Economics, Politics, Quick Fix

Against Degrowth

Degrowth is the political platform that holds our current economic growth as unsustainable and advocates for a radical reduction in our resource consumption. Critically, it rejects that this reduction can occur at the same time as our GDP continues to grow. Degrowth, per its backers, requires an actual contraction of the economy.

The Canadian New Democratic Party came perilously close to being taken over by advocates of degrowth during its last leadership race, which goes to show just how much leftist support the movement has gained since its debut in 2008.

I believe that degrowth is one of the least sensible policies being advocated for by elements of the modern left. This post collects my three main arguments against degrowth in a package that is easy to link to in other online discussions.

To my mind, advocates of degrowth fail to advocate a positive vision of transition to a less environmentally intensive economy. North America is already experiencing a resurgence in forest cover, land devoted to agriculture worldwide has been stable for the past 15 years (and will probably begin to decline by 2050), as arable land use per person continues to decrease. In Canada, CO2 emissions per capita peaked in 1979, forty years ago. Total CO2 emissions peaked in 2008 and CO2 emissions per $ of GDP have been continuously falling since 1990.

All of this is evidence of an economy slowly shifting away from stuff. For an economy to grow as people turn away from stuff, they have to consume something else, for consumers often means services and experiences. Instead of degrowth, I think we should accelerate this process.

It is very possible to have GDP growth while rapidly decarbonizing an economy. This simply looks like people shifting their consumption from things (e.g. cars, big houses) towards experiences (locally sourced dinners, mountain biking their local trails). We can accelerate this switch by “internalizing the externality” that carbon presents, which is a fancy way of saying “imposing a tax on carbon”. Global warming is bad and when we actually make people pay that cost as part of the price tag for what they consume, they switch their consumption habits. Higher gas prices, for example, tend to push consumers away from SUVs.

A responsible decarbonisation push emphasises and supports growth in local service industries to make up for the loss of jobs in manufacturing and resource extraction. There’s a lot going for these jobs too; many of them give much more autonomy than manufacturing jobs (a strong determinant of job satisfaction) and they are, by their nature, rooted in local communities and hard to outsource.

(There are, of course, also many new jobs in clean energy that a decarbonizing and de-intensifying economy will create).

If, instead of pushing the economy towards a shift in how money is spent, you are pushing for an overall reduction in GDP, you are advocating for a decrease in industrial production without replacing it with anything. This is code for “decreasing standards of living”, or more succinctly, “a recession”. That is, after all, what we call a period of falling GDP.

This, I think is the biggest problem with advocating degrowth. Voters are liable to punish governments even for recessions that aren’t their fault. If a government deliberately causes a recession, the backlash will be fierce. It seems likely there is no way to continue the process of degrowth by democratic means once it is started.

This leaves two bad options: give over the reins of power to a government that will be reflexively committed to opposing environmentalists, or seize power by force. I hope that it is clear that both of these outcomes to a degrowth agenda would be disastrous.

Advocates of degrowth call my suggestions unrealistic, or outside of historical patterns. But this is clearly not the case; I’ve cited extensive historical data that shows an ongoing trend towards decarbonisation and de-intensification, both in North America and around the world. What is more unrealistic: to believe that the government can intensify an existing trend, or to believe that a government could be elected on a platform of triggering a recession? If anyone is guilty of pie-in-the-sky thinking here, it is not me.

Degrowth steals activist energy from sensible, effective policy positions (like a tax on carbon) that are politically attainable and likely to lead to a prosperous economy. Degrowth, as a policy, is especially easy for conservatives to dismiss and unwittingly aids them in their attempts to create a false dichotomy between environmental protection and a thriving economy.

It’s for these three reasons (the possibility of building thriving low carbon economies, the democratic problem, and the false dichotomy degrowth sets up) that I believe reasonable people have a strong responsibility to argue against degrowth, whenever it is advocated.

(For a positive alternative to degrowth, I personally recommend ecomoderism, but there are several good alternatives.)

Model, Politics, Quick Fix

The Nixon Problem

Richard Nixon would likely have gone down in history as one of America’s greatest presidents, if not for Watergate.

To my mind, his greatest successes were détente with China and the end of the convertibility of dollars into gold, but he also deserves kudos for ending the war in Vietnam, continuing the process of desegregation, establishing the EPA, and signing the anti-ballistic missile treaty.

Nixon was willing to try unconventional solutions and shake things up. He wasn’t satisfied with leaving things as they were. This is, in some sense, a violation of political norms.

When talking about political norms, it’s important to separate them into their two constituent parts.

First, there are the norms of policy. These are the standard terms of the debate. In some countries, they may look like a (semi-)durable centrist consensus. In others they may require accepting single-party rule as a given.

Second are the norms that constrain the behaviour of people within the political system. They may forbid bribery, or self-dealing, or assassinating your political opponents.

I believe that the first set of political norms are somewhat less important than the second. The terms of the debate can be wrong, or stuck in a local maximum, such that no simple tinkering can improve the situation. Having someone willing to change the terms of the debate and try out bold new ideas can be good.

On the other hand, it is rarely good to overturn existing norms of political behaviour. Many of them came about only through decades of careful struggle, as heroic activists have sought to place reasonable constraints on the behaviour of the powerful, lest they rule as tyrants or pillage as oligarchs.

The Nixon problem, as I’ve taken to describing it, is that it’s very, very hard to find a politician who can shake up the political debate without at the same time shaking up our much more important political norms.

Nixon didn’t have to cheat his way to re-election. He won the popular vote by the highest absolute margin ever, some 18 million votes. He carried 49 out of 50 states, losing only Massachusetts.

Now it is true that Nixon used dirty tricks to face McGovern instead of Muskie and perhaps his re-election fight would have been harder against Muskie.

Still, given Muskie’s campaign was so easily derailed by the letter Nixon’s “ratfuckers” forged, it’s unclear how well he would have done in the general election.

And if Muskie was the biggest threat to Nixon, there was no need to bug Watergate after his candidacy had been destroyed. Yet Nixon and his team still ordered this done.

I don’t think it’s possible to get the Nixon who was able to negotiate with China without the Nixon who violated political norms for no reason at all. They were part and parcel with an overriding belief that he knew better than everyone else and that all that mattered was power for himself. Regardless, it is clear from Watergate that his ability to think outside of the current consensus was not something he could just turn off. Nixon is not alone in this.

One could imagine a hypothetical Trump (perhaps a Trump that listened to Peter Thiel more) who engaged mostly in well considered but outside-of-the-political-consensus policies. This Trump would have loosened FDA policies that give big pharma an unfair advantage, ended the mortgage tax deduction, and followed up his pressure on North Korea with some sort of lasting peace deal, rather than ineffective admiration of a monster.

The key realization about this hypothetical Trump is that, other than his particular policy positions, he’d be no different. He’d still idolize authoritarian thugs, threaten to lock up his political opponents, ignore important government departments, and surround himself with frauds and grifters.

I believe that it’s important to think how the features of different governments encourage different people to rise to the top. If a system of government requires any leader to first be a general, then it will be cursed with rigid leaders who expect all orders to be followed to the letter. If it instead rewards lying, then it’ll be cursed with politicians who go back on every promise.

There’s an important corollary to this: if you want a specific person to rule because of something specific about their character, you should not expect them to be able to turn it off.

Justin Trudeau cannot stop with the platitudes, even when backed into a corner. Donald Trump cannot stop lying, even when the truth is known to everyone. Richard Nixon couldn’t stop ignoring the normal way things were done in Washington, even when the normal way existed for a damn good reason.

This, I think, is the biggest mistake people like Peter Thiel made when backing Trump. They saw a lot of problems in Washington and correctly concluded that no one who was steeped in the ways of Washington would correct them. They decided that the only way forward was to find someone brash, who wouldn’t care about how things were normally done.

But they didn’t stop and think how far that attitude would extend.

Whenever someone tells you that a bold outsider is just what a system needs, remember that a Nixon who never did Watergate couldn’t have gone to China. If you back a new Nixon, you better be willing for a reprise.

Model, Politics

The Character of Leaders is the Destiny of Nations

The fundamental problem of governance is the misalignment between means and ends. In all practically achievable government systems, the process of acquiring and maintaining power requires different skills than the exercise of power. The core criteria of any good system of government, therefore, must be selecting people by a metric that bears some resemblance to governing, or perhaps more importantly, having a metric that actively filters out people who are not suited to govern.

When the difference between means and ends becomes extreme, achieving power serves only to demonstrate unsuitability for holding it. Such systems are inevitably doomed to collapse.

