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Today the Parliament of Catalonia declared independence from Spain, a move Spain declares illegal. It is the first contested independence declaration in Western Europe since Sinn Fein declared the Irish Republic in 1919.(*)

In an effort to understand the positions of both sides, I have created a dialogue between two imaginary characters, both Catalan. Gemma is for independence, and Toni is against. I’m not recreating the most commonly heard arguments for and against independence, but rather what I regard as the most plausible arguments on both sides. I hope that this exercise helps some readers understand the key arguments, but I also look at this as a learning opportunity for me as the author. What have I left out or gotten wrong? Who is more persuasive?

The Right to Decide

GEMMA: Surely, Toni, you concede that the people of Catalonia have a right to decide their own political future. Eighty percent of us wanted a binding referendum on independence, and that is what the Parliament has tried to give us.

TONI: I am not opposed to a binding referendum on independence, but then there is the little matter of the Spanish Constitution, which declares the country “indivisible.” Puigdemont’s referendum was illegal, and its results are of no validity.

GEMMA: Fighting the Nazis was also “illegal” in Germany. An unjust law is no law at all.

TONI: Germany was not a democracy in the 1930s. Spain is.

GEMMA: The U.S. was a democracy in the 1950s, but it discriminated against African-Americans. The civil rights movement’s sit-ins and protests were often illegal, but weren’t they morally justifiable?

TONI: I agree. But Catalans are not discriminated against today in the way that African-Americans were.

GEMMA: I don’t claim that we are. But we still have a right to decide our political future, and it is wrong for Spain to deny us that, constitution or no.

TONI: The right to self-determination is not an individual right like freedom of expression or the right to vote; it’s a collective right and therefore subject to far stricter limits. Your right to secede infringes on the rights of others who do not want secession. Like me.

GEMMA: That’s the reason why we have to be guided by the opinion of the majority. If we must force some people to go along against their will, it’s better to force the few than the many.

TONI: But do the majority of Catalans want independence? I deny they do.

GEMMA: We’ll talk about that later. Let’s focus on the question at hand: if the majority of Catalans do want independence, is it not morally acceptable for them to claim it?

TONI: Making such a big change on the basis of 50% plus one votes is a dubious proposition at best. And this is not the best of circumstances, in fact. Declaring independence now means breaking Spanish law and inviting economic and political disorder. Even when you have justice on your side, it is prudent and wise to exercise your rights in a careful and cautious fashion. That is not what the Catalan Government is doing.

GEMMA: I don’t understand why the status quo should be privileged here. If a majority of the voters clearly express their will to gain independence, forcing them to go along with the minority causes more disorder and more injustice than moving forward with independence. And the economic and political disorder is the fault of Spain, not the Catalan Government.

TONI: Now it’s you who are straying from the topic. Look, I don’t think we are all that far apart here. I favor a right to decide, although I would prefer a threshold like 52.5% or 55% for independence, not 50% plus one. I might even be willing to concede that denying the right to decide is unjust, but I nevertheless maintain that it is a small, almost trivial injustice.  Furthermore, you deny the right to self-determination to your own minorities.

GEMMA: The Catalan Government has recognized the right of the Aranese to independence or rejoining Spain. Our treatment of minorities within Catalonia is exemplary.

TONI: But what about L’Hospitalet de Llobregat? A large majority of people there oppose independence. Should they not have the right to rejoin Spain?

GEMMA: Perhaps, eventually. But look, the Catalan Government envisions allowing dual Spanish-Catalan citizenship after independence. So no one is going to be forced to give up Spanish citizenship and all its rights and privileges.

TONI: You’ll still have to pay taxes to the Catalan state.

GEMMA: As we do now to the Spanish one. It doesn’t make sense to strain at gnats and swallow camels here: Catalonia is indisputably more liberal toward its national minorities than Spain is.

TONI: The point is that if a majority of Catalans support independence (which I deny), it’s an extremely small and tenuous majority, and even if there is a right to decide on independence, it can be unwise and imprudent to stand upon your rights.

GEMMA: As for the wisdom and prudence of the independence declaration, we can discuss that later. But since we don’t disagree very much on the right to decide, let’s get to the real issue: whether Catalonia ought to become independent or not.

Catalonia’s Political Status

TONI: Catalonia is currently one of the most autonomous regions in Europe. Spain is an advanced democracy. Catalan is widely and freely spoken within the region. Our economy is prosperous. Why should we ruin a good thing by chaotically leaving Spain?

GEMMA: Because Spain is not really a free country, and Catalonia doesn’t really enjoy the autonomy you say we do. Look at the Regional Authority Index: Catalonia enjoys a lower self-rule score than the Canadian provinces, the Swiss cantons, the Faroe Islands, Greenland, Aland, U.S. states, Republika Srpska, Mount Athos, Australian states, Canadian territories, German Laender, Italian regions, the Azores, Madeira, Navarre, Puerto Rico, District of Columbia, Sarawak, Sabah, and the states of Mexico.

