Disqus - Latest Comments for Gareth

Re: Financial Paternalism as Self-Defense

Gareth — Tue, 19 Oct 2004 15:52:18 -0000

Well, as a social democrat, I was raised with a belief in universal social insurance, not redistribution. Those of us with Sweden as our ideological motherland were always opposed to means testing.

So, in our self-conception, we aren't redistributing money from the rich to the poor. We are forcing everyone to put money away for their own sickness, old age, etc. The state does it because it's the best at doing it.

Of course, we are happy to force the rich to contribute, but they should get their benefits when and if the time comes. Social insurance isn't about redistribution any more than the interstate highway system.

Re: Libertarians for Values!

Gareth — Tue, 19 Oct 2004 15:57:14 -0000

Sorry, Gunthrie, but that is precisely the kind of crap that makes normal people think Libertarians are wackos.

Neither Kerry and Bush are likely to shoot all small business owners, expropriate all agricultural land without compensation or set up a network of prison camps for their political opponents.

Re: Where Have All the Intellectuals Gone?

Gareth — Tue, 19 Oct 2004 16:05:20 -0000

By the way, Furedi is the genius-leader of an odd group of former Trotskyists (once proudly called the "Revolutionary Communist Party") who blew a whole lot of dot-com money trying to create a "pro-Enlightenment" anti-imperialist politically incorrect variant of Marxism in the 1990s. They lost a big libel trial when they claimed some liberal British journalists faked photos of concentration camps in Bosnia. They are now "spiked online." They are now basically libertarian. Anyway, they are more fun than the Objectivists.

Re: What is Big Government?

Gareth — Wed, 15 Dec 2004 15:26:41 -0000

At first blush, I'd say the size of government is equal to its cost (gross, not net of benefits, or else big government is anlytically the same as bad government). Cost is always relative to something, so you would have to either take some realworld example as your base line (say, the US in 1880) or maybe some anarcho-capitalist or libertarian utopia.

Re: The Forecasting Debate and the Brittleness of PAYGO

Gareth — Thu, 20 Jan 2005 07:11:31 -0000

Will,

Your argument proves too much. If actuarial forecasting is completely impossible, social security isn't the only thing that has to go: all defined benefit pensions, indeed all insurance, are just fraudulent.

By the way, Social Security is not "Pay As You Go" and hasn't been for twenty years.

Re: The Forecasting Debate and the Brittleness of PAYGO

Gareth — Tue, 25 Jan 2005 08:36:29 -0000

Look. You can't have it both ways.

If we assume that the SS payroll tax is just another tax, and SS payments are just another government program, then it makes no sense to talk about Social Security going "broke". Under these assumptions, the solvency of Social Security is just the solvency of the US Government, and Bush is to blame for any deterioration.

If we can talk about the solvency of Social Security at all, then we assume some distinct existence for the trust fund. Nothing wrong with that. But then calling it Pay-As-You-Go is just dishonest, because Social Security has built up substantial assets.

Micha's fundamentalist position doesn't make sense to me. Would he have any objection to a private defined benefit pension scheme? Would an insurance company who sponsored such a scheme wrong retirees if it refused to pay them promised benefits? Of course.

What is the libertarian position on government debt? Can it just be repudiated? What about other government contracts? Isn't government morally and legally obliged to fulfill them? If so, then why isn't it in the same position as a private insurance company which has sponsored a defined benefit plan?

What do libertarians do if the least expensive long-term insurer is the state? By the looks of this argument, they just deny that spreading risk has any utility and misrepresent pension systems.

Re: More Trust Fund

Gareth — Tue, 25 Jan 2005 11:16:28 -0000

Your correspondent has a curiously literal view of money. If I use a debit card to buy something, no "real" money changes hands. There is "merely" an accounting entry debiting my bank account and crediting the bank account of the vendor. If a corporation issues a bond to its pension trust, then it is "just" an accounting change.

But, by this logic, all financial transactions, that don't involve physically handing over gold ducats, are fictional.

Moreover, you can't have it both ways. If it even makes sense to talk about "Social Security's" solvency, then Social Security must have an independent existence from the general fund. Otherwise, the only real issue is the solvency of the US Government as a whole, not a topic that Bush wants to bring up.

Re: The Forecasting Debate and the Brittleness of PAYGO

Gareth — Tue, 25 Jan 2005 11:21:00 -0000

Micha,

You do see that the logic of your position is that the Government shouldn't pay its debts (since any of its revenues would come from taxation, which you consider "theft").