Many people (I am thinking most notably of neo-reactionaries) put too much stock in the incentives or institutions of government systems. Neo-reactionaries look at the institutions of monarchies and claim they lead to stability, because monarchs have a large personal incentive to improve their kingdom and their lifetime tenure should afford them a long time horizon.

In practice, however, monarchies are rather unstable. This is because monarchs are chosen by accident of birth and may have little affinity for the patient business of building a nation. In addition, to maintain power, monarchs must be responsive to the aristocracy. This encourages the well documented disdain for the peasantry that was common in monarchical governments.

Monarchy, like many other systems of government, was not doomed so much by its institutions, as by its process for choosing a leader. The character of leaders is the destiny of nations and many forms of government have no way of picking people with a character conducive to governing well.

By observing the pathologies of failed systems of government, it becomes possible to understand why democracy is a uniquely successful form of government, as well as the risks that emergent social technologies pose to democracy.

The USSR

“Lenin’s core of original Bolsheviks… were many of them highly educated people…and they preserved these elements even as they murdered and lied and tortured and terrorised. They were social scientists who thought principle required them to behave like gangsters. But their successors… were not the most selfless people in Soviet society, or the most principled, or the most scrupulous. They were the most ambitious, the most domineering, the most manipulative, the most greedy, the most sycophantic.” – Francis Spufford, Red Plenty

The revolution that created the USSR was one founded on high minded ideals. The revolutionaries were going to create a new society, one that was fair, equal, and perfect; a utopia on earth. Yet, the bloody business of carving out a new state often stood in stark contrast to these ideals – as is common in revolutions.

It is, as a rule, difficult to tell which revolutions will lead to good rule and which to bloody shambles and repression. Take, as an example, the Eritrean People’s Liberation Front. They started as an egalitarian organization that treated prisoners of war with respect and ended up as one of the most brutal governments in the world.

Seizing power in a revolution requires a grasp of military tactics and organization; the ability to build a parallel state apparatus in occupied areas; the ability to inspire people to fight for your side; and a grasp of propaganda. While there is overlap with the skills necessary for civilian rule here, the perspective of a rebel is particularly poorly suited to governing according to the rule of law.

It is hard to win a revolution without coming to believe on some fundamental level that might makes right. The 20th century is littered with examples of rebels who cannot put aside this perspective shift when they transition to civilian rule.

(This, incidentally, is why nonviolent resistance leads to more stable governments and why repressive governments are so scared of it. A successful non-violent revolution leaves much less room for the dictator’s eventual return.)

It was so with the Soviets. Might makes right – perhaps more so even than communism – was the founding ideal of the Soviet Union.

Stalin succeeded Lenin as the leader of the Soviet Union via political manoeuvering, backstabbing, and the destruction of his enemies, tactics that would become key in future transfers of power.

To grasp the reins of the Soviet Union, it became necessary to view people as tools; to bribe key constituencies, to control the secret police, and to placate the army.

And this set of tools is not well suited to governing a prosperous nation. Attempts to reform the USSR with shadow prices, perhaps the only thing that could have saved communism, failed because shadow prices represented a loss of central control. If prices were not set politically, it would be impossible to manipulate them to reward compatriots and guarantee stability.

It’s true that its combination economic system and ambitions doomed the Soviet Union right from the start. It could not afford to be a global superpower while constrained by an economic philosophy that sharply limited its growth and guaranteed frequent shortages. But both of these were, in theory, mutable. It was only with such an ossifying process for choosing leaders that the Soviet Union was destined for failure.

In the USSR, legitimacy didn’t come from the people, but from the party apparatus. Bold changes, of the sort necessary to rescue the Soviet economy were unthinkable because they cut against too many entrenched interested. The army budget could not be decreased because the leader needed to maintain control of the army. The economic system couldn’t be changed because of how tightly the elite were tied to it.

The USSR needed bold, pioneering leaders who were willing to take risks and shake up the system. But the system guaranteed that those leaders would never rule. And so, eventually, the USSR fell.

Military Dictatorships

“The difference between a democracy and a dictatorship is that in a democracy you vote first and take orders later; in a dictatorship you don’t have to waste your time voting.” – Charles Bukowski

Military dictatorships that fall all fall in the same way: with an increasingly isolated junta issuing orders that are ignored by increasingly large swathes of the populace. The act of rising to the top of a military inculcates a belief that victory can always be achieved by finding the right set of orders. This is the mindset that military dictators bring to governing and it always leads to disaster. Whatever virtues of organization or delegation generals learn, it is never enough to overcome this central flaw.

Governing a modern state requires flexibility. There are always many constituencies: business owners, workers, teachers, doctors. There are often many regions, each with different economic needs. To support resource extraction can harm manufacturing – and vice versa. Bureaucrats have their own pet projects, their own red lines, and their own ideas.

This environment is about as different as it’s possible to be from an army. The military tells soldiers to follow orders. Civilians are rather worse at this task.

Expecting a whole society to follow orders, to put their own good aside for someone else’s plan is folly. Enough people will always buck orders to make a mockery of any grand design.

It is for this reason that military governments are so easy to satirize. Watching career soldiers try and herd cats can be darkly amusing, although the humour is quickly lost if one dwells too long on the atrocities military governments turn to when thwarted.

After all, the flip side of discipline is punishment. Failing to obey orders in the military is normally a crime, whereas failing to obey orders in the civil service is often par for the course. When these two mindsets collide, a junta is likely to impose harsh punishments on anyone disobeying. This doesn’t spring naturally from their position as dictators – most juntas start out with stunning idealistic beliefs about national salvation – but does spring naturally from military regulations. And so again we see a case where it is the background of the leaders, not the structure of the dictatorship that leads to the worst excesses.

You can replace the leaders as often as you like or tweak the laws, but as long as you keep appointing generals to rule, you will find they expect orders to be obeyed unquestioningly and respond harshly to any perceived disloyalty.

There is one last great vice of military dictatorships: a tendency to paper over domestic discontent with foreign wars. Military dictators know that revanchist wars can create popular support, so foreign adventuring is often their response when their legitimacy begins to crumble.

Off the top of my head, I can think of two wars started by military dictatorships seeking to improve their standing (the Falkland War and Six-Day War). No doubt a proper survey would turn up many others.

Since the time of Plato, soldier-rulers have been held up as the ideal heads of state. It is perhaps time to abandon this notion.

Democracy

“Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.” – Winston Churchill to the House of Commons

To gain power in a democracy, a politician needs to win election. This normally requires some skill in oratory and debate, the ability to delegate to competent subordinates, the ability to come up with a plan and clearly articulate how it will improve people’s lives, possibly some past experience governing that paints a flattering picture, and above all a good reputation with enough people to win an election. This oft-maligned “popularity contest” is actually democracy’s secret weapon.

Democracy is principally useful as a form of government that is resistant to corruption. Corruption is the act of arrogating state power to take benefits for yourself or give them to your friends. Persistent and widespread corruption is one of the biggest impediments to growth worldwide, so any technology (and government system are a type of cultural technology) that reduces corruption is a powerful force for human flourishing.

It is the requirement for a good reputation that helps democracy stand against corruption. In any society where corruption is scorned, democracy ensures that no one who is visibly corrupt can grasp power; if corruption is sufficient to ruin a reputation, no one who is corrupt can win a “popularity contest”.

(It is also worth noting that the demand for a sterling reputation rules out people who have tortured dissidents or ordered protestors shot. As long as autocrats are not revered, democracy can protect against many forms of repression.)

There are three main ways the democracy can fail to live up to its promise. First, it can fail because corruption isn’t appropriately sanctioned. If corruption becomes just the way things are done and scandals stop sticking, then democracy becomes much weaker as a check on corruption.

Second, democracy can be hijacked by individuals whose only skill is self-promotion. In a functioning democracy, the electorate demands that political resumes include real achievements. When this breaks down, democracy becomes a contest: who can disseminate their fake or exaggerated resume the furthest.

It is from this perspective that 24/7 news and social media present a threat to democracy. Donald Trump is an excellent example of this failure mode. He made use of viral lies and controversial statements to ensure that he was in front of as many voters as possible. His largely fake reputation for business acumen was enough to win over a few others.

There are many constituencies in all societies. Demonstrably, President Trump is not popular in America, but he appealed to enough people that he was able to build up a solid voting block in the primaries.

Beyond the primaries Trump demonstrated the third vulnerability of democracies: partisanship. Any democracy where partisanship becomes a key factor in elections is in grave danger. Normally, the reputational component of democracy selects for people with a resume of past successes (an excellent predictor of future successes) while elections with significant numbers of undecided voters provide an advantage to people who run tight campaigns – people who are good at nurturing talent and delegating (an excellent skill for governing).

