Empiricism v. Principle

Will Wilkinson:

What if there’s no feasible path within the bounds of normal American democratic politics to significantly lower the level of government spending as a percentage of GDP? If we look at the world, what we see is that when people get richer, they want more welfare state. Maybe there’s nothing much we can do about that.

I’m not going to insist that that’s true. But it’s a possibility we need to think about. Folks on the right need to consider the possibility that we’ve been wrong to see demand for government as the sort of dependent variable that can be manipulated through education or propaganda or political organizing or too-clever-by-half fiscal policy gymnastics or far-fetched constitutional amendments. The only variable the level of government spending clearly and reliably responds to over the long run is GDP per capita, and the relationship goes the wrong way. When people get richer, they want more welfare state. You can want Americans to get continuously wealthier and also want the government to consume a smaller share of national economic output, but there’s very little reason to think you can have both of those things. That is what the world is telling us.

What if we listened? What if we accepted this and took it really seriously?

That’s a good question, Will.

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82 thoughts on “Empiricism v. Principle

  1. I some times think that this is the basis of the whole “Against Democracy” argument currently in vogue among libertarians. They really do know that most people are not into limited government so the next best thing is to prevent people from leaving.

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    • Exactly. Same with the the idea that voting is irrational and people who vote in elections are really ignorant. Brennan doesn’t come out and say it but I would not be surprised if his ideas of experts who are qualified to vote would be people who by and large agree with free market economics and libertarian positions on limited government.

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  2. As with Brennan’s argument, the question here is why do they want the government to be something different than it is?
    What do they want the outcome to be?
    Greater happiness, human flourishing, tranquility?

    For whose benefit do they want to change it?
    Everyone? A few select few? Just they themselves and no one else?

    It does seem very much like a religious fanatic, who asserts that everyone in the world would be so much happier if they only accepted my truth about the divine. Even if I need to have them do so at gunpoint.

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  3. When people get richer, they want more welfare state.

    Seems to me there’s a pretty obvious ambiguity in those words. Or confusion. Or deliberate deception…

    Nevertheless, I’ve often asked on these very pages the following question: at what point does automation coupled with outsourcing/offshoring/immigration combine to create a definitive signal that we’ve reached the point where a tax-increase-based, re-distributive GBI is the only answer?

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    • Never. The idea that “those who don’t work, don’t eat” is a very old one and very ingrained in humans. On LGM, the blogger djw states that in his classes, many of his students oppose GBI regardless of how they see themselves political and that the modal supporter has a graduate education of some sort. GBI is an idea that is popular with intellectuals but unpopular with the masses even if they are otherwise Far Left in their politics.

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      • When those who have good educations can’t find work because the jobs just don’t exist.

        Don’t work, don’t eat rests almost entirely on the premise that those who want to eat are not only willing to work, but able to find work. I suspect that the reason we haven’t hit that yet is because there is an idea that those who are willing to work are just being snooty & turning their noses up at honest, well paying, if somewhat unpleasant, jobs.

        Not sure how long that belief will hold out, but a certain class of Slate articles does help keep it alive.

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          • Ive heard that lots of stock traders already use programs that track stock prices and take advantage of minute fluctuations in price to make profits.

            Fully automated stock trading programs that private individuals can use do not seem that far behind.

            Though if everybody uses it, then very soon there may be little profit to be held in the stock markets.

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            • They do, and there is a lot of criticism over it.

              It’s why you sometimes hear calls for a tax/fee on trades. Something small, like a penny or a nickle per trade.

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              • It’s why having a private high-speed link so that your firm gets stock quotes and can place trades very slightly ahead of the competition can be a good investment.

                It’s also impossible to spin as anything but zero-sum, and so makes the slope about what sorts of investment income should be tax-advantaged more slippery.

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                • I understand the how & why of it, but it strikes me as a “within the letter of the law, but outside the spirit”, in that such high speed, extremely marginal trades don’t really spur or foster investment in the companies being traded (unless said companies provide high speed computers, networks, and trading software).

