Name the solution

There is this notion, proclaimed on all sides of the political spectrum, that if you want to solve a problem, the first step is to name it, center it, because only then can you properly address it. It sounds very rational, very modern. To address a problem, list it on the clipboard. Then we can get together and devise the 19-step plan that will remedy it.

This is often counterproductive for social problems, where the names that we demand be given have connotations that are far from neutral.

From 9/11 through the Obama era, Republican constituencies were scolding us we had to publicly name and call out “radical Islamic terrorism” as a problem, the enemy. Beginning in 2016, Democratic-aligned constituencies demanded that we center and call out “racism” and “white supremacy”. That continues, with a litany that includes “patriarchy” and “transphobia”, wrapped in a bowtie under the unobjectionably objectionable name “hate”. Now Republican-aligned constituencies demand that we publicly call out illiberal “wokism” and activist/academic movements like “critical race theory”.

I’ll try to put this gently, so as not to commit the same error I am criticizing. This approach to politics is unhelpful. The things partisans demand we call out can in fact be bad. All terrorisms, defined as violence or threat of violence against innocents to compel political change, are bad. Nearly all of us agree that racism, white supremacy, and “hate” are horrible. Even the “wokest” people will cop to existence of excesses in social justice activism, though they may argue that cynical overstatement of those excesses is a bigger problem than the excesses themselves.

We are asked to name, and then to publicly call out, problems not because there is some insight gained in the naming. What, we didn’t realize that racism was appalling before contemporary anti-racisms put it front and center? Was the Obama administration unaware of the existence of Islamic terrorism while it was drone assassinating weddings in the Middle East?

We are asked to name and denounce because some coalitions are better immunized, while other coalitions are put on the defensive, when public debate is structured around certain names. The Democratic Party’s coalition includes religious minorities, including Muslims, who are not terrorists but whose social networks and religious traditions are more proximate to groups that prosecuted atrocities in the name of Islam than the white Christians who overwhelmingly define the Republican Party. When we are naming white supremacy, the shoe is on the other foot. The point of this politics is to polarize in a way that gives one coalition the high ground, and sows division in the other while portraying them as apologists for evil.

There may be some electoral value to this, in the sense of persuading a sliver of swing voters or drawing habitual nonvoters into your great moral struggle. The polarization it provokes “usefully” helps stabilize partisan gerrymanders. It is emotionally delicious, as we grunt in our tribes, to hold up mirrors through which we are awesome and they are not. While naming problems and demanding denunciations may move some people to vote your way, it may entrench others and undermine your purported cause. A virtue weaponized ceases to be a virtue at all, and those who might be tarnished by association often perceive demands to denounce even things that they concede are bad as attacks. Because defiance of unjust coercion is itself a virtue, insistent calls to denounce may instead rally sympathy or support. When Republicans call out “critical race theory”, does that render progressives more or less supportive of social justice activism, whatever its excesses?

However things actually shake out at election time, whether demanding denunciations helps or hurts either party, the tactic reliably delivers revenue to media and political institutions. You can’t fundraise off quietly persuading a reasonable but mistaken public. When there are monsters to battle, partisans shower champions with cash.

If you are actually interested in constructive social change, this is a terrible politics. Durable change does not in fact come from crushing a near-equally-matched social enemy. It comes from cooptation until the rump social enemy is small, and can then be cleanly defeated. Gay marriage is no longer controversial in the United States, because the broad public was pretty quietly won over before the Supreme Court delivered a final victory. If the political parties had remained actively polarized around the issue, if nonsupporters strongly identified as objectors, there would have been no victory. An (unlikely) Supreme Court win would have become a new Roe vs Wade, a battle cry rather than a final outcome. The campaign for gay marriage was waged in favor of a solution, rather than as a fight against homophobia, which might have polarized the public into factions more or less implicated by the charge. It was a campaign for something that like most things, most people had never taken a strong position on, and could be content to accommodate what seemed kind without ever having to admit defeat or prior error.

You can’t coopt people while you are calling them out. You can’t achieve durable victories — win the peace rather than a continuing war — without bringing people into what becomes a broad consensus. When it’s the 99% against the 1%, you can crush the opposition. When it’s the 52% against the 48%, you can’t. If you try you get civil war, hot or cold. Both sides in every civil war are sure they have God and justice on their side while they destroy first the prerequisites of civilized life, then lives directly. At home as abroad, the real struggle is always for hearts and minds. The rest is just carnage.

Naming problems and demanding denunciations hardens the battle lines, digs trenches. Making everybody confess the people’s enemy is not a rational path to positive change. On the contrary, what reason demands is a politics that welcomes and improves the imperfect but well-intentioned creatures that we nearly all of us are, a politics that is generous with redemption rather than fierce with judgment of our fellows. By all means, hold policymakers (and pundits!) to account. But never publics. That’s a fool’s errand. Offer solutions and be grateful towards people who sign on, rather than name problems and condemn people for insufficient zeal in demanding their extirpation.

Update History:

  • 9-Jun-2020, 1:15 p.m. EDT: “sews sows division” (Thanks Steve Roth!)

Taxes vs subsidies, flows net and gross

A straightforward objection to the style of policy I proposed as “market dirigisme” in the previous post is that it’s too expensive for the central government to pay to subsidize all the behavior it wants from the public. As Peter Dorman writes in the comments

With so many objectives to pursue, if policy mainly took the form of bribery — excuse me, incentives — the state would be overwhelmed. It’s necessary to have negative incentives, taxes, as well as positive ones, feebate systems for instance.

The taxation-based complement of my market dirigisme is just Pigouvian taxation. Instead of purchasing from the citizenry the behavior the central government desires, the central government can penalize citizens who fail to behave as the central government prefers. That seems “cheaper”, but also meaner and more contentious. People generally don’t mind being offered an opportunity — “Hey! I’ll pay you if you do this thing. You don’t have to, but if it’s worth the money to you you can!” People object vociferously to, and organize politically against, state coercion that takes the form of “You should do this thing, and if you don’t we will punish and fine you.”

So it’s usually politically wise, I think, to prefer the former. Subsidize the behavior you want.

Revenue-motivated taxation should be broad-based and imposed gently on things mostly coded as good (like income). Pigouvian taxes, to be politically sustainable I think, require a strong consensus among the influence-weighted citizenry that the thing to be taxed is “bad”, that people, at an individual level, deserve to be punished or at least to compensate society for the behavior. Matt Yglesias has been talking up alcohol taxes, and that’s probably fine as a Pigouvian tax, because most of us have been persuaded at some level that drinking is a vice and even if we ourselves enjoy it responsibly, it’s fair that we should make some compensation to society for indulging. Gas taxes or carbon taxes are not fine. It is not a vice, at an individual level, for a person to drive to the grocery store or commute to work, even if they live far away. It’s not a vice for a person to live in an exurban or rural place where ordinary life requires long drives. On the contrary, many of us consider rural living an outright virtue. Yes, these choices have social costs, “externalities” in the language of Pigouish economists. But unless those social costs have been pervasively internalized as sin by the broad public (no, your own politically engaged friend group isn’t enough), Pigouvian taxation is “partial equilibrium“. A polity won’t allow large, enfranchised publics to be selectively penalized for behavior they think is fine. Michael Bloomberg can get a soda tax passed maybe in snobby elitist towns whose enfranchised publics look down paternalistically on frequent pop drinkers. But that’s pushing the limits. I’m all for a (refunded!) carbon tax, higher gas taxes, etc. I, um, voted for the proposed soda tax in San Francisco. But, realistically, it’s not a smart approach. You’re not going to save the planet by punishing large, influential blocks of citizens for behavior intrinsic to what they see as legitimate ways of living.

