capita income about 30% higher than in Kansas and over twice the population, plus is surrounded by similarly populous states; the state can raise revenue far easier than can Kansas.

So if states’ fiscal capacities have direct effects on their ability to provide basic services, the result is that poor states face the choice of implementing higher relative taxes or reducing services. Given the haphazard boundaries of states, this seems profoundly unfair.

For example, my home state of South Dakota has some of the lowest paid teachers in the entire country. It’s neighbor to the west, Wyoming, has considerably higher paid teachers; it was common for teachers in my corner to the state to decamp to Wyoming after a few years experience. Neither state has an income tax. What accounts for the difference? Wyoming has the good luck of possessing fossil fuel reserves that bring in considerable revenue. In fact, there is a crescent of oil, coal, and natural gas deposits in the American West that passes through North Dakota, Montana, and Wyoming, but almost entirely bypasses the Mount Rushmore state.

Given this fact, the author argues that states with lesser fiscal capacities should receive equalilzation grants from the federal government to even things out. You might think this would be madness, to simply hand states buckets of cash without any strings attached, but other federalist countries, like Canada and Australia, have implemented such programs without any ensuing shenanigans. Furthermore, such grants would actually allow the experimentation that is aspired to in the conception of states as ‘laboratories of democracy’. As it currently is, most federal money to states comes with so many strings attached that the state is basically a delegated administrator for federal spending.

Maybe the big irony here is that when it comes to states, the left and right have reversed views of redistribution. I can see why this is the case, and is related to the tension between the rationalist and pluralist strands of liberalism as proposed by Mr. Levy.

The piece did a good job of making me reconsider my implicit ‘Blue State’ view of federalism. Still, my pie in the sky dream would be a total overhaul of our state structure; I think too many states are too small to have good governance, rural bias in the Congress and Electoral College is becoming a major issue, and we’d all be better off with fewer, larger states that actually corresponded to economic and cultural divisions.

Tourist Economics

I recently spent the weekend in a classic mid-Atlantic beach town, Ocean City, Maryland. While there, I couldn’t help but put on my economist hat, as there were some things about the town that stood out to me.

First of all, the geography of the area means the town is set up like the classical economic thought experiment of a linear market: there’s basically one long road with all the businesses, and water just a couple blocks away on either side. The entire stretch is a mix of hotels & condos, restaurants, beach accessory stores, and grocery/liquor stores, with the occasional pharmacy. There was very little geographic differentiation, i.e. restaurants weren’t mostly clustered in one area.

What was striking to me was the near total absence of popular chain restaurants. In the city itself, I didn’t see any Starbucks, Chipotle, McDonalds, Panera, etc., which seemed very strange. In any other similarly populated area you’d find quite a few; and indeed, just outside the city there were several such establishments in outlet malls. So what could explain this? I have some potential explanations:

  • Consumer preference: Tourists prefer different types of restaurants when they are on vacation; they’d rather not go to the same places they go at home. Usually, the appeal of chain restaurants is that they are the same wherever you go, so you know what to expect. Being on vacation may flip that preference sufficiently that there isn’t enough demand for many such establishments.

 

  • Regulation: The local government has provisions that make it difficult for large chains to get established. You see this often enough in municipalities. Several years ago, when Wal Mart was first looking to expand into DC, the city council tried to pass a law that, while not naming Wal Mart, was obviously targeted at them. The already established players in the town have a strong incentive to prevent new competition, and it’s pretty easy to get this kind of stuff passed in small towns. The fact that just outside of the city limits you find plenty of Paneras and Dunkin Donuts, etc., suggests this might be a big factor, though it could be there’s more stable demand further inland.

 

  • Seasonal Demand: According to Wikipedia the actual residential population of Ocean City is around 7,000 people, but during the summer months the number of people swells to the hundreds of thousands. As such, the vast majority of businesses are probably shuttered during the off season. It could be that large chains just don’t do seasonal hiring very well; often hiring in such companies is an arduous process. I know from experience with a large retail chain that it often takes weeks to onboard just a cashier. I noticed that at most restaurants the staff working were from Russia/Eastern Europe, which reminded me that I often saw that at the tourist attractions in my home state of South Dakota. So in addition to short time hiring, the fact that most labor has to be imported from abroad through visas to meet demand might be a step too far for most large chains. Another related explanation could be that large chains don’t break even unless they’re open longer than seasonally. But if anything, I’d think the opposite would be true, since smaller businesses don’t have the economies of scale to reduce costs.

 

  • Search Costs: Search costs are relatively high when your hotel is across the street from the primary attraction, The Beach. There’s a high opportunity cost of time; every second you’re out looking for food is a second that you’re not on the sand. This would explain why there’s a pretty even mix of types of establishments all along the main corridor. Yeah, you could go searching for the best burrito place in town, but the pizza+burger place next to the hotel is probably good enough. This could lead to a situation where already established, mediocre independent restaurants are able to survive and hold onto their turf, but doesn’t explain why a Chipotle or whoever couldn’t eventually get in on the action as well.

 

Any explanation has to account for the fact that there are some chain restaurants present, but they’re mostly smaller regional chains, like Ledo Pizza or Grotto Pizza. I probably lean towards the regulation and seasonal demand explanations, but would love to know if there’s a literature on this.

The Efficient Market Hypothesis and Philosophy

Looking through my old saved articles I rediscovered some saved posts from Sweet Talk Conversation, and I thought this particular one was quite clever and deserved a mention.