I'd love to see what Cato's funders thought of that one!

Re: More Trust Fund

Gareth — Wed, 26 Jan 2005 07:32:48 -0000

Nicholas,

My point about the debit card was just that saying that a transfer of money or a repudiation of debt is a "mere" financial or accounting change is silly.

What about your point that SS and the General Fund are both held by the same entity, the US Government? The same is true of a company pension plan (held in trust by the company) which owns company bonds. The one thing this does not do is give the company the moral or legal right to default on the bonds, which is roughly what Bush is proposing.

I'm not a trust-fund sceptic. However, trust fund sceptics have the difficulty that, if their ontology is correct, it is impossible for social security to be in fiscal crisis, or have a low rate of return, or have any of the other myriad of sins attributed to it. Those concepts just don't make sense unless SS is taken to have an indpendent existence.

Re: How Much Does SS Screw You?

Gareth — Wed, 26 Jan 2005 07:34:40 -0000

Will,

That's nothing. If you had property insurance last year, and didn't have a break in or a fire, your rate of return was negative infinity!

Re: The Forecasting Debate and the Brittleness of PAYGO

Gareth — Wed, 26 Jan 2005 07:40:42 -0000

Micha,

It isn't hard to prove that the premise that taxes are theft leads to anarchist conclusions. One of these anarchist conclusions is that owners of US Government bonds would have to make do with a part ownership of the Lincoln memorial and the Yellowstone National Park.

If you are happy to be this consisent, good on ya. However, you will have to excuse me if I don't take your intervention in contemporary policy debates seriously.

Re: More Trust Fund

Gareth — Wed, 26 Jan 2005 09:30:13 -0000

Nicholas,

If you are worried about the capacity of the US Government to continue its existing mix of benefits and taxes into the future, I suggest you take the matter up with one George Walker Bush and his Republican Congress. I recall they made some decisions that have had an effect on this issue.

Re: How Much Does SS Screw You?

Gareth — Wed, 26 Jan 2005 11:34:24 -0000

Does Heritage take into account that, under the Micha Ghertner Federal Insolvency Plan of 2040, the half of your retirement account invested in US Bonds will only get you a few square feet of drilled-over Alaskan tundra and a $75 hammer?

Re: The Forecasting Debate and the Brittleness of PAYGO

Gareth — Wed, 26 Jan 2005 11:40:54 -0000

Micha,

As I understand it, not all libertarians think that government is illegitimate, and therefore that taxes are theft. The libertarian whose views I am most familiar with -- Richard Epstein -- definitely thinks the government must perform its contractual obligations.

Even an anarcho-capitalist might wonder about the transitional costs invovled in having the government default on all its obligations (except to the extent they could be fulfilled by selling Yellowstone and a few aircraft carriers).

So, I concede that my argument that government must meet its obligations to the SS trust fund does not work from your premises, since you don't think the government must meet its obligations, to the extent these would be paid out of taxes. However, I would still be interested in how a libertarian who thinks the government must meet its contractual obligations addresses this problem.

Re: More Trust Fund

Gareth — Wed, 26 Jan 2005 12:44:54 -0000

jk,

Default is exactly what Cato is proposing. Apparently, government debt is slavery or something.

(OK, I know, it's OK to pay the debt with the proceeds from selling aircraft carriers to private security firms. My bad for caricaturing your nuanced position.)

Re: The Forecasting Debate and the Brittleness of PAYGO

Gareth — Wed, 26 Jan 2005 14:30:35 -0000

Micha,

I suppose it is unreasonable for me to ask you what someone you disagree with would say. But the problem is that if you take for granted that the government should meet its contractual obligations, why wouldn't that include accrued obligations under Social Security? Bush's plan might arguably be consistent with this, although it is hard to say because we haven't seen it.

Re: How Much Does SS Screw You?

Gareth — Fri, 28 Jan 2005 06:57:37 -0000

A defined benefit plan has insurance aspects a defined contribution plan doesn't because the beneficiary shifts investment risk and the risk of living longer than average (SS has additional insurance features). Since both of these risks are bad, a rational person will prefer a defined benefit plan to a defined contribution plan with the same expected rate of return.

Will knows this. He also knows that SS is not pay-as-you-go, that actuarial analysis is not just guessing and that Social Security faces no greater risk of insolvency than the US Government itself. He doesn't care because he wants to social engineer Americans into a mass investment class. He calls this the "moral argument".

