Friday, November 28, 2014

American Conservatism’s Crisis of Ideas

BERKELEY – On the back left corner of my desk right now are three recent books: Arthur Brooks’ The Battle, Charles Murray’s Coming Apart, and Nicholas Eberstadt’s A Nation of Takers. Together, they constitute an important intellectual movement, which also happens to be a large part of the reason that American conservatism today has little that is constructive to say about managing the economy – and little purchase on the center of the American electorate.

But let’s back up historically, to the founding of what we might call modern conservatism in early nineteenth-century Britain and France. There were some – Frédéric Bastiat and Jean-Baptiste Say come to mind – who believed that government should put the unemployed to work building infrastructure when markets or production were temporarily disrupted. But they were balanced by those like Nassau Senior, who spoke out against even famine relief: Although a million people would die in the Irish Potato Famine, “that would scarcely be enough.”

The main thrust of early conservatism was root-and-branch opposition to every form of social insurance: make the poor richer, and they would become more fertile. As a result, farm sizes would drop (as land was divided among ever more children), labor productivity would fall, and the poor would become even poorer. Social insurance was not just pointless; it was counterproductive.

The proper economic policy was to teach people to venerate the throne (so that they would respect property), the paternal hearth (so that they would not marry imprudently young), and the religious altar (so that they would fear pre-marital sex). Then, perhaps, with women chaste for half or more of their childbearing years, the surplus population would diminish and conditions for the poor would be as good as they could be.

Fast-forward 150 years to post-World War II America, and to the original Chicago School critique of the New Deal version of social insurance – that it created “notches” that perverted economic incentives. The government, Milton Friedman and others argued, told the poor: make more money and we will take away your free housing, food stamps, and income support. People are rational, Friedman said, so they will not work for long if they get nothing or next to nothing for it.

The big difference between the Malthusian conservative critics of social insurance in the early nineteenth century and the Chicago critics of the 1970’s is that the Chicago critics had a point: Providing public support to the “worthy” poor, and then removing it when they began to stand on their own feet, poisoned incentives and was unlikely to lead to good outcomes.

And so, from 1970 to 2000, a broad coalition of conservatives (who wanted to see the government stop encouraging immorality), centrists (who wanted government money spent effectively), and leftists (who wanted poverty alleviated) removed the “notches” from the social-insurance system. Presidents Jimmy Carter, Ronald Reagan, George H. W. Bush, Bill Clinton, and even George W. Bush and their supporters created the current system, in which tax rates and eligibility thresholds are not punitive disincentives to enterprise.

So what is the problem that America’s new generation of conservative critics of social insurance sees? It is not that raising poor people’s standard of living above bare subsistence produces Malthusian catastrophe, or that taxes and withdrawal of welfare benefits make people work, at the margin, for nothing.

For Eberstadt, the problem is that dependence on government is emasculating, and that too many people are dependent on government. For Brooks, it is that knowing that public programs make one’s life easier causes one to vote for non-Republican candidates. For Murray, it is that social insurance means that behaving badly does not lead to catastrophe – and we need bad behavior to lead to catastrophe in order to keep people from behaving badly.

The crucial point is that America’s conservative elites believe Brooks, Eberstadt, and Murray. To this day, Mitt Romney is convinced that he lost the presidency in 2012 because Barack Obama unfairly gave Latino-Americans subsidized health insurance; gave women free reproductive health coverage (excluding abortion); and gave other groups similar “gifts.” He could “never convince them that they should take personal responsibility and care for their lives.”

In fact, it would be a tough sell for any candidate to convince Americans who receive government benefits that they are dependent rather than empowered; that it is bad for people to vote for politicians who make their lives better; and that good public policy seeks to create human catastrophe rather than to avert it. The problem for American conservatives is not their choice of candidates or the tone of their rhetoric. It is that their ideas are not politically sustainable.