Partisanship short-circuits this process and selects for whoever can whip up partisan crowds most successfully. This is a rather different sort of person! Rabid partisans spurn compromise and ignore everyone outside of their core constituency because those are the tactics that have rewarded them in the past.

Trump was able to win in part because such a large cross-section of the American electorate was willing to look beyond his flaws if it meant that someone from the other party didn’t win.

A large block of swing voters who look critically at politicians’ reputations and refuse to accept iconoclasts is an important safety valve in any democracy.

This model of democracy neatly explains why it isn’t universally successful. In societies with several strong tribal or religious identities, democracy results in cronyism dominated by the largest tribe/denomination, because it selects for whomever can promise the most to this large block. In countries that don’t have adequate cultural safeguards against corruption, corruption does not ruin reputations and democracy does nothing to squash it.

Democracy isn’t a panacea, but in the right cultural circumstances it is superior to any other realistic form of government.

Unfortunately, we can see that democracy is under attack on two fronts in Western nations. First, social media encourages shallow engagement and makes it easy for people to build constituencies around controversial statements. Second, partisanship is deepening in many societies.

I don’t know what specific remedies exist for these trends, but they strike me as two of the most important to reverse if we wish our democratic institutions to continue to provide good government.

If we cannot find a way to fix partisanship and self-promotion within our current system, then the most important political reform we can undertake is to find a system of government that can pick leaders with the right character for governing even under these very difficult circumstances.

[Epistemic status: much more theoretical than most of my writing. To avoid endless digressions, I don’t justify my centrist axioms very often. I’m happy to further discuss anything that strikes anyone as light on evidence in the comments.]

Politics, Quick Fix

A Follow-up on Brexit (or: why tinkering with 200 year old norms can backfire)

Last week I said that I’d been avoiding writing about Brexit because it was neither my monkeys nor my circus. This week, I’ll be eating those words.

I’m a noted enthusiast of the Westminster system of government, yet this week (with Teresa May’s deal failing in parliament and parliament taking control of Brexit proceedings, to uncertain ends) seems to fly in the face of everything good I’ve said about it. That impression is false; the current impasse has been caused entirely by recent ill-conceived British tinkering, not any core problems with the system itself.

As far as I can tell, the current shambles arise from three departures from the core of the Westminster system.

First, we have parliament taking control of the business of parliament in order to hold a set of indicative votes. I don’t have the sort of deep knowledge of British history that is necessary to assess whether this is unprecedented or not, but it is certainly unusual.

The majority in the house that controls the business of the house is, kind of definitionally, the government in a Westminster system. Unlike the American Republican system of government, the Brits don’t really have a notion of “the government” that extends beyond whomever can command the confidence of parliament. To have parliament in some sense (although not the formal one) withdraw that confidence, without forcing a new government to be appointed by the Queen or fresh elections is deeply unusual.

The whole point of the Westminster system is to always have a governing majority for key votes. If that breaks down, then either a new governing majority should arise, or new elections. Otherwise, you can have American-style gridlock.

This odd situation has arisen partially from the Fixed-term Parliaments Act of 2011, which severely limited the circumstances under which a sitting government can fall. Previously, all important legislation doubled as motions of confidence; defeat of any bill as strongly championed by the government as Teresa May’s Brexit bill would have resulted in new elections. Now, a motion of no-confidence (which requires a majority to amend a bill to add it, or for the government to schedule a motion of no confidence in itself) must pass, or 2/3 of the house must vote for an early election. This bar is considerably higher (as no government wants to go to the polls as a result of a no confidence motion), so it is much easier for a government to limp along, even when it lacks a working majority in the House of Commons.

It’s currently not clear what does have a working majority in parliament, although I suppose today’s indicative votes (where MPs will vote on a variety of Brexit proposals) will give us an idea.

Unfortunately, even if there’s a clear outcome from the indicative votes (and there’s no guarantee of that), there’s not a mechanism for enacting that. Either parliament will have to keep passing amendments every single day to take control of business from the government (which is supposed to be the entity setting business!), or the government has to buy into the outcome. If neither of those happen, the indicative votes will do nothing but encourage intransigence of those who know they have the support of many other MPs. If the rebels went to the Queen and asked to appoint a new government, this would obviously not be an issue, but MPs seem uninterested in taking that (arguably proper) step.

This all stems from the second problem, namely, that parliament is rubbish when constrained by external forces.

The way that parliament normally works is: people come up with a platform and try and get elected on it. If a majority comes from this process, then they implement the platform. They all signed off on it, after all. If there’s no clear majority, then people come up with a coalition agreement, which combines the platforms of multiple parties into some unholy mess that they can all agree to pass. In either case, the government agenda is clear.

The problem here is that there are people in each party on either side of the Brexit referendum. Some of them feel bound by the referendum results and some don’t, but even though its results were incorporated into party platforms, it still feels like a live issue to many MPs in a way that most issues in their platform just don’t.

It’s not even clear that there’s a majority of people in parliament in favour of Brexit. And when you have a government that feels bound by a promise to enact Brexit, but a parliament without a clear majority for any particular deal (or even a majority in favour of Brexit) you’re in for a bad time.

Basically “enact this referendum” and “keep 50% of the house happy” are two different goals and it is very easy to find them mutually incompatible. At this point, it becomes incredibly difficult to govern!

The third problem is Teresa May’s unwillingness to find another deal for the house. I get that there might not be any willingness in Europe to negotiate another deal and that she’s bound by a lot of domestic constraints, but there’s a longstanding tradition that MPs can’t vote on the same bill twice in one parliament. Australia is a rare Westminster system government that allows it, but only for bills that the senate rejects and with the caveat that a second rejection can be used to trigger an election.

This tradition exists so that the government can’t deadlock itself trying to get contentious legislation though. By ignoring it, Teresa May is showing contempt for parliament.

If, instead of standing by her bill after it had failed, she sought out some other bill that could get through parliament, she’d obviate the need for parliament to take matters into its own hands. Alternatively, if the Brexit vote had just been a confidence vote in the first place, she’d be able to ask the question of a brand-new parliament, which, if she headed it, presumably would have a popular mandate for her bill.

(And obviously if she didn’t head parliament, we wouldn’t have this particular impasse.)

By ignoring and changing so many parliamentary conventions, the UK has stripped itself of its protections from deadlock, dooming us all to this seemingly endless Brexit Purgatory. At the time of writing, the prediction market PredictIt had the odds of Brexit at less than 2% by Friday and only 50/50 by May 22. May’s own chances are even worse, with only 43% of PredictIt users confident she would still be PM by the start of July.

I hope that parliament comes to its senses and that this is the last thing I’ll feel compelled to write about Brexit. Unfortunately, I doubt that will be the case.

Model, Politics, Quick Fix

The Fifty Percent Problem

Brexit was always destined to be a shambles.

I haven’t written much about Brexit. It’s always been a bit of a case of “not my monkeys, not my circus”. And we’ve had plenty of circuses on this side of the Atlantic for me to write about.

That said, I do think Brexit is useful for illustrating the pitfalls of this sort of referendum, something I’ve taken to calling “The 50% Problem”.

To see where this problem arises from, let’s take a look at the text of several political referendums:

Should the United Kingdom remain a member of the European Union or leave the European Union? – 2016 UK Brexit Referendum

Do you agree that Québec should become sovereign after having made a formal offer to Canada for a new economic and political partnership within the scope of the bill respecting the future of Quebec and of the agreement signed on June 12, 1995? – 1995 Québec Independence Referendum

Should Scotland be an independent country? – 2014 Scottish Independence Referendum

Do you want Catalonia to become an independent state in the form of a republic? – 2017 Catalonia Independence Referendum, declared illegal by Spain.

What do all of these questions have in common?

Simple: the outcome is much vaguer than the status quo.

During the Brexit campaign, the Leave side promised people everything but the moon. During the run-up to Québec’s last independence referendum, there were promises from the sovereignist camp that Québec would be able to retain the Canadian dollar, join NAFTA without a problem, or perhaps even remain in Canada with more autonomy. In Scotland, leave campaigners promised that Scotland would be able to quickly join the EU (which in a pre-Brexit world, Spain seemed likely to veto). The proponents of the Catalonian referendum pretended Spain would take it at all seriously.

The problem with all of these referendums and their vague questions is that everyone ends up with a slightly different idea of what success will entail. While failure leads to the status quo, success could mean anything from (to use Brexit as an example) £350m/week for the NIH to Britain becoming a hermit kingdom with little external trade.

Some of this comes from assorted demagogues promising more than they can deliver. The rest of it comes from general disagreement among members of any coalition about what exactly their best-case outcome is.