So, what about the expense? Are subsidies to encourage desirable changes by the citizenry affordable? Yes, absolutely. There are two broad points to make here. First, the real cost of such subsidies is lower than it appears. As always, we should be wary of a dollar-for-dollar accounting frame when considering the costs of public policy. Public expenditures are not alike in their effect on price stability, distribution, and other social desiderata. Secondly, to the degree that we are forced to ration net outlays, balancing conditional subsidies with broad-based taxes can be made equivalent to Pigouvian taxes fiscally, while retaining the benefits of relying on subsidy politically.

Subsides of citizen behavior are cheaper than they look for a bunch of reasons. Very narrowly, subsidies are not expenses at all, they are only transfers. They do not directly recruit or put pressure on real resources. To the degree the state is conditioning subsidies in order to “purchase” something from the public, that isn’t quite right, but usually the behavior that will be purchased displaces minimal alternative uses of real resources, or even increases the availability of such resources, making them negative expenditures in a sense.

Let’s unpack that. If the state hires people to build dense housing, that imposes a direct real-resource cost. People who otherwise would do different work are diverted to building these homes. Brick and timber and steel that otherwise would go elsewhere go here. In a broad sense, we can argue that the dense housing net-frees resources, because the people who move in might otherwise have lived in resource-costly exurbs. But that’s a complicated, very contestable, calculation. However, if the state subsidizes people who live in densifying neighborhoods, and the voters in some communities encourage construction they otherwise would have forbidden, very little of the recruitment of real resources should be attributed to the state. The people the state pays with its subsidy are not hired away from their old jobs or withdrawn from the labor market. The choices about which real resources will be recruited and deployed to the now popular densification will remain with the local governments, communities, and developers, displacing their own alternative uses. Mostly what will have happened is we’ll have (i) gotten the policy outcome we might have wanted but failed to achieve if we tried to induce local governments to change their laws despite the resistance of their citizenry; and (ii) made a very-broad based, rather than targeted, transfer to citizens of that community.

In distributional terms, broad based-transfers are often scored as “expensive” relative to counterfactual programs targeting the needy (although when the cost of attrition is taken into account, they shouldn’t be). But relative to ordinary expenditures, broad-based transfers are desirably progressive. When the government hires a contractor to do something, some of the funds may go to modest wage workers, but lots also go to well-paid professionals or flow through as capital income to business owners. None go to people who are neither investors or workers. Business revenue from government expenditures is distributed like market income generally. To the degree a more egalitarian distribution is desirable, broad-based subsidies are “cheaper” than ordinary expenditure in the sense that they incur less of the social cost that comes with making the rich richer.

Finally, on a per capita basis, broad-based subsidies intended to alter citizen preferences with respect to local governance can be cheap even in accounting terms. Most voters are not rich, a little bit of money can make a big difference relative to the costs and benefits they perceive from local policy and the convenience costs of voting. Often when you want to get something done, you have to purchase things from rich people who control access to scarce resources or capabilities, for whom it takes a lot of money to move the needle. But when the state wants to purchase changes in behavior or political preference from the citizenry, most people are very far from rich, and small amounts of money can go a long way. (The current vaccine lotteries are a great example. The per-person cost of the lotteries is pretty tiny, yet they have seem to be effective.)

However inexpensive subsidies are in the senses I’ve described, in some contexts and for some purposes, fiscal limits in an accounting sense will sometimes bind, politically or institutionally. These cases should be infrequent. Well-arranged governments don’t face purely financial constraints on socially valuable investments, just like firms in a well-arranged financial system can always issue securities to fund high NPV investments. But sometimes, pathologically, firms are subject to hard capital rationing, and sometimes governments may have to tax in order to subsidize. In these cases, you use the ordinary tax system to ensure you have the revenue you will need to purchase changes of behavior from the public, just like any other public expenditure. We have property taxes, income taxes, sales taxes. If we want to pay citizens of neighborhoods that tolerate densification and our expenditures are revenue constrained, we can raise those other taxes. The tax increases should not take the form of matched “pay-fors”. That’s a very bad style of public policy. But financially constrained governments should use the tax system to ensure the revenue they require for public purposes, including purchasing behavior from the general public.

A certain kind of wonk will object and say that this is really dumb. Why tax everybody and pay some people a subsidy when you could more “efficiently” impose the same net financial flows by levying a tax on the people who don’t do what you want?

This is a point I’ve made before and I suspect I will make again. There is social meaning, and political effect, in gross financial flows. An income-tax-financed UBI is not the same thing as a negative income tax even when the net financial effect of the two would be the same. Besides the stuff wonks will deign to recognize (like that paying first and taxing back later ensures more certain and prompt payment to those who will ultimately be entitled), different program forms create different social facts. A UBI informs the public in the straightforward language of cash that we are all together receiving a benefit, for which we are paying according to our means. A negative income tax shouts that the poor get a benefit for being poor that the rich must pay for. How the public understands a policy is part of the policy, inseparable from its effects on behavior, its political sustainability, and its ultimate effectiveness. Gross flows condition the meaning of a policy to the public, in addition to net outcomes.

Sure, increasing general taxes in part to pay for conditional subsidies to the public can be equivalent in net terms to just imposing a conditional tax. But imposing a conditional tax has the social meaning that the payer is being punished or asked to compensate for doing wrong, and is politically unsupportable when influential publics think the taxed behavior is legitimate or virtuous. Offering a subsidy communicates no such judgment. I don’t feel judged by the state for not driving a Tesla, even though had I purchased one, I’d probably have been eligible for some government cash. An offer of a subsidy is a market bid, an opportunity. You can take it or leave it, but the option is no injury. The general schedules of taxes on property, income, and sales are… schedules of taxes that apply broadly to everyone and carry no judgment about the lifestyles or choices of segments of the public. Combining those two elements, a general tax schedule and a lucrative offer, yields an entirely different social animal than a tax targeted and conditioned on behavior, even when from a high level you could argue the net financial flows would be similar.

Market dirigisme

Market dirigisme is the name I give to a style of public policy I think we ought to use more. The idea is pretty simple. Governments form preferences over how the polity ought to be but currently is not. Often, what governments should do is to explicitly purchase the changes in behavior they desire from the general public.

Put this way, it sounds a bit weird. But it’s not weird. As I write, Ohio is enrolling people who accept a COVID-19 vaccination in million dollar lotteries. Ohio is paying people a few dollars each, in expected value terms, to get vaccinated. Among people who see declining birth rates as a problem — “natalists” is sometimes the word — welfare state proposals like child allowances are often evaluated on an axis of whether and how much they might encourage childbearing. One can support child-attached benefits for other reasons (like reducing child poverty) even if one is “antinatalist”. But part of the coalition that supports these benefits is openly interested in using the public purse to purchase a higher birth rate from the citizenry.

I have views about vaccination and natalism, but this piece is not about those. This piece is about the style of policy. It is a good style of policy, we should use it more, and we should use it in place of, or at least to augment, another style of policy that is common but I think very fragile.

Often when a central government wishes to change the polity, it tries to induce changes at the level of subsidiary governments, rather than via citizens and households. The Federal government incentivizes states to expand Medicaid, for example. Elizabeth Warren proposes encouraging less restrictive land use policies by offering grants to local governments that adopt them.

There are deep problems with this style of center-to-subsidiary governance. It’s intuitively attractive, I think, due to a mistaken analogy between government subsidiarity to bureaucratic hierarchy. It feels “rational” or “logical” to work through the “chain of command” rather than have the center try to mess directly with with hundreds of millions of citizens about whose particular circumstances it knows little.

But subsidiary governments are not bureaus of the central state. They are separately chartered, separately elected, sovereigns. In the United States we often discuss this tension in terms of law. The Supreme Court decides whether some proposed inducement from the center is acceptable or an unconstitutional abridgment of powers reserved to the states. Policy entrepreneurs come up with clever arguments to persuade the Court.

