Wednesday, May 27, 2009

On living in interesting times

Some things just don't happen. At least, we can't picture them happening.

The federal government of the United States, for example, will never go bankrupt. It just won't - businesses go bankrupt. Governments of small, poor, third-world backwaters go bankrupt. But the US of A? Not a chance.

This is the prevailing wisdom, anyways. Certainly no respectable opinion leader will openly suggest the United States government is en route to the same fate that GM will likely experience in the next week or so. Luckily, I am not a respectable opinion leader, and am therefor free to pontificate irresponsibly at will.

So here goes: I think there is a non-trivial possibility of the United States government defaulting on its debt in the next 10-20 years. Here is an article by one respectable economist who shares my concern, and by my count, that makes two of us. Maybe we're nuts. I hope we're nuts. Unfortunately, I'm not convinced we are. Consider:

1) The US is currently saddled with massive and geometrically increasing levels of debt, public and private. American consumers and politicians alike seem to have trouble making the logical connection between how much they earn/tax and how much they spend.

2) Medicare, Social Security, stimulus packages, financial sector bailouts and foreign wars are all putting upward pressure on government spending

3) Americans do not like tax increases

1 + 2 + 3 = An almost absurdly irresponsible pattern of spending and consumption by what is (for now, at least) the most powerful nation on earth. Here's a quick visual from the fine gentlemen over at Marginal Revolution:

And another one courtesy of the fine gentlemen over at, uhh, google images:

Scary stuff, huh? I wonder what kind of Debt/GDP ratio we'd have to see for T-bills to hit a AA rating. .80? 1.00? All I know is, we sure as hell don't want to find out.

No matter what, one of three things is going to happen in the next decade:

1) The federal government will make massive and unprecedented spending cuts

2) The federal government will raise taxes up to and above European Welfare-State levels

3) Serious people will consider the possibility of the federal government defaulting on it's debts.

As I said, interesting times.

Saturday, May 23, 2009

The Mismeasure of Well-Being

What kind of metrics should we use to gauge the success of different country's economic policies?

Per capita GDP is the obvious choice, but as many have pointed out, it is imperfect. What about inequality? What about education? Health care? Prevalence of slow drivers in the fast lane? Etc.

Enter the Human Development Index. The HDI aspires to be a more complete measure of the human condition than standard GDP measures. Does it succeed? Bryan Caplan doesn't think so:

So what are the main problems with the HDI?

1. I can see giving equal weights to GDP per capita and life expectancy. But education? As a professor and a snob, I understand the appeal (though a measure of opera consumption would be even better). But in terms of the actual if not professed values of normal human beings, televisions and cars are a lot more important than books.

2. When you take a closer look at the HDI's education measure, it's especially bogus. 2/3rds of the weight comes from the literacy rate. At least that's not ridiculous. But the other 1/3 comes from the Gross Enrollment Index - the fraction of the population enrolled in primary, secondary, or tertiary education. OK, I feel a reductio ad absurdum coming on. To max out your education score, you have to turn 100% of your population into students!

3. The HDI purportedly gives equal weights to three different outcomes, but bounding the results between 0 and 1 builds in a massive bias against GDP. GDP per capita has grown fantastically during the last two centuries, and will continue to do so. In reality, there's plenty of room left for further improvement even in rich countries. But the HDI doesn't allow this. Since rich countries are already close to the upper bound, the HDI effectively defines their future progress on this dimension out of existence.

To a lesser extent, the same goes for life expectancy: While it's roughly doubled over the last two centuries, dying at 85 is not, contrary to the HDI, approximately equal in value to immortality.

The clear winners from this weighting scheme, of course, are the literacy and enrollment measures, both of which have upper bounds that are imposed by logic rather than fiat.

4. The ultimate problem with the HDI, though, is lack of ambition. It effectively proclaims an "end of history" where Scandinavia is the pinnacle of human achievement. Admittedly, I've never visited Scandinavia. But when I see it for the first time this August, I'm pretty sure I won't say to myself, "Wow, it can't get any better than this!"

I'm inclined to agree. Per capita GDP is imperfect, but is it worse than the HDI? I'm all for the idea of better measures of the human condition than GDP. The problem with current measures (see also: The HPI) is that they suffer from a consistent bias in favor of statist, intervention-heavy public policy.

Question for the day: Imagine a team of Hayekian libertarians get together to create their own development index. Which factors would they emphasize to create an index biased in a pro-market, pro-liberty direction?

