...And Everybody Hates the Libertarians, 10/9
Notes from a program put on by Cato
It was called New Challenges to the Free Economy.
I did not stay to hear the last panel or the closing keynote. The weather was finally nice after five days of remnants from hurricane Ian, so I wanted to get in a bike ride. Listening to the recording, Doug Holtz-Eakin in the closing keynote called out the Natcons for wanting lots of government interference in the economy, which Doug points out is not only inefficient but leads to corrupt politics.
I went in person, mostly to be able to chat with Hal Varian. He told me about the OECD GDP tracker, which he thinks is the best “nowcasting” tool out there. He says that the Fed’s nowcasting tool tries to incorporate financial market data, but those are volatile, requiring the user to incorporate a lot of judgmental adjustment. The OECD GDP tracker says that U.S. GDP is 2 percent above what it was a year ago. Not seeing any screeching halt there.
Otherwise, I recommend watching on Zoom rather than shlepping to Cato for an event. I think I had a better chance of getting to ask a question if I’d stayed home and typed it in. Cato needs to train its session leaders to have a strict policy on audience Q&A. If the “questioner” goes more than 30 seconds with no sign of getting to a question, then the person’s mike gets shut off and you go on to the next person.
In his opening remarks, Cato President Peter Goettler described the “lonely, orphaned” plight of economic libertarians. He also characterized government intervention in housing, education, and health care as restricting supply and subsidizing demand. Ahem!
Varian, the Chief Economist of Google, was on a panel of like-minded speakers called “fighting back against antitrust populism.” Varian fought back with data that said that most searches are not for products or services, and sellers of products and services get most of their traffic from something other than ads. He pretty much said that the reason Google doesn’t have competition in search is that search is a lousy business—you have to respond to lots of queries, few of which generate revenue. Somebody should have asked him whether Google’s shareholders see it that way.
The next session, on trade, did not have the panelists all agreeing with one another. Two out of three spoke up for free trade. But Susan Houseman, of the Upjohn Institute, blamed trade for the loss of manufacturing jobs. Scott Lincicome, the moderator, asked her for specific trade policies that would help. Her response was “Burble. Losing manufacturing jobs is really bad for local economies. Burble. Currency manipulation by China. Burble.” Another panelist, Adam Posen of the Peterson Institute for International Economics piped up that his think tank also was against Chinese currency manipulation. My response would have been (a) I cannot get worked up over China buying a lot of Treasuries and (b) if you are worked up about it, then try fixing the Budget so we don’t have so many Treasuries to sell in the first place.
A third panelist, Arvid Panagriya of Columbia University, pointed out that during the supposed “de-globalization” of recent years, international trade has actually risen quite a bit. I wanted to ask about “stages of processing.” A lot of trade is intermediate goods being traded across borders many times along the way to being turned into final goods. This sort of trade is harder for protectionists to go after. If you restrict imports of goods in the intermediate stage, you’re only shooting your own manufacturers in the foot. That might explain why trade is proceeding in spite of protectionist noises being made.
The next session was on the politicization of business. Robert Atkinson, in both his presentation and in response to a question, said that it is not going to be stopped.
The left want corporations to take a stand on issues, like BLM and abortion. If the right fights back, as DeSantis did against Disney, then the right is turning corporations into political pawns. If your goal is to depoliticize business, that’s doing it wrong.
The question I wanted to ask was about generational differences. My generation thinks it’s natural for corporate leaders to stay silent about political issues. But with young people, is it the opposite? If so, then is trying to depoliticize big business hopeless?
Jason Furman gave the lunchtime address. In hindsight, I think he was supposed to be a centrist Democrat calling out anti-market progressives, with Holtz-Eakin a Republican calling out anti-market Natcons. I’ll save my complaints about Furman for another day. Nothing personal about Jason.
The next session was titled “Does the Regulatory State fuel populism?” Casey Mulligan said “yes,” Bryan Caplan said “no,” and James Broughel talked about how regulators don’t do cost-benefit analysis.
Bryan’s argument is that ordinary people are too stupid to figure out when regulation hurts them. Renters support NIMBY zoning regulations, for example. Mulligan’s argument was not that ordinary people figure out specific regulations, but they have the general insight that “the system is rigged” unless they vote for Trump.
I imagine that Mulligan gave his Cato hosts heartburn by presenting a chart showing opioid deaths rising sharply in the years subsequent to Attorney General Eric Holder early in the Biden Administration this memorandum:
Long sentences for low-level, non-violent drug offenses do not promote public safety, deterrence, and rehabilitation. Moreover, rising prison costs have resulted in reduced spending on criminal justice initiatives, including spending on law enforcement agents, prosecutors, and prevention and intervention programs. These reductions in public safety spending require us to make our public safety expenditures smarter and more productive.
