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Factor price equalization due to trade and investment flows across economies would substantially reduce economic reasons for immigration to rich countries. (Trade and investment flows will not eliminate economic reasons for migration because if polities differ in total factor productivity due to political institutions, there can still be an advantage to migrating to a more efficient economy in a fully globalized world.) Therefore, if you are an American who is deeply concerned about immigration to the U.S. for cultural or political reasons, one way to encourage less immigration is to press for full trade and investment liberalization in this country and around the world.

Now, does opposition to immigration correlate positively or negatively with support for free trade and “outsourcing” in voters’ attitudes? In my experience, negatively.

Chalk this up to one more way in which politics is about symbolism rather than substance, due to public ignorance.

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Is federalism for progressives? Libertarians, who are generally enthusiastic about the competitive federalism model, have tried to argue that the model provides, at the very least, a kind of modus vivendi for all ideological camps, allowing citizens in each state to have roughly the kind of government that they want. Relative to a single national standard on every policy issue, everyone is better off, right? Some progressives have agreed, to a point.

The problem is that status quo U.S. federalism is a long way from the competitive federalism model that scholars like Michael Greve favor. (I have contended that competitive federalism is still alive in the U.S. to a much greater extent than just about any other country excluding Switzerland and Canada.) The federal government establishes a firm national baseline on both economic and social policies. First, the U.S. Congress has authorized federal matching grants that incentivize state and local governments to spend their own taxpayers’ money on federal priorities. Even conservative politicians often have political trouble turning down “free” (better: “highly discounted”) federal money. Second, the U.S. Congress has authorized extensive federal regulations intruding into areas previously considered state prerogatives: securities and exchange regulation in the 1930’s (a provincial-only responsibility in Canada), occupational safety and health regulation in the 1970’s, mortgage originator licensing in the 2000’s, and health insurance regulation in the 2010’s, to name just a few examples. Third, the federal judiciary has established a firm baseline on civil rights, civil liberties, and “social” policies, repeatedly striking down laws regulating or criminalizing abortion, sodomy, contraception, and free speech, and, more recently, laws prohibiting gun possession and carrying, enacting public election financing, and authorizing certain regulatory takings. While some of these examples suggest that progressives might have reasons to favor a looser “baseline” from the federal judiciary, the overall historical trend has been for the judiciary to constrain conservative policies. (Note that libertarians typically favor judicial engagement on all or almost all of these questions, distinguishing their kind of limited-government federalism from the old “states’ rights” variety.)

Is there evidence that U.S. federalism as it already exists is tilted toward progressive priorities? I believe I have found such evidence in the distribution of state policy priorities.

Using the Ruger-Sorens database of state policies, which covers the years 2000-2010 (year-end), (more…)

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1) Polls continue to point to a significant “yes” victory in a future referendum on independence in Catalonia.

2) If the Catalan government backs down from a referendum, even if the Constitutional Court declares it illegal, as it certainly will, it will pay a heavy price at the polls. Therefore, it is locked into holding a referendum, unless it can negotiate a sufficiently advantageous fiscal settlement with the Spanish state. A negotiated settlement averting a referendum remains the most likely outcome, although p<0.5.

3) Some Catalans think the Socialist Party of Catalonia, which is linked with the main Spanish opposition party (PSOE) and has been trying to straddle the self-determination issue, will implode soon over the issue.

4) Catalonia and Spain may both be more viable as separate states than together. Spain's political economy is dysfunctional. Catalonia’s would not be (the largest Catalan party is centrist with some classical liberal elements). A functional state can carry a larger debt burden than a dysfunctional one. Therefore, the European Union might pressure Spain to accept a post-referendum settlement by which Catalonia is allowed to go free while taking on a disproportionate share of Spain’s debt. (On this point I am indebted to Jaume Lopez Hernandez of the Universitat Pompeu Fabra.) This is the second most likely outcome.

5) Spain’s threat to arrest Catalan leaders and prevent secession by force is not credible. (Although some autonomists and secessionists in Spain insist that the central government would indeed send in the tanks.) Therefore, it is unlikely that the Catalan government will be deterred. A “yes” vote followed by suppression is the least likely outcome, even less likely than a “no” vote.

6) If the Catalan referendum is held, regardless of the result, it would set a powerful precedent for Basque nationalists. The precedent is not that secession is easy or desirable, but that the possible legal framework will be recognized. The Basque Premier backed down from holding a referendum on his “Ibarretxe Plan” for free association after threats of arrest and a negative vote in the Spanish Cortes. The reason why I argued, in this interview, that Ibarretxe should have gone ahead with the referendum is not so much that I endorsed the Plan itself (on which I am agnostic), but that I fear his backing down set an unfavorable precedent for the “right to decide,” which I do favor.

7) Nevertheless, even if Catalonia secedes, the Basque Country Autonomous Community is unlikely to follow, at least right away. Pan-Basque independentists are a powerful force and would insist on bringing along Navarre (and later the French Basque provinces). But Navarre would vote “no” in a referendum held today or at any time in the near future. No other region of Spain is likely to hold a referendum either, and thus there is likely to be no “harmful precedent” for secession or “contagion” from Catalan secession.

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If you see corruption in the upper tiers of government as a major problem for an economy’s health in the long run (and the balance of evidence suggests that it is, at least at high levels in capitalist countries), then externally imposed austerity might be the only way to root it out. Syracuse prof Glyn Morgan passes along this story from Spain:

Rato, Castellanos and others jointly own a commercial lot near Madrid that is leased to a third party, according to Ayala’s Jan. 10 statement to the court. They also controlled a company together while Rato, 64, was running Bankia, Ayala said.

At the same time, Lazard billed Bankia 9.2 million euros ($12 million) for work either assigned or executed during Rato’s 27-month tenure at the bank, court documents show.

Their relationship exemplifies how a network of leaders from the governing People’s Party helped their associates among the financial elite to profit while the country’s savings banks, known as cajas, racked up losses. That toxic combination flourished during the boom fueled by Spain’s entry into the euro in 1999 and served to deepen the crash that resulted in a 41 billion-euro bailout of Spanish lenders, according to Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington.

Whether harsh spending cuts are a good idea or not for countries like Spain, Italy, and Greece depends in part on how one values the long run versus the short run. Also from the story:

“The things that we need to do to make Spain work require pulling the rug out from under the core interests of everyone” in power, Ken Dubin, a political scientist who teaches in Madrid at IE business school and Carlos III University, said in a May 22 telephone interview. “This is a political racket run for the benefit of politicians who suck the marrow out of the citizenry.”

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Last night the U.S. Senate played host to naked special-interest politics, as agricultural subsidy interests won vote after vote on the floor. As this story from Politico notes,

the sugar program stands out as one of the most intrusive of the commodity programs still on the books: a mix of price supports, import quotas, and since 2008, a feedstock program under which sugar can be purchased by the government to be used in biofuels.

The amendment Wednesday sought to end these purchases and roll back the price-support level from 18.75 cents per pound to 18 cents.

The amendment failed, 53-46. Some Republicans voted to keep the subsidies, including Marco Rubio of Florida. Even non-sugar-producing states’ senators voted to keep sugar subsidies:

And as a member of the Agriculture panel, Sen. Heidi Heitkamp (D-N.D.), warned her colleagues against unraveling the commodity coalition behind the farm bill.

“We forget that this is much bigger than a sugar program. It’s much bigger than any one single commodity,” said the North Dakota freshman, who hails from a state that is a major producer of sugar beets. “My concern is when you single out one commodity, whether it’s soybeans, corn or sugar or tobacco or rice, when you single out one commodity, you threaten the effectiveness of the overall farm bill.”

In other words, there’s a logroll among senators from subsidized states. My guess is that if you ran a logit model of votes on the sugar amendment, both sugar production and production of other subsidized commodities would enter the equation negatively. I wonder whether ideology or partisanship would factor in. I count 20 GOP “nays” (out of 45), meaning that a little over 60% of Democrats voted nay. And will Tea Party activists hold people like Rubio to account? I’m not holding my breath.

My last intemperate rant against agricultural subsidies here.

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The IRS has been taking flak for its treatment of right-leaning groups seeking recognition as tax-exempt “social welfare” organizations under clause 501(c)(4) of the Internal Revenue Code. As it happens, I have some personal experience with IRS scrutiny of 501(c)(4) applications. I was on the Board of the Free State Project (FSP) when the FSP applied for 501(c)(4) status in 2007-8. Our application was denied. We appealed, and the appeal was denied.

The reasoning the IRS gave us is that the FSP was simply a political action group trying to benefit the Libertarian Party. Nothing could be further from the truth. The FSP has never run or endorsed candidates or given money to any candidates. The FSP has never endorsed specific legislation or lobbied any elected or appointed official. More importantly, the FSP has never had any ties, formal or informal, with the Libertarian Party. Plenty of FSP participants reject electoral politics altogether. To my knowledge, the FSP has never received even a single donation from any foundation, government, party, or any other corporate entity whatsoever.