The author asks the question, can we apply something like the Efficient Market Hypothesis to other fields, like philosophy? Recall that in economics, the EMH has strong and weak forms, and his still hotly debated over which (if any) interpretation is correct. In the strong form, the market price of a good (typically a stock) reflects all possible information, whereas in the weak form temporary distortions are possible due to frictions.

By extension, if this concept is applied to the history of thought, you might come up with something like, for any good argument you hear, someone has already developed a good counterargument. In a strong form longstanding philosophical questions still being debated today are genuine stalemates. History has eliminated the bad responses to questions of free will, the nature of the mind and matter, the existence of God, etc., and the arguments that remain are the ‘good’ ones. The weak version might be some variation of ‘there’s a literature on everything.’

It’s a fun little read and something to think about, especially as I’m reading a couple of pieces right now on the history of ideas and whether they affect history.

 

 

The End of Reason?

To start, this week’s episode of the Weeds highlights new research on the link between lead and crime. One of the great sociological mysteries in the United States has been the crime wave that began in the 60s and lasted until the 90s, when violent crime levels collapsed. The most tantalizing theory revolved around the use lead additives in gasoline; when accounting for the time lag in human development, the use and subsequent banning of such additives suspiciously matched crime levels. There’s a more complete summary at Brookings.

While that is fascinating in its own right, I’m using it as a jumping off point to what I really want to talk about, which is the end of reason (?). It’s been rolling around in my head for awhile that most of our (Western) social and political theory has its basis in the Enlightenment, which had several phases and branches, but were all linked by a focus on the primacy of reason. The ideas of science, progress, liberty, all were developed during the Enlightenment. Our modern world is founded on the glorification of the rational individual: it is the basis for democracy, human rights, the market economy, and scientific progress. The world is a better place because of it. But sometimes I wonder if we’ve wrung all the gains possible out of the assumptions around the rational individual. Has the Enlightenment run its course?

Here’s an analogy. Suppose you are trying to propel an airplane as fast as possible. To a first approximation, you can just use Newton’s law F=ma to figure out how big an engine you’ll need. You’ll get a lot of gains out of just that. But eventually, to make incremental gains in speed, you’ll have to start accounting for a lot of complicated things, like aerodynamics. You’ll have to redesign your airplane or risk having it be torn apart by the very air in which it moves.

Our political institutions were developed by Enlightenment thinkers; our Constitution was designed by them. Ideas about rights, responsibilities, and self-determination all come from the Enlightenment. And so the assumption of reason pervades them.

But we’ve increasingly learned all the ways in which the human mind is unreasonable. Shaped by evolution, our brain has many limitations that are becoming more and more apparent. The working assumption of rational individuals has worked pretty well for the last few hundred years, but as we are propelled ever faster by technological progress, I worry that we are reaching a point where our societal airplane needs to be redesigned before it undergoes catastrophic structural failure.

Some examples of what I’m getting at:

Advertising and Media

The whole point of advertising, and the media industry in general,  is to manipulate us into paying attention to and having positive emotional responses to products. It’s obviously not an exact science, but it’s becoming increasingly sophisticated. Tim Wu’s recent book, The Attention Merchants, is all about this. What does it mean to live in a world where individual is not in control of where her attention is focused? What if advertising becomes so good at activating our autonomous responses it’s close to 100% effective? Ideas of self-control and self-determination go out the window.

Politics

Ezra Klein recently interviewed Zephyr Teachout for his podcast, and during a discussion of corruption in politics she makes the point that our legal definition of corruption is very narrow, to the point of being almost useless. Money in politics doesn’t have to be an explicit quid pro quo to have an influence. Campaign contributions from particular interest need not consciously change a politician’s mind to have an effect; they can work through deeper, more emotional connections that favorably skew the politician’s views towards the donor.

Or in politics more broadly, the sheer bandwidth of information available and the fast pace of political life makes both voters and politicians worse off, on net. As with advertising, political campaigning continues to hone in on ways to activate our more base impulses without our being aware. Robert Colvile writes in his book The Great Acceleration, “In a flashy, charismatic age, we vote for politicians who promise freshness and novelty, who run against business as usual and the shabby compromises of power. The problem is that once these politicians get into power, they prove unable to meet those promises… Our disillusionment is all the more severe for having had our hopes raised in the first place – meaning that we will be less inclined to trust any politicians at all.” Lather, rinse, repeat.

The tribal pressures described in Democracy for Realists look only to get worse in the near future, as political actors continue to up the rhetorical ante to activate identities and mobilize support. Now to be sure, elections in the past have had worse rhetoric; just look at the election of 1800. But today we are constantly awash in this kind of information.

Society

Consider the idea of implicit bias, where our brains have uncontrollable biases towards and against different groups of people. If true to a great enough magnitude, how would we deal with favoritism/discrimination? You can’t make biological responses illegal.

And to bring the discussion back to lead poisoning, our criminal justice system is based on an idea of personal accountability. As a response to the crime wave of the latter 20th century, America embarked on a program of mass incarceration. But if crime was occurring largely because of malformed brains from environmental poisoning, can we justify such a system? Indeed, if most crimes are a result of either mental illness, underdeveloped brains, or crimes of passion, does a system of incarceration even make sense? I recently read an argument, from an economic perspective, that we should just get rid of prison entirely; the net benefit to society is negative.

In sum, I’m worried that our political and societal institutions don’t have the intellectual foundation to deal with the fact that we are creatures of biology, and are often not in conscious control of our actions. The assumption that we are creatures of reason with free will has built a fantastic world, but it may be past time to pour some new foundations.