Term Limits

I received some pushback when I endorsed term limits in an earlier post, so I did some research. There are a lot of advocates of term limits and a lot of reasons for their advocacy. My reason is simple: power corrupts and repeated election to office results in the accumulation of power, creating greater incentives for corruption. But my research revealed an interesting thing: term limits themselves don’t inhibit the concentration of power. Rather, power accumulates in different places - unelected political bosses and professional staffs. In addition, some rather perverse incentives are created for politicians serving their last term. I guess I’m changing my opinion from favoring term limits to being undecided - except for the Presidency.

The Presidency is a unique institution. Besides having awesome power, the President has an unusual set of incentives. A second term President has a strong incentive to build a legacy, to think and act with long term interests in mind. History will be his or her only judge. No one else in government has that same incentive, or at least not to the same degree. That’s why second term Presidents since FDR always drop in popularity. During a second term, we have long term governance and we are short term voters.

Happiness Gap?

David Brooks as an interesting article on what he calls the “happiness gap”. In brief, Pew Research polling indicates that people are overwhelming happy with their live, their income, and their prospects. At the same time, they’re unhappy with government at the federal level. Based on the data, Brooks concludes some things about what people are thinking and how politicians should react to it.

That’s all very interesting, but call me skeptical. Consider the generation that preceeded the Boomers. They saw government take action and credit for ending the Great Depression, winning WW II, provide college education for legions of GIs, and build the Interstate. I can understand why they had a positive view of big government. Now consider the Boomers. They’ve seen a long series of failed attempts - Vietnam, the Great Society, the War on Drugs, stagflation, Nixon, the Energy Crisis - all pretty ugly. Depending on your orientation, either Carter or Reagan offered a glimmer of potential, but their successes came from reducing the scope and influence of government. The first Bush lied about tax increases, Clinton proclaimed that Big Government was over and then embarrassed everyone. 9/11 happened. And we all know that the administration of the Current Occupant has not been unalloyed good news.

I don’t know what younger people think, but I think the Boomers are weary and disillusioned with government. We’ve learned that our government isn’t the Tooth Fairy.

But hope springs eternal. Given the government’s track record, maybe we should raise taxes and give it a shot at health care. Then we could see a real happiness gap.

Getting Rich, Getting Poor

This post reminded me - there are two ways to improve your standard of living. The conventional way is to get a lot more money. But the other way is just as rewarding - let the prices of what you buy fall. If you could keep your current income but buy a week’s worth of groceries for one dollar and a new luxury car for $100, you’d be much better off.

Too many people focus on the first way and not the second. When people speak of increasing income inequality, they are looking at the first way. But when you consider how many things poor people can afford that were, in earlier times, affordable only by the rich, you have to conclude that the poor are much better off. It’s there for everyone to see. What’s harder to see is that the poor have a much improved standard of living because of income inequality. The logic of this conflicts with some people’s preconceived notions. They see income inequality as unfair and would fix it, entirely ignoring the consequences for the poor. God help the poor if the populists prevail.

Vouchers

My ISP problems seem to have been corrected by a new cable modem which seems quite a bit zippier, so I’m able to do a little writing here. My, there’s a lot of catching up I need to do. What should I do first?

The answer came quickly. This little essay on school vouchers is one of the best things I’ve read. Megan has excelled herself. It’s logical, thoughtful, and passionate. I’m tempted to memorize it, or at least the main thematic points, for the next time the subject comes up. [Now that I think about it, the subject doesn't come up that often. Maybe there's insufficient comparative advantage here.] I’ve often wondered why people favor government administered education. The case for publicly funded education has some merit, but the case for government administration of education is exceedingly weak.

Aaaargh!

In this old neighborhood, we get our Comcast cable through lines strung on phone poles which must have been placed during the Roosevelt administration. After a high wind Wednesday night, my cable Internet service has been intermittent at best. It’s fine in the late afternoon after the sun has been out for a while, but in the morning, it’s stone cold dead. It then makes an appearance in the late morning - five minutes at a time. It’s extremely frustrating. Comcast customer support (for once) didn’t treat me like an idiot, and a cable guy comes to the rescue tomorrow. I hope to renew posting once he’s done his magic.

