Author Archives: Arnold Kling

The conservative revolutionary and the archaic progressive

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I annotate a podcast with Peter Thiel and Eric Weinstein. Here is the original podcast (3 hours).

An excerpt from my annotation:

Weinstein says that if you walk into a room and subtract all of the screens, you will think that you are still in the 1970s. That is an indication of lack of progress.

I am inclined to push back. The first car I bought, in 1975, was a Ford Pinto. The quality of cars has gone up a lot since then. The food in my house is much better and much easier to prepare than the food in 1970. Outside my house, food choices at restaurants are dramatically better than they were in 1970. The ability to obtain goods made elsewhere, particularly overseas, has gotten much better. The ability to travel overseas has gotten much better, and once you get there it is much easier to pay for stuff, to find lodging, and so on.

Overall, I note that Thiel comes across as a conservative with the temperament of a revolutionary. Weinstein comes across as a progressive who holds onto some values that now seem archaic.

Race and immigration

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Commenters bring these topics up a lot. They also show up occasionally in excerpts that I quote. I want to put my own positions out there, for the record.

On race, my position is that we should treat people as individuals. One hundred years ago, Progressives were racist, even eugenicist. In the 1950s and 196s, Progressives were closer to my current position. Now they are against treating people as individuals. They think that they are fighting racism, but in my view they are perpetuating it (and perpetrating it).

I believe that as a society we are approximately treating people as individuals. So when outcomes as tallied by race or sex are disparate, I do not automatically assume racism or sexism is the cause. On the contrary, I assume otherwise.

On college admissions, as you know, my position is that they should be done by lottery. The determination of whether the student is capable of handling the courses should be made after admission, not before.

On immigration, my position is that we should have a more open front door and a less open back door. There should be fewer hurdles to impede legal immigration. The Center for American Progress is actually close to my position.

Build a generous and well-functioning legal immigration system that can be responsive to the nation’s changing needs. This would include realistic and independent evidence-based avenues for immigration that allow families to stay together and businesses to get the workers they need, while enhancing all workers’ rights to fair and increasing wages, safe working conditions, and the opportunity to thrive together. The rules of such a system would be designed to recognize the fact that the only way to have an immigration system that works is to more closely align supply and demand, rather than force the system to adhere to artificial caps, untethered from reality and revisited only once in a generation at best. Importantly, if immigration were successfully channeled through a functioning regulatory system, enforcement resources could instead be dedicated to preventing individuals from entering the country outside of that system and to appropriate enforcement actions necessary to maintain the integrity of that system and U.S. borders, which remain central to the very notion of national sovereignty.

I disagree with the idea of trying to figure out which people to allow to immigrate. Instead, I would prefer to use a price system.
Charge the would-be immigrant a fee, say $10,000, to obtain the right to get on the path toward citizenship. Of course, if these immigrants are immediately eligible for government benefits, such as Medicaid and food stamps, then the fee should be higher.

If employers or relatives or bleeding-hearts are motivated to bring in particular individuals, then those sponsors can pony up the money. Note that the bleeding-heart funds could handle the asylum cases.

To close the back door, we would need to reduce the potential rewards from illegal immigration, increase the penalties for it, and increase the probability of getting caught and incurring the penalties. What I would say to bleeding hearts is that if you don’t like to see would-be immigrants suffer because of such policies, you can put up the money to enable them to immigrate legally.

Joshua Mitchell on identity politics

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He writes,

The second notion of identity is not so much a specification of kind as it is a specification of a relationship, and indeed a morally freighted relationship of a particular sort. Understood this way, identity is a concept with discernible religious overtones; it refers to an unpayable debt one kind owes another as a result of an unforgiveable [sic] wrong. It describes a relationship of transgressor and victim.