TONI: But it still enjoys a higher self-rule score than French regions and on par with the Austrian Laender, Belgian regions, Argentine provinces, and Brazilian states — those four are federal countries!

GEMMA: But even the autonomy we do have is a sham, because the Constitutional Court is controlled by the central government. The World Economic Forum survey shows Spain has less judicial independence than China, Tajikistan, Azerbaijan, and Kenya, never mind other European states. It’s no surprise then that the courts always rule against Catalan autonomy. We can’t have true self-government if the Spanish state can always reinterpret it according to its own desires.

TONI: Judicial reform is a great idea. Why don’t we work toward that rather than independence? You could build a broad coalition across Spain for that reform. The problem with secession is that it avoids problems rather than confronting them. If Catalonia actually does become independent, it will make constitutional reform in Spain even more difficult.

GEMMA: Isn’t that like defending immigration restrictions on the grounds of preventing “brain drain”?

TONI: How so?

GEMMA: If it’s wrong to force doctors and engineers to live in poor, authoritarian countries because we want them to do good there, isn’t it also wrong to force me to continue to be a Spanish subject just so that I can be a vote for constitutional reform?

TONI: Who’s talking about forcing? This is a total red herring. I support your right to decide, but I deny you ought to decide in favor of independence. The costs outweigh the benefits, and one of those costs will be a less free Spain.

GEMMA: Independence might actually teach Spain a lesson and cause them to become freer in future.

TONI: Come on.

GEMMA: No, seriously. You can’t defend the behavior of the Spanish state in Catalonia recently, can you?

TONI: No, but the five people who went to the hospital after the police charges hardly constitute a wave of authoritarian repression.

GEMMA: What about the “Jordis” held in prison without bail? What about the websites shut down? What about the cyber attacks against the Catalan Government? What about the newspapers ordered not to print referendum notices? Don’t these acts violate the Spanish Constitution just as much as the Catalan Government’s acts?

TONI: They acted foolishly; they should have let the referendum go ahead and then just refused to recognize its legitimacy. I don’t defending holding Cuixart and Sanchez without bail, but it’s appropriate to investigate them for organizing a demonstration that trapped police in a building while they were merely performing their duties.

GEMMA: This sort of popular resistance is what you can expect if you unleash a campaign of repression. But earlier you decried the Catalan Government for breaking the law, and now you seem inclined to excuse the Spanish Government’s doing the same as mere “foolishness.”

TONI: I put them more or less on the same level, although I will note that most of the orders against websites and so on came from judges, not ministers. Presumably they know the law better than you or I.

GEMMA: Now we’re back to the problem of the judiciary in Spain.

TONI: Look, the bottom line here is that I believe Spain is reformable and you do not.

GEMMA: I have good reason to think Spain is unreformable. There are hostile, implacable majorities to Catalan self-government in the rest of Spain. The vast majority of Spanish voters oppose reforming the constitution to allow a binding referendum on self-determination or to create a federation. There is no political path forward here.

TONI: If Podemos won the next election…

GEMMA: …Which won’t happen.

TONI: Okay, but maybe they would do well enough to form a coalition with the Socialists and, say, the PNV, and get the process started.

GEMMA: Now you’re dreaming.

TONI: It could happen, but only if we stay in Spain and make the case. Persuasion is the way to go, not just leaving. Once you leave, you can’t go back.

GEMMA: Actually, we could. Independent states have joined together before. Look at how the German states came together to form Germany in the 19th century, or the American colonies joining together in the 18th.

TONI: It won’t happen here. There is so much bad blood now because of this independence process that Spain and Catalonia will be adversaries for years to come. And that’s bad news for us, because we need their support to get into the EU.

GEMMA: That bad blood isn’t our fault. If it weren’t for the independence process, the same Spanish mentalities that have brought about this campaign of repression would have hurt us in the future for one reason or another. If Spain wants to keep us by force, what does that say about their intentions toward us?

TONI: It says nothing about their intentions, but about their conception of the Spanish nationality.

GEMMA: If you had a girlfriend who told you that she would beat you violently if you ever tried to leave her, wouldn’t that make you want to leave her more?

TONI: Bad analogy. Spain and Catalonia are groups of people, not individuals.

GEMMA: But the basic point carries through: if Spain is willing to use force to stop us from self-determination, they want to have the power to exploit and abuse us.

TONI: Stop collectivizing “Spain.” Plenty of Spanish people do not want to use force against us.

GEMMA: But most do.

TONI: Now we’re arguing in circles. Let’s move on to the economic problems of an independent Catalonia.