But whatever the law decides of itself, the problem runs deeper. The central government is accountable to some weighting of the broad national public, and forms its goals and preferences accordingly. Subsidary governments are accountable to different weightings of different populations, and form very different preferences and priorities. When the center imposes inducements upon subsidiary governments, elected officials face often radically conflicting incentives. Perhaps their supporters desire the effect of single-family zoning, but the central government is incentivizing its abolition. How would, or should, local electeds behave? In practice, they will likely game the incentives. Local officials will seek ways they can both win the grants and deliver for their supporters, perhaps by eliminating the zoning but creating procedural pretexts for blocking multiunit development. We are left at best with a cat-and-mouse game, with the central government imposing ever more elaborate requirements, while local electeds invent ever more clever ways to have their cake and eat it. In practice, the center usually loses this game, or at best makes very slow progress, sewing cynicism about government capacity to deliver anything more than expressive victories.

A better approach is for the central government to alter the circumstances, and so the preferences, of the broad public. If we’d like denser communities, the central government can simply pay a subsidy to residents of communities growing denser. Elected officials of subsidiary governments no longer face conflicting incentives. If the subsidy is large enough to shift the preferences of the voters to whom local politicians are accountable, politicians will enact real change. If their supporters’ dispreference for density overwhelms the money, they won’t. The size of the subsidy can be set large enough to meet the central government’s objectives while still permitting some communities to opt out. While the aggregate effect is as political an outcome as any other form of state action, it would result from decentralized choices of citizens (either to support local government action to harvest the subsidy, or to eschew the subsidy in favor of the status quo) rather than direct compulsion by the central state. In the way that market outcomes do, either outcome will feel “natural”.

In general, the flow of incentives should be from the center to the edges, rather than from the center through subsidiary governments. Subsidiary governments are not subordinate governments, but distinct entities. They are accountable to citizens, not to a hierarchical superior. It is citizens that ought be the nexus between central and subsidiary governments.

A point in favor of this style of policy, I think, is that it works through finance. Money is abstract, fungible, bloodless. Land is birthright, race and increasingly party are tribe. These are things to fight and die for. But taxes and subsidies are arcane. They can be applied in increments, leaving scope for individual and local choice in ways that explicit command does not. It has become fashionable for people with my politics to lament “financialization”, and I do lament financialization, defined as the increase in rents to the financial sector and the decrease in the degree to which financial flows in our economy are tethered to what I perceive as meaningful production. But the last few years of tribalized politics, of self-righteousness and conflict largely detached (in my view) from meaningful progress, has reminded me of the virtues of financial materialism. The tax system might be racist, but as Dorothy Brown puts it, she had to become a “detective” even to perceive that. What if we could the mechanisms that have so quietly riven us apart be retooled to quietly bring us together? Money isn’t everything, but our conflicts over values would be less existential I think if our material circumstances weren’t so divergent, if our material interests were better aligned. I want just outcomes, but I don’t want people fighting and dying for them. I’d rather we just set the taxes and subsidies right.

If neoliberalism counseled leaving everything to markets, market dirigisme would put democratic publics in command of markets, while retaining markets’ extraordinary capacity to naturalize outcomes, and so diffuse and diminish conflict. Purchases of changes in behavior by the government would be overt and accountably debated, not hidden in technocratic “nudges”. Just as you know McDonald’s is trying to get you to eat hamburgers, you’d know the government is trying to pay you to have kids, or to get vaccinated, or to accept new housing nearby, or to diversify your neighborhood. But it would still be your choice whether to participate or to abstain. You might agree or disagree with the national policy. But retention of local agency means you can protest by opting out, rather than by blowing shit up. Even people who think McDonald’s is kind of a conspiracy to give us all heart attacks rarely resort to that.

Update History:

  • 28-Apr-2020, 11:40 p.m. EDT: “Once One can support child-attached benefits for other reasons”

Our governance problem in a nutshell

Will Wilkinson writes:

But “my way or the highway” cannot be the basis of any form of genuinely liberal politics. All durable liberal societies have evolved complex democratic institutions because it’s impossible to manage foundational disagreement in a liberal way — with peaceful toleration and mutual forbearance — without them. If a minority faction manages to arrogate to itself authority over the majority on grounds that it can justify only to itself — i.e., on grounds that the majority rejects — much if not most of the population will regard this authority as illegitimate. The confidence of the minority in its righteousness is irrelevant. If the minority gets high on its own supply and chooses to exercise its power in a way that tramples on our basic rights and interests, as the majority understands them, the system can rapidly destabilize.

This is right as far as it goes, but it would be more persuasive if every time Wilkinson wrote majority, he could write supermajority instead. It’s clearly right that if we have two factions with divergent interests and worldviews, but only one faction will govern, imposition of will by a small minority faction will be more corrosive of legitimacy than rule by the large majority. That’s true by arithmetic, regardless of how deeply either faction embraces or eschews a norm of “majority rules”. A much larger group will consider the rule illegitimate.

But it’s not clear how much force this argument has when the factions are roughly equally divided. In this case, one faction will still impose its will in ways that bind the other, but the losing faction is apt to consider the imposition unjust, and will be roughly as large as the faction endowed with formal authority. Democracy is most legitimate, and works best, when governance is by clear supermajorities. That’s why “bipartisanship” is — still! — coded in the American collective psyche as a virtue to be sought. Governance in the United States has never been remotely unanimous. There have always been seriously embittered losers in our many political conflicts. But when governance was bipartisan, outcomes often reflected consent of supermajorities rather than bare majorities.

However, under the United States’ competitive first-past-the-post electoral system, a 50:50 split in electoral power between parties is the attractor. As American politics have nationalized and the parties have come to represent distinct and divergent factions, neither faction can command a sizable electoral majority, so neither party can govern with much legitimacy. Both parties work the institutions as best they can and accuse the other of violating norms. Legitimacy of outcomes is fully conceded by neither. One party — let’s be clear, it’s the Republican Party — is electorally minoritarian. But the two are not so far from numerical parity that functional or naturalistic arguments (“the system can rapidly destabilize”) create a mutual interest in accepting the legitimacy of electoral outcomes. When there is a supermajority, even losing factions have an interest in conceding elections, because the alternative to legitimate governance is negative-sum civil conflict that they would likely lose. When there is not a clear supermajority — so they might win — civil unrest or worse becomes a tenable strategy.

The only way to durably restore legitimate government is to restructure our political system so that it ceases to do at least one of two bad things:

  1. Sort us into legible, divergent, cohesive factions (which we now aptly describe as “tribes”).
  2. Divide the country roughly 50:50.

The overlapping, heterogeneous political coalitions of America’s past, its two “big-tent” parties, did not survive — it seems unlikely that they ever would survive — modern telecommunications and the nationalization of just about everything. If this is right, if our political factions will necessarily be strongly sorted, our only hope to restore legitimate governance is to adopt an electoral system supportive of multiparty competition, which eliminates the 50:50 contested-legitimacy equilibrium and enables more fluid, potentially supermajority, coalitions to form.

It really is kind of QED. To remain a functional state, the United States requires legitimate government. In the current sociotechnical environment, we cannot sustain the supermajority support required for legitimate government under a competitive two-party system.

All it would take is an act of Congress to make the United States a multiparty democracy. I like to recommend Lee Drutman’s book.

Note: I’ve been doing Zoom “office hours” Friday afternoons 3pm EDT / 12pm PDT. It’s drop-in, informal, talk about whatever time. If you’d like the Zoom coordinates, let me know in the comments or DM me on Twitter.

The corporate income tax is a jobs program

The Biden Administration’s “American Jobs Plan” is aptly named. Obviously, spending on infrastructure and other things will provoke activity that contributes to employment. But less widely understood is that the “pay for” part is also employment supportive, perhaps more importantly and durably than the expenditure side. The proposal would increase the corporate tax rate from 21% to 28%. That’s good, but not enough. It would be better for employment if the corporate tax rate would be reset to the pre-Obama 35% rate, and better yet if it were set to the 50%-ish rates that prevailed during the worker-friendly 1950s. In addition to the top-line rate increase, the plan includes provisions to counter jurisdiction shopping and close loopholes in the corporate tax system. To the degree these reforms increase effective corporate tax rates, they too are employment supportive.