Crucially, this means that getting 50% of the population to agree to a referendum does not guarantee that 50% of the population agrees on what happens next. In fact, getting barely 50% of people to agree practically guarantees that no one will agree on what happens next.

Take Brexit, the only one of the referendums I listed above that actually led to anything. While 51.9% of the UK agreed to Brexit, there is not a majority for any single actual Brexit proposal. This means that it is literally impossible to find a Brexit proposal that polls well. Anything that gets proposed is guaranteed to be opposed by all the Remainers, plus whatever percentage of the Brexiteers don’t agree with that specific form of Brexit. With only 52% of the population backing Leave, the defection of even 4% of the Brexit coalition is enough to make a proposal opposed by the majority of the citizenry of the UK.

This leads to a classic case of circular preferences. Brexit is preferred to Remain, but Remain is preferred to any specific instance of Brexit.

For governing, this is an utter disaster. You can’t run a country when no one can agree on what needs to be done, but these circular preferences guarantee that anything that is tried is deeply unpopular. This is difficult for politicians, who don’t want to be voted out of office for picking wrong, but also don’t want to go back on the referendum.

There are two ways to avoid this failure mode of referendums.

The first is to finish all negotiations before using a referendum to ratify an agreement. This allows people to choose between two specific states of the world: the status quo and a negotiated agreement. It guarantees that whatever wins the referendum has majority support.

This is the strategy Canada took for the Charlottetown Accord (resulting in it failing at referendum without generating years of uncertainty) and the UK and Ireland took for the Good Friday Agreement (resulting in a successful referendum and an end to the Troubles).

The second means of avoiding the 50% problem is to use a higher threshold for success than 50% + 1. Requiring 60% or 66% of people to approve a referendum ensures that any specific proposal after the referendum is completed should have majority support.

This is likely how any future referendum on Québec’s independence will be decided, acknowledging the reality that many sovereignist don’t want full independence, but might vote for it as a negotiating tactic. Requiring a supermajority would prevent Québec from falling into the same pit the UK is currently in.

As the first successful major referendum in a developed country in quite some time, Brexit has demonstrated clearly the danger of referendums decided so narrowly. Hopefully other countries sit up and take notice before condemning their own nation to the sort of paralysis that has gripped Britain for the past three years.

All About Me, Politics

Knocking on a thousand more doors – political campaigns revisited

“Hi, I’m Zach! I’m out here knocking on doors for Tenille Bonoguore, who is running to represent you in Ward 7. Do you have any questions for her, or concerns that you’d like her to know about…” is now a sentence I have said more than possibly any other.

Ontario had municipal elections on October 22nd. I looked at the bios of my local candidates, emailed all of them to find out more about their platforms, met with two of them, and ultimately decided that I wanted to help Tenille. Soon after that, I had been drafted to help manage canvassing efforts (although my colleague Tanya did more of that work than I did) and I was out knocking on doors again.

I knocked on countless doors and talked to an incredible variety of people. I don’t even know how many times I went out canvassing, but it was lots. More, I think, than the last time I did this.

This blog post outlines the differences (I found) between municipal politics and provincial politics, as well as the difference between volunteering for a campaign and being part of the core campaign team. I hope it can be informative for other people looking to get involved in politics any level.

The first thing I should mention about municipal campaigns is that they are (in many cities; Toronto is one notable exception) much smaller than campaigns for provincial or national government. If you’re volunteering for one, you will probably frequently meet and talk with the candidate. This was a big contrast to my volunteering at the provincial level, where I met the candidate only once (and that was brief), despite regularly canvassing on her behalf.

This, along with the non-partisan nature of many municipal elections means that volunteering at the municipal level is a much better way to get your voice heard. When there’s no party line to toe, your perspective (or a voter’s perspective as relayed by you) can change someone’s mind and lead to a (potential) city councillor voting differently.

Money also goes a lot further in municipal elections. Waterloo had a spending limit of around $12,000 (and I don’t know how many candidates even hit that). This means that donating a couple hundred dollars could make you one of the largest donors to a candidate. I don’t recommend this as a way of influencing policy – I didn’t see anyone act differently because of who donated and I sure as heck didn’t see donors get any sort of special “access”. Trying to get “access” is more or less pointless anyways; municipal boundaries are often small enough that a simple email is all you need to get real, detailed answers right from a candidate (or sitting counsellor).

That said donating is a great way to support a candidate you care about and help them get their message out.

The smaller scale of municipal campaigns also means that any past experience will probably make you the resident expert in something. When you volunteer for a provincial campaign, you’re a small cog in a big machine. When you volunteer municipally, it’s not like that.

Although not all campaigns need your help to the same degree. Incumbents almost never lose races municipally. Only one incumbent (out of 4 who stood for re-election) lost in Waterloo. In Cambridge, no incumbent counsellor lost re-election. Incumbent counsellors are also more likely to have an experienced existing team, potentially limiting the responsibility you could hold. This isn’t necessarily a bad thing! There’s lots to be said for learning skills from more experienced people.

Still, if your main goal is to maximize your contribution towards the election of candidates who you trust, you should focus on open seat races (a seat where there’s no incumbent, due to retirement, scandal, etc.). Second to open seat races might be challengers who are unusually good candidates (e.g. they have extensive community ties and recognition, or other political experience).

(This is speculative. Local conditions may vary. You, or a sitting counsellor you trust might be best positioned to figure out where you can do the most good)

The ease in which you can find yourself in a position of responsibility in a municipal campaign comes with one drawback if you accept it – it can be stressful to be responsible. I don’t want to discourage anyone from getting involved, but I did find even my limited leadership role a source of stress.

From my point of view, three things make being part of a campaign team stressful:

  1. It’s a lot of work; the emotion work of listening to people’s concerns can be emotionally draining and the walking physically taxing. This leads to you trying to do admin work when tired and worn-out.
  2. The outcome is uncertain. Many people like certainty and the combination of caring about a specific outcome a lot and being unsure if it will come about can wear you down.
  3. The buck stops with you. When you’re a simple canvasser, you just need to show up; everything else is taken care of. When people asked me to do things, they wouldn’t get done unless I took care of them.

Now there were two further factors that probably made this more stressful for me than the average volunteer. First, I was working around my blogging French practice. If I was exhausted from campaigning and didn’t work on them, I’d beat myself up about it. People who respond to exhaustion in healthier ways (hint: any other way) wouldn’t have this stressor.

Second, one of the other candidates may have been engaging in underhanded tactics. As a young idealist, I took this rather hard and wasted a lot of energy being angry about it.

Now, I want to be clear that me being such a ball of stress wasn’t the fault of the campaign or anyone else in it.

I read an article a few months ago (that I’m now no longer able to find) about a campaign run and almost entirely staffed by women in California. The women who worked on it talked about how supportive the environment was and how useful it was to have things like “what are times you need off for childcare?” and “please let us know if you feel like you’re taking on too much” asked explicitly at the start.

Tenille’s campaign wasn’t run entirely by women, but it was pretty close (there was only myself and her husband on the core team). And just like the campaign I read about in California, Tenille and Zivy (our campaign manager) did an excellent job checking in with everyone and doing their best to make sure no one took on too much. If I pushed myself past the point I should have, it wasn’t for lack of them trying to create a campaign that didn’t encourage that.

I don’t want to get all gender essentialist here, but working on this campaign made me genuinely believe that women might bring something important and different to the political process. Previously, I’d wanted to see gender balance in elected representatives for basic fairness reasons. Now I find myself even more committed to it.

I think there were two things that made the stress all worth it. The first was getting Tenille elected. I was continually floored by just how good she will be as a counsellor. She knows so much about how Waterloo’s weird two-level government works, has been very involved in the community, and has a journalist’s instinct for hard questions. The second upside is all the other people I met.

There’s this branch of decision theory called functional decision theory that claims the key component of decision making is the algorithm that people use to make decisions. Functional decision theory holds that you can coordinate with someone without talking to them, as long as you can make an accurate guess as to what their decision-making algorithm will be.

This is relevant to campaigning, because you can coordinate with other cool people with similar beliefs to all end in the same room. All you have to do is figure out what candidate they’ll volunteer for and get on her campaign team. Then you’ll all show up in that candidate’s living room, drink coffee, and figure out how to get her elected.

(This can also be a general piece of advice; if you want to meet people you’ll find cool, go do whatever you think a 10% cooler version of you would do. Being part of a core campaign team works so well for this because you’ll spend a lot of time with the other members and be in a social context that provides lots of stuff for you all to talk about. This beats being a canvassing volunteer, where you’ll only see the same people intermittently and have less of a context that encourages mingling.)

