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December 2017 posts

Defending Nudges

By Jonathan B. Wight

In “Misconceptions About Nudges.” Cass Sunstein seeks to redeem nudges from the lambast emanating from Kantians and others. I’ll leave it to Mark White to rebut (if he chooses).


Some people believe that nudges are an insult to human agency; that nudges are based on excessive trust in government; that nudges are covert; that nudges are manipulative; that nudges exploit behavioral biases; that nudges depend on a belief that human beings are irrational; and that nudges work only at the margins and cannot accomplish much. These are misconceptions. Nudges always respect, and often promote, human agency; because nudges insist on preserving freedom of choice, they do not put excessive trust in government; nudges are generally transparent rather than covert or forms of manipulation; many nudges are educative, and even when they are not, they tend to make life simpler and more navigable; and some nudges have quite large impacts.

Does Altruism Exist?

By Jonathan B. Wight   

Arthur J. Robson has in interesting review of David Sloan Wilson’s Does Altruism Exist? Culture, Genes, and the Welfare of Others (Yale 2015) in the latest Journal of Economic Literature

The bottom line is that it is likely that genes and human culture co-evolve.  For example, the technology of herding animals may give rise to favoring the survival of those who are lactose tolerant.  This has profound implications for society, particularly if some genes can survive that lead humans to sacrifice for the interests of others., according to group selection theory. 

Darwin certainly thought that in the competition between groups, those whose members were willing to sacrifice for the group would out compete other groups comprised of selfish individuals.  Modern biologists, at least until recently, have not accepted this part of Darwin's thinking.  

Part of Robson's conclusion is that:

“Wilson makes a stimulating argument that, in the first place, group selection should be taken more seriously in general. In the second place, and of particular interest to economists, he argues that group selection should be taken especially seriously for humans, since cultural evolution is especially important for us. Indeed, he advocates the strong position that individual humans and human society have a relationship analogous to that between the organs of any individual and that individual. Hence, in particular, economists’ view of basic human motivations must be extended to include altruism as a central feature” (pp. 1581-2)

Robson goes on to argue against Wilson’s position, on the grounds that individual group selection still has lots of legs left and shouldn’t be thrown out before all avenues can be explored.

I don’t disagree with Robson, because individual selection has powerful explanatory force.  But at the same time I see no reason to accept his claim that “It seems desirable that [any] alternative retain the simplicity and generality of the current theory” (p. 1571).  A simple and elegant model on paper that doesn’t do the job should be thrown out, even if the replacement model is somewhat more complicated.

As with Robson, I don’t accept the claim that altruism is the be-all or end-all in society.  Indeed, as Robson notes, malevolence may be a more powerful force (as noted also by Adam Smith). 

Humans are complicated, and accepting that fact seems essential to further discovery, rather than maintaining the simplifying fiction that humans are always and everywhere predatory and selfish (even if it may seem that way this week with the sexual harassment scandals). 

David Sloan Wilson's writings are wonderfully provocative and timely, and hopefully pushing forward our understanding of complexity.  

Why I Fear Capitalism

By Jonathan B. Wight

The title of this piece is tongue-in-cheek.  Mort’s post on “Why I Fear Government” is completely understandable.  He’s wise and mature.  He’s experienced how the most benevolent plans of government leaders often produce horrible unintended consequences., and many government leaders are not paragons of virtue to start with.  Point well made.

However; I don’t believe our only choice is between a) laissez faire free market capitalism and b) Stalin, Hitler, and Mao.  Aren’t there any options in the middle?  

But as Mort noted, young people, who have their whole lives ahead of them, are increasingly saying they prefer more socialist policies. 

Michelle Goldberg explores why in “No Wonder Millennials Hate Capitalism" in the NT Times

While much of the angst young people feel toward capitalism is partially misguided, and reflects misunderstandings about the role of markets, our current leaders in Washington are making things worse for defenders of capitalism. 

Crony capitalism that trickles up through rent seeking is one symptom of dysfunction.  The new tax bill blows up the budget deficit to favor the 1%, not to address any urgent need given the current state of the economy.  Entitlement reform needs to be on the table, but not because of a debt crisis fueled by tax cuts. 

Not all government is bad; sorry—it’s not that simple.  For example, Ronald Coase showed that when there are negative externalities with high transaction costs, the market has no incentive to fix that inefficiency.  When nitric and sulfuric acid from factories in the mid-West fell as acid rain in New England, it ruined lakes and forests, but what market mechanism could ever correct this?  Instead, some sort of non-market mechanism is needed to force polluters to pay for their externalities or to limit their externalities.  I would prefer a mixed market mechanism, like cap and trade, but the bottom line is it took the threat of force by government to reduce the severity of acid rain over many decades.