The reason is obvious. Wages and benefits (including employer-side payroll taxes) are tax-deductible expenses. When the corporate tax rate is just 21%, the opportunity cost to shareholders of every dollar spent on all-in compensation is 79¢. Only 21¢ gets covered by the tax writeoff. When the corporate tax rate is 50%, 50¢ out of every dollar spent on worker compensation comes out of Uncle Sam’s pockets, rather than out of shareholders’. Hiring workers is a much better deal for firms when the corporate tax rate is high than it is when corporate tax rates are low. For the same reason raising income tax rates would be a boon for tax-exempt nonprofits, increasing corporate tax rates is a boon for labor.

The counters to this are rote, and wrong. “High corporate tax rates reduce job creators’ incentive to build and grow businesses, swamping any benefit from reduced wage costs.” That might be plausible in a world that is not this one. In this world, there is little evidence that variations in the corporate tax rate much affect aggregate economic activity one way or another. In the US postwar experience, the higher corporate tax decades were the highest growth decades. And that might be causal, given the lower opportunity cost, and so effective stimulus, of wages and other business expenditures. It might also just be coincidence. But the supply-side claim that low corporate and income taxes would turbocharge investment and entrepreneurship has been tested over decades, and only really motivated squinting can scry the merest hint of it. There is little evidence for even the more plausible claim that jurisdictional differences between tax rates shape the location of real activity (as opposed to the location where profits are incorporeally booked).

This shouldn’t be surprising. The rewards to active entrepreneurship can be immunized from the effect of high corporate tax rates, because entrepreneurs earn salaries, which are deducted from profits. It is passive shareholding that is inescapably penalized by a higher profits tax, but given the concentration of shareholding among the very wealthiest, and the fact that these shares are now worth a greater fraction of the economy than ever before, balancing the distribution of wealth away from this group would be a good rather than bad thing. Smaller businesses are often “pass-thrus” — S corporations or LLCs in the United States — limiting any impact of the corporate tax on startups and local entrepreneurs.

From a neoclassical corporate finance perspective, every investment that is profitable at a low corporate tax rate is profitable at a higher corporate tax rates. Under certainty, a profits tax shouldn’t affect business investment decisions at all. Under uncertainty, the IRR of projects declines with a higher rate, but the riskiness of projects (and so the hurdle rates imposed) decline as well, since the state absorbs the impact of losses as well taxing gains. Any effect is likely to be ambiguous and small, and overwhelmed by the effect of macro policy on risk appetites and hurdle rates.

But once we pierce the veil of abstraction that surrounds the neoclassical firm, we see very clearly that a high profits tax creates incentives among firm stakeholders to distribute the pretax surplus in ways that don’t flow through to accounting profits. In the United States, research and development is treated as an expense even though it creates valuable intangible assets. Under a high corporate profits tax that can’t be circumvented, firms are more likely to behave as Amazon has, laundering its profits into R&D projects to avoid the squeeze. Research and development contributes to hiring and growth, much more than the same dollars distributed into the pockets of wealth shareholders ever would.

Similarly, a content, well-organized, loyal workforce is an asset to a firm. For any given corporate tax rate, a rational firm will “overpay” workers (relative to the lowest wages that would fill their vacancies) as long as the value captured from an additional dollar in “efficiency wages” is greater than (1-t), where t is the tax rate. It’s the same math as before. With a 21% tax rate, the firm will pay efficiency wages until it captures back less than 79¢ of value it sends to workers. With a 50% tax rate, the firm will be rationally more generous, paying workers until it captures back less than 50¢ of each dollar as “organizational capital“. Firms’ selfish generosity can take the form of higher payments to its existing workforce, amenities or upgrades to working conditions that engender employee loyalty and morale, or new hiring to lighten the load and improve output quality.

Incentives to expand R&D or pay workers are prosocial “distortions” of the corporate tax. But there are less lovely ways firm stakeholders might try to prevent the pretax surplus from flowing into profits. Most garishly, the corporate income tax already encourages firms finance themselves with debt, rather than equity. Interest payments are deductible, so debt investors get paid like workers, from pretax income rather than taxed profits. That’s terrible, and a destructive subsidy to the banking industry. Leveraged capital structures create financial fragility, exposing firm stakeholders and the rest of us to risks of unpredictable losses and financial crisis. It has always been time to end the tax deductibility of interest payments. Raising the level of the corporate income tax would be a great occasion to close the very antisocial tax loophole created by deductible interest payments.

The American Jobs Plan proposes

to fix the corporate tax code so that it incentivizes job creation and investment here in the United States, stops unfair and wasteful profit shifting to tax havens, and ensures that large corporations are paying their fair share… these corporate tax changes will raise over $2 trillion over the next 15 years and more than pay for the mostly one-time investments in the American Jobs Plan and then reduce deficits on a permanent basis

I don’t know whether that revenue number will materialize, whether it accounts for the fact that accounting profits are likely to decline even as activity expands if the plan succeeds at raising effective tax rates. Raising and tightening enforcement of the corporate tax is a good idea regardless. It will redirect wealth, away from shareholders, to some mix of the state and other firm stakeholders including customers and suppliers and especially workers. CEOs are better people when the tax system constructs firm dollars not as shareholder dollars, but as resources of a range of competing claimants. We don’t tax because it is a bad thing that we have to endure in order to pay for stuff. We tax because it is a good thing that promotes a broad prosperity and helps reconcile generous provision of public goods with stable prices. (I like the @jdcmedlock term “tax positivity“.) Raising the corporate income tax, ideally back to 50%, and ensuring the rate is actually effective with respect to earnings attributable to shareholders, would support all of these goals. It’s a great tax.

Writing as a public good

The newsletter platform Substack has grown controversial. For an overview of the controversy, see Ben Smith. To get in the trenches, read Nathan Tankus’ impassioned letter about why he’s leaving the platform.

I am mostly aloof to the Substack wars. I love trans people. I also love, read, and learn from people that some trans advocates accuse of being hateful. The humans are complicated. Love them. I have little sympathy for the big names who’ve made careers of being “canceled”. But I worry that the growth of media that blur personal and political spheres is reshaping offline norms in ways more likely to impoverish our private lives than enact useful change. These media include Twitter feeds and old-school blogs. But Substack newsletters, because of the incentives and ultimately influence that come with monetization, raise the stakes. This is most clear in the authors whom the platform woos with advances under “Substack Pro“. Substack may ostentatiously recruit trans activists to “balance” complaints that they’ve become a refuge for bigots, but arguably their and their authors’ pecuniary interest is in a lively culture war, hot on both sides, rather than in forms of deliberation that might be more constructive but less exhilarating.

As a person who likes to write but who thinks professionalization corrupts public affairs writing, these are issues I give some thought to. Jeet Heer makes a good point when he tweets “Writing is either a career or it’s an aristocratic hobby. If it’s an aristocratic hobby, it’s closed to most people.” At the same time, when writing becomes a career, the institutions and incentives beneath that career cannot help but shape the writing.

It would be good if we could finance careers in public affairs writing while largely insulating authors from financial and career incentives. Substack’s subscription model may (or may not) prove an improvement on the listicle-inspiring ad model. But the direct pecuniary stake in subscribership it provides (and gamifies) will color what authors write. People are willing to fund their clique’s warriors, so offering political “red meat” is an obvious strategy to win subscribers. As Glenn Greenwald puts it, “They’re not paying because they’re getting something in return; they’re paying because they want to support journalism that they think…needs to be heard.” Functionally Substack shares a perhaps uncomfortable kinship with ActBlue or WinRed. A subscription-based model is going to encourage writers to to flatter the interests of especially more affluent readers. Substack subscriptions are expensive compared to paywalled conventional journalism, on almost any quantitative measure of writing unlocked. Finally, in my view, public affairs writing ought to be a public good, where authors contribute to a universally accessible, intertextual commons, rather than marketing paywalled silos. It’s not writers’ responsibility to bear the weight of this ought. We need to find ways to finance the people who cultivate the commons. But it is a commons that we want, rather than a labyrinth of paywalls or (worse) a few dominant publications everyone has to subscribe to.