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    1. CommentedFrederick Hastings

      A column from an economist, not a polemicist, on the historic intellectual debate on the role of government in human action and no references to rent-seeking, regulatory capture, induced dependency, pork-barrel spending, moral hazard, animal spirits?

    2. CommentedJ St. Clair

      lets add this article onto this one and compare subject regarding welfare "states"

    3. CommentedAndré Rebentisch

      Apparently conservatism in the United States is a unique brand dedicated to undermine cohesion in society. I would expect a conservative personality to esteem assistance for persons who do less well. The actual unresolved crisis lies in US federalism balancing, not ideology.

    4. CommentedG. A. Pakela

      In response to Mr. O'Callaghan's comments below, "the nonsense that the rich are so greedy that they will refuse to invest efficiently if they are required to pay their fair share of progressive taxation..." is indeed worthy of comment. Investors will decide among an array of opportunities on a risk and tax adjusted basis. If the tax on capital income is set at too high a level, investors will reject those risky opportunities whose after-tax return falls below what they are willing risk. A business owner will not reinvest in the business if she believes that the upside return is subject to confiscatory taxes, but she still has to absorb all of the losses if the investment fails.

      This is a decision process that affects millions of small businesses that are the backbone of employment opportunities for many if not most Americans. Thus, the real losers are not business owners, but those prospective job-seekers who cannot find work.

        CommentedAnthony Juan Bautista

        Indeed, Animal Spirits require that projected returns exceed cost of capital. The Fed is doing everything possible to lower the discount rate on new venture; and the White House is doing everything possible to raise it. All the while our projected returns are revised downward in serial fashion, as the consumer deleverages.

        At least this is how I explain the world to myself over coffee and toast.

    5. CommentedFrank O'Callaghan

      J Bradford DeLong is right but does not go far enough, (Perhaps this is courtly academic elegance) but he could point out that most right wing orthodoxy has failed to deliver on it's promises. Conservative "ideas" are a thin veil for a lootocracy. It is not a coincidence that those who vote most loyally for the 'red state' side have been most disadvantaged by their representatives.

      The nonsense that the rich are so greedy that they will refuse to invest efficiently if they are required to pay their fair share of progressive taxation is absurd beyond comment. That has not prevented this theory from being the central plank of conservatism for decades.

      The conservative (liberal economic) attitude to the potato famine in Ireland bears examination. The view was taken that one or two million deaths of the Irish poor were a 'necessity' for the 'greater good' was argued. The amount of resource released by the removal of these desperately poor and deprived was relatively small. Had a similar number been 'liquidated' at the OPPOSITE extreme of the social/economic scale in the British Isles at the time it would have released a much greater quantity of resources. Indeed it would have required a much smaller casualty toll to produce a much greater social 'good'.

      There are those who see a similar argument today with the 99% vs the 1%

        Portrait of J. Bradford DeLong

        CommentedJ. Bradford DeLong

        I do wish they would give me a link at the bottom to which I can attach a longer, extended version of the argument...

    6. CommentedProcyon Mukherjee

      The debate is shifting to empowerment versus dependence, and America is equally divided on the road to be taken; the illusion of clarity and the binding rationale to take on a particular path as opposed to the other is seen in the weakness of the current incumbent to take on a decisive stance on either taxation, fiscal or in transfers of all forms. The ‘majority view’, if it is muddled to give a clear direction and if the ‘less than majority view’ is straddled in the legacies of the past, we have a polity that reflects not only in the lack of vision but also in the lagging ‘bias for action’.