Later, writing about justice and mercy, he writes that the left

fixes exclusively on mercy–hence the impossibly expensive Green New Deal, the demand that there be free health insurance, or free college tuition, or socialism. . .[The] call for free stuff is the dreamy consequence of confusing supplements and substitutes, which will produce a political nightmare if implemented. There is no free stuff. There is only the mercy of the gift, which elicits thankfulness, or the distorted effort to eliminate the world of payment altogether, which prouces a soul that demands everything.

I would word this section differently. Instead of talking about justice vs. mercy, I would talk about earning vs. entitlement. It appears to me that young people on the left find the concept of earning to be somewhat foreign. Entitlement makes more intuitive sense to them. How much of this is Home Appiens, who takes YouTube and Facebook for granted, without having to earn them? If we are entitled to Google Maps, why aren’t we entitled to health care?

Read Mitchell’s entire piece. In my view, it has not without flaws. But some of his points are apt and very well made.

Whether you call it identity politics, multiculturalism, or the hard left, I think that its preeminence on college campuses exceeds its overall hold on intellectual life. Read Robby Soave’s book, or check out the Intellectual Dark Web on YouTube, or read Quillette, or read National Affairs. There are plenty of well-credentialed people who are not buying what the professors are selling. This is in addition to the not-so-well-credentialed people who may be even wiser still.

Tabarrok and the Baumol effect, reconsidered

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A bunch of folks got together at Cato for lunch to gang up on Alex Tabarrok. Recall that he and Eric Helland want to claim that the high prices of health care and education are almost entirely due to the Baumol Effect.

I offered as an alternative hypothesis that much of the higher prices can be accounted for by the government subsidizing demand and restricting supply. Here are some notes, based on the discussion.

1. Health care spending has been rising at the same rate in most developed countries. Can government policy be the cause everywhere? On the other hand, in most developed countries the proportion of health care spending paid for out of pocket is low, to perhaps there really are not such significant differences in policy across countries.

2. Veterinary care prices have been rising even faster than human health care prices. Yet there are no government subsidies for pet care.

3. Incomes for other high-skill professions, such as accountants and lawyers, also have risen sharply. Point (3) sounds like it could support the Baumol-effect story, but on closer examination it is more problematic.

4. A pure Baumol Effect would raise wages in every occupation where productivity growth is slow, including for barbers and waiters. That has not taken place.

5. It is difficult to account for the vast difference in pay between adjunct professors and tenured professors. At one point, I asked “Are adjuncts idiots?” That is, are their skill levels so dramatically lower than those of tenured professors?

6. Another question to ask is, “Are college administrators idiots?” In theory, it would seem that you could create a university with all courses only taught by adjuncts and offer a low-cost degree. That this does not happen shows how difficult it is to compete in higher education.

Overall, I still suspect that the story of “It’s all a Baumol effect” is an intellectual swindle. It is tautologically true that in a two-good world, if the relative price of good X falls, then the relative price of good Y goes up. But it is not necessarily the case that the price of good Y has to rise relative to *the* wage rate. In fact, the opposite seems more likely. But the actual ata seem to show that prices in health care and education have gone up faster than wages. I have a hard time coming up with a two-good, homogeneous-worker general equilibrium model that can exhibit that behavior.

In fact, when it comes to talking about wages, Tabarrok pulls a switch and starts talking about the wages of high-skilled workers, so we are no longer talking about “the” wage rate. Instead, we are talking about a skill premium. So Tabarrok has already added an epicycle, as it were, to the Baumol Effect story. That is, he has grafted on a skill premium.

I can more easily fit the data to a story that includes a skill premium as well as a Baumol effect. But then one can argue that this skill premium depends in part on regulations that protect credentialed workers. It is amplified by demand subsidies for education and health care, which put government in the role of enhancing the skill premium.

How I practice what I do

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Tyler Cowen writes,

a number of you asked me what form my practice takes.