What I don't get is why the moral argument requires so much sophistry...

Re: How Much Does SS Screw You?

Gareth — Sat, 29 Jan 2005 18:32:42 -0000

it's a funny kind of insurance that pays off if you manage to avoid disaster for 65 years.

It's not so funny if you outlive your savings.

Especially if you're forced into it...

Tu quoque, my friend, since you are defending a forced defined contribution scheme.

Anyhow, there is a good reason why insurance is (sometimes) more efficient if people are forced into it. It's called adverse selection.

Re: The Proper Pre-eminence of Immanence

Gareth — Wed, 02 Feb 2005 08:17:23 -0000

Reliance on immanent criticism is, I believe, a hallmark of a genuinely liberal, non-utopian cast of mind.

Maybe, although Marx and Hegel were both on the immanent criticism team.(They may, actually have been more on the liberal team than their friends and enemies have tended to think, but that's another tale.)

Re: The Proper Pre-eminence of Immanence

Gareth — Wed, 02 Feb 2005 14:16:33 -0000

The question of Marx's ideas about the validity of moral beliefs is a hard one. All we really have are jibes, but they make it clear that Marx was on the immanentist side (unless you interpret him as a complete moral skeptic or nihilist, which I think is wrong).

Marx thought our beliefs, including our moral beliefs, arise out of the conditions of life, which are historically determined. So, Aristotle's theory of the virtues could not have occurred to anyone before the development of a leisure class based on slavery, and Kantian and utilitarian abstractions depend on highly developed commodity production.

But for Marx, you can't get "outside" class society, so you can't criticize this, except from within capitalist society. He is willing to say that a more highly productive society in the future will develop different (and, he thinks, better) norms, but he isn't prepared to say what they will be, except in a negative way. He makes fun of socialists who tried to do that, from his early attacks on Proudhon to the Critique of the Gotha Program.

So, he is really like Hayek and the later Rawls on this. You can't get outside your historical situation: at most, you can reflect on it critically. The metaphysics is that working class activity will generate a new culture, superior to the old one. But it isn't superior judged form some external standpoint, but superior because it solves the problems capitalism posed.

Lenin, on the other hand, hypothesized that certain bourgeois intellectuals could, with the use of "science", obtain a knowledge of history from the outside.

Re: Social Security: The Big Lie

Gareth — Sun, 06 Feb 2005 14:59:39 -0000

A promise is a lie if it isn't fulfilled. It isn't a lie if it is.

The irony here is that the people who propose not fulfilling the promise justify it by saying that the promise was always a lie.

Re: How Much Does SS Screw You?

Gareth — Sun, 06 Feb 2005 15:06:14 -0000

Jason,

All financial assets are IOUs. IOUs from the US Federal Government are generally considered the safest financial assets around.

Sure, to pay off US Govt bonds, the US Govt will eventually have to either raise taxes or reduce spending (almost certainly, raise taxes BTW). That is solely because of George W. Bush and his enablers in Congress.

But how is that an argument that the Bonds are not really financial assets? They are only not really financial assets if the US Govt is going to default on them. That would be unconstitutional, and would result in a global financial crisis.

Re: The “Grace of Congress” Problem

Gareth — Tue, 08 Feb 2005 08:23:02 -0000

A philosphical point and then a practical one.

Philosophically, you draw a fundamental distinction between a "politician's promise" and a "guarantee." But even fee simple property rights are only as secure as the political consensus securing them. In other countries, this isn't very secure. If there is a political consensus that diverting the SS trust fund and payroll tax revenues is as unthinkable as defaulting on the public debt, then that is all the security you can get in life.

The Democrats are trying to create that kind of consensus, and if they beat Bush on this, then that will be more than just a "politician's promise."

More practically, I, for one, have no objection to reducing the level of political discretion as long as it is combined with the defned benefit.

What about Brad De Long's proposal to vest the trust fund in nonpartisan trustees, who can make benefit cuts if necessary to maintain actuarial soundness? Congress would precommit future payroll taxes, and what the general fund owes in debt repayment.

Re: The “Grace of Congress” Problem

Gareth — Tue, 08 Feb 2005 08:32:58 -0000

I read Yglesias' post, and he makes both these points.

Re: Arms Races, Happiness, and other Goods

Gareth — Thu, 10 Feb 2005 15:03:42 -0000

My take away point from Layard isn't that we should abolish capitalism. It is that, as a society gets richer, the utility cost of redistribution is less, even if the cost in lost income/wealth is the same.

