Brilliance from Bryan

by Russ Roberts on June 9, 2009

in Standard of Living

Bryan answers Brad. Beautifully.

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{ 46 comments }

Daniel Kuehn June 9, 2009 at 10:28 am

Well I think…

JUST KIDDING GUYS!!!! :-D

Russ Roberts June 9, 2009 at 10:41 am

Daniel,

LOL

Methinks June 9, 2009 at 11:25 am

I love that post.

There's one problem with allowing immigrants into a country as second class citizens. The more generous the welfare state, the more motivated people are to commit fraud to obtain welfare benefits. This is a problem with social democracies and one reason they have such restrictive immigration policies.

Gil June 9, 2009 at 11:31 am

So the poor can stay terribly in their home country or be poor second class in another? Howz about questioning the role of evolution and genetics as well? These people are born naturally underproductive hence have no capacity to not be poor. If it's plain folly for the aspiring economic leveller to say "why not take those who have 'too much' and give it to those who have 'too little'" then is it not folly to say "free the market and they'll go from poor to rich" as these people aren't being 'held down' but are just plain unproductive, period?

Sam Grove June 9, 2009 at 11:32 am

I've begun tossing around the idea that part of the problem with our discussions it that we suffer from a certain categorical restriction.

We tend to talk about the duopoly between markets and government with society as the container of the two, but what if we begin talking about markets, government, and society as three distinguishable categories?

In the duopoly discussion, government is viewed as a tool of society, but if government is a tool of society, we are left with a paradoxical situation of government being the manager which leaves society subject to the machinations of government rather than the other way around, which is a requirement for tool users.

If government is a tool for society, then it should not be the manipulator. Tool users are not managed by their tools.

By distinguishing society as an alternate realm (rather than via government) for action to improve the general welfare, then we can open a new area for discussion of cooperative action modes for achieving various social goals without always resorting to the force wielding tool of government.

It's actually happened before, but the impatience of progressives changed the dialog such that it came to be assumed that net social progress can be accelerated by latching good intentions to the force of arms.

Randy June 9, 2009 at 11:47 am

Sam,

"If government is a tool for society…"

Ah, but it isn't. The people do not rule, they are ruled. The questions for those who desire order are of the most effective and/or efficient methods of exploitation. And then there are those who desire disorder… the rebels and heretics.

Daniel Kuehn June 9, 2009 at 11:47 am

Sam Grove -
I think that's a good instinct, but I would caution against loading up consideration of these issues with too much assumptions, such as that government or some sort of coercive collective action is unnatural or alien to "society", or that "the market" is somehow a pre-existing state of nature. All of these things are tools, and all of these things are naturally occuring social organizations.

Take the family, for instance. The family is certainly a coercive collective where some members rule and theoretically look out for the interests of other members by use of force. It's not a perfect analog to the state, of course – nobody wants the state to be paternalistic the way a family can be. But it illustrates my point that we should be careful about our assumptions of what exactly a "state of nature" looks like.

If you assume that all coercive collective action is a violation of "first principles", you're assuming your own conclusions. I honestly, swear to God, do have libertarian sympathies. I do get worried when the state is justified for the state's sake. But the opposite idea – that the collective action can be written out as alien – I think can be just as distortionary. I don't think the natural, human "state of nature" is so easy to define in either case.

Matt June 9, 2009 at 12:14 pm

Any argument based on the state of nature has to be eyed very skeptically. It is, perhaps, a useful didactic tool, but so clearly an imaginary construct that it cannot, on its own, be used to justify any given system. Man was never in a state of nature as assumed by Hobbes, Locke, Rousseau etc.