In writing as in many other domains, I think “high-powered incentives” — extrinsic money rather than intrinsic goods like pride in virtue or quality — are essential at low levels but destructive at high levels. We expect and want baristas and warehouse workers to be primarily in it for the money, although of course they take pride in the quality of their work too. The tax and shareholder-value revolutions of the 1960s through 1980s destroyed American society by turning the people near the top of our social hierarchies into rapacious maximizers, and we should undo that, quickly. In writing and in general, external incentivizers can easily distinguish outright incompetence from a basic capacity to do the work. Above a certain level, however, quality is difficult to observe. Incentivizing putative correlates of quality encourages gaming, with a net effect that is ambiguous at best. At high levels, people’s “skin in the game” should increasingly become attached to broad, cooperative outcomes rather than narrow measures of behavior.

In light of all this, one way the Substack model might be improved is with caps and refunds. As with Substack now, there would be paywalled content, but the paywall would be stochastic. When a browser hits a piece, if it’s an identifiable subscriber it’s allowed through. If not, a quiet lottery decides yay or nay. The odds of denial would go down as the number of subscribers go up. At very low subscriberships, this would effectively be the current model, a hard paywall. At very high subscriberships, all content would effectively be open.

On its own, this would be a prescription for free-riding and death spirals. Why pay expensively to “subscribe” when other people have already unlocked the writing for you? However, what if the net cost of subscribing declines with readership, so that if many people subscribe, the contribution requested is very small?

A simple way to do this would to impose a compensation cap. Suppose an author requests $5 per month or $60 per year with a $150K cap. If she accumulates 2500 subscribers, she’s hit the cap. Thereafter, revenue from additional subscriptions gets distributed pro rata as a refund to subscribers. If she has 5000 subscribers, each subscriber would get $30 back, making the net cost of supporting the author only $30 per year. If she has 50,000 subscribers, the cost drops to $3 per year, literally spare change, just a quarter per month, and the writing becomes part of a wide-open commons. Once an author has hit her cap, she still ought to (and I think still would) promote her work and try to get people to contribute. But her incentives would become egotistical and altruistic: Egotistical because public affairs writers want their work to be influential and widely available (as long as they are also paid). Altruistic because encouraging new subscribers would decrease the burden on writers’ already loyal subscriber base, and because more exposure really might contribute to the process by which ideas and insights make the world a better place.

A gentler approach might replace a simple cap with an asymptotic limit. Each dollar contributed would go to one of two pools, author payment or pro rata refunds. The first subscribers’ funds would go almost entirely to author payments, but as cumulative revenue increases, the share going to the author would decline, and the share going to refunds would increase, so that the author’s payment as a function of total revenue approaches a horizontal asymptote. Under this scheme, the transition from extrinsic peddle-subscriptions-to-pay-my-rent incentives to more intrinsic and altruistic incentives would occur very gradually. If one wanted to maintain some degree of financial incentive for authors to expand their contributor base and reduce subscriber burdens, the asymptotic limit could be by an upward sloping line, but with a slope much less than one, so that at the limit say 10¢ out of every new subscriber dollar would go towards the author, and 90¢ to the refund pool.

If you’ve got better ideas than these, please contribute them to the commons! We want to fund a lot of writing, of high quality and from a wide variety of points of view. But we want those voices to be independent, not just of particular institutions but also of the incentives imposed by variable remuneration. The humans are clever. Surely we can figure this out.

The “cap and refund” idea owes inspiration to and Clark Evans, ht Sigfried Gold. It bears some similarity in mechanics and in spirit to a suggestion by Ryan Cooper that a nationalized music streaming service pay out artists “progressively” — i.e. at gradually decreasing rates per-play, in order to encourage a musical commons conducive to a broad creative class rather than the winner-take-all status quo. The Glenn Greenwald quote is via Jemima Kelly‘s reporting, but the paragraph where I embed the quote is too wordy to include a hat-tip.

I want to add that this piece is not intended as an anti-Substack diatribe. I read and subscribe to a bunch of Substack newsletters, including some of the controversial ones. Overall, I think Substack has inspired a welcome renaissance in less institutional writing. I hope the current renaissance is a step on a journey to better things, that its concentration on a single platform decreases and that it evolves in a less winner-take-all direction. But overall I am grateful for Substack, and competitors like Ghost. If I were a better writer, I’d consider trying to make a living on these platforms myself.

Convenient, compulsory, compensated

Voting should be convenient, compulsory, and compensated.

We should all want everyone to vote. If this is a partisan issue at all, it’s partisan for like five minutes. It’s not actually clear which party would be hurt if everybody voted, but if one party were disproportionately harmed, it would just realign a bit. The US political system converges to a 50/50 electoral power divide, which under universal voting would move a bit closer to a 50/50 voter support divide than obtains now. You might argue that makes universal voting anti-Republican for the moment, since Republican power relies more strongly on disproportionalities in our electoral system. But that’s not right. The representation skew caused by the Senate, or by the vote-wasting overrepresentation of Democrats in dense places, would not be affected by universal voting. Unless the we reform redistricting, universal voting does not prevent gerrymandering. Given the 50/50 rule, so long as there remain disproportionalities of electoral power, one party or the other is going to continue to rely upon them.

If universal voting does have a near-term partisan effect, it will be by virtue of how current non-voters would vote, which absolutely nobody knows. Researchers and political professionals have no idea, because there is by definition no solid data. Opinion polling is notoriously bad even at predicting the behavior of “likely voters”, who are more reachable and easily characterized than nonvoters. Democratic partisans sometimes presume on the basis of crude stereotypes that voting expansion will always be good for them. Why are you sure Puerto Rico would be a blue state? (It should be a state if its public wants that regardless.) Any inferences you draw based on observed correlations between demography and voting behavior are confounded by a motherfucker of a selection effect. People’s choice of whether or not to vote is not random, and nonrandom in ways unlikely to be orthogonal to partisanship.

My guess is that under universal voting, both parties would abandon the fetishes of the weirdest, least popular elements of their coalitions. Our existing system gives tremendously disproportionate weight to motivated voters. Some people argue this is good thing. Why shouldn’t a democracy take into account the intensity as well as the prevalence of citizen preferences? Probably it should! But we already have way way way way too much of that good thing. In soliciting support before elections, and with every call they take after winning an election, politicians are overwhelmed by the tyranny of concentrated benefits versus diffuse costs. Our problem in politics is not underrepresentation of small, extremely motivated interests, whether industry lobbyists or righteous activists. Our problem is that the preferences and interests of the very broad public get overridden by those groups, and our polity is therefore so badly misgoverned it is in danger of collapse.

Under nonuniversal voting, turnout and suppression are inevitably dimensions of competition. But they are invidious dimensions of competition. I won’t waste words persuading you that competing to suppress the vote of your electoral adversaries is morally wrong and bad for democracy. Even avid practitioners concede the point, and mostly pretend suppression is not what they are doing. But conventional turnout competition is bad too. Uncompensated voting is a regressive tax. At best voting is a fixed cost, more burdensome to the less resourced. Affluent people with stable schedules, ready transportation, and spare attention have a built-in advantage. In practice, voting is more expensive, in terms of time and hassle, for poorer people, rendering it even more regressive. The goal of motivating turnout encourages drama and outrage rather than deliberation over tradeoffs. If the margin I am trying to overcome is “check this box, not that one”, we can talk about the benefits of the program and how the taxes will work. If the margin I am trying to overcome is “lose work hours you desperately need to stand in line, arrange childcare for that, pay for gas”, well, I’d better talk about how you are our last bulwark against authoritarianism, about how the other guy is Satan himself so failing to show up for our lone, beleaguered warrior would be a betrayal, even a sin. The recent Presidential election featured very high turnout, but I’m not sure you’d describe the foremath as a period of exemplary democratic deliberation.