    7. CommentedSharon Curran

      Reading the article, I wonder how people construe economics practiced conservatively with what is happening now. I think, Prof. DeLong, the problem is viewed as a debate between those who earn and those who need help rather than the morality of some people who have a lot of money--undeservedly and so much--compared to everyone else. I don't know how to reconcile a fellow working hard to make his business function or a woman employed for a particular reason with people, like those who caused the banking crisis with greedy behaviour and are still rewarded. Neither types of the conservatism you discuss take issue with this sort of reality. I think that is why a lot of people are so angry--there is a moral crisis at hand, I just don't think that people, particularly the undeserved rich, want to take responsibility for it. It is very easy to criticize the poor or unemployed, even the working poor, rather than recognize that unearned wealth (and I know that means more taxes, but perhaps a fairer distribution of wealth) is currently determining how society functions. And regardless of what type of conservatism one favours that particular issue is the problem.

    8. CommentedJohn Médaille

      I should point out that Bastiat, Senior, and Say were economic *Liberals*; the meanings of "liberal" and "conservative" have changed places in the last 100 years, so that today a "conservative" is one who believes in the crudest form of economic liberalism.

        Portrait of J. Bradford DeLong

        CommentedJ. Bradford DeLong

        I would disagree: Say and Bastiat, at least, believed in expanding government spending to put people to work when the number of unemployed was unusually large...

    9. CommentedPaul Ross

      As a layman reading the article the last paragraph hits home, the current Conservative platform is in essence telling the American People, "Vote for us, we'll make your life harder."

      As a voter, I am highly unlikely to vote for you, if that is what you offer.

      An exception being a stand on single red button issues I feel strongly about. (Personally I don't have many those; and the ones I do; would have me not vote for anyone, which is not a great way to run a country.)

        Portrait of J. Bradford DeLong

        CommentedJ. Bradford DeLong

        Complexity theory is supposed to give us a map between microfoundational characteristics and emergent macro properties. Unfortunately, complexity theory cannot do this for us yet. So as a result macroeconomists are trapped into either (a) writing down microfoundations they know are wrong and using them to construct models that say what they want them to say (and then falsely claiming that they have "scientifically derived" their results), and (b) waving their hands in the air and talking about reduced forms. (If you hadn't noticed, I favor (b) as more honest...)

        CommentedAnthony Juan Bautista

        REPLY to Ashok:

        Well we agree, mostly. I'm all-for drastically different paradigms as to understanding the macro economy. But these paradigms will have to be modeled. And the "truths" yielded, will be constrained by usefulness. And the most useful thing in the world, is a reasonably good forecast. (I'll even go so far as to say that all true things can be modeled, with various precision, depending on how "good" the truth is.)

        I just want people to realize exactly who in society is talking to them, when the macro-economist claims: "This is what we should do, and I KNOW it." It's not a scientist talking to them, and it's likely not even a truth-seeker. (Again, this applies to all political persuasions.)

        CommentedAshok Rao

        But nothing significant happened over the past 70 years that would force a complete haul of an economist's priors.

        I don't want to compare the work of macroeconomics to Einstein, I mean he's truly a mind-blowing guy, but even Einstein had his doubts about quantum mech (famously, "God does not play his dice on us").

        There's also a rich, and thriving, field of computational economics based on complexity theory that will be promising (I think) in the next era.

        Economics might be a flawed discipline, and it is certainly not 'scientific' in the physics sense of the word – but how can it be? How can you create a controlled experiment in all but the smallest interventions (a la Poor Economics)?

    10. CommentedAnthony Juan Bautista

      "American conservatism today has little that is constructive to say about managing the economy"

      Sadly, JBD continues the sullied tradition of economist as political partisan.

      When I read pieces like this I simply remind myself: these men are not scientists, and these men are not truth-seekers. And their role in society must be framed as such; meaning, it's important to understand what these people are NOT. What they ARE--exactly where they bring value--is an open question.

      We must likewise remind ourselves that the same men now making claim to a corpus of good knowledge (asserting that they now "know" what's best), are the same people who 5 years ago didn't "know" we were headed for the greatest global economic turmoil in 80 years (70 years after Keynes gave them a running start). What credible scientific discipline studies phenomena for 70 years, and still can't make modestly useful predictions based on modeled theory? (And this applies to econo-partisans of all religions.)