My opinion is that, behind all of the arguments, most of the differences between free marketers and social democrats lie in a disagreement about whether man should be free to pursue individual ends, or whether he should be herded into pursuing collective ends. The subject has been treated beautifully with regard to economics by Hayek in L,L,L vol 2, and as a sort of genealogy of philosophy by Berlin in Two Concepts of Liberty. Berlin's analysis stating that believers in positive liberty aim to create a world in which the wants of the empirical individuals need to be sublimated in favor of the wants and desires of the theoretical rational self is an extremely powerful tool with which we can read most defenses of social democracy or social justice. Does that mean that social justice is wrong? Of course not, but it is, in many ways, a labyrinth and most people who accept it likely do not understand the basis of the argument, and have been, as many would argue about the entire world, created by the argument rather than in the process of creating it themselves.

Both concepts, the positive view of social democracy, and the negative view of libertarianism, would create a world which had significant problems and significant benefits. My feeling is that smart libertarians (I really hate that word) are more willing to realize the negative aspects of their worldview than are smart social democrats, and understanding that any system has problems is important. The world itself is problems, and we are constantly trying to fix them. Viewed from this perspective, DeLong sounds naive, and Caplan more penetrating.

John June 9, 2009 at 12:33 pm

So immigration policy is justified by the existence of the welfare state, and in absence of the welfare state we could have open borders?

Sounds a little to simplistic to me.

John June 9, 2009 at 12:33 pm

So immigration policy is justified by the existence of the welfare state, and in absence of the welfare state we could have open borders?

Sounds a little to simplistic to me.

Sam Wilson June 9, 2009 at 1:31 pm

The first two comments to this post were almost as entertaining as Bryan's rebuttal to DeLong.

At any rate, I'm a little confused as to why Dr. DeLong would focus solely on the wealth retained by rich individuals and pay no heed to the wealth created by the same. Sure, Bill Gates is vastly wealthier than anyone posting here at the cafe, but is he a feudal baron, confiscating crops from the peasants? On the contrary, wealth is produced through voluntary trade. Even if it can sometimes be asymmetrical, both parties are still better off after than before. This is so basic a principle of economics, one wonders how…

You know, I'm going to let that thought just trail off. I don't need to be incendiary in this sort of public forum. Not with my POWERWORD: IRL NAME attached to it.

Point is, what does our understanding of coercive redistribution tell us? We can predict the destruction of the means of production and a steady decline into poverty for everyone involved. To really get the poorest among us a leg up, we have to stop battering them with ghastly policies like minimum wage statutes, trade restrictions, labor "regulations", price controls, and so on. Gainful employment and education (and well, just about everything Bill Easterly and those of like mind recommend) are the crutches out of the mud, not throwing money at the problem.

There's also something in there about the grievous error of conflating money with wealth, but I think Russ has convered that pretty damn well more than once on EconTalk.

Sam Grove June 9, 2009 at 2:05 pm

"If government is a tool for society…"

Ah, but it isn't. The people do not rule, they are ruled.

I know that, but I am speaking to how people, particularly "progressives", view the world,which is why I brought up the paradoxical nature of that view.

Sam Grove June 9, 2009 at 2:16 pm

I think that's a good instinct, but I would caution against loading up consideration of these issues with too much assumptions, such as that government or some sort of coercive collective action is unnatural or alien to "society", or that "the market" is somehow a pre-existing state of nature. All of these things are tools, and all of these things are naturally occuring social organizations.

Coercive "collective"* action has been the default state of human societies for all of history, so I don't whose assumption you are speaking about. The "market" is merely our reference to the sum of human economic activities. If it is natural for humans to produce and trade, then I suggest that "the market" is a "natural" product of human nature.

The coercive nature of "the state" is something we can address in the same way we can address the human heritage of animal passions, including the frequent appearance of violent aggression.

Do you think I make many assumptions about these things?

Daniel Kuehn June 9, 2009 at 2:21 pm

Sam -
I think "the market" is natural too. More than that, I think that the market is an evolutionary advantage that we've developed because of how advantageous market interactions are and how superior they are to central planning.

I was responding to your point that we should talk about "market", "society", and "government" as "distinguishable categories". I'm suggesting that they aren't, they're all "natural" and intertwined and it's possible to recognize that without denegrating the market.