Most of the people I met through the campaign are in a rather different stage of life than I am; they aren’t all young techies like most of my other friends. Many of them had kids. Some of them even had jobs outside of tech! Despite the fact that our lives looked rather different, I found I really liked them. They were universally kind, thoughtful, and willing to listen to other perspectives.

(It is rare that I get to hear multiple people talk about why that had kids, what they expected to get out of it, and how they were surprised, but it turns out I really enjoy it when I do. Knowing people at other stages of life is great because you can get advice about your stage of life.)

We had a potluck and reunion a month after the campaign was over and I found myself giddy afterwards; it wasn’t just the stress of the campaign that made me like them. They’re just cool people.

The social scientist Jonathon Haidt wrote in The Righteous Mind that many of the experiences people highlight as the most meaningful in their life happen in the context of some shared struggle. Whatever the depredations, working together for some important cause feels good. In my last post on canvassing, I also quoted Hannah Arendt, who talked about the “extreme pleasure” of working in a group. She was right. Haidt is right as well. Canvassing, volunteering, trying to get someone elected – these are all things that you will look back on and feel proud about.

It’s for these reasons – and because politics needs good, dedicated, decent people – that I recommend becoming involved at any and all levels of government. You don’t have to run yourself. There are plenty of excellent candidates out there who need help, money, and time. If you’re new to politics, consider volunteering to knock on doors. If you’re an old hand, consider taking on a leadership role.

You might change the world. And you might make amazing friends.

Model, Politics, Science

Science Is Less Political Than Its Critics

A while back, I was linked to this Tweet:

It had sparked a brisk and mostly unproductive debate. If you want to see people talking past each other, snide comments, and applause lights, check out the thread. One of the few productive exchanges centres on bridges.

Bridges are clearly a product of science (and its offspring, engineering) – only the simplest bridges can be built without scientific knowledge. Bridges also clearly have a political dimension. Not only are bridges normally the product of politics, they also are embedded in a broader political fabric. They change how a space can be used and change geography. They make certain actions – like commuting – easier and can drive urban changes like suburb growth and gentrification. Maintenance of bridges uses resources (time, money, skilled labour) that cannot be then used elsewhere. These are all clearly political concerns and they all clearly intersect deeply with existing power dynamics.

Even if no other part of science was political (and I don’t think that could be defensible; there are many other branches of science that lead to things like bridges existing), bridges prove that science certainly can be political. I can’t deny this. I don’t want to deny this.

I also cannot deny that I’m deeply skeptical of the motives of anyone who trumpets a political view of science.

You see, science has unfortunate political implications for many movements. To give just one example, greenhouse gasses are causing global warming. Many conservative politicians have a vested interest in ignoring this or muddying the water, such that the scientific consensus “greenhouse gasses are increasing global temperatures” is conflated with the political position “we should burn less fossil fuel”. This allows a dismissal of the political position (“a carbon tax makes driving more expensive; it’s just a war on cars”) serve also (via motivated cognition) to dismiss the scientific position.

(Would that carbon in the atmosphere could be dismissed so easily.)

While Dr. Wolfe is no climate change denier, it is hard to square her claims that calling science political is a neutral statement:

With the examples she chooses to demonstrate this:

When pointing out that science is political, we could also say things like “we chose to target polio for a major elimination effort before cancer, partially because it largely affected poor children instead of rich adults (as rich kids escaped polio in their summer homes)”. Talking about the ways that science has been a tool for protecting the most vulnerable paints a very different picture of what its political nature is about.

(I don’t think an argument over which view is more correct is ever likely to be particularly productive, but I do want to leave you with a few examples for my position.)

Dr. Wolfe’s is able to claim that politics is neutral despite only using negative examples of its effects by using a bait and switch between two definitions of “politics”. The bait is a technical and neutral definition, something along the lines of: “related to how we arrange and govern our society”. The switch is a more common definition, like: “engaging in and related to partisan politics”.

I start to feel that someone is being at least a bit disingenuous when they only furnish negative examples, examples that relate to this second meaning of the word political, then ask why their critics view politics as “inherently bad” (referring here to the first definition).

This sort of bait and switch pops up enough in post-modernist “all knowledge is human and constructed by existing hierarchies” places that someone got annoyed enough to coin a name for it: the motte and bailey fallacy.

Image Credit: Hchc2009, Wikimedia Commons.

 

It’s named after the early-medieval form of castle, pictured above. The motte is the outer wall and the bailey is the inner bit. This mirrors the two parts of the motte and bailey fallacy. The “motte” is the easily defensible statement (science is political because all human group activities are political) and the bailey is the more controversial belief actually held by the speaker (something like “we can’t trust science because of the number of men in it” or “we can’t trust science because it’s dominated by liberals”).

From Dr. Wolfe’s other tweets, we can see the bailey (sample: “There’s a direct line between scientism and maintaining existing power structures; you can see it in language on data transparency, the recent hoax, and more.“). This isn’t a neutral political position! It is one that a number of people disagree with. Certainly Sokal, the hoax paper writer who inspired the most recent hoaxes is an old leftist who would very much like to empower labour at the expense of capitalists.

I have a lot of sympathy for the people in the twitter thread who jumped to defend positions that looked ridiculous from the perspective of “science is subject to the same forces as any other collective human endeavour” when they believed they were arguing with “science is a tool of right-wing interests”. There are a great many progressive scientists who might agree with Dr. Wolfe on many issues, but strongly disagree with what her position seems to be here. There are many of us who believe that science, if not necessary for a progressive mission, is necessary for the related humanistic mission of freeing humanity from drudgery, hunger, and disease.

It is true that we shouldn’t uncritically believe science. But the work of being a critical observer of science should not be about running an inquisition into scientists’ political beliefs. That’s how we get climate change deniers doxxing climate scientists. Critical observation of science is the much more boring work of checking theories for genuine scientific mistakes, looking for P-hacking, and doubled checking that no one got so invested in their exciting results that they fudged their analyses to support them. Critical belief often hinges on weird mathematical identities, not political views.

But there are real and present dangers to uncritically not believing science whenever it conflicts with your politic views. The increased incidence of measles outbreaks in vaccination refusing populations is one such risk. Catastrophic and irreversible climate change is another.

When anyone says science is political and then goes on to emphasize all of the negatives of this statement, they’re giving people permission to believe their political views (like “gas should be cheap” or “vaccines are unnatural”) over the hard truths of science. And that has real consequences.

Saying that “science is political” is also political. And it’s one of those political things that is more likely than not to be driven by partisan politics. No one trumpets this unless they feel one of their political positions is endangered by empirical evidence. When talking with someone making this claim, it’s always good to keep sight of that.

Economics, Politics

Good Intentions Meet A Messy Reality In Elizabeth Warren’s Corporate Citizenship Push

[Epistemic Status: I am not an economist. I am fairly confident in my qualitative assessment, but there could be things I’ve overlooked.]

Vox has an interesting article on Elizabeth Warren’s newest economic reform proposal. Briefly, she wants to force corporations with more than $1 billion in revenue to apply for a charter of corporate citizenship.

This charter would make three far-reaching changes to how large companies do business. First, it would require businesses to consider customers, employees, and the community – instead of only its shareholders – when making decisions. Second, it would require that 40% of the seats on the board go to workers. Third, it would require 75% of shareholders and board members to authorize any corporate political activity.

(There’s also some minor corporate governance stuff around limiting the ability of CEOs to sell their stock which I think is an idea that everyone should be strongly behind, although I’d bet many CEOs might beg to differ.)

Vox characterizes this as Warren’s plan to “save capitalism”. The idea is that it would force companies to do more to look out for their workers and less to cater to short term profit maximization for Wall Street [1]. Vox suggests that it would also result in a loss of about 25% of the value of the American stock market, which they characterize as no problem for the “vast majority” of people who rely on work, rather than the stock market, for income (more on that later).

Other supposed benefits of this plan include greater corporate respect for the environment, more innovation, less corporate political meddling, and a greater say for workers in their jobs. The whole 25% decrease in the value of the stock market can also be spun as a good thing, depending on your opinions on wealth destruction and wealth inequality.

I think Vox was too uncritical in its praise of Warren’s new plan. There are some good aspects of it – it’s not a uniformly terrible piece of legislation – but I think once of a full accounting of the bad, the good, and the ugly is undertaken, it becomes obvious that it’s really good that this plan will never pass congress.

The Bad

I can see one way how this plan might affect normal workers – decreased purchasing power.

