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Libertarians often bemoan the expansion of the federal government over the centuries and cite Thomas Jefferson’s quotation, “The natural progress of things is for liberty to yeild [sic], and government to gain ground.” Of course, there have been important advances for liberty in the U.S. in the 20th and 21st centuries too, yet overall, government’s impact on the economy has increased dramatically. In his book, The Rise and Decline of Nations, political economist Mancur Olson theorized that the simple passage of time permitted the accretion of more and more interest groups (“distributive coalitions”), who would lobby government to increase their share of the economic pie at the expense of the total size of the pie. Therefore, more stable societies would see relative economic decline.

I have always been skeptical that the mere passage of time was an important predictor of interest-group power and bad economic policy. Indeed, all of Olson’s data came from the post-World War 2 period, and he had good things to say about France and Japan, particularly in relation to Britain, that do not ring true 30 years after he wrote the book.

However, as I investigate the economic history of early modern Europe, I am struck by what looks like a “law of political entropy,” that is, a tendency for relatively “associational” governments that act as agents for the taxpayer to become ossified, oligarchic, “predatory” states that exploit the taxpayer. Consider the Dutch Republic and Switzerland, probably the two most “associational” states in early modern Europe.

During the Dutch Golden Age, the highly decentralized federation acted as an agent of the provinces, who in turn were federated associations of the towns. The towns were ruled by the principal merchants. There was a semi-hereditary “stadtholder” position at the central level, demanded by the monarchical ideology of the day, but the real political power lay with the great taxpayers.In fact, during the period of the Republic’s most rapid economic growth, there was no stadtholder, just an elected “grand pensionary,” the proto-liberal Johan de Witt, who supported free trade, republicanism, and religious toleration, opposed imperialism and military meddling, and strongly endorsing the doctrine of provincial (and town) sovereignty over Republic-level control.

Unfortunately, after the French and English launched a combined sneak attack on the Republic in 1672, de Witt was overthrown and lynched, and the stadtholders returned. Although the Dutch escaped that war with their independence, over time the political system became more ossified, and by the end of the 18th century English GDP per capita had caught up with Dutch. According to Wikipedia,

At first the lower-class citizens in the guilds and schutterijen could unite to form a certain counterbalance to the regenten, but in the course of the 16th, 17th and 18th century the administration of the cities and towns became oligarchical in character, and it became harder and harder to enter their caste. From the latter part of the 17th century the regent families were able to reserve government offices to themselves via quasi-formal contractual arrangements. Most offices were filled by co-option for life. Thus the regent class tended to perpetuate itself into a closed class.

Similarly, Switzerland started off as an extremely loose confederation of republican cantons in the late Middle Ages (individual cantons could even declare war). The cantons themselves were originally established by peasants who had thrown out the Habsburg aristocracy, winning a bloody victory over their knights at the Battle of Morgarten:

When the Confederates attacked from above with rocks, logs and halberds, the Austrian knights had no room to defend themselves and suffered a crushing defeat, while the foot soldiers in the rear fled back to the city of Zug. About 1,500 Habsburg soldiers were killed in the attack. According to Karl von Elgger, the Confederates, unfamiliar with the customs of battles between knights, brutally butchered Continue Reading »

Having finally turned the corner on a brutal, 11-day (and counting) cold, I feel up to getting back to my blogging routine. First up: a followup to last month’s post, “Why So Little Decentralization?”

To review, that post posed a puzzle (a problem for political scientists to ponder, you might say). The puzzle is this: developing countries are far more centralized than developed countries. That is so despite the fact that some developing countries are much larger and more diverse than developed countries, and many of them have now been democratic for quite some time. Furthermore, if decentralization were simply a relict of post-medieval state-building (some might venture that sort of claim about Switzerland, for instance), then the fact that developing countries have lower state capacity and a more recent independence than almost all developed countries deepens the puzzle.

I went through two explanations that do not actually explain the puzzle very well: shallow local talent pools and illiberalism. In particular, they cannot explain why developing countries are often very decentralized along some dimensions (allowing discrimination against goods and workers from other regions, linguistic and cultural rights, etc.), but not others (chiefly tax policy).

I think there are two explanations that actually work: secession prevention (in ethnic federations) and excessively personalist electoral systems (in nonethnic federations). In this post I’ll talk about secession prevention.

