Archive for the ‘Markets and Morality’ Category

Looking through the freedom index data over time, it can look like a depressing series of new laws and restrictions on people’s lives. Now, freedom has increased at the state level on certain issues (local gun bans overturned, sodomy laws overturned, medical marijuana laws passed, eminent domain reforms enacted, same-sex partnerships spreading). But there are ever more areas in which state governments find new ways to intervene: E-Verify mandates (which are likely coming to the entire country soon), smoking bans, online gambling bans, salvia bans, DNA databases for arrestees (recently upheld by the U.S. Supreme Court), trans-fat bans, and ever-more occupations coming under the license Raj.

Libertarians often look at this endless march of new regulations and dourly quote Thomas Jefferson, “The natural progress of things is for liberty to yield and government to gain ground.” Yet what this ignores is the explosion in the unregulated areas of human life. Ever-lengthening statute books do not necessarily mean more restrictions on what people are actually doing.

Advocates of positive freedom have always celebrated technological change as liberating. More options mean more choices mean more freedom. Traditional libertarians don’t often seem to want to think this way, probably because they think of negative freedom as more important: i.e., the absence of restrictions on peaceful choices. I agree with them there: positive freedom is desirable but not at the expense of negative freedom.

I am arguing here that technological change enhances negative freedom, even if the number of laws and formal restrictions remains constant. How is this possible? Most importantly, technological change opens up new domains of human endeavor that have yet to be regulated. Secondarily, certain technological changes can disrupt government regulation. Finally, crowded agendas mean that governments stop enforcing certain laws, which leads to new social expectations about what laws will be enforced.

To understand the first point, it is important to recognize that human life is finite. Therefore, (more…)

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I love Brad DeLong’s academic work. He’s way smarter than me and, more importantly, clearly works much much harder than I do. And he tackles interesting questions. But every time I check his blog, I get an awful “Everyone in the world is evil or stupid or both except Brad and a few of his friends” vibe.

I’d not been there for a while, but switching to The Old Reader (for now) from Google Reader messed up my RSS habits. And so, there I was, looking at Brad DeLong saying that Steven Landsburg is the stupidest man alive and that “the University of Rochester has a big problem” – presumably Landsburg’s continued employment there.

What was the cause? A piece at Gawker taking great offence at a thought experiment Landsburg proposed. I’ll link Gawker at the end so you’re not tempted to read it before reading the original Landsburg piece.

In grad school, we had a lot of fun with thought experiments of this sort. The classic one is Nozick’s experience machine. Step into the machine and you’ll experience a simulated life much better than the one you’d otherwise live; moreover, you’ll never remember that you’re actually in the machine. If you stay out of the machine, there has to be something that matters more to you than experienced utility.

Tyler Cowen liked to ask a variant on it in our Economics & Philosophy class: World B is identical to World A, as far as you are ever able to observe, but in World B, your wife has been cheating on you for years and you never ever knew it, nor will you ever know it. The worlds are identical except for the unknown-to-you fact of your wife’s infidelity. Are you worse off in World B? If so, clearly state exactly how, and make that consistent with other things you believe about utility.

So, what was Landsburg’s offensive thought experiment? Recall that the rules of thought experiment club are that you don’t add in auxiliary assumptions but stick to what’s stated in the thought experiment. Landsburg asked a series of three questions, then wanted to know why our answers to 1 and 2 might differ from our answer to 3. Here they are.

Farnsworth McCrankypants just hates the idea that someone, somewhere might be looking at pornography. It’s not that he thinks porn causes bad behavior; it’s just the idea of other people’s viewing habits that causes him deep psychic distress. Ought Farnsworth’s preferences be weighed in the balance when we make public policy? In other words, is the psychic harm to Farnsworth an argument for discouraging pornography through, say, taxation or regulation?

That’s scenario 1. Most economists just ignore that psychic harm – the world’s essentially impossible to evaluate when we add this kind of thing in. Further, Farnsworth could pay other people not to watch pornography if he really cared about it that much. But we could assume that away to stick within the proper confines of the thought experiment: say transactions costs prevent it. Is pyschic harm of this sort admissible in the utilitarian calculus? Here’s scenario 2:

Granola McMustardseed just hates the idea that someone, somewhere might be altering the natural state of a wilderness area. It’s not that Granola ever plans to visit that area or to derive any other direct benefits from it; it’s just the idea of wilderness desecration that causes her deep psychic distress. Ought Granola’s preferences be weighed in the balance when we make public policy? In other words, is the psychic harm to Granola an argument for discouraging, say, oil drilling in Alaska, either through taxes or regulation?