The FSP clearly qualifies as a social welfare organization, if not a public-benefit, charitable organization (“501(c)(3)”), according to the IRS’s own rules. The point of the FSP is to promote New Hampshire as a destination to people who are philosophically classical-liberal or libertarian. That’s it. The FSP spends money on advertising and promotion, maintaining a website, and holding two annual educational-social events in New Hampshire. The FSP believes that is an organization operated for the public benefit, especially with the educational programs held at its events. However, even if the IRS does not buy that interpretation, it is clearly an organization intended for the social and educational benefit of philosophic libertarians. It is clearly not a political action organization. Indeed, had the FSP applied for section 527 recognition, it probably would have been denied, leading to the absurd likelihood that the IRS would have considered the FSP a nonprofit fitting into no nonprofit category.

Since then, the FSP has operated just fine as a generic nonprofit corporation with no IRS tax status; since the organization’s expenditures always exceed its merchandise sales, it does not have any tax liability. However, 501(c)(4) status would have been a useful designation and signal to donors of the organization’s credibility.

Conservatives would like to find Obama’s fingerprints on the current IRS scandal, but they are unlikely to do so. Career bureaucrats at the federal agency that collects taxes from Americans are unlikely to be friendly to American antitax groups. The IRS’s hostility to antitax groups will manifest itself in a variety of ways, but that hostility is apparently nothing new or even particularly surprising. That doesn’t mean it isn’t wrong, of course.

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All 50 states ban the direct sales of motor vehicles from manufacturers to consumers. The politics of this regrettable policy are clear: auto dealers are powerful political players in every state, while only a few states actually have manufacturing facilities. Banning direct manufacturer sales benefits dealers while hurting manufacturers and consumers.

State governments continue to insert themselves into the contractual relationships between car manufacturers and dealers, typically to the ostensible benefit of the latter. The New Hampshire Senate recently passed a bill regulating the terms and conditions of dealer contracts with manufacturers, prohibiting manufacturers from requiring dealers to alter the appearance of their showrooms, for instance. (Disturbingly, the state director of Americans for Prosperity in New Hampshire supports the bill.) The bill is actually unlikely to change any “balance of power” between automakers and auto dealers. Automakers will simply respond by vetting potential dealerships far more closely and perhaps charging higher franchise fees. The onus of this response is likely to fall more on new dealerships than on incumbents. So the real losers from the bill are going to be potential entrants into the car dealer industry and, of course, consumers.

These are not the only examples of “state protectionism,” in which state governments adopt laws meant to reduce competition from out-of-state businesses for the benefit of local incumbents. Some states still prohibit certain out-of-state direct-to-consumer wine shipments. Regulatory barriers can accomplish the same ends. States have widely varying regulations on insurance products, making regulatory compliance a huge barrier for a company trying to market a standard policy in multiple states. For a long time, major life insurance companies lobbied Congress to adopt a national life insurance regulatory regime, pre-empting state laws. They were opposed by local life insurance agents, for whom knowledge of and compliance with distinctive state regulations were a significant source of competitive advantage. In the end, no national legislation materialized, but Congress authorized the formation of an interstate compact, essentially a contract among consenting states that sets up a single insurance regulator. More than 40 states have joined the Interstate Insurance Product Regulation Commission, which regulates life insurance and annuities.

Such state protectionism potentially runs afoul of the so-called “dormant commerce clause” of the U.S. Constitution. The commerce clause allows Congress to regulate trade among the several states. By implication, then, states are presumptively prohibited from burdening interstate trade, unless authorized by Congress. Unfortunately, courts have been reluctant to scrutinize state economic regulations that have an essentially protectionist character, although especially blatant discrimination against out-of-state imports has been overturned. (more…)

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At Econlog, the very sharp Garett Jones makes an argument for paying politicians more:

There’s some evidence that when it comes to politician quality, you get what you pay for; Besley finds that higher pay for U.S. governors predicts governors with more experience in politics, and Ferraz and Finan look at Brazilian data and find a slower revolving door and better educated politicians in regions where politicians get better pay. But alas the egalitarian ethos in democracies makes it difficult to raise the pay of politicians.

But there’s a countervailing effect of high salaries for politicians: they increase careerism. With high salaries for politicians, you’re more likely to get candidates who give the voters what they want so that they can get (re-)elected. And one of the themes of Jones’s post is that the voters are ignorant and excessively egalitarian: we shouldn’t always give them what they want. We need politicians who are intelligent, informed, and public-spirited. High salaries get us more of the first two and less of the last.

What else does the evidence suggest? In the American states, governments that pay legislators more and generally have more professionalized legislatures have higher government spending. Neil Malhotra has found good evidence that the causal arrow goes from spending to professionalism rather than the other way around. However, his study, for all its sophistication, has some evidentiary holes, and I believe the last word has not been spoken. From my own observations of the highly deprofessionalized, low-paying ($100 a year) New Hampshire legislature, I would say that it attracts candidates who are ideologically motivated but not careerist. They deviate significantly from the views of the median voter, for good or ill.

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In his 1982 book, The Rise and Decline of Nations, economist Mancur Olson argued that over time, stable societies accumulate “distributive coalitions,” narrow special-interest organizations that complexify social life and burden the economy with overregulation and opaque forms of wealth redistribution. The notion that distributive coalitions are more often bad than good for economic performance, at least when they are not sufficiently “encompassing” to internalize the costs of inefficient redistribution, is pretty well accepted, but Olson’s thesis that political stability and the passage of time are the most important determinants of the number and power of distributive coalitions has been more controversial. One of the chapters of his book is an empirical test of the hypothesis on the 50 states. Olson finds that states settled earlier have higher rates of unionization and lower growth rates (in the 1960s and 1970s), except the former Confederate states, which “benefit” from the disruptive legacies of the Civil War and Reconstruction.

I am skeptical of Olson’s explanation for the growth of distributive coalitions, but his research does contain a kernel of truth. States that industrialized (note) early often show up on the bottom of economic freedom indices and usually have lower-than-average growth rates even today. Why is that?

To answer the question, we have look back at the social context of 19th century industrialization. The U.S. started out as an overwhelmingly rural, farming country. Industrialization populated the cities. Industrialization advanced first in those parts of the country that were unfit for export agriculture, benefited from high tariff walls on manufactures, and had a policy of free labor: southern New England, New York, and New Jersey. However, resource discoveries in the West also brought urban growth to California.

In 1900, the most urbanized states, by far, were Rhode Island (88.3%) and Massachusetts (86.0%). Then came New York (72.9%), New Jersey (70.6%), and Connecticut (59.9%). Pennsylvania (54.7%), Illinois (54.3%), and California (52.3%) were not far behind Connecticut. All of these states, with the possible exception of Pennsylvania, are now recognized as “deep-blue,” solidly Democratic states. Most of these states were relatively free for industry in the early 20th century, but they also boasted the strongest labor unions and most severe class conflict. These highly urban states became “proletarianized,” leading today to a strong concentration of Democratic votes in their metropolitan centers, according to Jonathan Rodden and other scholars.

As late as 1957, New Jersey was an example of a low-tax business haven. State and local taxes from all sources as a percentage of personal income stood at just 6.3% in New Jersey that year. Delaware had the lowest tax collections in the country, at 4.6% of income. States at the high end included Vermont (9.1%), which pioneered the state income tax, North (9.7%) and South Dakota (9.0%), and Oregon (9.0%). These states remained rural for a long time in part because prairie populism and Yankee progressivism yielded fiscal and regulatory policies that deterred investment. The South’s repression of blacks through Jim Crow kept their institutions “extractive,” to use Acemoglu and Robinson’s term, and their comparative development level low.

Nowadays, urbanization does not tend to produce proletarianization. Not many Americans are employed in manufacturing any more, nor are many private-sector workers covered by collective bargaining agreements. Thus, economic freedom has lost its self-undermining character. In the 1800s and early 1900s, economic freedom fostered industrialization, which brought on proletarianization, which led to a pro-regulatory public ideology, which then led to reversals in economic freedom. Now, late industrializers are not necessarily becoming less economically free. Indeed, there is a slight, positive correlation between present-day state urbanization rate and the Ruger-Sorens measure of economic freedom, controlling for left-right ideology.

States like California and New York are living off the accumulated capital of past economic freedom. Now that the political tide has turned decisively against economic freedom in those states, they are shedding people and jobs and growing more slowly than the rest of the country. Places like the Dakotas, Carolinas, Oklahoma, and Texas, which have reversed their anti-market policies of the past, represent America’s dynamic economic future.

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Cross-posted to freedominthe50states.org

The recent release of the 2013 edition of Freedom in the 50 States has sparked a great deal of interest and comment among academics, students, the media, and the general public. Since the goal of our study is really to spark a conversation about freedom and state policies, William and I have been happy to see all the feedback. From the hundreds of positive comments we’ve received over the past week, it’s clear the study sparked a conversation in which many are eager to participate. In this blog post I will address some of the feedback and questions about the study we’ve received.

First, it’s important to understand how our study conceptualizes freedom. We ground our conception of freedom on an individual rights framework. In our view, individuals should be allowed to dispose of their lives, liberties, and property as they see fit, so long as they do not infringe on the rights of others. The study is an index of how state and local public policies conform to this framework.