                  I suppose you could argue that there is some public benefit to it, and I’ve heard such arguments, but I really have to squint to see the value.

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                  • Well, it allows prices to equilibriate faster. There is some degree to which profits are a result of certain transactional frictions. Finance profiting off of such frictions can be regarded as a deadweight loss. Since the function of the finance sector is to convey efficiently via price signal certain information about the goodness of certain hard assets, a program that has the effect of returning randomly fluctuating prices to equilibrium serves this role.

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                    • Can you estimate the benefit, given that:

                      1. The fluctuations are minuscule, far below the level at which they’d affect investment decisions.

                      2, The direction of the fluctuations is random, so that in the absence of the high-speed traders, they would tend to cancel out.

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                      • There’s also the fact that the guys with the shorter information loops have a ridiculous advantage.

                        There’s been cases where they could literally probe incoming trades, determine a seller’s minimum sale price, a buyer’s maximum, and maximize their profit by buying from the seller at minimum and selling to the buyer’s at maximum.

                        They effectively took a large table rake of every trade.

                        And they could do this because they could generate buy/sell orders and cancel them before the other end could react, getting this information.

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            • I’ve written one. It’s not that hard. (I mean getting one that works well? That’s different).

              I did it for my thesis. For machine learning, stock market’s are a great choice if you’re playing with “what’s more effective” rather than “how can I predict this”.

              It’s got simple criteria (“Do you have more money than when you started”) so you can judge efficiency, the data sets are cheap, complete, and plentiful.

              It basically means you have a ton of easy data, a really simple set of win/lose criteria, and a lot of different things you can play with.

              I keep meaning to go toy with it some more. I had a rather fun idea about dealing with local minima (a general problem in genetic algorithms) that I meant to test out….

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            • HFT is the financial equivalent to Maxwell’s Demon. One of the consequences of the laws of thermodynamics is pithily stated as “there ain’t no such thing as a free lunch.” No free energy, no perpetual motion machines, everything “runs down” and tends towards thermal equilibrium absent the injection of new energy.

              In a vaguely analogous way, the Efficient Markets Hypothesis states that, at least over the medium to long term, traders can’t beat the market. Indeed, I’ve seen studies demonstrating that only a tiny fraction of managed funds outperform index funds over reasonable time scales of, say, 5 to 10 years. And even those successes should rightly be attributed to dumb luck.

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    • Really high intractable unemployment would be a major indicator. Extremely high wealth imbalance would be another indicator.

      Though I’m uncertain if you could easily have a GBI necessitating unemployment level in one part of the world based on outsourcing/offshoring. I don’t think it’d produce enough ‘efficiency’ so to speak.

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  4. Do they want more “welfare” or do they want more “government services”?

    Like, do they want more highways? Or more airports, or more parks, or more bike lanes along bayous?

    Or is ir they just want more monetary assistance?

    I believe that replacing more welfare for more government is a sleight of hand here

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    • You’ve hit on something I think.

      It’s not like our democracy “decides’ what it wants from a fixed pool. It’s competing factions that get into power and spend money on supporting their base. Since gov’t can print and spend all it wants, there is no “decision” on how best to spend a limited set of funds. Result, EVERYONE gets swag.

      And let’s not forget that “democracy” is your group getting what you want. When what you want doesn’t get enough votes, it’s a “travesty of democracy”.

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    • Or are they looking around themselves, seeing that – although economic recovery has some big blind spots – for the most part everyone they know is better off, the stock market seems to agree, hyperinflation isn’t a thing – and say “In that case, why the fish can’t somebody repair the roads or afford enough people to have more than one goddamn line open in the post office?”

      Reasonable people can disagree about how big government should be. But there’s a toxic strain of person who insists on insisting that everything government does, in particular the parts that have widest general popularity, are actually entitlements – because of the popularity.

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  5. When people get richer, they want more welfare state.

    I think it should be phrased this way: when people get richer, they are more willing to allow the expansion of a welfare state.