Randy June 9, 2009 at 2:28 pm

Sam,

"…I am speaking to how people, particularly "progressives", view the world…"

True. Progressives don't like to think of themselves as "rulers", but rather as the "good" people – as opposed to all those other people who must be forced to be "good".

Aurelia Masterson June 9, 2009 at 2:30 pm

Annnd welcome to the "right" wing. The opposing arguments just cannot hold up against real evidence.

Daniel Kuehn June 9, 2009 at 2:36 pm

To bring this BACK to Russ's post, which I think is a new goal here – I actually like Bryan and Brad's points, and I think to a large extent they're just talking past each other.

DeLong is pointing out a very simple and obvious fact – markets create inequality in income and other outcomes. Why? Because people are different, have made different investments, and have different skills. This is true. There's nothing to challenge about that. And some people are upset about that. OK – they can be if they want to be. To a limited extent, I suppose inequality bothers me too.

Caplan points out another side of the story – that many correctives that are introducedd make things worse, and that the market actually gives the poor the best deal in many cases. Protectionism stands out as one of the most obvious cases where it hurts those it is meant to help.

I don't think DeLong made a successful case against the market on the basis of the inequality it causes. Being a regular reader of DeLong I don't think he WANTS to make that case. He's a fan of the market. Caplan did make a successful case against certain market interventions, but obviously not all.

It was an interesting read, but as so often happens on this blog too, I think the two were talking past each other. And in a lot of ways they both made arguments that honestly aren't contradictory and can (should?) be embraced by everyone: Markets lead to inequality… protectionism is less efficient than the market. All very good points and an entertaining format.

Randy June 9, 2009 at 2:48 pm

Daniel,

"…on the basis of the inequality it causes."

Interesting turn of phrase there. Does the market cause inequality? I think not. I think it simply reveals inequality. Two players may think themselves equal before the game, but not after.

Daniel Kuehn June 9, 2009 at 2:50 pm

Randy -
I think markets cause income inequality based on unequal inputs in ability, right? I don't think there's a disagreement between you and me on how that works where you think you may be seeing one. Let's not worry about my phrasing so much – what did you think of DeLong and Caplan?

Randy June 9, 2009 at 3:36 pm

Daniel,

Honestly, nothing new. One is professing his faith and the other is pointing out the logical consequences.

Sam Grove June 9, 2009 at 7:28 pm

I was responding to your point that we should talk about "market", "society", and "government" as "distinguishable categories". I'm suggesting that they aren't, they're all "natural" and intertwined and it's possible to recognize that without denegrating the market.

One of the things intelligent being do is make distinctions. It is already common to distinguish between markets, government, and society. My point is about how we view the relationships between those aspects of human behaviors.

Obviously, all of these aspects of human relationship fall under the category of "human behaviors", and thus are interrelated. But if we are to discuss human progress, then we are going to talk about changing certain human behaviors.

Human behaviors are manifestations of human instinct modified by knowledge and beliefs.

Once upon a time in the U.S., especially during the period of extensive immigration, many mutual aid societies were formed by people to address the issues of people coming to a new land of opportunity and often with little wealth brought along.

I want to suggest that these activities took place in the "social" milieu rather than in what is often thought of as "the market" or in the political milieu.

I suggest we can make these distinction based on certain parameters:

Government: law, enforcement, taxation, etc.
Market: contract, profit-making, production
Society: friendship, voluntary organization

This is not to say there is no overlap, but I think it may be useful to understand when which parameters are in effect when discussing human behaviors and when we speak of social goals.

Often it appears in discussions that there are only two spheres of human action regarding social progress, markets and government, at least I have often had that impression.

For instance, the question: "What about the poor?"

The discussion between libertarians seems to be either, let the market be, or the government must do something about the poor.

Why does the question have to be addressed within those limits?

I suggest that it doesn't.

Greg Ransom June 9, 2009 at 7:58 pm

I want to make a simple point.

Brad DeLong is abusing economic science — misusing "utility theory" in the most incompetent way.

And Caplan isn't calling him on it.