Catalonia’s Economic Status

GEMMA: What you call “problems” I call opportunities. Right now Catalonia pays about 8% of its GDP every year to the rest of Spain. Despite being the economic powerhouse of the country, public spending per person is actually lower in Catalonia than the rest of Spain. That’s fiscal exploitation, and we will get an immediate economic boost from independence.

TONI: I say that figure is closer to 5% of GDP than 8%, but whatever. I don’t deny that there are selfish reasons behind independence, but I’m against selfishness as a political agenda. It’s our duty as a well-off region of Spain to help the less well-off parts of the country.

GEMMA: It’s not selfishness, it’s basic fairness. We work harder and pay higher prices for things, but we don’t get to reap the rewards.

TONI: I agree that the regional fiscal formula should take cost of living into account, and we would get some more public funds if that were the case. I even think Spain ought to give the autonomous communities more taxing powers. But you can do that without independence; look at the Basque Country and Navarre as possible models for Catalonia (“Concierto”).

GEMMA: But how do we get the Spanish Government to agree to a Concierto for Catalonia?

TONI: I don’t know, but certainly not by violating the Constitution and declaring independence.

GEMMA: The issue of how to negotiate with Spain is really separate. All I want you to concede here is that if Catalonia became independent, all else equal, our economy would be healthier – right?

TONI: Are you assuming Catalonia stays in the European Union? Because that’s far from guaranteed.

GEMMA: I said “all else equal,” so yes.

TONI: Well, by that definition I would have to concede it. But I don’t think we should just care about the economy of Catalonia; I care about the fate of our fellow Spaniards.

GEMMA: So do I, but that doesn’t mean I must be in political union with them. If fairness requires that Catalonia give 8 or 5% of its GDP to Spain every year, doesn’t it also require that Spain give 5 or 8% of its GDP to Morocco? In fact, if this is an argument against Catalan independence, isn’t it also an argument against Spanish independence? Shouldn’t Spain politically unify with Morocco? Then it could help the citizens of Morocco quite a lot.

TONI: I’m not sure Morocco would like that. Too many Spaniards; it would be colonialism all over again.

GEMMA: Well, India then! Indians could well and truly outvote Spaniards. Spain could be an Indian colony. That’s only fair, by your logic, isn’t it?

TONI: The question of foreign aid is a difficult one. We should be giving foreign aid to India, but that doesn’t mean we need to be politically unified with them.

GEMMA: Then Catalonia can give aid to Spain without being politically unified with it.

TONI: Of course. I’m just pointing out that if some aid is to continue after independence, the economic case for independence is less than it seems at first sight.

GEMMA: Fair enough. But there is still a substantial case for it, especially when you take into account the opportunity to get away from Spain’s corruption and wasteful public spending on Pharaonic projects.

TONI: Catalonia is not much less corrupt than the rest of Spain. Just look at the corruption in the old Convergence and Unity party. How many of the politicians in today’s (pro-independence) Democratic Party of Catalonia were involved in corrupt contracting practices?

GEMMA: As far as you or I know, no one. You can’t seriously dispute that Catalonia is less corrupt than Spain.

TONI: It’s a very near thing as far as I can see. And Catalonia has plenty of wasteful public spending too. We have one of the highest debt-to-GDP ratios among all autonomous communities.

GEMMA: The reason for that was the incentives set up by the old system. With the central government footing the bills, all the autonomous communities spent wastefully. Independence offers us an opportunity to get away from the old way of doing things.

TONI: Even if that’s true, it shows that there is nothing inherently virtuous about the Catalan political system or the nationalist parties currently running the government. Let’s talk about something much bigger than these considerations: the European Union and World Trade Organization. Independentists have tried to mislead us for years about the prospects for Catalonia’s joining the EU. Accession would not be automatic, and Spain will never allow it. Being outside the WTO will be even worse. Catalonia is a small, trade-dependent economy. The tariffs our goods will face will crush our export industries. These effects alone could be larger than the 8% of GDP you say our net fiscal transfers to Spain represent.

GEMMA: No one denies there will be short-run costs to independence. The long-run benefits are larger. If Spain is willing to harm Catalans by keeping us outside the EU after independence, they will also be willing to harm us when we are under their thumb. At least independence lets us negotiate with other European countries as an equal. WTO membership will happen relatively quickly. Also note that as long as other countries do not recognize Catalonia’s independence, our goods will have access to European and global markets on the same terms as Spanish goods. There is no reason recognition of our independence and accession to the WTO and EU could not happen around the same time.

TONI: It’s odd, you have to admit, for independentists to hope that Catalonia’s independence is denied recognition so that Catalonia’s citizens are still treated as if they were Spanish citizens. If Catalonia is denied recognition, other European countries are not going to negotiate with Catalonia as an equal. You cannot have it both ways: all the rights and benefits of independence but none of the duties and costs. The short-term costs of secession could be huge. Just look at all the businesses moving out of Catalonia.