Capitalists, if allowed to, will pollute at other people’s expense.  They will overfish the commons if it’s profitable.  It’s lovely to think about ways to privatize and create property rights, but it doesn’t always work.  And yes, government will also pollute and overfish.  It takes vigilance on both sides.  There are plenty of other reasons why we need good government, but that’s enough for today.

Why I Fear Government

By John Morton

Several years ago, economists from the University of Arizona and Arizona State University and I conducted a study to see if more knowledge of economics influenced high school students’ views about markets and government.  We administered the Test of Economic Literacy accompanied by a survey assessing attitudes on government and market solutions to problems.  We found some positive correlations between economic knowledge and pro-market approaches, but the big finding was that the more important an issue was, the more the students wanted to rely on government solutions.  We also found that the wealthier a ZIP code, the more the students favored government solutions rather than market solutions.

David Friedman (The Machinery of Freedom) states that “there are essentially only three ways that can get another person to help me achieve my ends: love, trade and force.”  Love works for small groups like families and for cooperation when people share a common goal.  Trade does not require love. Instead, trade helps you achieve your goal if you help me achieve my goal.  It is voluntary.  The third method is force.  Do what I say or I will punish you.  The alternative for people who criticize the selfishness of markets is government.  This is force whether the government is autocratic or democratic.  It is foolish to give a politician power and believe political power will be used only for good.  Check out the swamp in Washington, DC.

In The Bourgeois Virtues, Deirdre McCloskey puts it like this:  “Anyone who after the 20th century still thinks that thoroughgoing socialism, nationalism, imperialism, mobilization, central planning, regulation, zoning, price controls, tax policy, labor unions, business cartels, government spending, intrusive policing, adventurism in foreign policy, faith in entangling religion and politics, or most of the other thoroughgoing 19th-century proposals for governmental action are still neat, harmless ideas for improving our lives…is not paying attention.”

Matt Ridley put it succinctly in an article in the fall 2017 Journal of Private Enterprise: “The market gave us prosperity and innovation, while government gave us Stalin, Hitler, and Mao, so why are people so forgiving of the state and so mistrustful of the market?”

Ronald Reagan said that you should run from anyone who makes any of these statements:

  • Certainly I will respect you in the morning.
  • The check is in the mail.
  • I’m from the government and I’m here to help you.

Tax Reform

Jonathan B. Wight

Given last night’s Hail Mary pass of the turkey tax reform that passed the Senate, I would have hoped that at least two Republican senators of conscience would have made a speech along these lines:

“There is no immediate economic crisis that forces hasty action in the dead of night. With the economy growing last quarter over 3%, with the Dow up more than 25% this year, with unemployment hovering near full employment, and with corporate profits near record highs, there is no urgency for a major fiscal stimulus that would pump another trillion dollars into the economy, coming from increasing the pubic debt--unless it directly addresses the crisis of crumbling infrastructure.

"I would support a tax bill that is revenue neutral, and that can be implemented on a permanent basis, not with the gimmick of tax rates jumping by 2027.

“I would support tax reform that makes the system fairer, simpler, and more efficient.  This would include a tax cut on corporations, since they rarely pay the current nominal tax rate by using an army of accountants and lawyers to fill every loophole.  Hence, let’s agree to lower corporate tax rates but eliminate all the loopholes. 

"I would support a bill that does not make income and wealth inequality larger, and would hopefully make it smaller.  

Larry  curley  moe“But I refuse to vote for any tax bill churned out without a single public hearing, and without waiting to hear from the non-partisan Joint Committee on Taxation what the latest changes mean for the bill’s cost and impacts.  (There was no debate on the final bill presented to the Senators for a vote.)

“This current process for making law is broken, and no bill is better than something passed simply because my party claims to need it for political cover.”

But where are such principled Republican leaders to make such a statement?  

The major Obamacare health legislation had many public hearings and longer deliberative debate, but was not without skullduggery.  Still it is looking like a paragon compared to this charade.

Buffoonery in the name of special interests has reached recent new highs and reminds me a lot of the legislative process witnessed in my youth in Brazil. 

[Image: By Columbia Pictures/Pillsbury (eBay front back) [Public domain], via Wikimedia Commons]

Wealth Inequality Workshop

By James Brusseau

BrusseauThe Wealth Inequality Workshop is a half-hour documentary exploring the philosophy and ethics of wealth distribution.

The question is: How do we begin thinking about wealth inequality? What values initiate the discussion, and how can they be understood?

After reviewing the Rawls/Nozick debate which casts wealth inequality as a tension between equality and freedom, some more speculative and disquieting questions are considered. What is need? Is it possible to feel desire because we have too much instead of too little?

While no perfect answers emerge, the documentary does provide a sense of the full range of approaches to wealth inequality afforded by contemporary philosophy and ethics.

Link: http://wealthinequalityworkshop.org/

[James Brusseau teaches ethics at Pace University.--JW]