As is the case with any index, the “freedom index” has some limitations—-it cannot capture all aspects of freedom, such as freedom from depredations originating outside government. Nor is freedom all there is to quality of life. We thus encourage readers to use our scores in conjunction with other indicators when assessing government effectiveness, “quality of life,” or other, similar concepts. Visitors to our Web site can also personalize the rankings by choosing which aspects of freedom they value and see how the states compare against one another.

To ensure the transparency of the freedom index, which has been a critical goal for us from the start of this project, we try to answer as many readers’ questions as possible on our website. The most common questions that we have received have centered on why certain policies were included or not included in the index. Here, we address the policies readers have asked about the most. (more…)

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Last time I was here, I had a lot of fun teasing American libertarian readers, at least until the earthquake brought my guest blogging to an abrupt halt.

Support for liberty is a lot like support for GMO-free food. If you survey people, they’ll tell you how much they love it. They might even tell you it’s the most important thing in the world for them. But make them pay $0.50 extra to have it and they’ll choose the next product on the shelf. A few pay extra for the GMO-free tags, but if you’d probably be disappointed if you launched a GMO-free brand based on a survey of how much people claimed to hate genetically modified foods.

Jason Sorens and William Ruger have done great work in showing the substantial differences in experienced freedom across the 50 US States. A lot of libertarians live in New York; New York tends to come last in these surveys. Moving someplace that doesn’t keep trying to ban large sodas would mean giving up easy access to Broadway shows. It’s fine to be a pluralist and to weigh Broadway shows against personal liberties in some great personal utilitarian calculus, but it’s not exactly consistent with ‘Live Free or Die’ rhetoric.*

Absolute differences across American states are perhaps not large enough to make it worth moving. But if that’s the case, what are we to make of libertarian activism in the less-free states? It’s exceptionally unlikely that even the most effective activist in New York could move the state more than a point or two in the ordinal rankings, but that same person could take an oil job in North Dakota and move from worst to first while working there to help make North Dakota even better.

I’ve also argued, and often, that American libertarians should consider moving to New Zealand, which ranks first in the worldwide index weighing civil and economic freedoms. Why not choose to live free, or as free as is possible in the current world?

The Honours thesis I’m supervising this year will examine the price of liberty. The international ranking above gives a nice cross-sectional snapshot of differences in liberty across countries. Some of the measures can be extended backward in time. My student, Chris Read, is going to add these measures to international migration data to estimate the elasticity of migration flows to measured liberty and compare that elasticity to things like expected income differences across countries. Most people are messy pluralists; I’m really curious to see how things here pan out. Hopefully by the end of it, we’ll be able to say “A unit increase in civil liberties, all else equal, has about the same effect on inbound migration as a $X increase in median income.” That X will be close to a revealed preference measure of the price of freedom.

Later this week, I’ll post reassessing some of my Kiwi-enthusiasm in light of the post-earthquake policy experience. I’ve been pretty disappointed with how things here have panned out. We are not as far outside of the asylum as I had thought.

* I count myself as a messy pluralist of this sort too; I’m not trying to disparage it! Freedom matters, other stuff matters too.

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The new, book-length edition of Freedom in the 50 States: Index of Personal and Economic Freedom will be released on March 28 by the Mercatus Center at George Mason University. In the days leading up to release, I will be “teasing” a few of the novel findings and methods from the study. Here at Pileus, I’ve already posted a couple of teasers over the past few months, linked here:

This post will explain the logic and method behind the weighting scheme in the new edition. Every index of freedom has to use some way of weighting its variables to come up with an aggregate measure of freedom. The Heritage Foundation’s “Index of Economic Freedom” and Fraser Institute’s “Economic Freedom of the World” and “Economic Freedom of North America” essentially weight each variable equally, either within categories that are themselves weighted equally in the overall index (Fraser) or across the index as a whole (Heritage). The most commonly used international indices of democracy, Polity IV and Freedom House, and the first two editions of Freedom in the 50 States use “arbitrary” weights, that is, the researchers weight the categories according to their own judgment using general criteria.

We were unsatisfied with all of these approaches, as well as with inductive statistical alternatives known as “principal component analysis” and “factor analysis.” Here is how we put the case in the book:

Because we want to score states on composite indices of freedom, we need some way of “weighting” and aggregating individual policies. One popular method for aggregating policies is “factor” or “principal component” analysis, which weights variables according to how much they contribute to the common variance—that is, how well they correlate with other variables.

Factor analysis is equivalent to letting politicians weight the variables, because correlations among variables across states will reflect the ways that lawmakers systematically prioritize certain policies. Of course, partisan politics is not always consistent with freedom (e.g., states strong on gun rights tend to be weak on gay rights). The index resulting from factor analysis would be an index of “policy ideology,” not freedom.

Another approach, employed in the Fraser Institute’s “Economic Freedom of North America,” is to weight each category equally, and then to weight variables within each category equally. Of course, this approach assumes that the variance observed within each category and each variable is equally important. In the large dataset used for the freedom index, such an assumption would be wildly implausible. We feel confident that, for instance, tax burden should be weighted more heavily than court decisions mandating that private malls or universities allow political speech.

Previous versions of this index used a subjective weighting system, based on a rough assessment of the importance of each policy in terms of the number of people affected and the value they were likely to place on their infringed freedom. We were dissatisfied with the imprecise and subjective manner in which we constructed those weights, and for this edition we have tried to use a much more objective and independent measure of the “value” of each freedom.

The new, “objective” method of weighting variables is what we call the “freedom value” approach. Here is how we describe it: (more…)

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John Samples at the Cato Institute defends the filibuster:

Allowing majority rule to always trump minority interests would undercut the intent and structure of the Constitution, with its many protections of minorities from the tyranny of majorities.

As political scientist Gregory Koger has noted, the filibuster has been used to force Senate majorities to consider minority amendments. A majority has every reason to prevent such amendments; they often force senators in the majority to cast tough votes on controversial issues. By forcing amendments, however, the filibuster enhances accountability while expanding the scope of the debate.

While the House is organized along partisan lines, the Senate is much more individualist, partly because of the filibuster. Getting rid of the filibuster would increase the power of party leaders. Will senators represent their states better if they are more at the mercy of party leaders? In a polarized age, do we really need more partisanship in the Senate?

The current threat of filibusters requires the majority party to move toward the center, satisfying more voters. In a polarized time, the filibuster tends to make Senate actions more representative of the nation as a whole.

John is right that the filibuster makes the Senate a more consensual body and drags what the Senate passes toward the national median. He’s also right that the U.S. system of government is one of separation of powers and a large number of veto players, and the filibuster merely sharpens that feature of the system.

But all political institutions pose tradeoffs. In my last post on the topic, I noted that the filibuster has important harmful consequences for the federal judiciary and tax code. What John celebrates as the individualist character of the Senate also opens the door wider to parochial pork and lobbyist influence. If one Senator demands a “side payment” (in the form of favorable legislation) in exchange for allowing legislation to proceed smoothly, (s)he can often get it. That’s how the federal tax code became so byzantine. It’s how the “Cornhusker kickback” and “Louisiana purchase” originally got into Obamacare. Furthermore, stronger party leadership in the Senate would help clarify responsibility for policy. As it stands now, voters usually don’t know whom to blame for unpopular policies, and politicians are usually able to obfuscate responsibility because the filibuster complicates the voting record in the Senate (voting for the rule can often be more important than voting against final passage).

Note as well that when the House and Senate are controlled by different parties, as has often been the case, there is the same incentive for cross-party collaboration that John praises as part of the filibuster. The U.S. system already has many safeguards for minorities. Precisely for that reason, I see the filibuster as unnecessary. Since all institutions have tradeoffs, institutions that are “in a sort of middle” (with apologies to Edmund Burke) are usually more robust than those at either extreme of the majoritarian-consensus continuum.

Extreme status-quo bias might be justified if the status quo were rosy. But in the U.S., it’s not. Look at the economic freedom rankings. The U.S. is now #18 in the world, far behind countries like New Zealand, Canada, Australia, and even the United Kingdom — all English-speaking countries with parliamentary systems and few veto players. The countries with systems most like the U.S. system of separation of powers — Latin American countries like Brazil and Mexico — are well behind (Brazil is #105, Mexico is #91). The status quo in the U.S. is not very good, and we should tweak the system in favor of letting through more change.

Finally, I’d like to elaborate the bureaucracy problem more fully and illustrate its relevance to today. With the filibuster, it is difficult for legislators to constrain bureaucratic excesses, so long as 40 Senators are willing to protect the agency. Right now, the EPA is planning to regulate greenhouse gases as pollutants without explicit statutory authority. In many other instances, the EPA has overreached recently, even drawing a unanimous rebuke from the Supreme Court. But no matter how out-of-control the EPA gets, and no matter what the partisan composition of the Senate is, it will be very difficult for Congress to pass any legislation reining them in. Even if Republicans take the majority, they will be unable to prevent the EPA from regulating greenhouse gases with command-and-control mandates. A better alternative to command-and-control mandates would be a carbon tax or “clean” cap-and-trade (without the industry and consumer giveaways from the 2009 Waxman-Markey bill). But conservative Republicans will block that with all their might, no matter what the EPA does. And without that as an alternative, Democrats won’t go along with a reining in of the EPA. So instead we’re left with a Pareto-inferior outcome that no one really wants.