Rafi June 9, 2009 at 7:59 pm

Sam I like your point. Non-profit, voluntary associations are a third domain of human activity. Charities, wildlife preserves, hobby-based societies (e.g. bird watching, homebrewing tastings) are all areas of human interaction that libertarians don't spend enough time thinking about or building. There's a great essay in "The Libertarian Reader" that talks about this. The capacity for non-profit, non-coercive human interactions are there. They should be explored and strengthened.

Ray Gardner June 9, 2009 at 8:55 pm

Sweet!

vidyohs June 9, 2009 at 9:23 pm

Isn't "coercive collective" just another term for tyranny, dictatorship, or slavery? As a father I may have been a tyrant, but I certainly didn't run a collective, the kids had no choice.

At the core, what is wrong with income inequality? In spite of all the boo hooing I have never seen any evidence that income inequality is any more than the results of effort inequality.

And when I say effort inequality I am meaning facts that go deeper than just what a man does on a job. I mean what decisions he made beginning way back in grade school, how he viewed his elders instructions and advice, how hard did he work in school, college, how hard did he work at ignoring Mary with her cute butt and his desire to get some instead of studying, and finally how serious did/does he take deferred gratification?

Making an effort to succeed means so much more than merely flexing muscles or agitating brain cells.

Gil June 9, 2009 at 10:12 pm

"In spite of all the boo hooing I have never seen any evidence that income inequality is any more than the results of effort inequality." – vidyohs

Who's to say any inequality is unnatural? Since Libertarians are too weak to be a separatist movement and overthrow government then government going to always be here. Libertarians might further despair that those who are strong enough to be separatists are just as 'statist' as the government they intend to overthrow. Who's to say 'force' is necessarily unnatural as those who excel in initiating it as they don't feel obliged to refrain from it. As far as they are concerned they were given this power and it'd be a shame not to use it. Weaklings may despair over what the strong do but they're weaklings and they can't much change their lot in life and should find allegiance with a gentler strong group.

vidyohs June 9, 2009 at 10:45 pm

"Who's to say any inequality is unnatural?"
I have no idea Gil who would say such a silly thing? Personally, I have never seen any equality in nature, and have so stated consitently since I was about 2 years old and realized I was but one of four, the smallest being me. Natural equality? It is to laugh.

"Who's to say 'force' is necessarily unnatural as those who excel in initiating it as they don't feel obliged to refrain from it."
Not really positive exactly what you're trying to say here, force can definitely be seen as natural in nature, and as reflected in historical human action. I don't know of anyone who has ever disputed this.

"As far as they are concerned they were given this power and it'd be a shame not to use it."
Naw, they just form a communist cell, join a union, or form a government.

Posted by: Gil | Jun 9, 2009 10:12:07 PM

I'd be more interested and entertained, Gil, if you'd somehow challenge or refute the premise that income inequality is typically the result of effort inequality.

vidyohs June 9, 2009 at 11:05 pm

The subject of the Russ Roberts upheaval still doesn't get it.

All historical evidence tells us that socialism is as deadly as smallpox, kills more people, and leaves entire nations and cultures in poverty, shock and degeneration.

There is no such thing as believing in a some smallpox, a little smallpox, some aspects of smallpox, and refusing to recognize or understand that any smallpox at all is invitation to total devastation of a people.

A man that says he is willing to go for a little socialism is asking for the full menu. It always happens that way. Teach people that they can have some for free, and they will teach their children that they can have it all for free. So, the man who in the first place says he is willing to go for some, is the man responsible for the ultimate collapse.

Free and easy is always more attractive than rewarding and hard, and people will typically chose the free and easy because of developed human tendency to laziness. However, free and easy is destructive of human character.

So we have the constant battle.

Churchill, brilliant and courageous man, said, "if at forty you aren't conservative, you have no brain."

Ahh, another cliche. Again foolish people never know that all cliches began as condensed wisdom and lose none of their truth through repitition.

"Do not let the Camel get his nose under the tent." Arab proverb.

"You may think you can ignore politics, but politics won't ignore you." Pericles.