Some of the biases of voluntary, uncompensated voting can be reduced by making voting more convenient. But, in a system where turnout and suppression are in fact dimensions of electoral competition, convenience reforms are non-neutral. They are likely to be supported by the side that sees electoral advantage in them and opposed by the side that thinks it stands to lose. Partisans may often be overconfident in their theories of how these reforms will (un)tilt the field, but nevertheless. You end up where we are, with one side emphasizing “voter access” (convenience reforms) and the other emphasizing “voter integrity”, which provides a not-facially-evil pretext for opposing convenience reforms.

This is not a great place to be! Because electoral integrity actually is a real concern. The integrity of the US electoral system is and has been in bipartisan doubt for some time. Before there were Trump operatives making stuff up about Dominion Voting Systems, there were people like Jenny Cohn and, well, me, worried about unaccountable touchscreens and “ballot marking devices” produced by ES&S and Diebold. In 2016, I think it’s fair to say that many Democrats were not 100% sure that Trump’s slim electoral margin might not have owed something to Russian incursions that went beyond publicly reported exfiltrations of information from state electoral systems. There is no credible evidence for what Democratic-leaning media have dubbed “The Big Lie” (or what diehard Trumpists call “The Steal”), and Trumpists’ attempts to circumvent the electoral authorities and courts whose role it is to adjudicate such evidence were despicable. But absence of evidence is not evidence of absence. If, however mistakenly, your priors were very strong that Donald Trump had it in the bag, it’s not ridiculous that with margins as slim as they were and the US electoral system as “loose” as it is, you might not have been persuaded of his loss. Again, this is no excuse for failing to accept the result — Democrats who felt the 2016 election was illegitimate didn’t invade the Capitol. To the very limited degree they promoted circumventing the outcome with electoral college machinations, that too was discreditable. We go into each election with the electoral system we have, not the one we might wish to have.

It is between elections that we get to improve the system, and improve it we should. We do want an electoral system the legitimacy of whose results are more sure, which produce more and more certain evidence in forms accessible to the public. It’s not ridiculous to be concerned about voting machines. With in-person voting, it is a bit ridiculous to be concerned about voter fraud, because the costs and risks of going to a polling place and lying about your identity are (or can be made) very high relative to the marginal effect an individual might have even on very close elections. However, with remote voting, voter fraud becomes a more serious issue, as the possibility of mass rather than one-at-a-time identity theft increases the potential effect, and the ability to perpetrate the fraud without physically turning up at a polling place reduces costs and risks. If this sounds like a Republican talking point, it’s also precisely why we don’t have internet or smartphone balloting, and shouldn’t any time soon. It’s hard to “hack” thousands of bodies showing up at polling places. It might not be so hard to steal the internet credentials of thousands of people and vote on their behalf from some perch beyond US law. Mail-in voting sits between easily securable in-person voting and clearly not-securable internet balloting. It might or might not be right to universalize it, and the raging of a deadly pandemic might legitimately affect the balance of costs and benefits. But we’re not having a meaningful conversation about those tradeoffs while what we’re really arguing about is access versus suppression.

In other words, we won’t do a good job of balancing security and convenience, we won’t even be able to discuss that balance, as long as election technique is subsumed in partisan competition over turnout and suppression. Compulsory, compensated voting would eliminate those dimensions of competition, and render electoral integrity a technical dispute within which both parties’ interests would be broadly aligned. This would make safe convenience a reachable goal. Convenient, compulsory, generously compensated voting would eliminate the structural bias towards the affluent, as the compensation would be more meaningful to the poor than to the rich. Convenient, compulsory, compensated voting would improve American governance, which is too much in thrall to very motivated parties and attends too little to the more diffuse interests of ordinary voters. Convenient, compulsory, compensated voting would quiet the crosswinds that make it impossible for the United States to competently administer elections because administrative choices and election-rigging are too difficult to distinguish.

Alex Kovner has a post I really like, “Start with the State“:

Most democratic discussions start with the people, and attempt to build structures from them on the principle of representation. This has resulted in some real gains for democracy, most notably the creation of the U.S. Constitution and the democratization of Europe, with changes such as the reform bill of 1832 in Great Britain. Nevertheless, it’s hard to point to any meaningful improvement in democratic structures since the 19th century. All the improvement has been directly tied to representation through the franchise, namely including women and minorities.

Instead, why don’t we start with the state, and ask what it needs to properly perform its broad social role of service to the people?

The reason to want universal voting isn’t (just) because all the people “deserve” representation. To be clear, I think they do. But maybe you don’t. You may think that layabouts who don’t value the franchise enough to endure its inconveniences deserve whatever government they get.

But if it is to govern effectively, the state needs to know and give weight in practice to its whole public’s values and interests. To do that, it requires some form of deliberate, secure, widely-agreed polling that enfranchises its whole public. The state has a strong interest in criteria for enfranchisement not becoming a dimension of political competition, as that is not conducive of deliberative excellence and undermines integrity of the polling.

Universal, secure, legitimate polling is a necessity of practical statecraft, and the quality of practical statecraft is the hinge upon which all of our fortunes in fact rise or fall together. Voting should be convenient, compulsory, and compensated.

A heathen’s Easter

I have always been a devoutly irreligious person. I’m not an atheist. I think that creed assumes we know far more about our circumstances than we actually do. But I found very little appealing about the religious tradition within which I was raised, and I’ve not been drawn to others. However, in recent years, I have developed some reverence for a certain aspect of Christianity’s founding tale.

“Love your murderer” is, I think, an ethical aspiration. That one ought to love in some fashion every human being does not mean that people shouldn’t be held accountable. Murderers and other doers of foul deeds should be punished to deter others, should be tasked with restorative work where such work can be done, should be segregated from society and deprived of some freedoms as long as they remain a danger to others. Failing as a society to insist on those things would be failing to love the humans more broadly. (I hope it goes without saying that we should love our murderer because they are human, not because they are our murderer.) But when we punish, deter, or restrain our fellow humans, that ought to be an occasion of sad necessity, not joy or righteous vengeance. We should be very humble in any suggestion that pain we impose constitutes “justice”. Taking pleasure in the harm or punishment of someone who has hurt us is understandable and effusively forgivable, at a personal level. At a social or political level, however, it is noxious. It deforms us. It provokes us to terrible acts, sometimes in the name of, rather than in opposition to, the law. Individually, it is understandable when we sometimes take self-righteous pleasure in other people’s harm. I do, far too often. But it is the opposite of an aspiration. It is a lapse.

Obviously, the Christian story is an example of a person loving his murderers. And for that alone, it draws from me a certain respect. But a few years ago my wife and I had a child, and the part of the Catholic Holy Trinity I identify with shifted, perhaps egoistically. It occurred to me that there is so much focus on the son, who forgave his own murderers. But what about the father, who is called upon to forgive the murderers of his child? “Love your murderer” is an ideal I can at least conceive of aspiring to. But “love your child’s murderer”? Intellectually, the case is the same. We owe love to the humans, unconditionally and universally. That is the foundation of human virtue. But, as the kids say: I. Can’t. Even. I can’t let my mind go there. It is too great a betrayal, at an emotion level, of the star around which I orbit.

My theological sophistication is about candy-wrapper level. But for whatever it’s worth, I consider this aspect of Christianity’s founding myth or event remarkable, and underemphasized. “Forgive them, Father, they know not what they do,” represents a profound plea from the lips of a man being painfully murdered. That a parent, one with fire and brimstone readily at hand and a notorious history of smiting, would forgive is perhaps even more astonishing, even more wonderful.

