Category Archives: Three-Axes Model

The Three-Axis Model and Coalitions

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From a reader:

Does the three axis model help understand coalitions?…Are coalitions a kind of exchange where people accept each other’s position on the model?

My first thought is that coalitions are more likely to form on particular issues, with each group in the coalition using its preferred heuristic. This makes such coalitions fragile. For example, the biggest enthusiasts for the drug war probably were conservatives, who see drug abuse as barbaric. Progressives might side with conservatives to the extent that they views “pushers” as oppressors. However, as they grow to see imprisoned drug sellers more as oppressed than as oppressors, their support for the drug war weakens.

Does a coalition form because one group accepts another group’s model? I think this is less likely, and it is unlikely to last long. For example, perhaps immediately after 9/11, progressives accepted the civilization vs. barbarism narrative about terrorist groups. However, that has changed. Now, when a conservative uses the language of civilization vs. barbarism, he is likely to be labeled by progressives as an Islamophobe. Look at what happened to the film maker after the Benghazi incident.

I noticed that in the popular novel Kite Runner, the Taliban were portrayed as grown-up schoolyard bullies, which made it possible for progressives to process them by using the oppressed-oppressor narrative. Perhaps progressives favored the war in Afghanistan because they were persuaded to think of the Taliban as oppressors. President Bush attempted to make that case about Saddam Hussein in Iraq, but at that point progressives were not buying such a narrative. For that war, his coalition was smaller and quite fragile.

[I note in passing that Walter Russell Mead wrote last week,

Civilization is a hard won victory, and it must be constantly reclaimed in the face of barbarism.

He was talking about Mali.]

Concerning coalitions, I can imagine trying to include language in a bill that is intended to appeal to more than one dominant heuristic. For example, an immigration-reform measure could include language designed to emphasize border security and English as a national language in order to mollify conservatives that civilization is still valued.

Libertarians who try to get progressives on board with school choice are likely to emphasize it benefits for inner-city children, rather than talk up its benefits more broadly. I think that these attempts to frame issues in another group’s heuristic are more constructive than many other approaches for discussing politics. But these attempts will tend to fail nonetheless. As far as progressives are concerned, public education and teachers’ unions are automatically on the side of the oppressed, and that makes school choice a hard sell.

Ideas, Policy, Truth, and Rationalization

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From Russ Roberts.

Keynes saw economics ideas influencing policy. But maybe it is policy that influences economics. So as the world becomes more interventionist, the economists respond by finding arguments that rationalize that policy. (I am sure I’m not the first person to suggest this. Feel free to share references in the comments.)

…Obviously, this is not the whole story. Keynes was right–good ideas are powerful. Economists aren’t just affected by public opinion, they affect it in turn. But I do think our profession (like journalists) have a view of ourselves that is quite romantic–we see ourselves as truth-seekers. Well, yes, there is an element of truth-seeking in what we do. But it’s not the only factor.

I believe it helps to think in terms of two uses for reasoning. There is motivated reasoning, which is aimed at rationalizing one’s own actions and those of one’s favored group. And there is constructive reasoning, which is aimed at seeking the truth. The existence of motivated reasoning is well established in the literature on psychology and political beliefs. The existence of constructive reasoning is something that I take on faith.

It is tempting to say that I engage solely in constructive reasoning, while other people engage in motivated reasoning. Of course, the odds that this is the case are not very high.

In fact, I think that in contemporary America we are highly tribal in our political beliefs. Think of my three-axis model. If you make an argument that rationalizes the views of those who share your ideology and puts down the views of those with a different ideology, you raise your status within your tribe. If you do the opposite, you lower your status within your tribe. So once you become embedded in a tribe, your reasoning tends more and more toward motivated reasoning.