Cato is on the Progressive side of the drug war. And Holder’s memo actually seems sensible. To steelman the opposing point of view, you might say that the police have trouble proving in court that someone is a drug dealer, but they are pretty confident in some cases, and the mandatory minimum sentences for repeat offenders of “low-level, non-violent” offenses helps prosecutors get drug dealers off the streets. So maybe Holder allowed more drug dealers to stay in business. But it’s quite a stretch for Mulligan to imply that continuing the previous policies would have kept fentanyl away.
Speaking of lax law enforcement, I took the subway for the first time since the pandemic. I saw one rider jump over the turnstile without paying. Then I read Jacob Siegel and Sean Cooper:
The Washington, D.C., metro is losing $40 million a year, and maybe quite a bit more, because of rampant evasion of fares on the rail and bus system. Following a decriminalization of fare evasion in D.C. about four years ago, police significantly reduced the number of tickets handed out to those caught avoiding the fare. In 2017, roughly 15,400 people received civil or criminal charges for fare evasion. In August 2022, the total number of tickets fell short of 300.
At 7:30 AM, there were few riders, about half wearing masks. At 3 PM the seats were almost filled, and there were almost no masks. I wore a mask both ways, and also at Cato, where I was one of the few. Say what you want, but it was my decision, not a government dictate.
re: Do generational differences mean that trying to depoliticize big business is hopeless?
I recently read Roger Martin's book 'Fixing the Game' The thesis there, though he doesn't mention class explicitly, is that the USA now has two capitalist business classes. See a book review here in Forbes. https://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/ This comes after reading Mark Mizruchi 'The Fracturing of the American Corporate Elite' .
A recurring moral question for the wealthy is 'how is it right that I have so much, when so many have so little?' The people in the older capitalist class, who used to all vote Republican, could point to a prosperous working and middle class, factories full of the latest goods which were loved by the people who bought them, and a certain amount of philanthropy. In 1953 Eisenhower nominated Charles Wilson, the President of General Motors, to be his Secretary of Defense. During his confirmation hearings was asked if he could make a decision that was bad for GM, he famously replied '“What’s good for GM is good for America.” (Readers here will not be surprised to hear that what the press reported him saying isn't exactly what he said.) For the first few decades after the Second World War, the American business community was united around centrist policies that were in the broad national interest. This behavior was certainly self-interested and pushed policies that were far more favorable to the elite than they were to the working class, but at base business leaders recognized that their interests and the country’s went hand in hand. Since one way to look at the industrial economy is 'convert hydrocarbons into wealth' the elites of this time spent a lot of their time politicking, politicking on the international stage about Oil. Some of what they did there was dreadful, and at this point in time it was the Left that was arguing against these political policies, and at the same time saying that the working class deserved a bigger slice of the wealth created.
But something happened in the 1970s. A new class of business leader emerged, one that was internationalist and which did not believe that their interests went hand in hand with everybody else's. They put their personal interests ahead of those of everybody else's and indeed denied that there was a national interest, or that if there was one, it was shameful. Forbes talks about the problem here: https://www.forbes.com/sites/gautammukunda/2020/06/05/whats-good-for-gm-is-good-for-americawhat-should-you-do-during-a-national-crisis/ but without reference to the economy of expectations that Martin writes about. This business class went out and captured the Democratic party.
Since the 1970s two classes of capitalists have been fighting a serious class war, to the impoverishment of all the rest of us. The new capitalists have been winning. When this class gets to the 'how is it right that I have so much, when so many have so little?' question their only answer is 'because I spend so much on the unfortunate. I should have my wealth because I am more virtuous and noble than the rest of you, and will spend it, on those who need my help most.' (Most of whom, conveniently, live far away and cannot vote for proposals such as a wealth tax that targets share profits, or ending subsidies for windmill generated electricity.) They aren't arguing that the working class deserves a bigger slice of the pie, instead they are arguing that the working class should get nothing, because it's better that cheaper workers overseas get any local wealth creation. And anything else is racist! We'll do away with work for the poor and let them live on the dole! Isn't this what every enlightened person wants, to be free from the need to labour? (Some of them really believe this. It is not just rhetoric with them.)
This oversimplifies, and is only true in the broad outline. There are new business leaders who don't neatly fit in this sociological model. Elon Musk most of the time talks like a old capitalist, and can point to a factory of beloved automobiles and a local workforce -- but of course the green subsidies have been very good for him, and managing stock expectations is how he got to be so rich.
Thus I think that you have misunderstood the past. Business has always been political. It's just that the political goals of the Left are different from the ones you remember from when you were younger, and the Republican Party was the party of business.
"If your goal is to depoliticize business, that’s doing it wrong."
I'm curious, what in Kling's view, is the right way to depoliticize business? The political left has no hesitation about using the power of government to install DEI teams at every major company in the US and pressure every company in the US including Disney to champion their positions on major issues. Yet Kling has focused his criticism, not on the left that leads the charge of politicizing business, but on figures like DeSantis that show the slightest push back.
When Arnold Kling's preferred libertarian policy champion, Paul Ryan, was in the driver's seat in 2017-2018 and had the full backing of the Republican Party and President and Republican voter base, Kling declined to notice, and complained about libertarians getting thrown under the bus.