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    • Yes, you work in the justice system.
      When people are poor, they just fucking kill people who break the law.
      Prisons — a good portion of our welfare state — are a product of a rich society.

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            • So you DID miss the point entirely. Somewhere, an English teacher cries.

              Or the only crime you noticed was the loaf of bread thing, somehow missing the con men, grave-robbers, revolutionaries, the masses of working poor, the prostitutes….

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          • Last month, I chose to break the law. I choose to exceed the posted speed limit. See, I was climbing a hill, and right before the top of the hill was a driveway. Someone came out of the driveway and almost T-boned me, except that I accelerated hard and maneuvered to avoid the accident. Of course, the officer and his radar gun sitting on the other side of the crest of the hill didn’t see that happen, so when I crested the hill I was still traveling above the posted speed limit.

            But yep, totally my choice. Get T-boned, or break the law.

            Notme, your view of the world is so ridiculously without nuance or empathy I truly wonder how you manage to function in it.

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            • Did you tell you tell the officer why you shouldn’t get a ticket or did you just accept the ticket? Everyone seems to think that their reason for breaking is the law is worthy of an excuse.

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              • Nope, I don’t bother giving officers a reason or excuse. It rarely works, and the officer that day left me with the impression that he’d heard enough excuses that day (he was running a speed trap, after all).

                My lawyer will be discussing it with the local prosecutor or judge next month.

                However, you miss the point (as usual). I didn’t “choose” to break the speed limit that day, I reacted to a near collision. There was no real reasoning or thought to it, such that it was a conscious choice. No one forced me to accelerate and maneuver, but it was the prudent thing to do, and the thing I’ve been taught to do by every state driving trainer and examiner I’ve ever encountered. So it wasn’t really a choice, as such.

                Additionally, you flatly ignore that we live in a society with lots of laws to break. Many of them are common sense, and breaking them is clearly a no-no. But a lot are just silly, or not obvious, and it is very easy to be unaware that you just broke a law. I mean, ignorance of the law not being an excuse is a lovely cliche, but the reality is that it is impossible for anyone to be aware of all the laws that govern them, and the less well off you are, the less likely you are to have any awareness of any but the most basic and obvious of laws.

                But please, don’t let reality stop you from exhibiting any empathy for those whose station is beneath you.

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                • In a similar instance, my wife tried the excuse with the officer, it worked, and then he gave us a ticket for having an Obama sticker in our back window (which is a rarely enforced law in NY state, but not our native NJ).

                  So yeah.

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                  • Well now, this is different. See here, we aren’t just talking about innocently breaking the law and getting jammed up, we are talking about very specific acts that have obvious, common sense, well known laws against.

                    Perhaps if you didn’t deal so heavily in generalities, you’d be able to avoid these conversations.

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                    • What is the difference between someone who speeds and someone who robs a bank? One law you think is a chickenshit law and the other one you think is justified? How would it if work if choose to live in a world where we only obey the laws we think are justified but rationalize our contempt of the others?

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                      • Most people aren’t D&D Lawful, notme.
                        No, really.
                        The world still works.

                        I live in a world where a surprising number of rapists walk around free. In fact, we even incentivize them! What else do you call a free market where we pay teachers so little? If they’re not getting paid in dollars, they’re getting paid in jollies.

                        I object to the people like the Kochs, who don’t think that ANY law applies to them.

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                      • How can you be this dense and be a practicing lawyer?

                        Let’s use terms you should know. Robbing a bank is Malum In Se, Speeding is Malum Prohibitum. One can be broken very easily by accident, through ignorance, or due to exigent circumstances; the other can not be broken by accident (but can very much be mitigated by circumstances).

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                        • You sound like one of my 1LTs. I recently went to my base’s traffic court with her after she got a speeding ticket. She told me she was going down a large hill on base and was clocked 10mph over the limit. She thought it was unfair b/c she was going down hill. I asked her if the fact that she was going down hill stopped her from obeying the speed limit. She had to admit it didn’t. I suppose you think she should have gotten off?