Wednesday, May 20, 2009

Mind the Gap

People have a natural tendency towards pessimism on the subject of economics. For an example, check out the responses to the first question in this survey of Americans and Economists. This disparity doesn't surprise me, since I've had a lot of conversations with non-economists who think people were wealthier in the 60's/70's, poverty is becoming more of a problem, and so on. Frequently, the pessimists' response to these perceived problems is to recommend a broader role for government in the market economy - we have problems, so we have to "do something" about them.

This kind of pessimism is in fact a central tenet of statism, and has been since Marx. Since we currently live in a market economy, more or less, to admit that things are good and getting better would be to admit that capitalism has a lot to recommend it.

So here's a challenge, to any pro-government Progressives among my readers (who number in the tens of millions, I'm sure): If capitalism is so destructive, exploitative and in unjust, why is it that the world has seen such immense gains in wealth and quality of life since the outset of the modern capitalist era?

Here's the video that inspired this post. It's humbling to consider how lucky we are to have been born where and when we did.

Sunday, May 17, 2009

Peak Column #2: Why I am not a Conservative

Last week at Rules for Radicals, we noted that modern political discourse takes place along a simple left-right axis. We decided – or at least I did – that neither the Right nor the Left is entirely good, true and virtuous. Each have their advantages, of course, but neither is perfect. And one of the benefits of being a Radical is that you are free, unconstrained by popular dogmas, to strive for perfection.

Before we begin this week’s lesson, let’s define some terms. We’re going to start calling the set of beliefs generally associated with the Left “Progressivism” and those associated with the Right “Conservatism.” Hopefully, you are already familiar with these words. If not – well, perhaps this isn’t the column for you. There is a word search on the last page, however, which might be more your speed. Best of luck.

Now that we’ve thinned our ranks (quality of readership, rather than quantity, will continue to be the goal here at Rules for Radicals) let’s get to work. Contemporary political discourse essentially boils down to the competing ideologies of Progressivism and Conservatism. Unfortunately, I’m convinced that neither of these is anything but outdated and useless. A provocative claim perhaps, since everyone reading this column most likely identifies with one or the other movement to some degree. But I’m assuming serious readers of Rules for Radicals are an unusually open-minded and hard-to-offend group. If you lack such qualities, the word search beckons.

We’ll start with Conservatism, because the modern Conservative movement, compared to its Progressive nemesis, is 1) Sillier, 2) More outdated, and 3) Less powerful. Debunking it will hardly require breaking a sweat, but it will get us warmed up in anticipation of our real target, the modern Progressive movement.

If you yourself are a Progressive, you’re probably used to thinking that the world is run by wealthy, three-piece-suit-clad Republicans deciding the fate of the world in smoke-filled rooms. You certainly didn’t think that YOU ran the world, or at least people who think like you. But take a look around; the ideological zeitgeist of the Western world has been shifting leftward for at least 200 years now. If Conservatives were in charge, would they have let that happen? Given that true power in a democracy lies in the ability to shape the opinions of the masses, would they have let the Universities, public schools and print media become overwhelmingly staffed by left-leaning Progressives? The answer is: only if they are incredibly stupid.

Which is certainly not a wild suggestion. Perhaps you’ve heard the name “Sarah Palin”. Take a break from this column and refresh your memory with a half-hour on Youtube, keeping in mind that North American Conservatives, acting through the Republican party, had at one point gotten very excited over this woman’s candidacy for the second-highest position of power in the world. She is reputably a plausible candidate for the 2012 ticket. As President. No matter what your ideological sentiments, there is no argument against this blindingly obvious fact: The modern Republicans have become the party of the word search. Conservatives in the other Western nations are generally not a whole lot better.

So modern Conservatism is anti-intellectual, prone to failure, and generally acting as if it is consciously trying to minimize its influence on policy decisions. Worst of all, the philosophical groundings of Conservatism are laughably inadequate. A Conservative is, by definition, one who opposes change. That is to say, he prefers the present state of the world to any conceivable alternative. Not only is this inconsistent – societies are constantly changing, and to remain a Conservative for any appreciable length of time suggests a deplorably whimsical nature – it is also demonstratably harmful. If true Conservatives had reigned for the past 40,000 years, we’d all still be swinging from trees, hurling spears at each other. Change is often for the better, and an ideology that refuses to acknowledge this doesn’t deserve our support.