Housing and Wealth Destruction

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Thomas J. Sugrue writes,

The bursting of the real estate bubble has been a catastrophe for the broad American middle class as a whole, but it has been particularly devastating to African Americans. According to the Center for Responsible Lending in Durham, North Carolina, nearly 25 percent of African Americans who bought or refinanced their homes between 2004 and 2008 (and an equivalent share among Latinos) have already lost or will end up losing their homes—compared to 11.9 percent of white families in the same situation. This disparate impact of the housing crash has made the racial gap in wealth even more extreme. As Reid Cramer, director of the Asset Building Program at the New America Foundation, puts it, “Basically, we have gone from an average minority family owning 10 cents to the dollar compared to the average white family to now owning less than a nickel.” The median black family today holds only $4,955 in assets.

Sugrue can only process this through the oppressor-oppressed model. He blames predatory lending. If he could open his eyes a little wider, he might be able to see the role played by government housing policy. Some notes:

1. From a wealth-destruction perspective, you cannot just look at the people who lost their homes. People who stayed current on their mortgages nonetheless experienced wealth destruction.

2. Probably more borrowers were “victimized” by Freddie Mac, Fannie Mae, and FHA than by Wall Street. That is, my guess is that a majority of the homeowners whose wealth has been crushed paid for their homes with loans backed by one of those agencies.

Speaking of housing, Luigi Zingales finds some numbers regarding occupancy fraud.

In fact, the authors find that more than 6% of mortgage loans misreport the borrower’s occupancy status, while 7% do not disclose second liens.

You get a lower rate by saying you plan to live in the home, so speculators will often lie about that. One of the reasons that programs to “help owners stay in their homes” are not doing very much is that a lot of those owners never occupied the homes in the first place.

Zingales references a working paper that I cannot find. Thus, I cannot tell whether the borrowers defrauded the lenders or the lenders defrauded the investors who bought the loans. I always presume that it is the borrower instigating the fraud. However, Zingales says that the bankers should be prosecuted. He makes it sound as if the lenders would record a loan internally as backed by an investment property and report it to investors as an owner-occupied home. That would require a much more complex conspiratorial action on the part of the lender, and until I learn otherwise, I will doubt that it happened.

Mortgage Narrative vs. Reality

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Two papers from the research department at the Boston Fed.

1. Christopher L. Foote, Kristopher S. Gerardi, and Paul S. Willen write,

Borrowers
Borrowers did get adjustable-rate mortgages but the resets of those mortgages did not cause the wave of defaults that started the crisis in 2007. Indeed, to a first approximation, “exploding” mortgages played no role in the crisis at all. Arguments that deceit by investment bankers sparked the crisis are also hard to support. Compared to most investments, mortgage-backed securities were highly transparent and their issuers willingly provided a great deal of information to potential purchasers. These purchasers could and did use this information to measure the amount of risk in mortgage investments and their analysis was accurate, even ex post. Mortgage intermediaries retained lots of skin in the game. In fact, it was the losses of these intermediaries—not mortgage outsiders—that nearly brought down the financial system in late 2008. The biggest winners of the crisis, including hedge fund managers John Paulson and Michael Burry, had little or no previous experience with mortgage investments until some strikingly good bets on the future of the U.S. housing market earned them billions of dollars.

Why then did borrowers and investors make so many bad decisions? We argue that any story consistent with the 12 facts must have overly optimistic beliefs about house prices at its center.

2. Kristopher Gerardi, Lauren Lambie‐Hanson, and Paul S. Willen write,

many borrowers
languish in persistent delinquency, in which they neither cure their defaults nor lose their homes to foreclosure. In short, judicial intervention succeeds in temporarily reducing foreclosure by increasing the incidence of persistent delinquency. We show that persistently delinquent borrowers are unlikely to cure and that most eventually experience foreclosure. Over time, the foreclosure gap between judicial and power-of-sale states shrinks whereas the cure gap, or lack thereof, stays exactly the same. In other words, in the long run, a given number of defaults is expected to yield the same number of foreclosures regardless of the laws. These borrower-protection laws do not prevent foreclosure, they merely delay it.

My take on this is that attempts to prevent foreclosure merely set borrowers up to fail again. This raises the cost to lenders.

The problem with both of these papers is that they contradict the oppressed-oppressor narrative. The first paper says that borrowers and investors did not have bad mortgages foisted upon them by evil banks. Instead, everyone involved made assumptions about home prices that proved to be erroneous. The second paper says that treating delinquent borrowers as oppressed and trying to relieve the oppression with leniency is counterproductive.