As I’ve previously explained when talking about trade, many countries will sell goods to America without expecting any goods in return. Instead, they take the American dollars they get from the sale and invest them right back in America. Colloquially, we call this the “trade deficit”, but it really isn’t a deficit at all. It’s (for many people) a really sweet deal.

Anything that makes American finance more profitable (like say a corporate tax cut) is liable to increase this effect, with the long-run consequence of making the US dollar more valuable and imports cheaper [2].

It’s these cheap imports that have enabled the incredibly wealthy North American lifestyle [3]. Spend some time visiting middle class and wealthy people in Europe and you’ll quickly realize that everything is smaller and cheaper there. Wealthy Europeans own cars, houses, kitchen appliances and TVs that are all much more modest than what even middle class North Americans are used to.

Weakening shareholder rights and slashing the value of the stock market would make the American financial market generally less attractive. This would (especially if combined with Trump or Sanders style tariffs) lead to increased domestic inflation in the United States – inflation that would specifically target goods that have been getting cheaper as long as anyone can remember.

This is just since 1997! Very basic colour TVs cost more than $1000 (unadjusted for inflation) when first introduced. Today I would expect to pay less than $600 for a 40″ 4k TV.

 

This is hard to talk about to Warren supporters as a downside, because many of them believe that we need to learn to make do with less – a position that is most common among a progressive class that conspicuously consumes experiences, not material goods [4]. Suffice to say that many North Americans still derive pleasure and self-worth from the consumer goods they acquire and that making these goods more expensive is likely to cause a politically expensive backlash, of the sort that America has recently become acquainted with and progressive America terrified of.

(There’s of course also the fact that making appliances and cars more expensive would be devastating to anyone experiencing poverty in America.)

Inflation, when used for purposes like this one, is considered an implicit tax by economists. It’s a way for the government to take money from people without the accountability (read: losing re-election) that often comes with tax hikes. Therefore, it is disingenuous to claim that this plan is free, or involves no new taxes. The taxes are hidden, is all.

There are two other problems I see straight away with this plan.

The first is that it will probably have no real impact on how corporations contribute to the political process.

The Vox article echoes a common progressive complaint, that corporate contributions to politics are based on CEO class solidarity, made solely for the benefit of the moneyed elites. I think this model is inaccurate.

It is certainly true that very wealthy individuals contribute to political campaigns in the hopes that this will lead to less taxes for them. But this isn’t really how corporations contribute. I’ve written in detail about this before, but corporations normally focus their political contributions to create opportunities for rent-seeking – that is to say, trying to get the government to give them an unfair advantage they can take all the way to the bank.

From a shareholder value model, this makes sense. Lower corporate tax rates might benefit a company, but they really benefit all companies equally. They aren’t going to do much to increase the value of any one stock relative to any other (so CEOs can’t make claims of “beating the market”). Anti-competitive laws, implicit subsidies, or even blatant government aid, on the other hand, are highly localized to specific companies (and so make the CEO look good when profits increase).

When subsidies are impossible, companies can still try and stymie legislation that would hurt their business.

This was the goal of the infamous Lawyers In Cages ad. It was run by an alliance of fast food chains and meat producers, with the goal of drying up donations to the SPCA, which had been running very successful advocacy campaigns that threatened to lead to improved animal cruelty laws, laws that would probably be used against the incredibly inhumane practice of factory farming and thereby hurt industry profits.

Here’s the thing: if you’re one of the worker representatives on the board at one of these companies, you’re probably going to approve political spending that is all about protecting the company.

The market can be a rough place and when companies get squeezed, workers do suffer. If the CEO tells you that doing some political spending will land you allies in congress who will pass laws that will protect your job and increase your paycheck, are you really going to be against it [5]?

The ugly fact is that when it comes to rent-seeking and regulation, the goals of employees are often aligned with the goals of employers. This obviously isn’t true when the laws are about the employees (think minimum wage), but I think this isn’t what companies are breaking the bank lobbying for.

The second problem is that having managers with divided goals tends to go poorly for everyone who isn’t the managers.

Being upper management in a company is a position that provides great temptations. You have access to lots of money and you don’t have that many people looking over your shoulder. A relentless focus on profit does have some negative consequences, but it also keeps your managers on task. Profit represents an easy way to hold a yardstick to management performance. When profit is low, you can infer that your managers are either incompetent, or corrupt. Then you can fire them and get better ones.

Writing in Filthy Lucre, leftist academic Joseph Heath explains how the sort of socially-conscious enterprise Warren envisions has failed before:

The problem with organizations that are owned by multiple interest groups (or “principals”) is that they are often less effective at imposing discipline upon managers, and so suffer from higher agency costs. In particular, managers perform best when given a single task, along with a single criterion for the measurement of success. Anything more complicated makes accountability extremely difficult. A manager told to achieve several conflicting objectives can easily explain away the failure to meet one as a consequence of having pursued some other. This makes it impossible for the principals to lay down any unambiguous performance criteria for the evaluation of management, which in turn leads to very serious agency problems.

In the decades immediately following the Second World War, many firms in Western Europe were either nationalized or created under state ownership, not because of natural monopoly or market failure in the private sector, but out of a desire on the part of governments to have these enterprises serve the broader public interest… The reason that the state was involved in these sectors followed primarily from the thought that, while privately owned firms pursued strictly private interests, public ownership would be able to ensure that these enterprises served the public interest. Thus managers in these firms were instructed not just to provide a reasonable return on the capital invested, but to pursue other, “social” objectives, such as maintaining employment or promoting regional development.

But something strange happened on the road to democratic socialism. Not only did many of these corporations fail to promote the public interest in any meaningful way, many of them did a worse job than regulated firms in the private sector. In France, state oil companies freely speculated against the national currency, refused to suspend deliveries to foreign customers in times of shortage, and engaged in predatory pricing. In the United States, state-owned firms have been among the most vociferous opponents of enhanced pollution controls, and state-owned nuclear reactors are among the least safe. Of course, these are rather dramatic examples. The more common problem was simply that these companies lost staggering amounts of money. The losses were enough, in several cases, to push states like France to the brink of insolvency, and to prompt currency devaluations. The reason that so much money was lost has a lot to do with a lack of accountability.

Heath goes on to explain that basically all governments were forced to abandon these extra goals long before the privatizations on the ’80s. Centre-left or centre-right, no government could tolerate the shit-show that companies with competing goals became.

This is the kind of thing Warren’s plan would bring back. We’d once again be facing managers with split priorities who would plow money into vanity projects, office politics, and their own compensation while using the difficulty of meeting all of the goals in Warren’s charter as a reason to escape shareholder lawsuits. It’s possible that this cover for incompetence could, in the long run, damage stock prices much more than any other change presented in the plan.

I also have two minor quibbles that I believe are adequately covered elsewhere, but that I want to include for completeness. First, I think this plan is inefficient at controlling executive pay compared to bracketed scaled payroll taxes. Second, if share buybacks were just a short-term profit scheme, they would always backfire. If they’re being done, it’s probably for rational reasons.

The Good

The shift in comparative advantage that this plan would precipitate within the American economy won’t come without benefits. Just as Trump’s corporate tax cut makes American finance relatively more appealing and will likely lead to increased manufacturing job losses, a reduction in deeply discounted goods from China will likely lead to job losses in finance and job gains in manufacturing.

This would necessarily have some effect on income inequality in the United States, entirely separate from the large effect on wealth inequality that any reduction in the stock market would spur. You see, finance jobs tend to be very highly paid and go to people with relatively high levels of education (the sorts of people who probably could go do something else if their sector sees problems). Manufacturing jobs, on the other hand, pay decently well and tend to go to people with much less education (and also with correspondingly fewer options).

This all shakes out to an increase in middle class wages and a decrease in the wages of the already rich [6].

(Isn’t it amusing that Warren is the only US politician with a credible plan to bring back manufacturing jobs, but doesn’t know to advertise it as such?)

As I mentioned above, we would also see fewer attacks on labour laws and organized labour spearheaded by companies. I’ll include this as a positive, although I wonder if these attacks would really stop if deprived of corporate money. I suspect that the owners of corporations would keep them up themselves.

I must also point out that Warren’s plan would certainly be helpful when it comes to environmental protection. Having environmental protection responsibilities laid out as just as important as fiduciary duty would probably make it easy for private citizens and pressure groups to take enforcement of environmental rules into their own hands via the courts, even when their state EPA is slow out of the gate. This would be a real boon to environmental groups in conservative states and probably bring some amount of uniformity to environmental protection efforts.

The Ugly

Everyone always forgets the pensions.

The 30 largest public pensions in the United States have, according to Wikipedia, a combined value of almost $3 trillion, an amount equivalent to almost 4% of all outstanding stocks in the world or 10% of the outstanding stocks in America.