GEMMA: Those businesses are just moving their headquarters, not their actual operations. It’s for legal reasons, such as access to European Central Bank bailouts.

TONI: Actually, some executives of companies are moving too, and statistics I’ve seen show tourism to Barcelona is down.

GEMMA: Over the long run, tourism will rise because Catalonia’s profile will rise as a destination when we’re an independent state.

TONI: That’s just speculation.

GEMMA: Independence is only risky and costly because the Spanish Government is making it so. If they were willing to negotiate, independence could be seamless and efficient, like Czechoslovakia’s Velvet Divorce.

TONI: But they’re not, and we have to deal with reality as it is.

GEMMA: The more Spain punishes Catalonia for the independence process, the more desirable independence becomes, because the more obvious it becomes that Spain is willing to harm Catalans for its own political purposes. The choice is between being ignored, exploited, and trampled forever or suffering those costs all at once for a chance at living free and prosperous forever.

TONI: Even if you support independence, which I do not, you cannot endorse the manner in which it is being pursued. What ever happened to common sense and good judgment? A unilateral declaration of independence is a terrible idea. We Catalans are about to lose everything we have worked for since the 1978 transition, including the self-government we currently have. Spain may even ban independentist parties.

The Declaration of Independence

GEMMA: What was the alternative? Simply submitting and accepting punishment and humiliation? Spain was imposing direct rule even before Puigdemont called the session to declare independence.

TONI: It should never have gotten this far. After October 1, Puigdemont should have called off the process, because the referendum was not held in free and fair conditions. It gave no mandate for independence even if you take the result at face value.

GEMMA: Whose fault was that? Not the Catalan Government’s. They had everything in place for a regular, legal vote, until the police intervention.

TONI: Even without the police intervention, many Catalan voters would have boycotted.

GEMMA: Still not the Catalan Government’s fault. Should we be held hostage to a boycotting minority? That’s not how democracy works.

TONI: They’re not the minority. May I remind you that only 42-43% of the eligible electorate voted on October 1. And on November 9, 2014, only 37% voted. Neither vote can be considered representative. Every poll by the Center for Opinion Studies since July 2016 has shown more Catalans opposed to independence than in favor. And in the “plebiscitary elections” of September 27, 2015, independentists won only 47% of the vote. The declaration of independence is undemocratic and illegitimate.

GEMMA: I’ll take your points one by one. First, the police violence of October 1 undoubtedly suppressed turnout, and the 9N2014 consultation was nonbinding, which also depressed turnout. Let’s assume that an agreed referendum could have gotten 75% turnout on October 1, a huge number. Even if every single one of those additional voters voted no, the pro-independence vote would still outnumber the anti-independence vote. And support for independence has only grown since the police violence of that day. Polls are volatile and often biased. Elections are the only way to secure democratic legitimacy. In the 2015 election, support for independentists outnumbered support for unionists. The balance was provided by parties with no position on the issue, like the Pirate Party and Catalonia Yes We Can.

TONI: And Catalonia Yes We Can opposes the declaration of independence. I would wager that most of their voters oppose independence. So the implications of the 2015 election are not as clear as you think they are. Even if a majority of Catalans support independence right now, that could easily change. Such a slender, ephemeral majority is hardly the basis for such an important step.

GEMMA: What choice does the Catalan Government have? They have tried everything to gauge the will of the Catalan people. After the massive independence demonstrations of 2011, they held an election on a platform of beginning the self-determination process. The pro-sovereignty parties won the 2012 election with 50% of the vote. They repeatedly tried to negotiate a referendum with Spain, which is not banned by the Constitution. Rajoy repeatedly rejected those overtures. Then they tried to do their own referendum, which because of court rulings was downgraded to an informal consultation run by volunteers. Independence won that vote. No one forced anti-independence voters to boycott. Then the plebiscitary elections were held. Independence won again. Finally, the October 1 binding referendum confirmed that result. Every time independence has been tested at election, it has won. If opponents of independence want to stop the process, all they have to do is win one, single, solitary Catalan election. That they cannot do. Now exercising our right of self-determination cannot be conditional on a thug’s veto, that is, Spain’s violent disruption.

TONI: We anti-independence voters boycott these fake referendums because they are illegal. It is pointless to participate in them. If Puigdemont were so sure of a pro-independence majority today, why didn’t he call elections?

GEMMA: Because the process has been going on for more than five years now. It is time to bring it to a conclusion.

TONI: You have to deal with the world as it is, not as you wish it to be. Even Andreu Mas-Colell says Catalonia cannot have real independence right now. There is no question of having territorial control. Spain will intervene and crush the independence movement, rule Catalonia directly, and call new elections. Independentist parties will either boycott these elections or be banned, and unionists will govern Catalonia. Catalan public media, schools, and police will be purged of independence supporters. The Catalan immersion program in our schools will be abolished in favor of Castilianization. This is all a disaster from your perspective as well as mine. Is all this theater of independence declarations and singing “Els Segadors” in the streets really worth that political reality?