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                          • OMG! Reading comprehension is most certainly NOT your strong suit, is it?

                            No, coasting is not a defense for speeding. But the law does allow for exigent circumstances, such as medical emergency, or avoiding a greater harm (like a collision), etc.

                            Seriously, do you not get that the law needs to have some degree of flexibility & understanding in it? It can not be a perpetual ass, even if some of the lawyers who practice it find a way.

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                        • the other can not be broken by accident

                          I went to the bank the other day, and handed the teller a check I wanted to deposit. Anyway, I meant to, but I pulled out the wrong piece of paper, and gave her my French assignment, which was a list of sentences I’d translated into English:

                          J’ai une arme à feu.
                          Donnes moi tout ton argent.
                          Si tu cries, je te tue.

                          And so on. It was really embarrassing, but we all had a good about it afterward.

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                • Re: ignorance of the law being no excuse… I don’t think it’s possible to determine a symbolic calculus for anything larger than Godel’s proof of God’s existence, but without it we can’t formally prove how many situations we have in our legal corpus where literally all options available to a person in a particular situation are illegal.

                  I suspect it’s nonzero.

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                • I had a broadly similar situation a few years back. On a rural road – perfectly straight, not highly traveled and no cars in miles other than me and the guy ahead of me. I was coming up to pass him, and by a ridiculous coincidence he was just hitting the left turn to his unmarked driveway. Since the road was so lightly traveled, he didn’t signal, or look, or think, that there might be someone up his jacksie at passing speed… So right when I start my move into the left lane, he slows down and veers left. The only way out was forward, on the left shoulder, hard on the gas. Any thought, any slowdown, any other option, and one of us t-bones the other.

                  So do I get the stocks and him the pillory, or is it the other way round? I always forget.

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        • When the choice is breaking the law or death than most people are going to choose to break the law. I’m a generally law abiding fellow but life is complicated and the law needs to be flexible enough to realize this at times. It actually does, one of the defenses to a tort or crime is the defense of necessity. That the defendant needed to do this wrong act in order to avert a greater injury or crime. Many religions based on law also recognize this. Judaism teachers that your generally allowed to break God’s law to save your life or a life of another. This means that a Jew could eat pork or lobster if the only other choice is to starve.

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    • “I think it should be phrased this way: when people get richer, they are more willing to allow the expansion of a welfare state.”

      I think that’s eminently fair rephrasing.

      I think the more general version is true, “When people get richer, they are more willing to allow the expansion of the public sphere (including things other than the welfare state)”

      I think the most expansive version of this is blindingly obvious, “When people get richer, they care less about their control of every dollar”

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      • Could be that, could also be that a more generous welfare state is, more or less, a superior good. As people get more comfortable and have not only their basic needs but many of their caprices satisfied, they’re more likely to accept the idea of resources going to satisfy popular but abstract desires for fairness and equality.

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        • In contrast, there’s the (apocryphal) story about the rich dude whose interlocutor noticed was paying distinct attention to what were (to him) trivial expenses. And said something to the effect of “as a person with your wealth, I’d think you wouldn’t need to account for things at that level”. The response was, “how did you think I got the wealth, then?”

          Of course it’s a morality tale – I use it to explain why I count calories so tightly – but as a cliche it might carry more truth than what actually would have happened.

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  6. I think the libertarian-critiquing here is off base, fellas.

    This is called “challenging your intellectual priors”. Wilkinson is taking a fundamental assumption of his ideological cadre and upending it. Whether he goes anywhere with it or not is another question, but how often does *anybody* of any ideological camp engage in this sort of activity?

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    • I don’t think it’s off base; I think if you take Wilkinson seriously, it provides a good way to understand a lot of problems that (some) other libertarians have had selling their program. Lots of people want to vote for free stuff, but they may not want to vote for expansive regulations, professional licensing, and the like. Acknowledging this could allow for a lot more freedom when it comes to building a coalition.

