it has become harder for insiders to capture the gains from building more, opening up or liberalizing systems. And so they are closing off opportunities and limiting potential gains for everyone.
I have just started reading The Innovation Illusion, by Frederik Erixon and Bjorn Weigel. They take the view that capitalism’s main strength is its ability to adopt new and better methods while discarding what is inefficient. They also take the view that this strength has diminished in recent decades. If you read Tyler’s entire essay, you will see that his point is that the benefits from capitalism are tending to go toward people with less political power and the displacement from capitalism is tending to affect people with more political power.
I live in Dallas, and so it is interesting to compare the analysis to what is happening in Dallas and the view of the residents here. Dallas is clearly more open. We build roads, have booming growth yet very cheap cost of living because of few barriers (to building more housing units or opening or running businesses). Far less of a NIMBY than on the coasts. People are, I think, pretty happy with Dallas and the results of growth.
I think Tyler starts with a basic preconception, the passage of Brexit and Trump’s election were dumb moves by voters, and he is searching for the reason the British and American voters did such dumb things.
Maybe instead he should think a bit more about whether they were dumb things? The stock market clearly does not think Trump’s election was dumb. Maybe he should write his next article on why the market is wrong?
The stock market is a poor proxy for the economy as it is comprised of currently existing companies. Policy that prevented new companies from competing, or overseas companies from trading in the US could conceivably boost the market while harming the economy.
They also take the view that this strength has diminished in recent decades.
Maybe the effects of trade are diminishing because there has been open trade in the developed world since the ending of WW2 or JFK. That is a long time and there is diminishing returns to any economic policy. Also, the average person in developed does not feel these benefits because the majority of them have changed the fortunes of people in China and India which together is about 28% of the world’s population. (Bonus points that the average person may not think about the benefits of trade…Like a 10% tariff would mean gas prices go up 9% the next day…And they don’t think about that.) And finally, I wish all economic political writers would not assume the 1950 – 1974 economy was historically a great economy. The enforced labor discrimination of markets limited efficiency in a lot ways.
And finally, I still say economist really underestimate how economic creative destruction creates social-political creative destruction. So libertarian economist endlessly whine the culture (and family) is breaking up. (My take the 1970s had a lot of creative destruction than we give it credit for.)
How much of the ‘slowdown’ of economic growth is simply a function of the main input to economic growth, population size, is stagnating? Literally Japan in 2016 can not grow the economy too fast as there simply not enough people to grow the total.
Increasing density inherently increases the complexity of social arrangements and forces more and more compromise among the stakeholders. Arguing that increasing density is smart public policy except for the pesky fact that existing stakeholders mostly lose is pretty lame. Have we really run out of win-win solutions to be explored?
Could you liberalize access to private property or private wealth or the nuclear family? Those ideas are obviously crazy but they illustrate that liberalization is not necessarily a good thing.
Liberalizing building restrictions and liberalizing access to the benefits of Yale seem like great safe ideas. And those can proceed in highly win-win fashions without major policy change: If San Francisco really doesn’t want to loosen building restrictions, other cities can compete. If Yale doesn’t want to liberalize their system, other systems will compete.
Liberalizing an end to most forms of copyright is another strong case. Why don’t we allow any company to create Disney characters, etc?
Immigration is the big one that warrants skepticism. Immigration is also widely opposed even among top libertarians. Especially in the current US/European model it really is forced assimilation on both migrant and host. Looking at the transformation of France doesn’t seem like a happy win win at all.
Singapore is cited as a mass immigration success story and it absolutely is. But it’s mostly intra-ethnic migration of the dominant ethnic group that is permanently in power. Israel is a similar mass immigration success story of intra-ethnic immigration. In some ways the success of Singapore and Israel are both models of successful mass immigration and ethnic segregation which is arguably illiberalization.
Even the mass migration proponents admit that mass migration is not compatible with current ideas such as universal suffrage, mostly equal access to education, and non-discrimination of employment.
Sorry, one more post from me:
In some scenarios, political incumbents will vote, protest, and fight political liberalization. But in hindsight the losses incurred by incumbents is small, petty, or even a net positive, and the gains by former outsiders are large. Consider building new condos: the political incumbent residents often oppose, but the new condos attract new local amenities like restaurants and gyms and such, and often in hindsight the change is so great, even the previous incumbents experienced net positive change. This is the scenario that motivates Tyler Cowen op-ed and it’s the same scenario that inspires Bryan Caplan’s Open Border ideology. Caplan takes this farther that the net benefit to previous outsiders is so large and the political opposition so strong that he endorses undermining law and existing political process and engaging in various subterfuges to force changes past political resistance.
In other scenarios, liberalization causes a more serious loss to the political incumbents. Consider neighborhood K-12 schools. Often higher level of government will pressure good schools in good neighborhoods to “liberalize” and accept students from problem neighborhoods. This absolutely benefits the transfer students but can cause real genuine harm to the receiving schools and the students who attend. In many scenarios, the losses can be pronounced and dramatic. Great schools can be quickly turned into terrible schools. A similar scenario is where there is political pressure for nice neighborhoods to “liberalize” and offer increased access to people using government subsidized housing programs. This absolutely benefits the new residents but often causes clear harm to incumbent residents. Often residents relying on government housing programs have various forms of social dysfunction which can hurt the neighborhood that they live in.
I would argue in the win-win type scenarios or the mild lose-win scenarios, you can be honest, explain the situation to the politically incumbent residents, and persuade them. The benefits of city growth aren’t that complicated to explain and those goals can be achieved through normal political process and discussion. You won’t win 100% of the time and that is ok. San Francisco notoriously limits higher density building, but many residents are aware of the problem that causes, and convincing more people is a quite reasonable strategy.
With immigration, there is often serious loss to the incumbent population. Race and multi-racial societies are outrageously controversial, even this crowd can’t discuss that subject openly. Those are strong reasons to pump the brakes, and adopt a more conservative strategy to deep irreversible changes.
I have the utmost respect and admiration for Tyler Cowen and wish I were 1/1000 as smart and knowledgeable as he. Nevertheless he does display the usual bigotries common to The Enlightened Ones of his cocoon. In this cocoon, Evil Oppressors, Trump and Trump voters, are “anti-immigrant.” Nothing could be farther from the truth. Trump has always said there should a big door in the wall. The Enlightened Ones will never depart from simple oppressor-oppressed narratives and the systems that produce and maintain them. The current immigration system brings in lots of poor people who are unlikely to assimilate and highly likely to maintain the grievance culture in which The Enlightened Ones are so invested. The idea of a Canadian-style immigration system, ie., one that makes sense, promotes social stability, is transparent and competently administered, in other words the direct opposite of the US system, is beyond their comprehension. If one wants to understand Trump’s likely approach to immigration, forget Tyler and read Frank Buckley (yes, promoting him yet again, I am the worst fanboy): http://www.thetimesherald.com/story/opinion/columnists/2016/12/29/missing-best-immigrants/95954682/ Unfortunately, gratuitously sneering at Trump is much too satisfying for The Enlightened Ones and all any commonsense proposal to fix the US’s broken immigration system will be knee-jerk opposition.