Looking at the expected yields on these funds makes it pretty clear that they’re invested in the stock market (or something similarly risky [7]). You don’t get 7.5% yearly yields from buying Treasury Bills.

Assuming the 25% decrease in nominal value given in the article is true (I suspect the change in real value would be higher), Warren’s plan would create a pension shortfall of $750 billion – or about 18% of the current US Federal Budget. And that’s just the hit to the 30 largest public-sector pensions. Throw in private sector pensions and smaller pensions and it isn’t an exaggeration to say that this plan could cost pensions more than a trillion dollars.

This shortfall needs to be made up somehow – either delayed retirement, taxpayer bailouts, or cuts to benefits. Any of these will be expensive, unpopular, and easy to track back to Warren’s proposal.

Furthermore, these plans are already in trouble. I calculated the average funding ratio at 78%, meaning that there’s already 22% less money in these pensions than there needs to be to pay out benefits. A 25% haircut would bring the pensions down to about 60% funded. We aren’t talking a small or unnoticeable potential cut to benefits here. Warren’s plan requires ordinary people relying on their pensions to suffer, or it requires a large taxpayer outlay (which, you might remember, it is supposed to avoid).

This isn’t even getting into the dreadfully underfunded world of municipal pensions, which are appallingly managed and chronically underfunded. If there’s a massive unfunded liability in state pensions caused by federal action, you can bet that the Feds will leave it to the states to sort it out.

And if the states sort it out rather than ignoring it, you can bet that one of the first things they’ll do is cut transfers to municipalities to compensate.

This seems to be how budget cuts always go. It’s unpopular to cut any specific program, so instead you cut your transfers to other layers of governments. You get lauded for balancing the books and they get to decide what to cut. The federal government does this to states, states do it to cities, and cities… cities are on their own.

In a worst-case scenario, Warren’s plan could create unfunded pension liabilities that states feel compelled to plug, paid for by shafting the cities. Cities will then face a double whammy: their own pension liabilities will put them in a deep hole. A drastic reduction in state funding will bury them. City pensions will be wiped out and many cities will go bankrupt. Essential services, like fire-fighting, may be impossible to provide. It would be a disaster.

The best-case scenario, of course, is just that a bunch of retirees see a huge chunk of their income disappear.

It is easy to hate on shareholder protection when you think it only benefits the rich. But that just isn’t the case. It also benefits anyone with a pension. Your pension, possibly underfunded and a bit terrified of that fact, is one of the actors pushing CEOs to make as much money as possible. It has to if you’re to retire someday.

Vox is ultimately wrong about how affected ordinary people are when the stock market declines and because of this, their enthusiasm for this plan is deeply misplaced.

Footnotes

[1] To some extent, Warren’s plan starts out much less appeal if you (like me) don’t have “Wall Street is too focused on the short term” as a foundational assumption.

I am very skeptical of claims that Wall Street is too short-term focused. Matt Levine gives an excellent run-down of why you should be skeptical as well. The very brief version is that complaints about short-termism normally come from CEOs and it’s maybe a bad idea to agree with them when they claim that everything will be fine if we monitor them less. ^

[2] I’d love to show this in chart form, but in real life the American dollar is also influenced by things like nuclear war worries and trade war realities. Any increase in the value of the USD caused by the GOP tax cut has been drowned out by these other factors. ^

[3] Canada benefits from a similar effect, because we also have a very good financial system with strong property rights and low corporate taxes. ^

[4] They also tend to leave international flights out of lists of things that we need to stop if we’re going to handle climate change, but that’s a rant for another day. ^

[5] I largely think that Marxist style class solidarity is a pleasant fiction. To take just one example, someone working a minimum wage grocery store job is just as much a member of the “working class” as a dairy farmer. But when it comes to supply management, a policy that restriction competition and artificially increases the prices of eggs and dairy, these two individuals have vastly different interests. Many issues are about distribution of resources, prestige, or respect within a class and these issues make reasoning that assumes class solidarity likely to fail. ^

[6] These goals could, of course, be accomplished with tax policy, but this is America we’re talking about. You can never get the effect you want in America simply by legislating for it. Instead you need to set up a Rube Goldberg machine and pray for the best. ^

[7] Any decline in stocks should cause a similar decline in return on bonds over the long term, because bond yields fall when stocks fall. There’s a set amount of money out there being invested. When one investment becomes unavailable or less attractive, similarly investments are substituted. If the first investment is big enough, this creates an excess of demand, which allows the seller to get better terms. ^

Model, Politics

Why does surgery have such ineffective safety regulation?

Did you know that half of all surgical complications are preventable? In the US alone, this means that surgeons cause between 50,00 and 200,000 preventable deaths each year.

Surgeons are, almost literally, getting away with murder.

Why do we let them? Engineers who see their designs catastrophically fail often lose their engineering license, even when they’re found not guilty in criminal proceedings. If surgeons were treated like engineers, many of them wouldn’t be operating anymore.

Indeed, the death rate in surgery is almost unique among regulated professions. One person has died in a commercial aviation accident in the US in the last nine years. Structural engineering related accidents killed at most 251 people in the US in 2016 [1] and only approximately 4% of residential structure failures in the US occur due to deficiencies in design [2].

It’s not that interactions with buildings or planes are any less common than surgeries, or that they’re that much inherently safer. In many parts of the world, death due to accidents in aviation or due to structural failure is very, very common.

It isn’t accidental that Canada and America no longer see many plane crashes or structural collapses. Both professions have been rocked by events that made them realize they needed to improve their safety records.

The licensing of professional engineers and the Iron Ring ceremony in Canada for engineering graduates came after two successive bridge collapses killed 88 workers [3]. The aircraft industry was shaken out of its complacency after the Tenerife disaster, where a miscommunication caused two planes to collide on a run-way, killing 583.

As you can see, subsequent safety improvements were both responsive and deliberate.

These aren’t the only events that caused changes. The D. B. Cooper high-jacking led to the first organised airport security in the US. The Therac-25 radiation overdoses led to the first set of guidelines specifically for software that ran on medical devices. The sinking of the Titanic led to a complete overhaul of requirements for lifeboats and radios for oceangoing vessels. The crash of TAA-538 led to the first mandatory cockpit voice recorders.

All of these disasters combine two things that are rarely seen when surgeries go wrong. First, they involved many people. The more people die at once, the more shocking the event and therefore the more likely it is to become widely known. Because most operations involve one or two patients, it is much rarer for problems in them to make the news [4].

Second, they highlight a specific flaw in the participants, procedures, or systems that fail. Retrospectives could clearly point to a factor and say: “this did it” [5]. It is much harder to do this sort of retrospective on a person and get such a clear answer. It may be true that “blood loss” definitely caused a surgical death, but it’s much harder to tell if that’s the fault of any particular surgeon, or just a natural consequence of poking new holes in a human body. Both explanations feel plausible, so in most cases neither can be wholly accepted.

(I also think there is a third driver here, which is something like “cheapness of death”. I would predict that safety regulation is more common in places where people expect long lives, because death feels more avoidable there. This explains why planes and structures are safer in North America and western Europe, but doesn’t distinguish surgery from other fields in these countries.)

Not every form of engineering or transportation fulfills both of these criteria. Regulation and training have made flying on a commercial flight many, many times safer than riding in a car, while private flights lag behind and show little safety advantage over other forms of transport. When a private plane crashes, few people die. If they’re important (and many people who fly privately are), you might hear about it, but it will quickly fade from the news. These stories don’t have staying power and rarely generate outrage, so there’s never much pressure for improvement.

The best alternative to this model that I can think of is one that focuses on the “danger differential” in a field and predicts that fields with high danger differentials see more and more regulation until the danger differential is largely gone. The danger differential is the difference between how risky a field currently is vs. how risky it could be with near-optimal safety culture. A high danger differential isn’t necessarily correlated with inherent risk in a field, although riskier fields will by their nature have the possibility of larger ones. Here’s three examples:

  1. Commercial air travel in developed countries currently has a very low danger differential. Before a woman was killed by engine debris earlier this year, commercial aviation in the US had gone 9 years without a single fatality.
  2. BASE jumping is almost suicidally dangerous and probably could be made only incredibly dangerous if it had a better safety culture. Unfortunately, the illegal nature of the sport and the fact that experienced jumpers die so often make this hard to achieve and lead to a fairly large danger differential. That said, even with an optimal safety culture, BASE jumping would still see many fatalities and still probably be illegal.
  3. Surgery is fairly dangerous and according to surgeon Atul Gawande, could be much, much safer. Proper adherence to surgical checklists alone could cut adverse events by almost 50%. This means that surgery has a much higher danger differential than air travel.