Now, given time, effort, and a modicum of good will, legislators can find ways around the filibuster and could probably even resolve the EPA issue mentioned above. But the filibuster increases the bargaining costs of reaching deals. In that way spatial models of legislation are imperfect. Pareto-improving deals don’t always happen when transaction costs are high enough. Look at the fiscal cliff. Look at the sequester. No one is happy with the way those are turning out. A robust political system needs safeguards for minorities, yes, but it also needs to keep bargaining costs manageable.

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Conservatives and liberals are both mad over the Senate’s mundane filibuster compromise. Liberals wanted the filibuster abolished or severely pared back, and conservatives didn’t want any reforms at all. Of course, the sides are exactly flipped from 2005, when it was Senate Republicans who threatened the “constitutional option.” Both sides are afflicted with short-termist thinking.

Abolishing the filibuster is the long-term desirable thing to do. Gaping holes in the federal judiciary and the arcane monstrosity that is the federal tax code owe their existence to the filibuster and the immense status-quo bias in the U.S. Congress. Sure, bad things would get through if the filibuster were abolished. Obamacare was only enacted because Dems briefly held a filibuster-proof majority in the Senate. But the country is now facing severe problems across the board, from taxation to debt to health care to virtually unsupervised regulatory agencies. We need radical, comprehensive policy surgery, not more insanely complex, achingly tentative, compromise procedures that allow the infections in the national political economy to fester further. Abolish the filibuster and, while we’re at it, the presidential veto (amend the Constitution).

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In Canada, provincial parties are totally organizationally independent of federal parties and may not even have the same names. Thus, the British Columbia Liberal Party has generally been right-of-center, and British Columbia Liberals tend to vote Conservative at the federal level. Quebec Liberals have generally been more Quebec-nationalist/decentralist than the federal Liberals. Most provinces have parties named “Progressive Conservative,” even though there is no longer any federal Progressive Conservative Party. And so on.

Of course, it doesn’t work that way in the U.S. State (and even local) elections feature Republican and Democratic candidates, except in Nebraska, where state legislative elections are nonpartisan. As a result, state election results are driven by national trends. Surprisingly, political scientists had not formalized this insight until recently. Here is a paper from Steven Rogers:

State legislative elections are not referendums on state legislators’ own performance but are instead dominated by national politics. Presidential evaluations and the national economy matter much more for state legislators’ elections than state-level economic conditions,  state policy outcomes, or voters’ assessments of the legislature. Previous analyses of  state legislative elections fail to consider which party controls the state legislature and whether voters know this information. When accounting for these factors, I discover that even when the legislature performs well, misinformed voters mistakenly reward the minority party. Thus, while state legislatures wield considerable policy-making power, elections are ineffective in holding state legislative parties accountable for their own performance and lawmaking.

Tyler Cowen calls this “the problem with federalism.” But it isn’t a problem with federalism as such. It’s a problem with U.S. federalism. In Canada, you can’t send a message to the federal government by voting against the incumbent federal party at the provincial level. (In fact, provincial elections are not held on the same days as federal elections.) Changing the perverse accountability dynamic of U.S. state legislatures may require something as simple as changing the names of state parties.

State parties may even have an incentive to do this. For instance, the Republican Party in New Hampshire could change its name to something like “New Hampshire Conservative Party” or “New Hampshire Party.” By doing so, it could help to insulate itself from the partisan swings at the national level that are beyond its control.

In the last election, New Hampshire Republicans lost majorities in the state house and the executive council. The reason for this was the (more…)

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I agree with pretty much everything Marc has to say on the deal below. (For my own thoughts, see here.) Nevertheless, from a political point of view, something very like this deal was inevitable.

First, the Republicans held a bad hand. All the Bush tax cuts were going away, so they had very little leverage. The only leverage they had was over letting unemployment benefits, stimulus tax credits, and corporate welfare expire, and letting the sequester take effect immediately. However, Republicans are scarcely fonder of the sequester than are Democrats, both because of its cuts to defense and because of the blunt, across-the-board nature of the domestic discretionary cuts. As soon as the negotiations turned to dealing with taxation and spending separately, Republicans were never going to get significant spending cuts out of a taxation deal, because they had very little to offer Democrats on taxation. In the end, Republicans got a higher income threshold for tax increases, but paid for it with extensions of the foregoing expenditure programs.

Why were Republicans not willing to give a little more on tax increases on the rich in exchange for cuts in tax expenditures? Here the optics play a role. Pushing hard to let the low-income and higher ed tax credits expire could easily be demagogued. Letting extended unemployment benefits expire when Republicans continue to insist that the economy is weak would also be jarring. On the corporate welfare side, the diffuse-costs, concentrated-benefits logic applies in full force. Besides people who read sites like this one and the concentrated interests who benefit from such programs and spend literally hundreds of millions of dollars a session lobbying for them, no one cares about corporate welfare, and many even think of it as “pro-business” (as I’ve read journalists oh-so-neutrally describe them in articles on the deal) and therefore somehow pro-recovery.

Now, if this analysis is correct, then in two months when the spending side of the fiscal cliff is dealt with, Democrats will hold a similarly weak hand, and we should look for essentially zero Republican concessions on taxes. If the outcome deviates from this prediction in either direction, then we will have good reason to think that extraneous factors, such as “negotiation skills,” played some kind of role.(*) But I would look for the Nash Equilibrium to obtain.

(*) Another possibility, of course, is that I misread the (House) GOP’s preferences. They may hate defense spending cuts so much that they are willing to allow more tax increases to prevent them. That would, of course, be a perfectly awful outcome from a limited-government perspective — and therefore very much within the realm of possibility.

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Pileus‘s own Jason Sorens is, among many other things, the founder of the Free State Project. The FSP is an initiative that aims to put the convictions of people who talk about individual liberty to the test. Its proposal is based on the straightforward premise that a relatively small number of committed and organized activists can effect disproportionately large political change in their communities. More specifically, the FSP suggests that if 20,000 “liberty-loving people” were all to move to a state of relatively small population, their concentrated efforts could enlarge the scope of liberty in that state, perhaps even making it a genuine home of liberty.

After a somewhat contentious vote several years ago, the FSP decided that New Hampshire—of “Live Free or Die” fame—would be their liberty mecca. (Wyoming came in second.) If you sign on to the FSP’s initiative, here is what you agree to: If and when the total signatories on the FSP’s pledge reaches 20,000,

I hereby state my solemn intent to move to the state of New Hampshire. Once there, I will exert the fullest practical effort toward the creation of a society in which the maximum role of civil government is the protection of life, liberty, and property.

Some people are excited enough about the prospects—and, no doubt, depressed and frustrated enough about the decline of liberty elsewhere—that they are not waiting for the full 20,000 signatories: As of today, 1,117 FSP pledges have already moved to New Hampshire.

Why New Hampshire? Lots of reasons. The FSP actually gives you a list of “101 Reasons You Should Move to New Hampshire (If You Love Liberty).” Here is another reason: In the most recent edition of the “Freedom in the 50 States” report, co-authored by Sorens himself along with William Ruger, and published in 2011, New Hampshire comes out on top: The Granite State ranks #2 in “economic freedom,” #11 in “personal freedom,” and yet #1 in the combined “overall” ranking.

I find the prospects of making New Hampshire the Hong Kong of America intriguing, even inspiring. When the United States is spending itself into debt oblivion—something like the Nicolas Cage character in Leaving Las Vegas, we seem to be thinking that it’s all over anyway so we might as well drink ourselves all the way to death—and when government regulation is pouring out of Washington like the Mississippi over the levees in New Orleans after Katrina, the idea of an island of freedom amid a sea of bleak oppression has its attractions.

Even supposing 20,000 liberty-loving people would move to New Hampshire, however, I have reasons to worry about the likelihood of success of the FSP. Let me list a few here. I preface them by saying that I hope I am wrong about how worrisome they are. I too want a world for my children and grandchildren in which they are not slaves to government debt and regulation.

1. I have heard whispers that in the next edition of Sorens’s and Ruger’s “Freedom in the 50 States,” which I understand is due out in the Spring of 2013, New Hampshire no longer retains its #1 overall ranking—and that it might indeed slip several spots. (Perhaps neither Sorens nor Ruger cares to confirm or disconfirm this now, but I would be happy to have them do so if they wish.)

2. In the recently released Economic Freedom of North America 2012, which includes most of the provinces of Canada along with the States of America, New Hampshire lands in a disappointing sixteenth place, behind Alaska and above North Carolina. The EFNA report scores New Hampshire particularly low (a) on Social Security payments as a percentage of GDP (NH gets a 5.1 out of a possible 10 on this, 10 being highest), (b) on total tax revenue as a percentage of GDP (5.6 out of 10), and (c) on indirect tax revenue as a percentage of GDP (a dismal 3.0 out of 10).

3. CNBC recently published its list of “America’s Top States for Business 2012,” and New Hampshire’s spot is again disappointing: nineteenth—embarrassingly, behind Oregon and ahead of Arkansas.