"You may think you can ignore socialism, but socialism will not ignore you." Paraphrase

"You may think you can ignore government, but government won't ignore you." Paraphrase.

"You may think you can ignore life, but life won't ignore you." Summation.

Now let's look at one that is an absolute piece of BS. "I'm a social liberal, but a fiscal conservative." That is schitzo supreme.

How can one believe in social liberalism and all the policies that entails, yet say that they will refuse to fund them? Why would I believe them, why would you?

Uh-Huh!

Why bother with that kind of BS?

vikingvista June 9, 2009 at 11:38 pm

"human tendency to laziness"

Cynical way to word it. Some call it a tendency to maximize utility. It is the system of incentives imposed by socialism, and not inviolable nature, that should be derided.

Sam Grove June 9, 2009 at 11:44 pm

"Greater than the tread of mighty armies is an idea whose time has come."

Victor Hugo

vikingvista June 9, 2009 at 11:52 pm

"The discussion between libertarians seems to be either, let the market be, or the government must do something about the poor."

Nongovernmental noncommercial organized acts of generosity are highly developed, varied, accessible, and effective. To determine whether you prefer that approach, or the government approach, you merely have to answer the question:

"Do I want to help, or do I want to force other people to help."

Sam Grove June 10, 2009 at 1:05 am

coercive collective action

I think we are likely to be in agreement about the meanings of "coercive" and "action".

I think where discussion is needed is what is meant by "collective".

Usually that means "government" as an agency of collective will.

I assert that there is no "collective will".

muirgeo June 10, 2009 at 1:08 am

Glaukon: "Well, here's a little graph (Exhibit 1.13) that shows the income share of the poorest 10% as a function of countries' economic freedom. It's basically flat – however much latitude the market has, the poor get about 2.3% of national income."

and

Glaukon: "Verily, my dear Agathon. There may be good arguments out there for social democracy. But 'It's better for the poor than laissez-faire,' isn't one of them.'"

Anyone who cared to look into the details of these two statements would realize the flaw with Kaplan argument.

I'll elaborate if anyone is interested. For a hint… which of these countries is run laissez-faire and which is considered a social democracy?

Gil June 10, 2009 at 1:20 am

Yeah, you talk tough vidyohs but you don't have any ideas on any change. I'm sure you'd love to round up the key statists, massacre them, bulldoze their bodies into a large pit and fill it in and then warn the average voters who supported them that if they don't change their ways they'll end up in a pit as well but in reality nothing happens. Similarly, it must be embarrassing watching Mexican drug lords do more to thwart their government than any Libertarian yet they wouldn't have heard of Mises or Hayek let alone have any intention of being Libertarians but they do get the job done.

Daniel Kuehn June 10, 2009 at 6:09 am

vidyohs -
RE: "There is no such thing as believing in a some smallpox, a little smallpox, some aspects of smallpox, and refusing to recognize or understand that any smallpox at all is invitation to total devastation of a people."

Sure there is! It's called a vaccine :)

RE: "The subject of the Russ Roberts upheaval still doesn't get it."

Be careful – you seem to be the one violating the brevity concerns, the staying on topic concerns, and the ad hominem concerns that Russ initially raised.

Martin Brock June 10, 2009 at 6:13 am

Brad and Bryan argue at cross-purposes and so don't clash.

Bengali could weigh 40,000 times less than Glaukon who weighs 400 times less than Cheney and 400,000,000 times less than Gates, but that's not what "the market system" does. It's what a particular system of forcible propriety does.

A "market system" entitles people to exchange their property freely. "Market" doesn't imply what constitutes "property". Gates is so wealthy largely because of particular proprieties involving intellectual property and its collective governance through incorporation. He is free to exchange this property, but these particular proprieties are not inevitable, and a market system without these proprieties is easily conceived and established.

And a market system without century long, international copyrights that don't distinguish novels from computer source codes, not to mention software patents, is freer than a market system without these property rights. A system without this property is not Communism. It's a freer market system.