I think the danger differential model doesn’t hold much water. First, if it were true, we’d expect to see something being done about surgery. Almost a decade after checklists were found to drive such large improvements, there hasn’t been any concerted government action.

Second, this doesn’t match historical accounts of how airlines were regulated into safety. At the dawn of the aviation age, pilots begged for safety standards (which could have reduced crashes a staggering sixtyfold [6]). Instead of stepping in to regulate things, the government dragged its feet. Some of the lifesaving innovations pioneered in those early days only became standard after later and larger crashes – crashes involving hundreds of members of the public, not just pilots.

While this only deals with external regulation, I strongly suspect that fear for the reputation of a profession (which could be driven by these same two factors) affects internal calls for reform as well. Canadian engineers knew that they had to do something after the Quebec bridge collapse created common knowledge that safety standards weren’t good enough. Pilots were put in a similar position with some of the better publicized mishaps. Perhaps surgeons have faced no successful internal campaign for reform so far because the public is not yet aware of the dangers of surgery to the point where it could put surgeon’s livelihoods at risk or hurt them socially.

I wonder if it’s possible to get a profession running scared about their reputation to the point that they improve their safety, even if there aren’t any of the events that seem to drive regulation. Maybe someone like Atul Gawande, who seems determined to make a very big and very public stink about safety in surgery is the answer here. Perhaps having surgery’s terrible safety record plastered throughout the New Yorker will convince surgeons that they need to start doing better [7].

If not, they’ll continue to get away with murder.

Footnotes

[1] From the CDC’s truly excellent Cause of Death search function, using codes V81.7 & V82.7 (derailment with no collision), W13 (falling out of building), W23 (caught or crushed between objects), and W35 (explosion of boiler) at home, other, or unknown. I read through several hundred causes of deaths, some alarmingly unlikely, and these were the only ones that seemed relevant. This estimate seems higher than the one surgeon Atul Gawande gave in The Checklist Manifesto, so I’m confident it isn’t too low. ^

[2] Furthermore, from 1989 to 2000, none of the observed collapses were due to flaws in the engineers’ designs. Instead, they were largely caused by weather, collisions, poor maintenance, and errors during construction. ^

[3] Claims that the rings are made from the collapsed bridge are false, but difficult to dispel. They’re actually just boring stainless steel, except in Toronto, where they’re still made from iron (but not iron from the bridge). ^

[4] There may also be an inherent privateness to surgical deaths that keeps them out of the news. Someone dying in surgery, absent obvious malpractice, doesn’t feel like public information in the way that car crashes, plane crashes, and structural failures do. ^

[5] It is true that it was never discovered why TAA-538 crashed. But black box technology would have given answers had it been in use. That it wasn’t in use was clearly a systems failure, even though the initial failure is indeterminate. This jives with my model, because regulation addressed the clear failure, not the indeterminate one. ^

[6] This is the ratio between the average miles flown before crash of the (very safe) post office planes and the (very dangerous) privately owned planes. Many in the airline industry wanted the government to mandate the same safety standards on private planes as they mandated on their airmail planes. ^

[7] I should mention that I have been very lucky to have been in the hands of a number of very competent and professional surgeons over the years. That said, I’m probably going to ask any future surgeon I’m assigned if they follow safety checklists – and ask for someone else to perform the procedure if they don’t. ^

Economics, Politics, Quick Fix

Why Linking The Minimum Wage To Inflation Can Backfire

Last week I explained how poor decisions by central bankers (specifically failing to spur inflation) can make recessions much worse and lead to slower wage growth during recovery.

(Briefly: inflation during recessions reduces the real cost of payroll, cutting business expenses and making firing people unnecessary. During a recovery, it makes hiring new workers cheaper and so leads to more being hired. Because central bankers failed to create inflation during and after the great recession, many businesses are scared of raising salaries. They believe (correctly) that this will increase their payroll expenses to the point where they’ll have to lay many people off if another recession strikes. Until memories of the last recession fade or central bankers clean up their act, we shouldn’t expect wages to rise.)

Now I’d like to expand on an offhand comment I made about the minimum wage last week and explore how it can affect recovery, especially if it’s indexed to inflation.

The minimum wage represents a special case when it comes to pay cuts and layoffs in recessions. While it’s always theoretically possible to convince people to take a pay cut rather than a layoff (although in practice it’s mostly impossible), this option isn’t available for people who make the minimum wage. It’s illegal to pay them anything less. If bad times strike and business is imperiled, people making the minimum wage might have to be laid off.

I say “might”, because when central bankers aren’t proving useless, inflation can rescue people making the minimum wage from being let go. Inflation makes the minimum wage relatively less valuable, which reduces the cost of payroll relative to other inputs and helps to save jobs that pay minimum wage. This should sound familiar, because inflation helps people making the minimum wage in the exact same way it helps everyone else.

Because of increasingly expensive housing and persistently slow wage growth, some jurisdictions are experimenting with indexing the minimum wage to inflation. This means that the minimum wage rises at the same rate as the cost of living. Most notably (to me, at least), this group includes my home province of Ontario.

I think decreasing purchasing power is a serious problem (especially because of its complicated intergenerational dynamics), but I think this is one of the worst possible ways to deal with it.

When the minimum wage is tied to inflation, recessions can become especially dangerous and drawn out.

With the minimum wage rising in lockstep with inflation, any attempts to decrease payroll costs in real terms (that is to say: inflation adjusted terms) is futile to the extent that payroll expenses are for minimum wage workers. Worse, people who were previously making above the minimum wage and might have had their jobs saved by inflation can be swept up by an increasingly high minimum wage.

This puts central bankers in a bind. As soon as the minimum wage is indexed to inflation, inflation is no longer a boon to all workers. Suddenly, many workers can find themselves in a “damned if you do, damned if you don’t” situation. Without inflation, they may be too expensive to keep. With it, they may be saved… until the minimum wage comes for them too. If a recession goes on long enough, only high-income workers would be sparred.

In addition, minimum wage (or near-minimum wage) workers who are laid off during a period of higher inflation (an in this scenario, there will be many) will suffer comparatively more, as their savings get exhausted even more quickly.

Navigating these competing needs would be an especially tough challenge for certain central banks like the US Federal Reserve – those banks that have dual mandates to maintain stable prices and full employment. If a significant portion of the US ever indexes its minimum wage to inflation, the Fed will have no good options.

It is perhaps darkly humorous that central banks, which bear an unusually large parcel of the blame for our current slow wage growth, stand to face the greatest challenges from the policies we’re devising to make up for their past shortcomings. Unfortunately, I think a punishment of this sort is rather like cutting off our collective nose to spite our collective face.

There are simple policies we could enact to counter the risks here. Suspending any peg to inflation during years that contain recessions (in Ontario at least, the minimum wage increase due to inflation is calculated annually) would be a promising start. Wage growth after a recession could be ensured with a rebound clause, or better yet, the central bank actually doing its job properly.

I am worried about the political chances (and popularity once enacted) of any such pragmatic policy though. Many people respond to recessions with the belief that the government can make things better by passing the right legislation – forcing the economy back on track by sheer force of ink. This is rarely the case, especially because the legislation that people have historically clamoured for when unemployment is high is the sort that increases wages, not lowers them. This is a disaster when unemployment threatens because of too-high wages. FDR is remembered positively for his policy of increasing wages during the great depression, even though this disastrous decision strangled the recovery in its crib. I don’t expect any higher degree of economic literacy from people today.

To put my fears more plainly, I worry that politicians, faced with waning popularity and a nipping recession, would find allowing the minimum wage to be frozen too much of a political risk. I frankly don’t trust most politicians to follow through with a freeze, even if it’s direly needed.

Minimum wages are one example of a tradeoff we make between broad access and minimum standards. Do we try and make sure everyone who wants a job can have one, or do we make sure people who have jobs aren’t paid too little for their labour, even if that hurts the unemployed? As long as there’s scarcity, we’re going to have to struggle with how we ensure that as many people as possible have their material needs met and that involves tradeoffs like this one.

Minimum wages are just one way we can do this. Wage subsidies or a Universal Basic Income are both being discussed with increasing frequency these days.

But when we’re making these kind of compassionate decisions, we need to look at the risks of whatever systems we choose. Proponents of indexing the minimum wage to inflation haven’t done a good job of understanding the grave risk it poses to the health of our economy and perhaps most of all, to the very people they seek to help. In places like Ontario, where the minimum wage is already indexed to inflation, we’re going to pay for their lack of foresight next time an economic disaster strikes.