4. Only today I saw this report from Wired that public buses in many metropolitan systems in America are starting to install listening devices with their surveillance systems, so that they can secretly record private conversations. Which metropolitan systems? You will not be surprised that it includes San Francisco and Baltimore; more surprising, perhaps, are smaller cities like Traverse City, Michigan and Athens, Georgia; but this I found both shocking and disappointing: “Concord, New Hampshire also used part of a $1.2 million economic stimulus grant to install its new video/audio surveillance system on buses.” That is wrong for so many reasons.

I also have more general reasons to doubt the possibility of the FSP’s success that are less directly dependent on having chosen New Hampshire as opposed to any state. Perhaps I will outline them in the future.

In addition to my caution that I hope I am wrong about the chances of FSP’s success in New Hampshire, I would also hasten to add that none of these worries entails that one should not still make the attempt. Even if one is certain of failure, some causes are worth fighting for regardless. If one is not willing to fight for liberty and prosperity, even against depressingly long odds, then what on earth would one fight for? One does what one can. One fights for liberty and against oppression, whatever the odds, leaving the rest in God’s hands.

Can New Hampshire be the place?

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Theorizing Medieval Geopolitics
Theorizing Medieval Geopolitics: War and World Order in the Age of the Crusades by Andrew A. Latham (Routledge, 2012) offers a constructivist interpretation of late-medieval European states and warfare. Latham describes his approach as offering an “explanation-what” or “property” theory rather than an “explanation-why” or causal theory. He is interested in clarifying the nature of the medieval “corporate-sovereign state” and the ways in which medieval European societies conceived of and legitimized war. Rather than studying the late-medieval period merely as a staging ground for the development of the modern state, as Hendrik Spruyt does in his interesting book The Sovereign State and Its Competitors, Latham explores the logic internal to the late-medieval system, perceiving the transition from high-medieval feudalism to early-modern absolutism as a gradual one. (He therefore rejects what he calls “the Westphalian rupture” and explicitly endorses both the stateness and non-feudality of pre-Westphalian polities, whether city-states, empires, or kingdoms.)

Constructivism in international relations refers to a broad research paradigm emphasizing the roles of shared international culture, ideas, and values in constraining state actors. It rejects both the “power politics” theorizing of neorealism and the materialism of Marxism. Of course, in one sense the late-medieval period is a “most likely” case for constructivism, as one could hardly deny the role of ideas in buttressing the power of the Catholic Church or provoking the Crusades. But apparently some have tried. Latham successfully shows that realist views prioritizing interests over ideology in explaining the Crusades (e.g., opportunities for looting) are inconsistent with current historical knowledge.

At other points, though, Latham’s obdurate refusal to consider the role of interests annoyed me. In explaining why the medieval kingdom came to prevail over the city-state, the principality, the bishopric, and the city-league, his account boils down to the claim that medieval political philosophy viewed the kingdom as “more legitimate” (90-91). Technological change plays no role in the explanation, and power politics is only begrudgingly and indirectly acknowledged (96).

Latham could also be clearer about the role that his ontology of war can play in general causal theories of international relations. Defining war as an “institution” composed of “deeply embedded intersubjective beliefs” (48) does nothing to bridge the distance between this kind of project and rationalist approaches to war. Why aren’t “norms” (or if one prefers, “deeply embedded intersubjective beliefs”) best thought of as variables in a utility function? (Realists would still not be happy with this, of course.)

The first 50 or so pages of the book bog down heavily in the IR literature. For someone like me largely uninterested in the paradigm bun-fights, the more interesting part of the book comes later. I learned something about the demise of feudalism (it was remarkably early, 13th century at the latest) and something about how Thomist and other late-medieval political philosophy differed from the prior Augustinian tradition (more optimistic about the state’s ability to promote the common good). Medieval historians are unlikely to find much new here, but for political scientists, Latham’s book does a service in synthesizing the up-to-date historiographic literature on the diplomacy and warfare of the period.

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Conservatives and taxpayer groups are ready to fight the $1 trillion farm bill when it comes up for a vote in the new Congress. Agricultural subsidies, price supports, and tariffs in developed countries (the U.S., Japan, and the European Union especially) not only harm consumers at home by hitting them with higher prices, but cause severe poverty abroad by shutting exports from less developed countries (LDCs) out of developed-country markets and by dumping developed-country surpluses on LDC markets at prices below marginal cost. Since the poorest people in the world are farmers in poor countries, and over 15 million people die from hunger and disease each year due to severe poverty, rich-country agricultural subsidies are literally killing poor people on a massive scale.

Here’s just one anecdote from the IFPRI report of how this works:

Harrison Amukoyi’s farm is perched on a hillside in western Kenya. On less than two acres of land, he raises several crops and a dairy cow. To sell milk, Harrison and his neighbors must compete with industrialized countries that dump their subsidized milk on local markets, depressing prices for Kenyan farmers. This unfair contest appears in countless guises throughout the developing world, intensifying conditions of poverty.

And here are some figures from the NCPA analysis on how poor farmers would benefit if cotton subsidies alone were eliminated:

The International Cotton Advisory Committee (ICAC) estimates that ending U.S. cotton subsidies would raise world prices by 26 percent, or 11 cents per pound. The results for African countries dependent on cotton exports would be substantial:

  • Burkina Faso would gain $28 million in export revenues
  • Benin would gain $33 million in export revenues
  • Mali would gain $43 million in export revenues.

We have seen reductions in severe poverty recently. The world’s biggest reduction in severe poverty has come in China over the last three decades. It’s clear that economic reform is the critical, long-term driver of poverty reductions. But where did China’s poverty reductions start? With growing agricultural productivity. The poorest countries of the world can’t just move straight into manufacturing. They need first to generate some agricultural surplus. Making it possible for poor farmers to sell to rich consumers, or even to their own people, is necessary to making that happen.

Removing rich-country agricultural subsidies could also have political-economy benefits. Many LDCs repress their agricultural markets in favor of the urban sector. Thus, their own governments deserve some share of the blame. The typical tool for this repression is a “marketing board” monopsony. The marketing board buys produce at coercively depressed prices and then tries to export it for a profit, plowing the proceeds back into urban subsidies. Rising world prices for farm goods would increase the profits of these marketing boards, potentially allowing them to raise the prices they pay farmers at home. While some nasty governments might find the new revenue reinforces their power, the new revenues would surely build useful state capacity in just as many places. Furthermore, rising farm incomes should increase the political power of the farm bloc in LDCs, which increases the probability of domestic liberalization.

Ending the rich world’s harmful policies would not eliminate global poverty. However, it would make a significant dent and could set in motion economic and political processes that would have far-reaching effects indeed.

Still, agricultural subsidies and trade barriers survive, amounting to well over $300 billion per year in the rich countries of the OECD, dwarfing the aid sent from rich to poor countries. They survive because of the collective-action problem: poor people have no voice at all in the political systems of the rich world, and rich-world consumers barely have one. Producers organize effectively because of the clear benefits they receive from subsidies, and even ideological opposition from both the left and the right cannot effectively fight them.

The only effective way to counter the greed of the few is with the white-hot moral passion of the many. (more…)

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Catalonia Update

The Monkey Cage is carrying an interesting update on the Catalonia situation from Duke political scientist Laia Balcells. Catalonia is heading to elections, called by the premier Artur Mas, from the Convergence and Unity (CiU) party, a moderate Catalan nationalist party on the center-right. The CiU has always favored a “right to self-determination” for Catalonia, but now they favor holding a referendum on independence, unless Spain agrees to a new fiscal pact giving Catalonia broader powers.

She lays out three possible post-election scenarios:

1. A secessionist process scenario: a combination of Catalan nationalist parties (e.g. CiU ERC; CiUERC+SI) obtains a majority of the seats. Mas calls for a referendum. Despite the fact that the referendum is not likely to be recognized by Spain, it gives democratic legitimacy to the self-determination process. The medium-term outcome of this path is highly unpredictable at this point: Rajoy is not Cameron, and the PP government is making threats to deter Mas from the referendum (e.g. declaring it illegal). Some members of the Spanish military have even mentioned armed intervention in Catalonia to defend the “inviolable unity of the Spanish State”. The EU, on its end, delivers ambiguous messages regarding the permanence of Catalonia in the union if there is a breakup.

2. A fiscal pact scenario: CiU obtains a majority of the seats. Mas makes a credible threat of a self-determination referendum to Rajoy, who concedes on an agreement that improves Catalania’s fiscal capacities. CiU then renounces its secessionist demands, and ERC and other minority parties remain as the only ones asking for independence.

3. A stalemate/centralization scenario: Catalan nationalists do not obtain sufficient support in the elections and things remain at a standstill. Mas has a hard time governing given the economic and political gridlock. This scenario would probably imply asking for another bailout to the Spanish state and new attempts at centralization. (Given the results of the polls, this is however the least likely scenario)

Let’s look down the game tree to see what is likely to happen.

I think we can rule out 3 as a likely scenario, if the polls are right. Apparently 57% of poll respondents now say they would vote “yes” in an independence referendum and only 20% no. That’s a dramatic increase in secessionist sentiment even over the last few months. Catalan nationalist parties have frequently won significant majorities in the past, and I see no reason why they would not in the upcoming election with the radical turn in Catalan opinion.