The history of Christianity, especially at the social and political level, imperfectly evinces this ethos which I draw from, or project onto, the tale. Nevertheless, I think the ethos offers crucial lessons for us now. All of our political factions, even the ones who coined the pejorative term, slip frequently into “othering” one another. I take that to mean a withdrawal of the love, or even the aspiration of love, from some group or class of humans, often because “they” are purported to be vicious or guilty or dangerous, to have harmed us or our values or people we hold dear. There is a lot in our social affairs that needs changing, and there will be losers as well as winners from those changes. In a broad sense, I think if we act well and wisely, there will be many fewer losers than we fear, because our misarranged society exacts terrible costs even upon most of its “winners”. We reform society out of love for humans, to create scope for greater flourishing. But when people are harmed, whether transiently or durably, that counts as a cost, regardless of how wicked we persuade ourselves are the losers. That there will be losers is no excuse for inaction, in the same way that our love for a murderer mustn’t inhibit us from sober punishment. We owe a duty to all the humans. However difficult it may be to quantify human welfare, as best we can we must find ways of improving it. But the eggs we must break are losses to be minimized, not righteous smiting of the vicious. To whomever you are shouting at, owning, canceling, legislating against, you owe a duty of love. Aspire to love even your murderer. If you are better than me (and I assure you, you are), aspire to love even your child’s.

Happy Easter, to all those who celebrate it. And to all of those who don’t.

Update History:

  • 04-Apr-2020, 4:25 p.m. EDT: “there will be losers as well as winners, from those changes”; ” But to the degree when people are harmed, whether transiently or durably, that…”; “…the eggs we must break are costs losses to be minimized…”

Liberalism and class

The success of people like Donald Trump and Victor Orbán has deeper roots than the charisma of a few demagogues. It reflects a potentially fatal weakness of contemporary liberalism that liberal political coalitions have not seriously addressed. Quite simply, liberalism as practiced in the broad West since the 1980s becomes coded as elite and upper-class, not because the public is misled by charlatans but because the public is perceptive. For “liberalism as practiced…since the 1980s” I might have used the term “neoliberalism”, but I want to emphasize I am not referring (just) to the project of expanding the scope of markets and market-like institutions, even to domains formerly insulated from them. Aspects of liberalism so foundational they are indistinguishable in liberal communities from virtue predictably become polarized by class.

Three pretty basic liberal values include

  1. the right to live as, where, and among communities one chooses, so long as those choices don’t harm others, under a narrowly circumscribed conception of harm;
  2. that competition for social goods (like jobs) or imposition of social sanctions (like punishment for crime) should be administered according to predefined formal procedures, “neutral” with respect to the identities of the parties; and
  3. that one has an obligation to be tolerant of, and interact cordially with, people of widely varying lifestyles, beliefs, and communities (a kind of complement to the first value)

All of these values I think have become polarized by class, not just in the United States with our peculiar history, but throughout much of the West and especially the recently liberalized, post-communist East.

It is not hard to understand why. The right to live as, where, and among communities one chooses is only valuable to the degree that it is practical and ethical for a person to exercise that right. Among the affluent, the costs of uprooting oneself from where one happens to start to some other community of ones own choosing are tolerable, both to the uprooter and the community left behind, because affluent people rely upon portable financial capital and impersonal markets for most of their requirements. In less affluent communities, people’s wealth and insurance against adversity are bound up in very personal relationships, which get destroyed rather than transported when a person “abandons” her roots. Professional class Americans follow their careers around the country, relocating between liberal cities and college town with remarkable ease, paying expensively for new child care in each. Working class Americans are much more likely to rely on family to render child-rearing manageable and consistent with their jobs. Among the affluent, elderly parents can be left “on their own”, because deliveries can be paid for, rides can be hired, if necessary more intensive, personal help can be paid for. The downscale elderly rely much more upon unremunerated help from children and church, upon the goodwill of particular human beings. When people upon whom they rely leave, they simply become poorer. For the person who might choose to leave, this cost they might impose pits liberal “rights” against very visceral obligations. A person who has faced that dilemma, and chooses to stay, might understandably view the kind of people who make the opposite choice as selfish.

Alternatively, an economic migrant who feels compelled to move somewhere he would not otherwise choose in order to help those he’ll leave behind might not count his exile as a blessing of the liberal order. He may think the cash he’ll send home is more valuable than whatever his presence could offer, but his family will still be broken. Liberalism gains adherents from the promise of choice, but creates cynics when the choices are so bad it feels like compulsion beneath a velvet glove. Which you experience depends very much on affluence.

The class valence of our second value, procedural fairness, is more obvious. We all understand that however formally neutral, almost any institutional procedure is gameable, and people with lots of resources will tilt the odds in their favor in ways unavailable to people with less. If you are accused of a crime, what is more important, your actual guilt or innocence, or the quality of legal representation you can afford to engage? The answer is not obvious. We invented standardized testing to make fair and neutral decisions in academic admissions, and then we invented the SAT prep industry by which the wealthy could gain an edge. The IRS acknowledges that it enforces our ostensibly neutral tax laws disproportionately against the not-so-wealthy, even though the wealthy hide more dollars from the fisc, because despite ostensibly neutral enforcement procedures, the IRS can afford to go after the working class but is outgunned when it goes up against the rich.

It’s not just that the game is rigged. It’s that there’s no game we can invent that plausibly would not be rigged, given the yawning differentials of resources that now prevail in our society. Throughout the Trump Administration there was a chorus of “career professionals” each day shocked anew by some violation of procedural norms. The Inspectors General were fired! I’ll admit, I was outraged too. But I’m of their broad social class. The outrage did not catch fire so much beyond the ranks of career professionals, because most people accurately understand that under the weight of contemporary inequities, the liberal ideal is already something of a sham. From the perspective of those who will always lose anyway, which is worse, to lose under institutions about whose professionalism and neutrality hymns are sanctimoniously sung, or to lose in what is obviously a kangaroo court? The latter does less violence to your dignity.

You may say this is overcynical, and I’ll agree. (I would, wouldn’t I?) However infertile the soil for fairness and impartiality, we’ll get more of it by assiduously trying than by giving up all hope and just cackling while we summarily execute the meddlesome poor. But try as we might (and we really do try!), we succeed at best partially, and the contours of our success cannot help but bend to the terrain of wealth and class. Differentials of economic and institutional power in our society are simply too great for our efforts to yield outcomes that are even plausibly fair. Why should the people on the losing end of this get bent out of shape in defense of “liberal norms”? Why shouldn’t they entertain hopes of a more honestly, overtly, accountably hierarchical order of which they might not be the bottom rung? Support for liberal norms and procedure rises with economic and social class, because liberal norms and procedure only deliver a colorable simulacrum of fairness for people in higher social and economic classes. Everyone else is understandably open to alternatives.

Finally there is the obligation that is the flip side of liberal choice and diversity, the requirement to be tolerant. This doesn’t sound so hard or class-stratified. You do you, I’ll do me, we’ll all get along just fine. But we’ve already seen that the stakes of interpersonal conflict and controversy are higher in communities where people’s material security depends upon direct intercourse and approval. If you’re affluent and your neighbor is freaky, that’s cool, you still send your kid to day care. If you can’t afford daycare and your neighbor is freaky, do you still send your kid over while you work a shift? Deviance imposes higher costs within communities of direct, reciprocal interdependence than it imposes among affluent communities whose material needs are provided for by markets. This takes its toll on the balance of values between toleration and conformity within such communities.

More pressingly, liberal societies do not demand toleration only at an individual level. An essential fact of liberal societies is we are permitted to segregate into communities reflecting diverse choices of lifestyle, profession, interest, etc. Individuals who do not choose to so segregate, or who do not have the means to choose, are nevertheless segregated by virtue of the people who leave. The obligation to be tolerant in a liberal society then shades from a kind of negative requirement — “try not to be a dick” — to a positive requirement of understanding the sensibilities and sensitivities of diverse communities and taking care to respect them. On the cultural left this is sometimes referred to as “code switching”. More broadly it might be understood as diplomacy.