GEMMA: The fact that the Catalan Government does not have territorial control does not mean that the Spanish Government does. We saw that on October 1 they could not stop the referendum from happening. The people will be in the streets to defend our sovereignty. The world will not allow Spain to kill us all, and that is the only way they could actually rule directly.

TONI: I shudder at the coldness with which you contemplate such extremes.

GEMMA: Not coldness at all. I am merely plotting out the game tree. At the end of the day, Spain’s capabilities may be higher than Catalonia’s, but Catalonia’s resolve is much higher than Spain’s. I don’t think any of the “extremes” you mention will actually come to pass.

TONI: And if your independence adventure turns out to be catastrophe, there will be no turning back, no way to undo the damage.

GEMMA: To the contrary. There is a constituent process for a new constitution. Spain should allow it to continue. Unionists could win those elections and write a constitution defining a political link with Spain. This negotiation might even allow a way to unblock the constitutional reform problem. Bilateral negotiations between Catalan and Spanish states could come up with a new institutional arrangement without the need for a constitutional amendment.

TONI: Now you are really lost to high speculation. I have never heard any independentist minister or politician discuss such a scenario. Every historical precedent suggests that once a country attains independence, it doesn’t go back. That said, I don’t expect it to get that far. Spain is fully capable of taking total control of Catalonia, regardless of how many of your friends go into the streets.

GEMMA: We shall have to see, won’t we?

TONI: Unfortunately, yes.

GEMMA: Don’t be so glum, Toni. It’s a beautiful moment. There were a lot of loyalists in the American colonies when they declared independence, and Britain was much more powerful, but look what happened there.

TONI: Are you counting on French intervention too?

GEMMA: Slovenian? Belgian? Estonian? Once a few EU countries recognize us, the EU as a whole will have to get involved.

TONI: As you said, we shall have to see.

Continue Reading »

Over at Learn Liberty, I take on the recent kerfuffle over intergenerational mobility. Some scholars and journalists are saying that the U.S. has a major “problem” with mobility because its “churn” numbers (the rate at which children of rich parents fall into lower income deciles and children of poor parents rise into higher ones) are lower than those of some other advanced industrial economies. The problem is that “churn” can come from anywhere. It might mean openness of opportunity, but it might also mean instability or political control of the economy.

In a free society, people’s incomes correlate with the marketable value they create for others. The traits that help you create marketable value include your work ethic, honesty, conscientiousness, and intelligence. Parents often pass down these traits to their children, whether through their genetic contributions or through training and socialization. So if two parents have traits that correlate with creating value for others, their kids are more likely to have those traits, too. And in a free society, that means parents with high incomes will tend to have kids who go on to earn high incomes, too.

(And before anyone asks, I didn’t write the “different…than” construction. My formal blog posts are edited into informal, conversational English over there!)

My latest for Learn Liberty looks at proposals for starting an equalization program to redistribute from rich to poor states in the U.S. and finds them wanting. Due to the audience for that blog, I kept that post nontechnical and brief. I’ll reproduce part of it here and then elaborate on some of the complexities and possible counterarguments.

[C]ritics of federalism point to one big disadvantage: federalism, they say, is unfair.

This criticism particularly applies to the fiscal aspect of federalism — that is, the ability of states to choose their own tax burdens and spending levels. The argument runs like this: states have different tax bases per citizen (some are richer than others), so richer states can tax their citizens at lower rates than poorer states, offer more benefits and better public services, or both. In this view, federalism is unfair because it helps the residents of rich states and hurts the residents of poor ones.

I will argue, by contrast, that fiscal federalism actually helps people living in poor states more than people living in rich states.

[…]

But there’s a more fundamental problem with the fairness argument for equalization: it ignores migration. Presumably, we care about the welfare of actual people, not the arbitrary geographic categories they live in. In a federal system in which people can easily move across state borders, migration accomplishes everything an equalization program might, without the negative side effects.

Think about a positive productivity shock, like the emergence of a new, highly profitable industry, which raises real wages in one state. Workers will move from other states to the state with the higher wages. The increase in the labor supply will return real wages to their normal level, at which point the migration flow will stop. Those who have moved have become better off, and even those who have remained in the initially poorer states are, at the end of the day, earning just as much as those in the initially richer state. Being able to pay a lower tax rate in a richer state will only accelerate this process — and ultimately eliminate the rich-state tax advantage.

[…]

[S]ome places are just more desirable to live in than others. These places will tend to have higher home prices and rents and lower wages. Think about it: if I take some of my compensation in the form of higher amenities, I’m willing to earn a lower real money wage. For this reason, nice places to live that don’t have a lot of industry, like New Mexico and Maine, have low real wages, while places that are less nice to live in but do have industry tend to have high real wages (see figure 1).