So what happens after the election if nationalists win a majority? I think it likely that (more…)

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Media are reporting the results of the Puerto Rico status referendum as if the statehood option had won. Now, it may indeed be the case that the resident commissioner will present legislation of accession to the Union in the House of Representatives, but only an oddly structured ballot devised by the pro-statehood party allowed the referendum to “succeed.” In fact, a majority of Puerto Ricans voted against statehood.

The ballot asked two questions. The first question asked voters, “Do you agree to maintain current territorial political status?” The “no” option received 54% of the vote, 934,238 votes of 1,730,245 valid votes. The second question asked voters to choose among three status options: statehood, associated free state, and independence. Statehood received 61.15% of the valid votes, 802,179 votes in all.

But note two things. First, many voters who opposed statehood in favor of, say, independence would have voted “no” on the first question. Second, 25% of the ballots on the second question were left blank, apparently out of protest at a question the pro-status quo party regarded as unfair. If you add blank ballots to the total on the second question, the statehood option received less than 45% of the vote.

This is a good example of how political leadership tries to use a cyclical majority to secure its favored alternative.

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Bob Higgs has used the concept of “regime uncertainty” to explain why the Great Depression lasted so long. In brief, the argument is that FDR’s escalatingly anti-capitalist rhetoric in the mid- to late-1930s spooked investors, who were uncertain whether they would be allowed to enjoy the future fruits of their investments. Therefore, investment declined, provoking a slump in 1938 and generally prolonging the Depression.

Some have argued that the prolonged period of high unemployment and anemic growth the United States has experienced in the wake of the 2007-9 “Great Recession” is also due to regime uncertainty. They blame the Obama Administration and Democrats in Congress for fostering a regulatory environment hostile to business.

But if that explanation of poor growth in 2009-10 is right, how can it explain poor growth in 2011-12, after Republicans took the House of Representatives? Under divided government, regime uncertainty is nil. The 2011-12 Congress is on pace to be the least productive since 1947 in terms of passing laws. Libertarians say gridlock is good — well, we definitely have gridlock, so where are all the benefits?

Here’s the evidence:

The chart shows inflation-corrected personal income, excluding transfers from the government. Real personal income today still stands below its level at the start of 2008. If these figures were divided by population, they would look worse still. There has been a very weak recovery.

Why should we not blame House Republicans as much as Democrats and Obama for the bad economy? (more…)

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Robert Farley of the University of Kentucky and Lawyers, Guns, and Money had a “diavlog” with me on bloggingheads.tv. We covered Pileus, the Conor Friedersdorf essay on why he can’t vote for Obama, libertarianism and foreign policy, and secessionism. This was my bloggingheads debut, and we hope to do more of these in the future.

(Embedding doesn’t seem to work, so here’s the link.)

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A pro-secession protest in Catalonia on September 11th brought out 8% of the region’s entire population, The Economist reports. Opinion polls have support for independence at about half of the electorate, possibly more. The moderate nationalists in power in Catalonia have even radicalized their platform. In the past, Convergence and Unity was a moderate nationalist, center-right party coalition dedicated to greater autonomy for Catalonia and a recognized right to self-determination. While refusing to rule out independence in the long run, they rejected secession as attainable or desirable in the near term. Now, they explicitly advocate eventual sovereignty (effectively, independence within the European Union).

In addition to Convergence and Unity, there has been, since the mid-1980s, a significant independentist strain within Catalan nationalism. The Catalan Republican Left (ERC) has been the main exponent of this current. In the early 2000’s, ERC actually formed the regional administration along with the regional Socialists. They helped put together Catalonia’s new autonomy statute that, among other things, defines Catalonia as a “nation” rather than a “nationality” for the first time. (Yes, this sort of symbolism seems to matter to nationalist voters.) Over time, ERC support has been growing, and so has broader support for independence. Thus, this most recent outbreak is nothing new, rather the last expression of an upwelling of  “fed-up nationalism” that has been going on for at least a decade.

In one sense, Catalan nationalism is easily explicable as the (more…)

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After the 2008 primary season, I analyzed Ron Paul’s performance in each state to see how institutional factors such as caucus and primary form affected his electoral success. This exercise turned out to be useful for estimating the size of the pro-liberty electorate in each state. In this post, I do the same with the 2012 results.

The dependent variable in this analysis is the percentage of the vote obtained in each state’s statewide primary or caucus. If a state held both a primary and a caucus or convention, I used the primary results. The independent variables are as follows. (All variables were taken from Dave Leip’s Atlas of U.S. Presidential Elections.)

First, I use a dummy variable for whether the state had a caucus or convention versus a primary. As an outsider candidate with a committed band of activist supporters, Paul tended to do much better in caucuses than primaries.

Next, I also included dummy variables for who is eligible to vote: a dummy for an open caucus/primary, in which all voters are allowed to vote, and a dummy for a closed caucus/primary, in which only registered Republicans are allowed to vote. The excluded category consists of “modified-open” elections, in which independents and Republicans are allowed to vote. Since Paul was more popular among self-identified independents than among self-identified Republicans, it stands to reason that he would do best in open primaries and worst in closed primaries.

I also tried variables for the number of other candidates running active races and appearing on the ballot. In this regard, I counted only “significant” candidates that might have had a chance of winning, that is, the following six (other than Paul): Mitt Romney, Rick Santorum, Newt Gingrich, Rick Perry, Jon Huntsman, and Michele Bachmann. Bachmann dropped out of the race after Iowa and Perry and Huntsman after New Hampshire. Thereafter, Santorum withdrew only after the April 10 primaries and Gingrich held on until May 2. However, in many states – almost entirely primary states – candidates that had withdrawn remained on the ballot and often received significant support. We should expect both of these variables to have a negative influence on Paul’s vote share (for instance, in Virginia, where only Romney and Paul were on the ballot, Paul benefited from tactical voting by supporters of other candidates and received 40%), but in fact the number of candidates in the race had a statistically significant, positive association with Paul’s support (candidates on the ballot has the expected negative association, as shown below). This result is theoretically implausible and apparently simply captures Paul’s otherwise unexplained success in Iowa and New Hampshire. Therefore, in the estimations reported here, I have included solely the variable for number of non-Paul candidates on the ballot.

Next, I included a three-point variable for the extent to which Mitt Romney had clinched the Republican nomination when the primary in question was held. After February 28, it became very unlikely that Romney would lose, as Nate Silver noted here. After April 3, it became a near mathematical certainty that Romney would win. Therefore, the “clinching” variable takes on values of 0.5 for contests held after February 28 through April 3 and values of 1.0 for contests held after April 3.

Finally, I include a variable intended to capture home-state effects for active candidates. It is coded zero for all states except Massachusetts, Georgia, and Texas. For the former two, home states of Romney and Gingrich, respectively, it is coded -1, and for the last, Paul’s home state, it is coded 1. (Santorum dropped out of the race before the Pennsylvania vote, for which reason it is coded zero.)

The dependent variable is rather skewed, as the following histogram shows:

As a result, statistical analysis with this variable revealed the presence of heteroskedasticity, which violates the assumptions necessary for Ordinary Least Squares regression. Therefore, I transformed the variable using the natural log, which gave it a roughly normal distribution and eliminated heteroskedasticity in the regression analysis:

The results of the regression analysis are reported below the fold:
(more…)

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Small-government types have often debated whether the 17th Amendment to the U.S. Constitution, establishing direct election of senators, is in part responsible for the decline of federalism in the U.S. I have long been skeptical of the 17th Amendment repeal movement, because Germany has a system in which states (Länder) elect senators (members of the Bundesrat), and Germany has within a few decades moved from a stronger system of federalism than the U.S. enjoys to a much weaker federalism than the U.S. enjoys. I’ve recently been reading Fiscal Decentralization and the Challenge of Hard Budget Constraints, edited by Jonathan Rodden, Gunnar Eskeland, and Jennie Litvack, and it turns out this arrangement or something like it is more common than I realized — and with even worse consequences.
First, here is Rodden on Germany (p. 174): (more…)

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Harvard economist Ed Glaeser weighs in on federal mandates in general:

Although I am open to having state governments require more health coverage, I fear a federal government with too much power to control individual behavior. The track record of federal interventions in managing markets suggests a strong case for limiting that power.

The question of bestowing appropriate power on the federal government depends not on the health-care issue alone, but on whether you think — on the whole — that the U.S. government does good things when it heavily regulates behavior. The 1942 case that is often cited as a precedent for health care, Wickard v. Filburn, provides the perfect example of why I fear this control….

There are many reasons to leave control over markets, such as health care, to state governments. States have tougher budget constraints, which discipline spending. States can adapt to local tastes, so Massachusetts can have more intervention than Texas. If people don’t like a state’s rules, they can always move elsewhere. Local experiments provide the evidence that can lead to real progress.

I’m not against all health-care mandates, but the history of federal overreach is worrisome, and I’d be happier if the Supreme Court decides that the law limits this ability to manage markets.

I don’t agree with everything in the article, and it’s unclear whether he favors a federal “tax penalty” on the uninsured to replace the “mandate,” or whether this is also something he prefers state governments do, but it’s refreshing to see a clear and sensible articulation for a more thoroughly federalist construction of the Constitution.