If you have a prior commitment to the paramount value of liberty in comparison to utility, Layard can be right, and it won't matter to you. At most, his research generates self-help advice about valuing status less and family time more.

But if you are a Chicago-style libertarian (economic liberty is good because it increases aggregate utility), then you can't just ignore Layard because maybe it doesn't. Vast differences in status may generate more unhappiness than the wealth they make possible is worth. Which is not to say it is either possible or desirable to eliminate differences in status, but is to support a social democratic amelioration of them.

Re: Misunderstanding Social Security

Gareth — Thu, 10 Feb 2005 15:18:06 -0000

Will,

Forget social security. Forget government. Imagine an anarcho-capitalist utopia.

You have two options. One is to pay $X per month into a diversified mutual fund with an expected return at 65 of $5 million.

The other is to pay the same per month to a pension company with a guaranteed benefit equal to an annuity equal to what we expect $5 million will buy the year you turn 65. You can be confident about the solvency of the pension company during your lifetime.

A rational person would pick the second option. That is because the pension company takes on the risks Elizabeth Anderson mentions. These risks are ones normal people are averse to.

For that reason, it is rational to pay somewhat more than $X per month to get the second option. That increment is, in effect, an insurance premium. Social Security adds disability insurance and a death benefit.

So Anderson is right. The calculators, to make a fair comparison, would have to provide a market price for "defined benefit" insurance, disability and death insurance premiums from an entity with long-term financial stability comparable to the US Government.

And monkyboy is correct that the great American people understand this. There are lots of options if you want to invest for your retirement and are prepared to live with these risks. There is no other purveyor of equivalent insurance.

SS may have further redistributory effects, but this is not why it is broadly popular, although as a social democrat, I don't have a problem with them.

Re: Misunderstanding Social Security

Gareth — Fri, 11 Feb 2005 07:47:38 -0000

Will,

I think you need to make a distinction between having a legal entitlement which could be altered by Congressional legislation, and not having a legal entitlement at all. As a matter of positive law, they are different. And, as a matter of practice, they are different too, especially if it would be politically impossible for Congress to enact the legislation abolishing the entitlement.

Nicholas:

I don't deny that SS forces people to pay a premium to eliminate a risk they might prefer to take. That is why it is social insurance, not voluntary insurance. The question is whether you would rather see a little bit of paternalism or indigent old people.

I realize that you have firm philosophical commitments which mean you would rather see indigent old people. But the point here is really one of rhetorical hygiene. Your side has put forward these calculators as a fair comparison: our side is pointing out that you implicitly value the insurance aspects of a defined benefit at nothing, which is quite a bit less than the market would value them. I know you understand this, so who's engaging in the "noble lie" now?

Re: Misunderstanding Social Security

Gareth — Fri, 11 Feb 2005 08:09:30 -0000

BTW, yesterday's Financial Times noted that Cato shadow boxes with Krugman all the time, but hasn't proposed debating him. What about it? Will you debate him?

Re: Misunderstanding Social Security

Gareth — Fri, 11 Feb 2005 12:26:22 -0000

Will,

Defeined benefit pensions are both savings and insurance schemes.

All pensions -- defined benefit and defined contribution -- are savings schemes.

The difference is that the defined benefit scheme shifts certain risks from the recipient to the scheme. That is an insurance feature.

Social Security also has disability and death insurance features, as well.

Your Calculator is misleading because it compares a "rate of return" for a defined contribution scheme to a "rate of return" for Social Security without recognizing that the insurance features of Social Security would cost something if you tried to acquire them on the market.

The "Grace of Congress" point does not make SS any less insurance. In the UK, Parliament could, in principle, pass a law expropriating someone's house without compensation. Does that mean that UK citizens have no property rights? No, because, at least at present, it would be politically unthinkable for any Parliament to pass such a law.

Sure, property rights in the UK might be more secure if there was a justiciable constitutional right to them (although that would depend on whether the court system is more reliable in defence of property rights than political unthinkability, which is uncertain). So too, it would be better if Congress could not raid the trust fund for the general fund.

But how would you feel about a UK socialist who argued that there was nothing wrong with expropriating someone's house without compensation, since the right to the house only existed by Grace of Parliament? You would denounce the transparent rhetorical attempt to make thinkable what is properly unthinkable. Just because Parliament or Congress can do something immoral or stupid, does not mean it should.