What is it that I do, that I am practicing for? I think of my goal as writing essays and books that will stand the test of time. For example, when I wrote Crisis of Abundance, I thought it likely that its analysis of the challenges with U.S. health care policy would still be valid a decade later. It has now been more than a decade, and the book still holds up. With regard to Tyler’s points:

1. I don’t write every day. I try to take one day off a week from the computer. I approach my electronic devices with a fair amount of paranoia–they are out to distract me. Long walks or bike rides take me out of the world of the devices and allow me to think. But otherwise, I do write every day. My blog posts serve one of two purposes. First is note-taking. When I am trying to remember an idea somebody promulgated, I often can find it by searching back through my blog posts. Second is putting out trial balloons for ideas.

2. I don’t think I write so much about views that are diametrically opposed to mine. But I do write about pieces with which I quibble.

3. I also do serious reading very day.

4. I think about the answers that I gave to questions I was not expecting, whether the answers were good or bad. But I don’t have so many speaking opportunities.

5. Other than thinking about firms as cultures, I don’t think I’ve tried as much cultural code-cracking as Tyler.

6. I don’t listen to complex music, but maybe Israeli dancing serves a similar purpose. Each year, the repertoire gets larger and more complicated, so it may also forestall mental laziness.

7. Relative to Tyler, I have fewer in-person intellectual discussions. But I find comments on my blog posts helpful, particularly for my trial balloons. I can tell when something has been widely misinterpreted and needs better articulation or should be discarded.

8. Asking “what did I learn today?” seems like an interesting habit to try to follow.

9. Relative to Tyler, I have fewer intellectual friends. I count that as a weakness, but I don’t do anything about it.

10. I also avoid television, drugs, and alcohol.

11. The closest thing I have to “conversations with Tyler” is my monthly column for Liberty Fund, which is almost always a book review.

12. I used to teach, but only high school students.

I will add the following:

13. I schedule my blog posts in advance. You can gauge that by noting the date on Tyler’s post. My goal is to avoid reacting immediately to anything. This keeps me out of a lot ephemeral outrage events.

14. I don’t read Twitter. I count on Tyler to link to anything really interesting on Twitter. And even when he does recommend tweets, I rarely find them worth blogging about.

15. When I have a talk to give, I take many long walks and practice the talk as I walk. Boiling an entire book down to a 10-20 minute talk is a useful exercise.

Contra Will Wilkinson

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A commenter writes,

Measured on an individual level, Republican voters contribute more to GDP than Democratic voters. The paradox where Republican voters are higher income than Democrats but Republican areas tend to be poorer has been analyzed extensively by people like Andrew Gelman and discussed extensively over many years in the media. Hard to believe Wilkinson is unfamiliar with this. Essentially affluent voters in poorer regions vote Republican so overwhelmingly resulting in a Republican majority despite the poorer voters voting Democrat.

Conversely, it may be the case that the voters who solidify the Democrats’ hold in urban areas may are not necessarily the folks generating the GDP there.

The comment then goes on to question the attribution of Trump’s support to racial animus. I know that there are many researchers who claim that racism forms the core of Mr. Trump’s support. I am afraid that I tend to discount their claims as long as they appear to come from someone who is clearly personally hostile to Mr. Trump. Such a claim would sound more credible to me if it were coming from an analyst who is clearly neutral or sympathetic to Mr. Trump.

Bryan Caplan on Spain

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Caplan writes,

Why is Spain so much richer now than almost any country in Spanish America? Before you answer with great confidence, ponder this: According to Angus Maddison’s data on per-capita GDP in 1950, Spain was poorer than Argentina, Chile, Mexico, Peru, Uruguay, and Venezuela, and roughly equal to Colombia, Bolivia, Costa Rica, Cuba, Ecuador, Guatemala, and Panama. This is 11 years after the end of the Spanish Civil War, and Spain of course stayed out of World War II.

Suppose that we think of Spain as always having had higher average human capital than countries in Latin America, but that many Latin American companies were more resource-rich than Spain. What we have observed is consistent with the share of world wealth accounted for by human capital going up and the share accounted for by natural resources going down.