The Minimum Wage and the Three Axes

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Bryan Caplan writes,

Please don’t give me any “hard heads, soft hearts” answers. Give me “soft heads, soft hearts” answers. You’re trying to persuade Oprah Winfrey

The idea is to argue against the minimum wage. In my terms, Caplan’s challenge is to make this argument to someone who views political economy along the oppressor-oppressed axis. Low-wage workers are typically seen as oppressed, their employers are seen as oppressors, and the minimum wage looks like a tool to reduce oppression.

You can say, “The low-skilled workers who are priced out of the labor market by a minimum wage are even more oppressed,” but that does not get you far. Even though eliminating the minimum wage will make some low-skilled workers better off, it seems as though you are strengthening the oppressors’ bargaining position vis-a-vis the low-skilled workers who deserve more than the minimum wage.

The libertarian’s freedom-coercion heuristic says that working at a sub-minimum wage cannot possibly be a bad thing if someone agrees to do so. For progressives, aside from the fact that this is not their preferred heuristic, the problem is that working at a sub-minimum wage is not, in Michael Munger’s terms, euvoluntary. That is, it is only voluntary because your best alternative (not working at all) is so bad.

The Greg Mankiw approach would be to argue that a minimum wage acts like a wage subsidy to low-skilled workers combined with a tax on hiring low-skilled workers. So, if you really want to help the oppressed, you should have the government give a subsidy to low-wage workers, period, with no minimum wage. The subsidy will raise wages and increase employment rather than lowering employment.

I think that even the Mankiw approach will fail among those who see corporations and business owners as the oppressors. The subsidy fails to make the statement that low wages are an act of oppression. A minimum wage law does make such a statement.

We Are Still Tribal

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Robin Hanson writes,

People quite often find it prohibitively hard to talk merely because different groups have gotten into the habit of talking differently, even though their concepts could be translated without great difficulty. And members of these groups often go out of their way to signal group loyalty by choosing to talk differently than outsiders.

He refers to what seems like a fascinating article, which is behind a paywall. If I could put this in Hansonian terms, I would say that language is not about clear communication. It is about signaling tribal identity. Often, it is important for the signals not to be easily picked up by another tribe. And, yes, of course, this applies to jargon used in various academic disciplines.

Incidentally, one of the ways I describe the three-axis model is that progressives, conservatives, and libertarians speak different languages. Each responds to disagreement by, in effect, shouting louder in a language that the other party does not understand.

UPDATE: thanks to a reader, a quote from the article

we have acquired a suite of traits that help our own particular group to outcompete the others. Two traits that stand out are “groupishness” — affiliating with people with whom you share a distinct identity — and xenophobia, demonising those outside your group and holding parochial views towards them. In this context, languages act as powerful social anchors of our tribal identity.How we speak is a continual auditory reminder of who we are and, equally as important, who we are not. Anyone who can speak your particular dialect is a walking, talking advertisement for the values and cultural history you share. What’s more, where different groups live in close proximity, distinct languages are an effective way to prevent eavesdropping or the loss of important information to a competitor.

The author, Mark Pagel, has a book called Wired for Culture, which I will want to look into. On the Amazon page for the book, Herbert Gintis has a fascinating review.

David Brooks on Conservatism

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He writes,

American conservatism has three-part roots. Morally, it is rooted in the biblical metaphysic. Conservatives have an appreciation for the sinful nature of men and women and hence a healthy respect for Murphy’s Law. If something can go wrong, and there are people involved, you should be ready for the possibility that it will.

Philosophically, conservatism goes back to the epistemological modesty of Edmund Burke. The world is a complex place. The power of reason is bounded. Be skeptical of those who think they can grasp the complexities of reality and reorganize it through rational planning.

Economically, American conservatism differs from European conservatism because it goes back to the governing philosophy of Alexander Hamilton, to the belief in social mobility, immigrant possibility, and the idea that, in limited but energetic ways, government can help give people the tools to compete in a capitalist economy.