Two Americas

It took a while, but a more balanced view of the economy is starting to become visible. All of the talk about middle class squeeze and the lower class being left behind is just that - talk. The substance is very different from the talk.

Nevertheless, polling continues to indicate that people are pretty gloomy about the future of the economy. I don’t know why that is, but there are some interesting facts to note:

• Polling is often unreliable. It costs nothing to give an answer over the phone. What really matters is what people do, not what they say.
• Some politicians have a lot to gain from the idea that economy is in bad shape - that gives them a reason to fix it (and incidentally get elected).
• There is a great deal of turbulence in the economy as the pace of change quickens. The negative effects of the turbulence are easy to see and the benefits, though far greater, are also harder to see.

The tough part for economists and good economic policy is like the old Chico Marx joke: who are you going to believe? Me or your own eyes?

Anti-Incumbent

I found an amusing article on one guy’s struggle with Libertarianism. His best line is this: “…the Republicans have become wrong and corrupt, the Democrats are stupid and corrupt, and the Libertarians have gone plain crazy.”

Here’s a news flash: power corrupts. One of the smarter things this country has done was to limit the term of the President. One of the dumber things we’ve done is to not limit the terms of other office holders.

I doubt that the Libertarians will ever be a potent political force, but I bet that an Anti-Incumbent party could get some traction!

Free Trade Is The Future

This article is one of the best I’ve read about free trade. Unfortunately, the author implies that people who oppose free trade are uneducated Luddites and that the politicians who speak for them are venal scoundrels. OK, I’ll buy the part about politicians being scoundrels, but the real situation is a little more complicated. If your job is threatened by competition, you have cause to worry. Whether the competition is caused by free trade, new technology, or our your own employer’s ineptitude is immaterial. It is perfectly rational to work and vote against whatever threatens your well-being. The data suggests that free trade actually creates jobs, but the reality is that it both creates and destroys jobs. At net, free trade is a winner for society, but if your job is threatened and your prospects of getting one of these dandy new jobs are poor, you have a strong incentive to oppose the changes brought about by free trade.

In reality, it is the risk of job loss and poor options for subsequent employment that scares people. It’s no wonder that there’s considerable resistance to free trade. Yet, as all economists know, free trade is the best policy objective. So what’s the best policy?

I’ve read several suggestions for compensating workers who lose their jobs due to free trade, retraining them, etc. These solutions are, at best, unwieldy and unlikely to work. My humble suggestion is this: we should move relentlessly toward free trade, but in small increments, spread over time. We should reduce the disruption to a level of political acceptability. Let the opposition to free trade simmer, but not come to a boil. Free trade in the future is better than free trade never.

Feminist Economics?

I just had my first exposure to feminist economics. Seeing only the title, I was skeptical, but after reading it, I am more appreciative. The article is a critique of Mankiw’s Ten Principles of Economics. A common line that runs through the critique is that the focus on individual material well-being is too limited. I share that general criticism of economics. It is apparent that people constantly trade away material well-being for non-material things that they value more. Yet the full power of economic analysis has not been widely applied in mainstream economics. The Feminist Economics paper provides a lot of food for thought.

Self-Interest Revisited

In an earlier post, I argued that voting patterns and political affiliation are influenced by a number of factors, including self-interest. Someone then noted that people often do not vote in their economic self-interest (good analysis here). This is a semantic problem which I caused by examining self-interest solely in terms of material well being. Self-interest is broader than that.

A great contribution of Austrian economics is the notion that all value is subjective. We don’t all value things the same way. People will vote for what they value. Many people that feel strongly about abortion will support a candidate who shares their view, regardless of the candidate’s position on anything else. Is this self-interest? I think so - they vote for what they value highly. I have a friend who is vehemently opposed to President Bush - not because of any specific policy, but because of his accent and grammar. Is this self-interest? I think so - my friend values these things highly and votes accordingly (and, in fact, was a strong supporter of the well-spoken Bill Clinton, despite disagreeing with most of his policies).

I realize that my use of the term self-interest differs from common usage, but common usage depends upon a notion of objective value which is false. In a sense, everyone votes on the basis of self-interest, everyone is a value voter. Some of us (and most people who’ve read this far), place a high value on intellectual integrity. We are, I fear, a minority.