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  7. Partly this depends on how we’re counting size of government. The measure Milton Friedman was fond of was pages in the federal Register – it was the regulatory state that concerned him, and I’m the same way.

    My concerns with ever-expanding government are that an ever-growing thicket of regulation will make it impossible for new innovation, leading to economic stagnation and decay. I worry that corporations and similar interest groups will use the regulatory state to insulate themselves from competition, leading to complacency and the kind of economic sclerosis that democratic socialism caused in the 1970s. Regulation has its place, but far too much regulation is created without proper regard for the consequences, or out of an active effort to privilege political in-groups.

    These concerns can all be addressed without halting the expansion of the welfare state. In fact, nearly all my concerns around welfare relate to sustainability – that some of the big ticket welfare programmes were constructed without accounting for how expensive they would get and that this will result in disaster in the future unless they are altered. But that concern doesn’t apply to welfare expansion as the government’s tax base expands.

    I think all us libertarians should bear in mind that the reason the low taxes part of our platform gets so much attention is because its the part the Republicans are really keen on. That’s not a good reason for us to treat it as the most important part, especially since marginal tax rates really are a lot lower than they once were.

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    • Partly this depends on how we’re counting size of government. The measure Milton Friedman was fond of was pages in the federal Register – it was the regulatory state that concerned him, and I’m the same way

      Without a metric for “complexity of life” that’s a rather bad way to measure size.

      The complexity of, say, proper waste disposal measures is a function of the sheer number of chemicals used in the US, the large number of ways they can impact the environment, and the very large number of disposal, recycling, and other measures.

      EPA regs on chemicals have ballooned — because we realized things like “benzene causes cancer, so we shouldn’t leave giant barrels of the stuff out in the open, nor dump it down storm drains” or “Dumping all that C02 into the air has some long term problems”.

      The EPA not growing in size a whit, just keeping up with new chemicals and cataloging legal disposal methods that meet with already existing law, will grow anyways. Government didn’t expand. The world did.

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      • Yup. It’s a far more complex world than in 1955, 1893, or 1785.

        OTOH, I’d be fine with some kind of Regulatory Review Board with a libertarian, socialist, liberal, and conservative economist on it. If all four agree that a regulation is bad, it’s immediately gone. If 3 out of 4 agree, it goes to an immediate up or down vote in the House & Senate.

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    • This.

      And to address ‘s point, it isn’t the numbers necessarily*, but rather the efficacy. Does the reg do what it’s stated goal is**? If not, can we make it better, or should it be done away with?

      *One way to keep the numbers from growing too fast is to focus on cleaning out old, irrelevant law & reg on a regular basis. Not only would it keep the regs leaner & more understandable, it would also remove a favorite tool of prosecutors (using archaic laws to bring charges).

      **As opposed to the possible political goal that was intended when the law or reg was first crafted.

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      • There’s also history to consider.

        As in “there’s a regulation against this because some idiot did it, and we decided to explicitly say no, instead of trusting they can read, because there’s always a company or lawyer that will take up “Chemical X doesn’t count as Chemical class (Y) for disposal purposes, even thought every chemist in the world just shouted “OF COURSE IT DOES MORON” and run with it. Few will take up “Chemical X may not be disposed of this way” and try to claim that somehow Chemical X is Y, or that “disposed of this way” meant “that other way”. And fewer judges will allow it to proceed.

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        • Sure. I’m just saying such things should get reviewed regularly.

          The regulatory state should not just be a growth endeavour, it should also be a very introspective one. Barring that, it should be one that is more open to external challenges (i.e. lawsuits).

          Somehow, I think honest introspection, while perhaps more difficult for egos, is cheaper than lawsuits.

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      • Old irrelevant laws and regs are a bit like non-coding DNA. It just sits there and no one really cares.

        Nevertheless, regular regulatory review is a great idea that many federal agencies support. Please direct your questions to Mssrs Paul Ryan and Mitch McConnell as to why such programs are not funded.

        (In the deep of the night and many bourbons later, they will freely admit that jamming the regulatory process is a deliberate strategy to keep government as dysfunctional as possible.)