Actually, policy does weigh Granola’s concerns. It’s counted as existence value over and above option value or use value. Sound analyses don’t put much weight on it, but it does sometimes count. If I get existence value from thinking heroic Randian thoughts about oil derricks and man’s mastery of nature, that gets ignored in the cost-benefit analysis for some reason. But, again, all these kinds of pyschic distress are treated pretty dismissively in economics. And now the third and controversial question:

Let’s suppose that you, or I, or someone we love, or someone we care about from afar, is raped while unconscious in a way that causes no direct physical harm — no injury, no pregnancy, no disease transmission. (Note: The Steubenville rape victim, according to all the accounts I’ve read, was not even aware that she’d been sexually assaulted until she learned about it from the Internet some days later.) Despite the lack of physical damage, we are shocked, appalled and horrified at the thought of being treated in this way, and suffer deep trauma as a result. Ought the law discourage such acts of rape? Should they be illegal?

If we take this as a parallel thought experiment, the only trauma here allowable is the psychic distress, which we otherwise typically ignore.

It is a hard question and so a good one. All our intuitions tell us to condemn the third scenario while dismissing the psychic harms in the first two. But if we stick within the confines of the thought experiment, it’s hard to distinguish the cases. We can say the psychic harm is worse in the third case, and it would be in the real world, but it’s not hard to have a thought experiment Granola McMustardseed who gets more psychic harm from oil drilling than from being in Scenario 3. Or a Scenario 3 victim who never learns that it happened – a case pretty close to Cowen’s World A vs World B.

I don’t have any great answer other than that when we step away from the thought experiment and into the real world, a rule allowing Scenario 3 that imposes psychic harm no greater than that imposed in Scenarios 1 & 2 would also necessarily allow much much greater harm because we cannot set rules only allowing Scenario 3. But that’s a cop-out, because even if we could do it in the real world, I’d still want it banned – in the same way that I think I’m worse off in Cowen’s World B and that I wouldn’t want to step into Nozick’s machine. My maximand isn’t just experienced utility.

Meanwhile, Gawker turns it into a story about how Landsburg thinks rape is OK and DeLong signs onto their interpretation. The contrast between the quality of comments at Landsburg’s post and DeLong’s is interesting too… Landsburg’s commenters wrestle with a difficult thought experiment; DeLong’s want Landsburg fired.

[cross-posted to Offsetting Behaviour]

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Roger Koppl argues this week at ThinkMarkets that “Income inequality matters.” He thinks it matters so much that he says it twice. He believes “Austrian,” pro-market, economic liberals should be speaking up more on this “central issue.” I think Koppl could not be more wrong. The issue deserves all the inattention we can muster for it.

The problem I think is not Koppl’s motives. He rightly says that we should “watch out for ways the state can be used to create unjust privileges for some at the expense of others.” He is certainly right about that. He argues that unjust state policies may be skewing market results in such a way as to increase inequality. He may be right about that. But he is wrong in suggesting that we ought therefore to be paying attention to income inequality. We ought therefore to be paying attention to those policies. Whether they produce greater inequality is neither here nor there.

Koppl gives four examples: (i) policies that privatize profits and socialize losses, (ii) bad regulation, (iii) collapse of the rule of law, and (iv) public schools. I can certainly join Koppl in a hearty wish that we not only attend to these unwarranted policies, programs, and tendencies, but that we do so with a degree of urgency prompted, in part, by their effects on the poorest and most vulnerable among us. But talking about inequality is precisely a distraction from doing so.

In a great paper of a few years ago, Harry Frankfurt argued that “Egalitarianism is harmful because it tends to distract those who are beguiled by it from their real interests.”* Frankfurt thought that focusing on equality was actually pernicious because it distracted us from attention to real harms, of which inequality is at most an indicator. And he was right. It may well be that, for example, the evisceration of the rule of law results in greater income inequality. But it also might not. Whether or not it does so, however, it is unjust, and it deserves our attention. Similarly for the increase in moral hazard and regulation, to say nothing of the deplorable system of public education. All of these need attention, and one prime reason they do so is because of their effects on those least capable of circumventing their evils. If we care about the poor, what we ought to care about is bad policy, not indicators that may or may not have anything to do with policies that are making people worse off. As long as we are worrying about income inequality, we are worrying about the wrong thing.

* In “The Moral Irrelevance of Equality,” Public Affairs Quarterly, April 2000.