But New Mexico and Maine residents surely don’t deserve to be subsidized simply because they prefer to take their compensation in a nonpecuniary form, just as North Dakotans and Bay Staters don’t deserve to be taxed for choosing to live in unpleasant places where the market demands their labor.

[…]

Certainly, housing regulation is disrupting equalization through migration in the United States. An equalization program that specifically punished costly states and rewarded low-cost states might discourage excessive development restrictions and get migration flowing more freely again.

But housing regulation might end up being a self-correcting problem. As people flow from high-cost to low-cost areas, eventually the latter will enjoy more agglomeration economies that promote economic growth, and the high-cost areas will start to falter by comparison. By regulating housing so strictly, residents of coastal California, the Boston metro area, and elsewhere may be digging their own graves in the long run.

The argument I’m making here about how migration is a more effective equalizer than fiscal transfers makes some simplifications.

One simplification is that the major reasons why some states have higher per person incomes than others are exogenous productivity shocks and amenities (“desirability”). But there is another important reason: different places just tend to suit workers of different skill sets. If you have access to coal deposits and navigable rivers, you might have developed a steel industry and attracted manual laborers. If you have old, prestigious universities and a seaport, you might have developed high-tech export-oriented industries and attracted highly specialized workers. The latter sort of place will tend to have higher average wages, just because the average skill level of workers is higher.

So what changes about the argument if we relax this simplification and allow states to have different skill mixes? Very little. Yes, Massachusetts can have a lower tax rate than Mississippi because it has higher-skilled, higher-wage workers. But as a result, workers will tend to migrate to Massachusetts, driving pretax wages for Massachusetts workers below where they would be in Mississippi (adjusting for cost of living). Importantly, Massachusetts could still end up having much higher average wages than Mississippi, due to a higher ratio of high-skill to low-skill labor, but the posttax income of any particular worker will tend toward equality between the two states, leaving no benefit to moving from one place to the other. You can’t get around the fact that tax differences between jurisdictions will end up being incorporated into market wages and real estate values. (In real estate economics, this process is called “capitalization.”)

Now, what happens if we assume away labor migration? This is indeed an important change, and it may well make some sense once we talk about multinational federations like Canada. Anglophones might be willing to move to any one of the nine anglophone provinces, while Francophones are stuck in Quebec. Thus, a supporter of equalization could defend the program on the grounds that it is a legitimate way of preventing Francophones from being forced to migrate to anglophone areas or fall irretrievably behind the rest of the country economically.

Still, I wonder whether places like Montreal and Quebec City do not have very different economic profiles from, say, Chicoutimi or Trois Rivieres. There is ample room for labor migration within Quebec. If Quebec itself is large enough that some parts of the province tend to do well while other parts of the province do poorly, it may not need equalization to protect itself from economic shocks.

But let’s say it isn’t large enough. Let’s say there are economic shocks — like import competition, new technologies, and resource discoveries — that could cause Quebec either to race ahead of the rest of the country for 10 or even 20 years or fall behind for a similar length of time. Let’s say the Quebec economy is really volatile. If we don’t want Quebeckers moving out after every adverse shock (or Anglophones moving in when times are good?), an equalization program can help, right?

Possibly. But here’s another alternative: a rainy-day fund. If equalization is really supposed to be insurance against economic volatility, then don’t redistribute from rich to poor provinces, redistribute from rich to poor time periods. The provincial government itself could put away lots of money in cash or retire debt when times are good and take on debt or draw down cash when times are bad. Or if we think provincial governments aren’t competent and far-sighted enough to do this, we could have a program forcing provinces going through better-than-normal times for them to subsidize those going through worse-than-normal times, with the idea that each province comes out balanced over the long run. This insurance-type program might not have as bad incentive effects as equalization, not to mention the unfairness of subsidizing high-amenity places. Still, a publicly run insurance program for provincial budgets will likely create some moral hazard, a reluctance among provincial governments to take politically difficult steps to reduce economic volatility and therefore expected future payouts.

So there you have it. Instead of equalization programs, federal systems should facilitate equalization through migration, or when that is not possible, encourage rainy-day funds or possibly intertemporal insurance for regional budgets.

Over at Learn Liberty, I take up the question of what the rest of the world should do if Catalonia’s referendum on independence on October 1 succeeds, as is expected. I apply some straightforward assumptions about justice and individual freedom to the case. Secession is hard because it always involves violating some people’s rights — but then, so does stopping secession. The question has to be about how to preserve the greatest degree of freedom.

“Working from the premise that it is more just to allow people to live under a government they prefer, we can see the attraction of deciding controversies over sovereignty with a referendum. If more Catalans prefer to live under a Catalan state than wish to live under the Spanish state, then it is better to allow independence. If fewer do, then it is better to forbid it.”