(For my part, tomorrow’s decision is ho-hum unless the whole bill is struck down. Community rating, guaranteed issue, rate review (price controls), Medicaid expansion, and the associated tax increases are all a bigger deal for the economy than the individual mandate.)

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One keeps hearing that the euro crisis could doom Obama’s chances for reelection. (Because, after all, that’s the reason we should be concerned about the economy: its effects on politics.) I’m not so sure. Voters are hardly well informed, but if the Eurozone goes into deep recession and the U.S. into a mild one, won’t voters discount economic performance a great deal by looking at the cross-national difference? U.S. GDP growth of about 2% (annualized) right now is mediocre, but compared to Eurozone growth of about zero, it looks pretty good. Powell and Whitten (1993) and Whitten and Palmer (1999) find just this in their cross-national analyses of economic voting: the models do better when you assume that voters deduct OECD growth from national growth when assessing incumbents. No one in the U.S. presidential forecasting game seems to talk about these papers.

So here’s the bleg: Has anyone actually tried doing standard-issue presidential forecasting models with a cross-national growth adjustment? If so, what are the results? I’d find it hard to believe that U.S. voters are all that different from European voters in this respect. If no one’s looked at this, it seems to me that we need to put a firm thumb on the scale in favor of Obama when assessing the forecasts being released now.

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A Win for Federalism

The Defense of Marriage Act, as many of you know, was ruled unconstitutional by the U.S. Court of Appeals for the First Circuit (decision here) and the issue is likely headed for the Supremes. I never liked DOMA and I welcome its demise. Regardless of your view of gay marriage, you have to applaud the court’s support for federalism.

To conclude, many Americans believe that marriage is the union of a man and a woman, and most Americans live in states where that is the law today. One virtue of federalism is that it permits this diversity of governance based on local choice, but this applies as well to the states that have chosen to legalize same-sex marriage. Under current Supreme Court authority, Congress’ denial of federal benefits to same-sex couples lawfully married in Massachusetts has not been adequately supported by any permissible federal interest.

Mark this as a win for federalism. Unfortunately, state’s rights and the recognition (celebration?) of diversity seems limited to the issue of gay marriage. I would love to see the sentiment universalized (e.g., the war on drugs).

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In my last post on this topic, I described an ideal system of federalism and its advantages and disadvantages. One of the concerns that progressives often have about this kind of federalism, which I wish to take seriously, is that it will lead to a growing gap between the incomes of rich and poor regions (such as states in the U.S.). In this post, I’m going to summarize my findings on the empirical evidence on the relationship between federalism and inequality.

What I want to explain here is the extent to which different countries feature regional convergence or divergence in per capita incomes. That is, in some countries rich regions grow faster than poor ones, and in others poor regions grow faster than rich ones. The way to measure that is with the “annual rate of convergence,” which represents the average rate at which the differences in per capita income between a poor economy and a rich economy disappear, all else equal. A figure of 2% would mean that 2% of the average income difference between a rich and poor economy disappears each year. Even when convergence is happening, that does not mean that measured inequality between regions necessarily goes down, because random shocks can intervene (such as oil discoveries or real estate busts). But it’s a key question whether federalism can cause regional economies to convergence faster or more slowly (or even diverge).

Here is how some countries differ in their measured rate of regional convergence over the 1995-2005 period, the longest and most recent period for which consistent data are available (regions are defined as the subnational tier of government enjoying the greatest economic self-rule, which is in turn defined below: states in the U.S., autonomous communities in Spain, provinces in Canada, Laender in Germany, counties in Denmark, etc.):

Some countries actually experience regional divergence, in which richer regions grow faster than poorer ones: Slovakia, Poland, Ireland, Hungary, the Netherlands, and Japan, most notably. The fastest converger in the sample is the European Union (the 15-member EU prior to the entry of the postcommunist states and Cyprus). In other words, the gap between poorer EU states and richer EU states was erased at a 5% annual clip between 1995 and 2005. Much of this remarkable performance had to do with the steep rise of Ireland, but even when Ireland is excluded, the EU is a star performer among these “countries.”

In the chart above, there is no clear relationship between how (more…)

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Tyler Cowen makes the case that a large, inefficient public sector can be a good thing:

we should not be trying to squeeze the entire economy into the shoebox of the dynamic but risky “Economy I.” For public choice reasons, as well understood by Karl Polanyi (an underrated public choice theorist if there ever was one), the polity requires some respite from Economy I, whether we like that or not… Furthermore the more “sluggish” Economy II, by operating under different principles, often serves as a useful R&D lab for Economy I. Think MIT and Stanford, or note that Adam Smith ended up as a customs commissioner, as his father had been. Goethe and Bach worked for governments for much of their lives. It’s about balance and synergy, though it is perfectly fair to see contemporary Western Europe, especially in the periphery, as a region which has far too much Economy II and too little Economy I.

The first point in particular reminds me of Dani Rodrik’s argument for the welfare state under conditions of globalization: the government sector is relatively “safe” and can buffer dislocations due to global markets. Cowen isn’t referring exclusively to the public sector as “Economy II,” since the latter also includes labor-intensive, service-sector occupations, but he does imply here that the university system is a desirable public subsidy in part because it is inefficient and gives researchers respite from the private market.

I never really grasped that argument from Rodrik, and I still don’t. It seems to me that if you want inefficiency as a risk hedge, you could just bury some boxes of money and set fire to some of it in good times, then dig up what’s left in bad times. Less facetious: why not invest in a global equities index? Even better: why not push for globalization as a solution to its own problems? After all, there’s nothing about the economies we live and work in that’s inherently national. I live and work in the Erie County, New York economy. It’s a highly open economy. Why doesn’t Erie County, New York have an even bigger welfare state than the U.S.? Because we can buffer risk by investing in or, in the limit, moving to other parts of the country. So labor mobility and capital mobility are themselves solutions to the very risks posed by globalization of the merchandise trade combined with volatility in the terms of trade.

And you don’t have to set fire to any money.

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From the former head of the Harvard Law Review and sometimes professor of constitutional law (via CNN transcript):

Ultimately, I’m confident that the Supreme Court will not take what would be an unprecedented, extraordinary step of overturning a law that was passed by a strong majority of a democratically elected Congress.

And I’d just remind conservative commentators that for years what we’ve heard is the biggest problem on the bench was judicial activism or a lack of judicial restraint, that an unelected group of people would somehow overturn a duly constituted and passed law.  Well, this is a good example.  And I’m pretty confident that this – this court will recognize that and not take that step.

I don’t know what I find more interesting: (1) the belief that the Court overturning a law would be unprecedented; or (2) the attack on the justices as “an unelected group of people.”

Perhaps the next step will be the Judicial Procedures Reform Bill of 1937 2013.

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The quotation above comes from page 16 of a public finance textbook by Robin Boadway and Anwar Shah (Fiscal Federalism: Principles and Practice of Multiorder Governance, Cambridge UP 2009).

Is that right? Let me throw out just one counterexample: Bates, Markets and States in Tropical Africa.

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Constitutional debates swirling around the PPACA’s individual mandate have much to do with federalism. The core issue the Supreme Court is addressing is whether the federal government has essentially unlimited authority in economic policy, or whether they are yet some areas of economic policy-making (such as whether to compel commerce) exclusive to the states. As someone who believes that constitutions ought to be read according to – I don’t know – what their actual words say, I think the entire act is obviously unconstitutional. Article I, section 8 of the U.S. Constitution permits Congress to legislate in order to “regulate commerce…among the several states.” Thus, Congress has the authority to regulate interstate commerce. Not “anything that might be related somehow to interstate commerce,” plus “anything necessary and proper to any of those things.” Of course, no one on the Supreme Court, except perhaps Clarence Thomas on issues like this one, shares my judicial philosophy.

Putting the constitutional issues to one side, however, I want to address the desirability of the kind of federal system that classical liberals — and, perhaps, Justice Thomas — favor. We can summarize that federal system as follows:

  1. The primary regulatory authorities in the country are state and local governments.
  2. The economic role of the federal government is to ensure a common market: to prevent states from levying barriers to the free flow of goods, services, people, and capital, from tariffs to invidious regulations to local preferences in government procurement.
  3. The national court system protects basic human rights and civil liberties from infringement by federal, state, and local governments.
  4. State and local governments fund their activities almost exclusively out of their own resources. The federal government should not, in general, provide grants to state and local governments.
  5. State governments are politically autonomous, constitutionally sovereign, and independently elected. They may legislate freely within the bounds expressed above.
  6. State governments are permitted to form compacts to deal with externalities. For instance, states may choose to adopt uniform regulations on insurance so that companies can sell the same product in multiple states with a quicker approval process. Because states retain their sovereignty, they are free to enter and withdraw from such compacts at any time.

OK – so what are the arguments against this kind of system? (I go over some of the arguments and evidence in favor here.) One common objection to “states’ rights” is that state governments may violate the civil rights of some of their citizens. I share this concern, one reason I don’t think the term “states’ rights” is appropriate for my position; nevertheless, the concern is addressed with point 3 above. Another objection might be that problems like pollution and endangered species can cross state boundaries. Given a sufficiently small number of states, however, I do not see why they cannot contract with each other to solve their commons problems. What else?