Ignoring the distinction between property and the liberty to exchange property simply invites statists pandering to nominal "libertarians" to label all of their forcible enactments "property".

Daniel Kuehn June 10, 2009 at 6:17 am

muirgeo –
Nice numbers. I don't see a strong pattern, though, to illustrate or refute Caplan's point. Obviously there are some very notable social democracies very high on the list, exceeding places like the UK and the US. But less social democratic companies are also above the US, and there are some terrible dictatorships well below the US. I think the point is it's just not that simple to predict. It's not just the system of government that determines these things – we need to think about distribution of skills and that sort of thing too. The lowest 10% may have a lower share in the US, but that doesn't mean they're doing badly and it may only be a function of the fact that our highest 10% do significantly better.

Daniel Kuehn June 10, 2009 at 6:17 am

*countries

vidyohs June 10, 2009 at 6:27 am

I love people who maximize utility, but consistently stretching morning and afternoon 15 minute coffee breaks into 45 minute BS sessions, 1.5 hour lunches, surfing the web at the desk, and writing prolific and volumnous comments to Cafe Hayek or some other blog is lazy not maximizing utility.

Yes, vikingvista, I am typically cynical about the peoples of the "first world", America primarily because I live here, but almost equally about Europe and Australia; in other words nations where massive welfare states have sprung into existence over the last 150 years.

It would be almost amusing instead of painful, except it is happening to people I love, that so many working people are now finding that being paid for 8 hours of work and doing 5 is just not going to make it in the corporate world. So many I see have slid into the lazy way of consuming a day in trivial pursuits instead of doing their jobs, and now they can't even get up to go to the bathroom they are so swamped.

The attitude in this glut of labor is that if you want 8 hours pay, do 9 hours of work.

muirgeo June 10, 2009 at 9:57 am

"Nice numbers. I don't see a strong pattern,…"
Daniel,

That's partly the point. Kaplan equates degrees of economic freedom inversely with degrees of social democratization and then claims there is no difference in results for the laissez faire economies and the social democracies.

So including the dictatorships and the communist countries in his results while not defining which are the social democracies and the laissez faire economies is an amateurish mistake that calls into question his authenticity. I mean he is a professor at a major university. It's one thing to ignore data it's another to mis-represent it.

So looking specifically at the developed nations and comparing the laissez faire economies (defined as those with the greatest "economic freedom) with the social democracies the difference in share of income for the poorest 10% can be as much as 2.5 % which is a huge difference especially when social safety nets are likely not included in income numbers.

Seth June 10, 2009 at 10:12 am

Russ – Thank you for the link to Bryan's post. I agree with your assessments of it.

I like this sentence, "It sounds like the market counts Bengalis very little largely because of governments' labor market regulations."

Many market criticisms derive from government regulations, but it's hard to get people to realize that.

Sam Grove June 10, 2009 at 10:57 am

And a market system without century long, international copyrights that don't distinguish novels from computer source codes, not to mention software patents, is freer than a market system without these property rights.

Martin, did you intend the second "without" to be "with".

MnM June 10, 2009 at 12:42 pm

not defining which are the social democracies and the laissez faire economies is an amateurish mistake

Caplan (he spells it with a "C") linked to a book that makes precisely that distinction. That book includes data and methodology.

muirgeo June 10, 2009 at 1:27 pm

MnM,

I word searched all his linked documents and found NO specific precise distinction, definition or examples of laissez-faire countries.

Could you please show me where it was?

MnM June 10, 2009 at 1:37 pm

Muirgeo,

As far as I know, they never explicitly say "this is laissez-faire, this isn't". The Economic Freedom of the World index measures relative degrees of freedom; not the polar ends. Start with ch. 1 and pay close attention to Exhibit 1.1. They explain precisely what they mean, and why the use the metrics that they do.

Sorry, but I don't have time at the moment to go into more detail than that.

MnM June 10, 2009 at 1:39 pm

One more aside: I would note that it is a fascinating study. Anyone with a moment to read it would benefit from it.

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