Some developing democracies are ethnoregionally diverse, that is, they contain minority ethnic homelands that could form the basis of independent states. Examples include Continue Reading »

The Empirical Record

 

The Census Bureau is changing its annual survey, making it difficult to measure the impact of the Affordable Care Act. As the NYT reports:

 

An internal Census Bureau document said that the new questionnaire included a ‘total revision to health insurance questions” and, in a test last year, produced lower estimates of the uninsured. Thus, officials said, it will be difficult to say how much of any change is attributable to the Affordable Care Act and how much to the use of a new survey instrument.’

And

The questionnaire traditionally used by the Census Bureau provides an “inflated estimate of the uninsured” and is prone to “measurement errors,” said a working paper by statisticians and demographers at the agency. In the test last year, the percentage of people without health insurance was 10.6 percent when interviewers used the new questionnaire, compared with 12.5 percent using the old version. Researchers said that they had found a similar pattern in the data for different age, race and ethnic groups.

So, just to get things straight…the old questionnaire was acceptable when it overstated the magnitude of the problem. It is abandoned following reform so that it will be difficult to assess the impact of the Affordable Care Act against the historical data set. As Frederick Fleet might have said: “Didn’t see that one coming.”

Update: For an interesting piece on disappearing data, read Robert Samuelson (“Give Us Back Our Statistical Data”) in WaPo.

 

 

 

The Congressional Budget Office has released its updated budget projections.

Good news:

CBO now estimates that if the current laws that govern federal taxes and spending do not change, the budget deficit in fiscal year 2014 will be $492 billion. Relative to the size of the economy, that deficit—at 2.8 percent of gross domestic product (GDP)—will be nearly a third less than the $680 billion shortfall in fiscal year 2013, which was equal to 4.1 percent of GDP. This will be the fifth consecutive year in which the deficit has declined as a share of GDP since peaking at 9.8 percent in 2009.

Bad news:

But if current laws do not change, the period of shrinking deficits will soon come to an end. Between 2015 and 2024, annual budget shortfalls are projected to rise substantially—from a low of $469 billion in 2015 to about $1 trillion from 2022 through 2024—mainly because of the aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt. CBO expects that cumulative deficits during that decade will equal $7.6 trillion.

Bottom Line: Few legislators read the CBO’s documents. Fragments are cherry picked and appended to talking points when convenient. But the larger argument that the CBO, the GAO and the OMB have been making consistently for the past decade is met with silence.

For an overview of the CBO’s budget projections, see the National Journal.

Montreal talk

Tomorrow (Friday) at 5 PM, I will be at McGill University in Montreal to give a talk on “The Ethics and Economics of Secession.” All are welcome. Here are additional details:

Jason Sorens PhD, the founder of the Free State Project will be in Montreal for a guest lecture at McGill.

The event is an initiative of the Youth for Liberty (Jeunes pour la Liberté) group, the local chapter of Students for Liberty.

The event is co-sponsored by McGill’s Research Group in Constitutional Studies (RGCS).

The topic for this guest lecture will be:
“The Ethics and Economics of Secession”

Address
McGill University: Ferrier Building
840 Dr Penfield Avenue
Montréal, QC H3A 1A4

Room
Ferrier 456

Time Sink

The Sunlight Foundation has released a wonderful program (Capitol Words) that allows one to chart the number of times that members of the House and Senate have used specific words on the floor. You can chart the number of occurrences by party (try “debt” and see that both parties are concerned about the debt, albeit only when the president is from the other party). You can also compare different words (try “Koch” and “Benghazi” for example). I only wish that one could save the charts. H/t  Shane Goldmacher.

 

 

 

Bill Clinton is often quite a delight as ex-president, free to opine on a variety of subjects without being confined by anyone’s talking points. Case in point: his comments on Edward Snowden delivered before the Naval Academy earlier this week. As reported by Dustin Volz (National Journal):

“Mr. Snowden has been sort of an imperfect messenger, from my point of view, for what we need to be talking about here,” Bill Clinton said during a 50-minute speech at the Naval Academy in Annapolis, Md. “The Snowden case has raised all of these questions about whether we can use technology to protect the national security without destroying the liberty, which includes the right to privacy, of basically innocent bystanders.”

And

“We cannot change the character of our country or compromise the future of our people by creating a national security state, which takes away the liberty and privacy we propose to advance,” Bill said Wednesday, adding, “Don’t kill the goose that laid the golden egg.”

I am assuming many would disagree with his statements, including the former Secretary of State and the current President. But this appears not to trouble him in the least. Give him a podium and he will speak (and speak). That is the unbearable lightness of being Bill Clinton.

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