Re: Questioning Layard

Gareth — Wed, 16 Feb 2005 09:34:32 -0000

Let me try (hand raised from front of class, ignoring eyerolling from cool kids):

1. Scientific question: We measure well-being by asking people how they are feeling. Or maybe we visit them on their death beds and inquire whether they had a full life. Neither is perfect, but they both probably give different results than seeing if they are getting what they want.

2. Political question: What Rob said. My longer version would be imagine we are disembodied undergraduates in the Original Position. We are given a choice between a society where everyone is happy and a society where everyone gets what they want. I can't say I know what would happen, but if it was immediate unanimous agreement that the society where everyone gets what they want is better than I would suspect the OP bull session had been salted with Cato interns.

Re: Capitalism and Human Nature

Gareth — Wed, 16 Feb 2005 14:16:18 -0000

Good article.

Unusually, for Cato, you reference Hayek's melancholy feeling that an aspiration for socialism is natural, even if socialist society is not.

I don't think Karl Marx, as opposed to his followers, rejected human nature. The "ensemble of social relations" quote really means something closer to Aristotle's man is a political animal than a Blank Slate view. (Which is not to say that his vision of human nature was right, just that he had one). The argument is in Geras: http://www.amazon.com/exec/obidos/tg/detail/-/0805271821/qid=1108599172/sr=1-7/ref=sr_1_7/103-6848006-6330264?v=glance&s;=books.

Re: Capitalism and Human Nature

Gareth — Thu, 17 Feb 2005 12:14:18 -0000

bjr:

I think your confusing two kinds of scientific endeavour. The basic principle of evolutionary psychology is that, since humans are animals, the human sciences are subdisciplines of ethology in the same way that chemistry is a subdiscipline of physics or biochemistry is a subdiscipline of chemistry.

A proposition of ethology can be falsified by showing that it is contrary to observed animal behaviour. The animal in question can be a sea cucumber or a human.

Part of scieintific progress is falsifying and refining general theories. But another part is showing that complex phenomena can be understood as examples of more general laws. So when chemists and physicists showed that the behaviour of the periodic table made sense in light of quantum mechanics, they made progress.

This answers monkyboy's point as well. No doubt, some pop evopsych theorizing is wrong or unscientific, but the basic premise -- that psychology is a specialized form of ethology -- can only be denied by denying evolution.

Re: Capitalism and Human Nature

Gareth — Fri, 18 Feb 2005 07:09:15 -0000

If you want to understand human beings, study human beings. Nothing is added to the sum of knowledge by adding at the end "and the reason for this behavior is the evolutionary process.

If you want to understand aardvarks, study aardvarks. But if you want to explain what you have found out about aardvarks, you are going to need natural, kin and sexual selection, evolutionary stable strategies and all the rest of it. And if you start studying aardvarks with a dogmatic insistence that there is no such thing as aardvark nature, and all aardvark behaviour is socially constructed, you are never going to learn much about aardvarks.

If you want empirical findings, here are some:

1. Stepparents are significantly more likely to abuse or kill children in their care than biological parents.

2. Women have higher standards for looks in short-term sexual partners than for long-term mates; men are the opposite.

3. If you prick us, we bleed. If you tickle us, we laugh. If you poison us, we die. And if you wrong us, we seek revenge.

Taking Shylock's laws, it doesn't seem to bother anyone that there is an explanation why we are more averse to poisons that were around in the Stone Age than those that were synthesized after the Second World War. If this fact has political implications, they are liberal ones: environmental regulators should apply stricter scrutiny to recently synthesized chemicals than to naturally abundant ones.

And who is against an adaptationist explanation for skin strength, or blood clotting, or tickling (not that I know one for tickling, but I'd be interested)?

The point of evolutionary psychology is that there is also an adaptationist explanation for the tendency to seek revenge, a tendency which is, at first blush, irrational.

Clearly, you don't need Darwin to know that there is a human nature: Shakespeare didn't. In fact, I doubt anyone denied it until the nineteenth century. But evolutionary psychology is resisted because it deprives deniers of human nature, not just of the position of common sense, but of the higher status position of theoretical sophistication.

Re: Capitalism and Human Nature

Gareth — Fri, 18 Feb 2005 08:15:33 -0000

What is gained by studying aardvarks if you want to study men? Well, one thing we know about humans is that they are animals. If studying aardvarks tells us something about the general principles of animal behaviour, then we now know something about human behaviour.