Today’s conservatism is estranged from these roots. Today’s conservatism is more properly called Freedomism. It is the elevation of freedom as the ultimate political good.

Run this through the filter of the three-axes model. “an appreciation for the sinful nature of men and women” sounds to me like the civilization-barbarism axis. The complaint about “the elevation of freedom as the ultimate political good” sounds to me like a concern with focusing on the freedom-coercion axis.

David Brooks is probably my favorite columnist, in part because he tends to be more charitable than others to those with whom he disagrees. However, I often do not share his prescriptions, and this is one such instance.

The Three Axes and Immigration

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Vipul Naik uses the three-axis model to examine how immigration restrictionism differs between progressives and conservatives.

Combining a focus on the oppressor-oppressed axis with territorialism and local inequality aversion produces the kinds of proposals and concerns that Costa raised in his EPI blog post. Explicitly, it generally involves a combination of a path to citizenship, stricter enforcement, strong laws against worker exploitation, and an immigration policy designed to benefit currently low-skilled natives.

…center-right individuals are likely to be more focused on concerns of civilization versus barbarism, and while the alien invasion metaphor is probably an exaggeration, basic concern about how illegal immigration undermines the rule of law adds to the general worries about the harms created by immigration. Thus, center-right restrictionists are more likely to favor reform proposals that include attrition through enforcement and stronger border security while simultaneously reducing future levels of legal immigration

For libertarians, of course, immigration restriction is one of the biggest evils in the entire world. From the perspective of the freedom-coercion axis, there is nothing more powerful than the ability to exit government. I believe that America is a great country because through so much of its history it drew people who wanted to exit other lands. Also, the availability of a less-governed frontier gave the pioneers an exit option.

In this century, many trends have made exit more difficult. The consolidation of school districts into gigantic city-wide and county-wide units is one example. The increase in the scope of government (what economists would call “bundling”) is another. The widely-unread Unchecked and Unbalanced talks about problems and solutions in these terms.

I am not sure that I can be charitable toward progressives who favor immigration restriction. I believe that the oppressor-oppressed axis naturally would favor open immigration. However, open immigration is a political loser. The people who are here do not want it to be easy for other people to come in. Even Hispanic citizens probably do not want more immigrants, but they sense (correctly) that some of the hostility toward illegal immigration is motivated by ethnic prejudice. So my uncharitable view is that progressives are choosing the most politically advantageous position on immigration, which is to not stand up for more open immigration policies but instead to express solidarity with Hispanics by showing sympathy with currently-illegal immigrants.

I find it easier to be charitable to conservative immigration restrictionists. I do not see them as being cynical or hypocritical. They are just dead wrong.

The Three Axes and Drug Prohibition

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In a conversation with Russ Roberts, Becky Pettit says

educational inequality has become so dramatic that among young black men who have dropped out of high school, a huge fraction of them, upwards of 2/3, can expect to spend at least a year in prison

She says that much of the increased incarceration in recent years is for drug offenses and nonviolent property offenses. To a libertarian, thinking along the freedom-coercion axis, it is drug prohibition itself that is offensive. Any time the government declares a “war” on anything, libertarians assume the worst. And they see drug use as a choice with which the government has no right to interfere.

Progressives have wanted to see drug users as oppressed, the victims of a bad environment and of “pushers.” Progressives see no problem in having government act to protect individuals from their bad impulses, in this case the impulse to take drugs. However, when it comes to punishment and incarceration, progressives would want to exempt users and focus on drug sellers. For progressives the idea of punishing those who profit from selling drugs has some merit (I could be uncharitable and say that for progressives the idea of punishing those who profit from anything has some merit).

To conservatives, both drug users and drug sellers are on the side of barbarism. Along the civilization-barbarism axis, the high incarceration rate among those involved in the drug trade probably looks more like a feature than a bug.

In this case, I find the libertarian freedom-coercion axis so compelling that I have difficulty seeing any merit in looking at the issue from the point of view of either of the other two axes. Perhaps I am not being sufficiently charitable. Along these lines, see the op-ed by Gary Becker and Kevin Murphy.