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        • Well the problem exists at more than just the federal level.

          As for the Republicans, honest question, how often do Democrats pursue regular regulatory review?

          I suspect the answer is not often, because a lot of regulation seems as tied up in ego & party reputation as it is purpose, so even if the purpose is past, there is still a desire to leave it be (unless it’s causing enough pain).

          You’d think, especially given how contentious the two parties are, that they’d at least go after the other parties favored gems (Obamacare being an obvious exception).

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          • There is also the message thing

            That’s the reason why anti sodomy laws (and antimiscenegation before) remain in the books, and their Repeal die in committee. Because “We want to convey a message” (generally a diapproving one)

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          • Not as often as they should. Good government is both critically important and deadly dull.

            But I’ll note that its only the Republicans who propose automatic sunset clauses or mindless 2:1 repeal/finalization requirements.

            A final point: When you write: “I suspect”, do you have any basis for that suspicion? How much effort did you put in on researching the regulatory programs of, say, the Department of Interior?

            My own view is that regulations that need to be redrafted have one or more of the following defects:

            a. The regulation is inconsistent with the authorizing statute. This problem arises when Congress revises the law on a regular basis (IRS) or passes enormously complex laws without providing the revenue stream to support the needed regulatory programs (EPA).

            b. The regulation is so poorly written that even experts struggle with understanding what the agency is trying to do. (Banking regs.)

            c. The regulation imposes compliance costs inconsistent with the goals of the statute. (Consumer protection, according to some.)

            In most cases, the real problem lies with Congress. If Congress does not write into the law that the agency must perform a cost-benefit analysis with respect to a certain regulatory action, then the agency is barred as a matter of law from doing so. If the statutory language is vague or confusing, litigation over the agency’s exercise of its discretion is inevitable.

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            • I suspect, because I don’t see such action happening often. Perhaps because it isn’t, or perhaps because it’s not something that makes the news very much unless it’s a hot button issue.

              I don’t have cause to interface with the Dept. of the Interior, but I do check up on other various regulatory agencies as the apply to my work, and my impression is that most agencies don’t much review their regulations on their own. At best, it happens if there is enough push from citizens & industry, but even that can be stymied by having a couple of large enough interests express a desire to maintain the status quo (read: capture). Then we get to lawsuits and calls to elected officials.

              This is likely connected directly to your last point about doing cost-benefit analysis, which I do understand is a political issue, so don’t take my point to be one that is overly critical of regulatory agencies per se (although I’m sure there is some valid criticism to made in the specifics), but rather critical of our regulatory structure as a whole, from legislators, to regulators, to enforcement. And before you drill down too deep, I bet that for every criticism I may level, there is a perfectly rational reason things are the way they are. That doesn’t mean the system isn’t in need of work, because perfectly rational reasons are fine on their own, but it is possible that a collection of perfectly rational reasons, existing in the same space, create a poorly functioning mess.

              Complex systems are complex.

              I agree with your list, but I would add a D) The regulation is obsolete. Either society, or technology, has surpassed the rule, and keeping it on the books out of laziness, oversight, sentimentality, or political protest is keeping things overly complex and preventing the whole from working smartly.

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              • I wonder to what extent the systematic gutting of the government agencies best suited to such things plays into it.

                When you remove agencies such as the OTA, you basically remove from Congress a ton of ability to make decisions without relying exclusively on lobbyists (doubly so, when one party starts embracing term limits — no chance to develop expertise on the job, no in-house source of expertise either), which means Congress has no way to do oversight on regulations other than…lobbyists.

                Who will cheerfully lie on both sides of the equation, depending on who is paying them.

                There were rumblings about gutting the CBO when they kept putting out reports on various GOP tax plans they didn’t like too.

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                  • As an agency attached to Congress, the OTA really shouldn’t be that independent of Congress.

                    On the other hand, axing it because it kept giving you data and analysis you didn’t like was terminally stupid. No surprise it was the 1994 Congress that did it.

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