Russ Roberts and Arthur Brooks

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You may have already listened. I do schedule these posts in advance. Brooks said,

When you treat somebody with contempt and feel like you are right, you get dopamine, too. It’s kind of amazing how ubiquitous in our learned behavior that reinforces rewards. It’s involved in–there’s a part of the brain called the nucleus accumbens that imprints habitual behavior. But, the neurotransmitter that it is occurring with is dopamine. So, for sure, when we have a habit of doing it, it gives us a little reward; the reward is reinforced neurochemically; so therefore it gets harder and harder to get out of that cycle. The thing that we need to keep in mind is that, with most things that give us a little bit of dopamine–hence a little bit of satisfaction–that the reward is very different in the short run and as it is in the long run.

The conversation is not about any particular economic or political issue. It is more “meta,” to use a fancy-sounding buzzword. Brooks claims that mutual contempt is a dangerous element in today’s partisanship.

A question that comes to mind is why this is happening now. And I am tempted to blame the technology. On Twitter, you get a lot of short-term reward for expressing contempt for the other side. Saying things that would improve relations with the other side gets you rewarded less. In fact, it gets you punished by your “base.”

An economic idea to promote housing development

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Anup Malani writes,

New residents are willing to pay significantly more for additional housing than it costs to build it. They could compensate existing property owners for the reduction in prices caused by new construction and still gain from moving to the city. Such a compromise is possible until the point at which new construction reduces the value of existing homeowners’ property by an amount greater than the value it affords new residents. Allowing incoming residents to compensate homeowners would help cities grow to their ideal size, at which the cost of adding one more resident is equal to that resident’s benefit to the city’s economy.

This sounds like a Coasian problem. Malani’s solution is to charge new residents an above-normal property tax rate and to return the proceeds to affected residents in the form of lower property taxes, while getting rid of the regulations that inhibit new development in order to protect incumbent residents. My thoughts:

1. In theory, this is sound economics. By replacing quantity rationing of new development with price rationing, you reduce deadweight loss.

2. In our area, developers are charged by the local jurisdiction for the costs they impose on infrastructure, so the basic mechanism is in place to include additional taxes. Then these taxes on developers would be passed on to the new residents.

3. In practice, it might prove difficult or impossible to eliminate the regulatory impediments to new development, so that high taxes on new residents (or on developers) would just be an additional deterrent to new construction.

4. In practice, it is likely to be very difficult to target the tax reductions to the most-affected residents. If you spread the tax reductions across many residents, each household only receives a minimal, meaningless amount. If you target only a few residents, then a lot of effort has to go into the process for determining who is most effected by the new development and how much they should receive.

Martin Gurri watch

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Matthew B. Crawford writes,

Among those ensconced in powerful institutions, the view seems to be that the breakdown of trust in establishment voices is caused by the proliferation of unauthorized voices on the internet. But the causal arrow surely goes the other way as well: our highly fragmented casting-about for alternative narratives that can make better sense of the world as we experience it is a response to the felt lack of fit between experience and what we are offered by the official organs, and a corollary lack of trust in them. For progressives to now seek to police discourse from behind an algorithm is to double down on the political epistemology that has gotten us to this point. The algorithm’s role is to preserve the appearance of liberal proceduralism, that austerely fair-minded ideal, the spirit of which is long dead.

Thanks to a reader for recommending the article. I think that Crawford’s main point is that choices made by algorithms can be difficult to legitimize. People want to know who made the decision and the reasoning behind it. Hiding behind an algorithm may seem to be a good way to avoid blame, but it is likely to exacerbate public distrust.

I know that in the world of credit decisions, where algorithms have been around for a long time, the standard when credit is denied is to list the top three reasons for denial. If Google and Facebook are going to get into the censorship business (against my recommendation), then they might want to adapt this approach. That is, whenever they do censor someone, list specific reasons, rather than some vague claim that someone “violated our terms of service.”