I then take up some common objections to this formula and conclude that they do not apply to the Catalan case:

“In conclusion, the more Catalonia does to guarantee respect for the rights of all its citizens after independence, the more confident we can be that Catalonia’s independence should be recognized following a successful majority vote.”

More here.

My latest post at Learn Liberty explores the close parallels between certain arguments for immigration restrictions and gun restrictions:

A common argument for restricting immigration to the United States and other developed countries — maybe even the most plausible one — runs like this. Opening the borders will bring in people who will consume more public services than they pay for in taxes and who will vote for more statist politicians who support those public services. The result will be less freedom for everyone in the long run. Therefore, many conservatives say, immigration control is a regrettable but necessary step to securing freedom.

Meanwhile, a common argument for restricting gun ownership in the United States and other developed countries — maybe even the most plausible one — runs like this. Opening the market to the free sale and possession of guns will allow criminals to get their hands on deadly weapons, perhaps through theft if not legal purchase, resulting in more murder and less freedom in the long run. Therefore, many progressives say, gun control is a regrettable but necessary step to securing freedom.

These are not the only arguments for immigration and gun controls, but they are among the most familiar arguments and likely the most persuasive arguments for those who see freedom as politically central. Few people who find the argument for immigration control persuasive find the argument for gun control persuasive, and vice versa. This inconsistency suggests conservatives and progressives suffer from ideological confirmation bias in evaluating these issues.

In the piece, I explain why these arguments still fail: a moral reason and an evidentiary reason. More here.

In my latest blog post for Learn Liberty, I take on arguments against decentralizing health care policy to the states on the grounds of fiscal capacity:

So if federal ACA spending were cut or even zeroed out, why couldn’t states that like the legislation simply reinstate the same taxes and spending that the federal government currently uses under the law? If the net budgetary impact of the health care law really is zero, there is no inconsistency with state balanced-budget requirements…

[T]he federal government faces a stricter constraint than the states in one crucial respect: its total debt burden is much larger. Federal debt is already greater than 100% of GDP, leading to higher interest costs and crowding out private investment. Expanding the debt even further would only exacerbate these serious problems.

State and local debt is much lower, at about 16% of GDP. State and local governments are much more fiscally responsible than the federal government, and that’s precisely what gives them room to spend if there’s a good reason for it.

More here.

In 2010 and 2015, I did some data analysis to see which states had the most libertarians, based on Libertarian Party and Ron Paul election results. I’ve now done something similar for 2016.

Unfortunately, in 2016 we didn’t have a libertarianish Republican presidential candidate continue through every primary, and so we can’t use primary election results. However, Rand Paul did run for several months and collected campaign contributions, which we can use. In addition, we can use votes and campaign contributions for the Johnson-Weld campaign to try to see where the libertarians are.

The best way to do this would undoubtedly be to do issue surveys of enough voters in every state that we could estimate the percentage of voters in every state that take libertarian policy positions. But we just don’t have big enough sample sizes at the state level to do this right now. There are experimental, new methods that let us estimate issue positions at the state level with smaller sample sizes, but these methods are extremely time-intensive, and in any case we still don’t have consistent questions over time that would let us develop measures comparable over time.

There’s no one “right” way to do this, but here’s what I did – and all reasonable methods seem to yield similar results. I:

  1. took each state’s percentage of the vote for Johnson-Weld, campaign contributions to Johnson-Weld per capita, and campaign contributions to Rand Paul per capita;
  2. substituted national average values for home states (New Mexico and Massachusetts for Johnson-Weld, Kentucky for Paul);
  3. standardized the three variables to have the same mean and variance; and then
  4. averaged them together.

Substituting national average values for the home states seemed justified because these home states would otherwise be near the top of the rankings, even though none of these states seemed particularly libertarian in other elections when these candidates weren’t running. New Mexico was a below-average Libertarian state before Gary Johnson started running, Kentucky was a mediocre state for Ron Paul contributions in 2008 and 2012, and so on.

Without further ado, here is the ranking of states (and D.C.) by libertarians per capita in 2016, as best we can tell from these three measures:

state lp16_s john_s rand_s libertarians16
District of Columbia -0.2273757 5.063998 5.91443 3.583684
Wyoming 1.34241 0.7520453 2.782263 1.625573
Alaska 1.92475 0.8954656 0.3591455 1.059787
New Hampshire 0.4562405 1.881349 0.7760671 1.037885
Colorado 1.33397 1.46498 -0.1094947 0.8964849
Nevada -0.2358154 1.115038 1.282813 0.7206786
Washington 1.05546 1.029371 -0.0169397 0.6892969
Hawaii 0.1017729 1.514048 -0.1154285 0.5001307
North Dakota 2.211699 -0.9076071 -0.1790468 0.3750151
Oklahoma 1.815033 -0.6429195 -0.1350837 0.3456767
Idaho 0.4224817 0.1906986 0.2989358 0.3040387
Montana 1.679998 -0.4868041 -0.321723 0.2904903
Arizona 0.4056023 0.1295627 0.0997089 0.2116246
South Dakota 1.713757 -0.8959171 -0.3943799 0.1411533
Maine 1.258013 -0.5925905 -0.2984428 0.1223265
Oregon 0.9373039 -0.3396169 -0.2768817 0.1069351
Virginia -0.531205 0.7552064 -0.0225921 0.0671364
Connecticut -0.5396447 0.9314943 -0.1919439 0.0666352
New Mexico 0.1017729 0.1134186 -0.081947 0.0444149
Vermont -0.3370917 0.315843 0.0580951 0.0122821
Nebraska 0.8529069 -0.4625284 -0.3718339 0.0061815
Indiana 1.0639 -0.6398522 -0.4644283 -0.0134603
California -0.2020566 0.1975027 -0.069957 -0.024837
Texas -0.3708505 0.0970403 0.1393362 -0.0448247
Kansas 0.8782258 -0.57144 -0.4413628 -0.044859
Minnesota 0.2030493 -0.1859483 -0.2730781 -0.0853257
Massachusetts 0.1017729 0.0265284 -0.3852127 -0.0856371
Utah -0.1176594 -0.040376 -0.111288 -0.0897745
Iowa 0.1524111 -0.5752427 0.1136567 -0.1030583
Illinois 0.127092 -0.2596285 -0.2625065 -0.131681
Michigan -0.0248227 -0.3442523 -0.0487973 -0.1392908
Missouri -0.1345388 -0.5485766 -0.190781 -0.2912988
Maryland -0.6240419 0.1328795 -0.4675777 -0.31958
Georgia -0.4805668 -0.1231457 -0.4113307 -0.3383478
Tennessee -0.6662404 -0.2489252 -0.1508911 -0.3553522
Wisconsin -0.016383 -0.6375318 -0.4363715 -0.3634288
Florida -1.197942 0.0469722 -0.0559043 -0.4022913
New York -1.105105 0.1764863 -0.3696713 -0.4327633
Kentucky -0.6831198 -0.6866438 0.0554005 -0.438121
North Carolina -0.7253183 -0.3510917 -0.4069826 -0.4944642
Ohio -0.3792903 -0.6159415 -0.5193276 -0.5048531
South Carolina -1.062907 -0.3300098 -0.2762537 -0.55639
West Virginia -0.3455315 -0.9457347 -0.4400242 -0.5770968
Pennsylvania -1.029148 -0.4462026 -0.4482422 -0.6411975
Rhode Island -0.3539712 -0.8717933 -0.7971447 -0.6743031
Arkansas -0.8097153 -0.6793436 -0.6667849 -0.7186146
New Jersey -1.468012 -0.3178977 -0.4170856 -0.7343319
Alabama -1.273899 -0.6585236 -0.4357239 -0.7893822
Louisiana -1.459573 -0.6117339 -0.3441515 -0.8051527
Delaware -1.704324 -0.7962323 -0.2577564 -0.9194376
Mississippi -2.033473 -1.015875 -0.2154772 -1.088275

The “lp16_s” column is the standardized value of Johnson-Weld percentage of the vote, “john_s” is the standardized value of Johnson-Weld campaign donations per person, and “rand_s” is the standardized value of Rand Paul contributions per person. D.C. is the “state” with the most libertarians due to its huge campaign contributions to these two candidates, even though the Libertarian ticket did worse than average there in the actual election. Wyoming comes next. It looks pretty libertarian across the board but was especially supportive of Rand. Alaska is third; it was a great state for the Johnson-Weld ticket. New Hampshire came fourth and was above average on all three measures.

I also looked into the possibility that Johnson-Weld did worse in swing states because of tactical voting, but I could find no evidence for this hypothesis. States where the polls were close did not show lower third-party support, surprisingly.

These results are pretty similar to those from previous years, except that I hadn’t looked at D.C. before. It’s not surprising that D.C. would score so highly on campaign contributions, because lots of people there are really interested in politics. Maybe I should have used campaign contributions to each candidate as a share of all campaign contributions, rather than per capita, but I’m unpersuaded that this would be the right way to go. D.C. really may have lots of libertarians – who are nevertheless swamped by those of other ideologies. Wyoming does a lot better than in previous years, and Montana significantly worse. Alaska has always been near the top in these numbers. New Hampshire hasn’t separated itself from the pack despite the Free State Project. It was the best state other than D.C., New Mexico, and Massachusetts for Johnson-Weld campaign contributions, but it was only moderately above average for Johnson-Weld votes and Rand Paul campaign contributions.

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