There are two concerns about fiscal federalism that many progressives share that I take seriously: that inter-jurisdictional competition under federalism will undermine the welfare state, and that the system will lead to greater inequality among regions. The first concern (more…)

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The long war is hemorrhaging support among the public. As the NYT reports, a new NYT/CBS poll provides some rather striking evidence:

The survey found that more than two-thirds of those polled — 69 percent — thought that the United States should not be at war in Afghanistan. Just four months ago, 53 percent said that Americans should no longer be fighting in the conflict, more than a decade old.

Even National Review seems to be souring on the war, if a post from today’s Corner is any indication. As Michael Walsh observes:

This is not a Good War….It’s time to wrap up this decade-long farce, time for both civilian leaders and military brass to take a long, hard look at the demoralizing mess we’ve made in Afghanistan, and to ask how America can avoid such mistakes in the future.

Walsh goes on to derive several lessons (all of which were apparent to many of us long ago and were reinforced by our time in Iraq) and concludes:

There was nothing wrong with going into Afghanistan in the first place. The Taliban was sheltering Osama bin Laden, and it was there that the 9/11 plot was hatched. The U.S. was right to mount a punitive expedition and remove the Islamic radicals from power — a mission that was quickly accomplished, thanks to a daring, special-ops-led military strategy that quickly routed the fundamentalists.

And that should have been that. We should have declared mission accomplished, pulled out, and left the Afghans to their own devices. It never should have morphed — under both George W. Bush and Barack Obama — into a fruitless exercise in tea-brewing. Some backwaters will always be backwaters, and deservedly so.

I almost feel as if I just read a quote from a decade-old issue of the American Conservative or, for that matter, a Ron Paul speech circa 2002.

Returning to the poll results above, one might dismiss them as a short-term reaction to the recent events in Afghanistan. Or one might, following Michael E. O’Hanlon, (the Brookings Institution) and attribute the low levels of support to the ignorance of citizens. In his words (from the above cited NYT article):

“I honestly believe if more people understood that there is a strategy and intended sequence of events with an end in sight, they would be tolerant…The overall image of this war is of U.S. troops mired in quicksand and getting blown up and arbitrarily waiting until 2014 to come home. Of course you’d be against it.”

Perhaps. But it may also be the case that after more than a decade of war and nation-building, citizens have finally had enough.

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David Corn’s soon-to-be released new book Showdown examines the pivot to address deficits in the summer of 2010-11. Many Democrats were bewildered that the administration would move on to the GOP’s turf and begin addressing the problem of deficits and debt (one might pause for a moment and ask whether there is any empirical evidence to suggest that the GOP—or either of the major parties—can make a claim to being the party of fiscal responsibility).  After all, there were many on the left that were making a powerful argument that the stimulus was insufficient and now was not the time to move to anything remotely resembling austerity (one might pause again and ask how reducing the pace of expansion can be cast as austerity, but again, I digress).

The answer, as revealed in some excerpts in Greg Sargent’s Plum Line (WaPo) was strictly poll driven:

Plouffe was concerned that voter unease about the deficit could become unease about the president. … voters needed to know — or feel — that the president could manage the nation’s finances. The budget was a test of government competence — that is, Obama’s competence.

And on a meeting of February 2011:

With Sperling sitting in on the presentation, Garin reinforced the White House view that Democrats had to up their game on deficit reduction. His firm had conducted extensive polling and focus groups. He told the senators that voters saw jobs as the most pressing priority. This might seem to support those Democrats who believed Obama had gone too far overboard on the deficit-reduction cruise. But when asked what the president and Congress should do to boost job creation, most voters said reduce the deficit and the debt. They had imbibed the GOP message; the problem with the economy was governmental red ink.

What I find particularly disturbing—even if unsurprising—is the following:

  1. We have an extraordinarily devastating problem: the slow pace of recovery and job creation.
  2. Those with a seat at the table understand the problem in Keynesian terms. They have a clear understanding of causality grounded in Keynesianism and a set of clear policy prescriptions that are drawn from theory.
  3. They nonetheless cast aside these policy prescriptions because—drum roll—voters embrace a faulty understanding of the economy and assume that deficits lead to unemployment.  They will not buy anything the Democrats have to say about the recovery if they do not believe that the administration is committed to deficit reduction.

Note: I am not concerned here with whether Keynesianism provides the best guidance to economic policymaking. Rather, it is the willingness of elected officials to embrace policies that they believe will be counterproductive simply because it sells before focus groups.

As Edmund Burke noted when arguing that representatives should be trustees rather than mere delegates: “Your representative owes you, not his industry only, but his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.” One would only wish that elected officials of both parties would spend less time with focus groups and more time with Burke, at least when thinking about representation.

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For all the usual association of independence movements with violence and “separatism,” the fact is that secessionist movements in liberal democracies usually pursue their aims peacefully, through the democratic process, and central governments resolve not to use military force to prevent secession authorized by a democratic vote (imagine that!). Such is the case in Scotland, where a referendum on independence is to be held within the next three years.

Given that sending Her Majesty’s Armed Forces north of Hadrian’s Wall is simply not on offer, responsible politicians from all British unionist parties are starting to mull openly significant powers for Scotland. The Prime Minister himself has promised a semi-federal union for Scotland if they rejected independence, and business-funded think-tank Reform Scotland and Labour politician Alistair Darling are also on record as supporting substantial fiscal powers for Scotland. The reason such decentralization might be salutary is not only that it might preserve the union (if one believes that should be a goal), but that it moves the UK closer to the principle that each level of government should pay its own way: true fiscal federalism. Of course, for fiscal federalism to work as it ought, you need more than an autonomous Scotland (and Wales and Northern Ireland). You need English local governance to be comprehensively reformed as well.

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Secessionism

My first book, Secessionism: Identity, Interest, and Strategy, has been released by McGill-Queen’s University Press. Secessionism is the first comprehensive, empirical study of the causes and consequences of contemporary secessionist movements worldwide. It also has a normative component, as I interpret from the empirical results a case for “legalizing secession” in order to reduce the incidence of violence.

Anyone who orders the book before August 31, 2012 should do so at the press’ website and use the coupon code “SORENS12″ at checkout for 20% off.

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Will global climate change increase resource-based conflicts around the world? Journal of Peace Research has a special issue on the topic, looking at how weather variability has already influenced the rate of conflict. The issue is free to the public until the end of February. Most of the studies find that weather variability does not cause conflict. Indeed, the horrific Indian Ocean tsunami of 2005 actually led to a quick, apparently durable peace agreement between secessionist rebels in Aceh and the Indonesian government. Here’s the abstract from the introductory essay by editor Nils Petter Gleditsch:

Until recently, most writings on the relationship between climate change and security were highly speculative. The IPCC assessment reports to date offer little if any guidance on this issue and occasionally pay excessive attention to questionable sources. The articles published in this special issue form the largest collection of peer-reviewed writings on the topic to date. The number of such studies remains small compared to those that make up the natural science base of the climate issue, and there is some confusion whether it is the effect of ‘climate’ or ‘weather’ that is being tested. The results of the studies vary, and firm conclusions cannot always be drawn. Nevertheless, research in this area has made considerable progress. More attention is being paid to the specific causal mechanisms linking climate change to conflict, such as changes in rainfall and temperature, natural disasters, and economic growth. Systematic climate data are used in most of the articles and climate projections in some. Several studies are going beyond state-based conflict to look at possible implications for other kinds of violence, such as intercommunal conflict. Overall, the research reported here offers only limited support for viewing climate change as an important influence on armed conflict. However, framing the climate issue as a security problem could possibly influence the perceptions of the actors and contribute to a self-fulfilling prophecy.

Erik Gartzke notes that if knee-capping development in middle- or low-income countries is the price of preventing climate change, it is those policies to address climate change that will produce conflict, since development is associated with peace:

The analysis here also suggests that efforts to curb climate change should pay particular attention to encouraging clean development among middle-income states, as these countries are the most conflict prone. Ironically, stagnating economic development in middle-income states caused by efforts to combat climate change could actually realize fears of climate-induced warfare.

If curbing carbon emissions is indeed the only way to stop drastic climate change (natural forcings don’t continue to counteract the human effect, and geoengineering doesn’t work), this argument suggests a possible rationale for having high-income countries pay the biggest initial price.

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Scotland’s upcoming independence referendum has been in the news in Britain. The Scottish government wants to hold the referendum in 2014, but UK Prime Minister David Cameron has said that Westminster holds ultimate control over the wording and timing of any legally binding referendum and wants to hold the referendum sooner.

Another point of contention is whether the referendum question should include two or three options. The SNP government in Scotland is open to a three-question (status quo, independence, or “devo max“) referendum, while the Conservative-Liberal Democrat coalition government in the UK wants a two-question (in or out) referendum. The apparent worry from Westminster is that a three-option referendum could split the unionist vote and allow independence to win with a bare plurality (say, 40% for independence and 30% each for status quo and devo max). Here is a debate among British political prognosticators about what will happen.

The solution to the problem is simple: (more…)

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