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One of the regular Pileus bloggers asked me to elaborate on a claim I made briefly in my earlier discussion of BHL. I had said “there is an intra-libertarian debate [that it is useful to have about philosophical justification: is a system of individual rights ultimately justified because it accrues the best results for the poor, or is it justified for some other reason(s), and has the beneficial characteristic of accruing the best results for the poor?” and suggested I thought it was the latter. The idea that the social order can only be justified if it brings about the best results for the worst off, which is a prominent feature of Rawlsian welfare-state liberalism, has been employed as a rationale for classical-liberal non-redistributionist policies. I certanily like the irony that the chief heuristic of redistributionist theory undermines redistributionist institutions. And, as I said in the orginal post, I appreciate the positive outreach effects of noting that free market policies help everyone prosper, especially the poor. But I am hesitant to agree that the Rawslian principle is why we should have free markets. For one thing, I think we should have free markets for the same reason I think we should be free generally. I do not differentiate “civil liberty” and “economic liberty.” The latter is simply the manifestation-in-transactions of the former. Without the freedom to transact, my “freedom to choose” is pretty superficial. Rawls himself argues that we must have a system of equal freedom to choose and believe and think and speak – rights that cannot be trumped by social utility. It is only trading and acquiring rights that he says can be interfered with. But as Nozick demonstrated, you cannot interfere with transactional freedom without simultaneously interfering with freedom of choice. There are not two kinds of liberty, civil and economic, there’s just liberty (although there are of course different contexts in which we talk about liberty). And I think liberty is a necessary component of human flourishing. Humans cannot achieve virtue and happiness by coercion. “Rights” should be understood as a way to secure the possibility of self-directed activity in the social setting. The social order is thus justified if it is one which protects individual rights, and unjustified otherwise. That is the why of classical liberalism. The fact that classical liberalism and free markets help the poor better than redistributive statism is a great thing, both intrinsically and in terms of explaining its virtues to others. But the justification must be something else, something universal. Put it another way: if everyone were wealthy, would individual rights no longer be important? Of course not.

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One of the arguments Michael Sandel makes in his new book What Money Can’t Buy is that what he calls “market values,” which include “the logic of buying and selling” (6 and passim), can, once introduced, crowd out other values. A striking example he offers is what happened at some child-care centers in Israel.

Apparently some parents were late picking up their kids. Pleading with them did not help, and it was costing the child-care centers money because they had to keep staff on to watch children while waiting for tardy parents. So the centers decided to adopt a new policy: if you’re late, we’re going to fine you. Sandel: “What do you suppose happened? Late pickups actually increased” (64). He explains:

Introducing the monetary payment changed the norms. Before, parents who came late felt guilty; they were imposing an inconvenience on the teachers. Now parents considered a late pickup as a service for which they were willing to pay. They treated the fine as if it were a fee. Rather than imposing on the teacher, they were simply paying him or her to work longer. (64-5)

Sandel gives other examples of similar transformations in social dynamics from fines to fees, including speeding tickets with progressive rates depending on speed, fines in China for having too many children, pollution permits and fines, carbon offsets, rhino hunting in Kenya, shooting walruses in Canada, and paying kids to read books or get good grades (chap. 2). His argument is that when things are put up for sale, “market values” come to dominate where often times “moral values” should dominate instead. As he puts it, “markets crowd out morals.”

He has a point. For example, he claims that one objection to adult consensual prostitution is based not on whether the consent was in fact voluntary, but rather on the “grounds that it is degrading to women, whether or not they are forced into it”; it moreover “promotes bad attitudes toward sex” (112). I would argue that if prostitution degrades women, it also degrades men: I see no asymmetry there.

On the other hand, what follows from the claim? After all, lots and lots of aspects of human behavior are affected differently when they are put in the context of a cash transaction rather than something else—but sometimes that is perfectly appropriate. The parents are, after all, paying the child care centers for a service, aren’t they? The john is paying the prostitute for a service, right? Sandel gives us no clear reason why in some places that is appropriate and in some places not, other than to say that sometimes “we need to ask what [moral] norms should govern” the social dynamics in question (112). Well, of course. But Sandel does not tell us what those norms are or when they are appropriate, and thus no clear reason why we should worry about markets crowding out other considerations.

Consider these questions:

1. Does sex before marriage crowd out the right kind of love in the relationship?

2. Does buying one’s food crowd out the right kind of pleasure and joy in eating that accrues when one makes one’s own food?

3. Does drinking coffee or 5-Hour Energy or taking cocaine crowd out the true or authentic performance you would otherwise have given?

Is it impossible to “go back” once you start down these roads, as Sandel claims about money in other areas?

The upshot of Sandel’s argument seems to be that we should prohibit the introduction of “market values” where they do not properly belong, on the grounds that allowing them in “degrades,” “corrupts,” or does not properly respect the sanctity involved. If so, does that mean we should prohibit other things too, like those listed above, on similar grounds? Where would this stop, exactly, and how could we ensure that the list of prohibited kinds of cash transactions are not merely a list of Sandel’s (or someone else’s) personal preferences?

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