So Conservatism is dead. Hopefully, you had figured this out for yourself, prior to reading this column. If you identify as a Progressive – well, you probably didn’t need my help to develop a healthy dislike of Ann Coulter, although you probably enjoyed my cheap shots at Palin. If you identify (or preferably, identified) as a Conservative, things are slightly different. I am asking you, on the basis of 800 hastily-typed words, to renounce your ideological faith. Scary stuff. Fortunately, as we’ll see next week, this doesn’t mean you have to grow your hair out and join SFPIRG. Progressivism, up close and under a bright light, doesn’t look too hot either.


Peak Column #1: Right and Left

You could probably tell me, if I was interested enough to ask, whether you self-identify as right-wing or left-wing. Sure, you might reject the left/right label, preferring to call yourself a Progressive Idealist, Libertarian, Marxist-Feminist or whatever, but trust me: it is simplistic to divide the world into right and left, but it is not inaccurate. The only way to avoid falling into either camp is to be so apathetic as to have never actually fleshed out a set of beliefs about the world beyond your immediate social circle. If this describes you, now would be a good time to turn the page – the grownups are going to talk politics.

Now, absent the riff-raff, let’s see if we can figure out this whole left-right thing. Doesn’t it strike you as remarkable that in the chaotic world of belief systems and ideologies, every possible opinion apparently simplifies to a neat and linear two-dimensional vector? At either end of this spectrum, we find a set of completely unrelated beliefs clustered together. On every topic of conversation that would be impolite to bring up at a dinner with your girlfriend’s parents, there is a right-wing perspective and a left-wing perspective. But why? What exactly do abortion, gun control, taxes, and the occupation of Iraq have in common? Certainly nothing obvious. But tell me how a given individual feels about any one of these topics, and I’ll lay money I can tell you how they feel about the other three.

Why aren’t there any abortion-loving Iraq hawks? Pro-apartheid gay rights activists? Evangelical Christian Neil Young fans? I suppose we could dig up a few of each, if we really looked. But I haven’t met any, and I doubt you have either. Again, this is weird - but for some reason, this strong correlation between beliefs in seemingly unrelated subjects doesn’t surprise us. What gives?

It’s possible that the polarization of Right and Left just reflects the difference between lies and truth, and the conflict between them is simply the noble and righteous facing down the wicked in a battle that has raged since the beginning of human history. (I’ll leave it as an exercise for the reader to assign the “good” and “evil” labels to their appropriate political orientations, depending on your tastes.) Regardless of whether this perspective is true or not, it is a common one. Michael Moore surely feels that modern Conservatives are agents of the Dark Side of the Force, and I doubt Sean Hannity has any trouble picturing a snarling Barack Obama administering a force-choke. Since neither of these men have small followings, we can conclude that their views are not rare.

But while this perspective has popularity to recommend it, it doesn’t have much else. I have many friends who are both Right and Left-leaning in their politics. All are good, decent and sincere people. If you have no friends who disagree with you, I will have to ask you to take my word for it - and maybe try to get out more – there is virtue at both ends of the political spectrum. Similarly, there is obvious and verifiable douchebaggery on both sides as well. You don’t get any further Right and Left than Hitler and Stalin. You also don’t get any more evil.

So the Good-and-Evil explanation is incomplete, at best. What else is there? Perhaps the two perspectives correlate with intelligence and stupidity. Here I will not strike as neutral a pose as with the good-and-evil hypothesis. If it is true that the Left Vs. Right dichotomy comes down to the stupid vs. the smart, the Left comes off looking pretty good. Professional academics, presumably the most educated and intelligent among us, are almost uniformly Left-leaning in their politics. This is especially true among those who actually study subjects such as political science, sociology, anthropology etc, which would seem to be particularly illuminating on the nature of human societies. Journalists, writers, artists, lawyers – basically, those who think for a living – are predominantly men and women of the Left. The thinking classes that trend Right – business owners and such – well, it’s not hard to see how nicely their financial self-interest and affection for free markets line up. So perhaps we’re on to something here.

And now the fun part: we can combine these theories and come up with a two-dimensional ranking system of ideologies; ideologies can be either good or evil, and appeal to either the stupid or the smart. If either the Right or Left is both good and intelligent, choosing to support one and turn our backs on the other is a no-brainer. But if, as I suspect, neither modern Progressivism nor Conservatism meets this standard, we will have to set about constructing (or reviving) a new ideology that does. Unfortunately though, we seem to be out of time, so this exercise will have to wait until next week.