      So when men like JBD assert they now "know", simply think to yourself: just 5 years ago, they DIDN'T KNOW. And this marginalizes the case for them currently knowing, or currently knowing who doesn't know!

      But perhaps I'm wrong. Perhaps someone can pass-on one of JBD's peer-reviewed, published works (the hard science) wherein his econometric models predicted (or implied) the Great Recession; or in timely/usable fashion, warned as to the depth or duration of the recession/output gap/unemployment, etc. This would certainly bolster the case for credibility (explaining why we should listen now).

      Yes, a formalized and (reasonably) prescient modeling and understanding from 5-plus years ago would definitely help to distinguish JBD from those frauds and ignoramuses who at present, really DON'T know.

      Help us separate the frauds from those who really know--those who are constructive versus those who are destructive.

        CommentedAnthony Juan Bautista

        Reply to CHARLES:

        Ha yes! I read "Genius" many years ago; perhaps it made an impression.

        And this is indeed a quotation that rightly frames the issue:

        "Religion is a culture of faith; science is a culture of doubt." RP Feynman

        However I feel the much needed cynicism toward the pundit-econo class (JBD, Krugman, and on and on) has a tradition predating RPF by 2K yrs or so:

        CommentedCharles Travis

        Interesting that I was just watching a documentary on Richard Feynman and he seemed to have the same basic premise - expertise that isn't being tested and evaluated is of little value.

        CommentedAnthony Juan Bautista

        REPLY to ASHOK (why no reply button?):

        I'm sorry to say, but resumes DO matter. Hence, it's extremely reasonable to ask a person who's making a claim to current knowledge: "How well have you understood the subject phenomena in the past?".

        Macro-economists have had 70 yrs to update their priors. A truly Bayesian algorithm/process gets more accurate at t+n! This has not been the case with macro econ--meaning, normative calculations are NOT Bayesian.

        And Newton was indeed no idiot--but let's remember, his models still apply to a VERY useful approximation. And Einstein was actually a Founding Father of QM; he got it!--another non-idiot! Heisenberg merely discovered another important constraint.

        You have helped me make a case that the statements of macroeconomists who claim they "know", should be weighted in-accordance with the historical precision and usefulness of their models. Truth is actually a model (Newton mentioned):

        CommentedAshok Rao

        Thinking that it was coming five years ago doesn't make your argument today any more appropriate and, conversely, not knowing that it was coming doesn't make what you say today irrelevant.

        Actually, all that matters is how one updates his/her priors after the event. There's an article here at Syndicate itself where JBD remarks how much the financial crisis has changed the way he thinks, noting a speech Larry Summers gave at Bretton Woods.

        Newton wasn't an idiot for not seeing relativity come, and Einstein wasn't an idiot for not seeing quantum mechanics come.

        It's kind of odd to expect economics to be as "scientific" as the study of nature. You can't form a controlled experiment. Which is why arguments from Rogoff and the like treating the 90% mark as some sort of natural, intrinsic, "threshold" don't hold water.

        The real problem is that conservatives seem to be allergic to Mr. Bayes.

    11. Portrait of J. Bradford DeLong

      CommentedJ. Bradford DeLong

      Let me note three things:

      (1) Most of what I have to say is highly, highly derivative from Mike Konczal and Mark Schmitt (and others); (2)
      The problem is not just that today's crop of AEI-conservative ideas is not politically sustainable, but that it is simply wrong--Cahn and Carbone's Red Families, Blue Families has convinced me that contra Murray America's (Blue) families are actually in pretty good shape (Red families that try to keep their daughters ignorant about family planning not so much), my take on Eberstadt is coming out in Democracy Journal later this month; and
      (3) Arthur Brooks seems to me at bottom simply lamenting that Democratic policies work and make people's lives better--that Republicans are losing their campaign to try to make America a worse-off place does not strike me as a minus.