Code-switching or diplomacy, it’s a hard thing. It takes time, practice, and careful attention to manners and mores. It is work, and the kind of work for which the verbal gymnastics of a formal education really helps. People from affluent communities have that advantage, and they have more resources to devote to the work, than people from poor communities. Some communities self-segregate so hermetically that members face very little need for diplomacy, in the same way many Americans see little reason to learn a foreign language. But poorer communities cannot do that, because they require access to resources that become available only by interacting with more upscale communities. For members of poorer communities, the burdens of diplomacy are high, yet they have little choice but to try and often fail to bear them. The “meritocratic” professional class, since it purports to recruit talent and serve clients from diverse communities, increasingly makes fluency and attentiveness to this kind of diplomacy a non-negotiable requirement. But this has the paradoxical effect of further isolating this class from the bulk of the public, for whom the burden of staying current with everchanging mores is simply too much. Yet the professional class disproportionately sets social expectations, leaving much of the public conscious of a kind of inadequacy, and resentful of a set of requirements that feels artificial and courtly and that clearly has the effect of excluding and disadvantaging them. The requirement of diplomacy has become a kind of regressive tax. The same high standards are expected of everyone, but only a certain class of people can easily afford to meet them.

Thus toleration itself, expansively defined, has become a regressive tax, helping cement the class valence of liberalism. Matt Yglesias gets into trouble on my Twitter timeline criticizing an “antiracism of manners”, but I think this is what he’s getting at, and I agree it’s unsatisfactory. The trouble is there’s no way out. One can’t demand that some communities be less sensitive without acknowledging that the mores of powerful communities will always be nonnegotiable (the original context for code-switching). Either liberal professionals require those within their ranks to be elaborately diplomatic towards diverse, less powerful communities, and by doing so set themselves apart as a peculiar and exclusive elite, or they don’t and everyone has to code-switch to accommodate the most affluent and powerful communities. In a less class-stratified society, it might be possible to define a kind of Esperanto into which everyone would be expected to acculturate for public purposes, in the way that English is Singapore’s public language even though it’s almost no one’s native tongue. In contemporary America, this would collapse to illiberal domination.

Putting all of this together, I think it makes perfect sense that liberalism has become a kind of upper-class creed. So long as it is, liberalism is in peril, and should be. There are illiberal currents on both the left and right that would exploit popular dissatisfaction to remake society in ways that I would very much dislike, whether by restoring a “traditional” hierarchy of implicit caste, or by granting diverse professionals even more prescriptive authority than they already have at the expense of liberty for the less enlightened. My strong preference is that we do neither of these things, and instead restore the broad appeal of liberalism by “leveling up”. We should ensure that everyone has the means to rely upon some mix of the market and the state to see to their material welfare, reducing the economic role of networks of personal reciprocity and history. This would render the good parts of liberalism more broadly and ethically accessible. Reducing economic stratification makes liberal proceduralism more credible pretty automatically. When economic and institutional power are dispersed and broadly shared, no one has a built-in edge, and aspirations of neutrality and fairness become plausible. Once we view society less through a lens of domination and oppression — because in a more materially equal society that will be a less credible lens — it will become possible to agree on a common, stable set of commercial and professional mores rather than extend deference to myriad communities’ evolving sensibilities. It will be practical for the broad public to learn and understand those common mores, and so not be excluded or set apart from professional communities by what come to seem like inscrutable courtly conventions.

There are undoubtedly tensions between liberalism and egalitarianism. But they are yin to one another’s yang. Opposites in a sense, they must be reconciled if either is to survive.

Fix the Senate III: Stochastic Gong Show

American government has an obvious problem. The only elected official held accountable for whether the government as a whole is effective is the President. But the President, under our checked-and-balanced system, cannot govern effectively without the active cooperation of Congress.

For members of Congress, how effectively we are governed during their tenure is basically a non-issue. Representatives are held accountable not for how the country is doing, but for the bills they personally sponsor and for how they individually vote. They have every incentive to pander pointlessly to key constituencies and to avoid contentious votes that might anger people, regardless of how essential the issue. Ultimately, the public interest is bound to the portfolio of legislation a Congress produces, while a legislator’s interest is bound to the popularity of individual bills and votes they become identified with. And to the unpopularity of votes they can avoid becoming identified with — much of why we have an “imperial” Presidency is because, on matters like war and peace for which Congress is Constitutionally responsible, our representatives rationally abdicate. They prefer to cede hard calls to the executive, so they cannot be blamed for whatever happens.

This helps explain a stylized fact of American politics: The public detests Congress as a whole, but loves their own representatives. Each member of Congress tailors her actions to keep the love of her own constituency, and usually succeeds. But all that preening and ducking of controversy fails to compose to an intelligent portfolio of legislation, conducive of high-quality government. Even when a single party controls Congress and the Presidency, for most representatives, the electoral cost or benefit of how well the country is governed under their party’s “brand” is modest compared to the personalized costs of a vote that might upset important constituents.

We would be better governed if Congresspeople had a stronger stake in the success of their legislative bodies as a whole than they had in their personal popularity with constituents. But we have no institutions that rewards elected officials for the collective successes, or punishes for the collective failures, of the bodies they constitute. We should create such institutions.

Suppose that at every Federal election, a yes/no question were placed on the ballot. “Do you approve of the job the US Congress is doing?” The result would be aggregated, one person one vote, into a national approval rating. Senators are ordinarily guaranteed six-year terms. But suppose (following the Constitutional amendment that would be required to enact this) each just-reelected or two-year-in Senator stood in jeopardy of losing their protracted terms, and being forced to stand again for election in just two years. For each such Senator, we’d perform a lottery in which the probability of having their terms abruptly shortened would be (1 - approval_rating). If Congress had a 100% approval rating, then senators could be as secure in their jobs as they are today. If Congress has only a 33% approval rating, however, then two-thirds of incumbent senators who might have looked forward to four or six years of job security would find themselves thrown untimely before the tribunal of the people. This would create a strong incentive for Senators to govern in ways that not only endear them to their own constituents, but also persuades the national public that Congress as a whole is discharging its duty of representation and governance well. [*]

I call this idea a “Stochastic Gong Show”, after the television variety show during which judges would cut poor performances short by banging on a gong. We would all stand in judgment of Congress, as we should. But rather than deterministically ending bad numbers with a bonk, we’d decide the risk our players face if they fail to choreograph a dance that delights the public.

An objection might be that it would only apply to senators, who would be judged for the performance of Congress as a whole. But maybe that’s okay. The Senate in practice is the more powerful house of Congress, populated by the more senior members of each party who are not without influence over their colleagues in the other chamber. If Senators really need Congress to work, they can go a long way towards making it happen.

A practical objection is that, under the only Constitutional amendment process ever thus far used, a supermajority of the Senate would have to approve adoption of this proposal, whose function and intent is to make senators uncomfortable, for the good of the nation. However, anything is possible if the public is sufficiently convinced it’s a good idea. “Stochastic Gong Show” sounds like a dorky thing attractive to people like me (and not just) who think injecting some randomness into democracy could do a lot of good. But the basic idea of a mechanism that automatically throws the bums out when, overall, we agree they’re doing a crappy job, strikes me as one that could be popular.

Notes: I first presented this idea a couple of years ago. It owes something to this proposal by Robert Merkle, who similarly proposes using an approval rating to drive political institutions, though he goes well beyond that, proposing (after Robin Hanson’s “futarchy“) that policy choices should be driven by market-predicted approval ratings conditional upon adoption.

[*] If this level of risk seems too strong, the formula could be generalized to 1-(k+approval_rating)/(k+1), for a chosen value of k. If k is zero, we have the original formula. If k were 1 and Congress’ approval rating was 33%, each senator’s risk of a shortened term would be 1-(1+1/3)/2, 1/3 rather than 2/3.

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