Re: Capitalism and Human Nature

Gareth — Fri, 18 Feb 2005 09:23:20 -0000

What's in dispute? That humans are animals? I got plenty of evidence for that, and Aristotle's on my side too. You reflect a Judeo-Christian cultural prejudice, possibly caused by the relative lack of primates in Judeo-Christian homelands.

I doubt that language emerged fully formed, and I think that plenty of animals have (undeniably less complex) languages. But, anyway, why do you need language to feel wronged or seek revenge?

Re: Arms Races, Happiness, and other Goods

Gareth — Fri, 18 Feb 2005 09:56:19 -0000

But Will, what if we don't meta-want to have what we want as much as we meta-want to be happy? Or, maybe we meta-prefer to pay some price in happiness to get what we want, but not any price? How neutral is revealed preference then?

Re: Capitalism and Human Nature

Gareth — Fri, 18 Feb 2005 13:54:17 -0000

I'd say you can only understand more complex phenomena in terms of less complex. You can only understand chemistry in terms of physics, molecular biology in terms of chemistry, cell biology in terms of molecular biology and so on.

monkyboy: What about post-industrial revolution affluence? Could we have achieved it without Adam Smith and David Ricardo?

Re: Capitalism and Human Nature

Gareth — Mon, 21 Feb 2005 07:19:17 -0000

monkyboy: I did some work on Victorian intellectual history, and I think the broad acceptance of the ideas of laissez faire among the 19th century elites, and the correlative transoformation of the common law (and, to some degree, the continental civil codes) was a result of the classical economists' influence. Only the British Empire really embraced free trade, but that was a big only in those days.

A lesser example of effective use of social science is the existence of an insurance/ risk management industry. The Cato types won't agree, but I suspect that Keynes' discoveries about aggregate demand have had similar beneficial impacts. If you count epidemiology as a social science, then there's more.

Of course, there are also all the malign effects of false social scientific theories...

Re: Capitalism and Human Nature

Gareth — Mon, 21 Feb 2005 14:06:31 -0000

Oh, and didn't social scientists save the Galaxy from thousands of years of barbarism by building a Foundation at Terminus and another one at the opposite end of the Galaxy? Or they would have, if it hadn't have been for the Mule and those long pointless sequels.

Re: Jonathan Chait: Confirmation Bias in One Satirical Lesson

Gareth — Wed, 23 Feb 2005 09:43:28 -0000

Micha,

You are proposing diverting stolen tax money so that the children of the improvident poor can get better educations.

You even advocate giving poor children the same opportunities as richer children, in direct contradiction of the sainted Hayek's writings on the subject.

What will this do to their parents' incentives? And you call yourself an anarcho-capitalist.

Re: Empiricism, Normativity, and the Burdens of Judgment

Gareth — Wed, 23 Feb 2005 14:56:35 -0000

Will:

Are you just saying that social scientists are influenced by their normative beliefs (in which case, even a paid-up positivist agrees with you, but likes to think that the process of scientific dispute will weed these biases out)?

Or are you saying that there is something about the human sciences which bridges the is-ought gap?

Re: Jonathan Chait: Confirmation Bias in One Satirical Lesson

Gareth — Wed, 23 Feb 2005 14:59:32 -0000

Hayek may not have been against public education, but he was against rhetoric about equal opportunities. (Rightly too, because you can't have equality of opportunity for one generation without equality of condition for the previous one.)

Re: Jonathan Chait: Confirmation Bias in One Satirical Lesson

Gareth — Fri, 25 Feb 2005 11:02:14 -0000

I have no problem with vouchers. They seem like good old-time social democracy to me. I wonder why there haven't been more experiments at the local and state level.

I think the libertarians here miss the point about adverse selection. It is a theoretical problem with markets with asymmetrical information. If there is a well-functioning insurance market, then someone has found a way to overcome it.

But one insight behind social democracy is that many socially-desirable insurance markets don't exist. Another is that people are rationally ingnorang about risk, and so can be better off when a paternalistic state makes them pay for insurance against risks they would otherwise ignore.

Re: Is the Pundit’s Fallacy a Fallacy?

Gareth — Fri, 25 Feb 2005 13:54:34 -0000

What are the satisfaction conditions of the phrase "There is no Social Security Trust Fund"?

Re: Sandefur on the Third Letter

Gareth — Thu, 03 Mar 2005 08:09:25 -0000

Now, I'd be the last person to want to defend Ayn Rand's reasoning abilities or aesthetic merits. Objectivism seems like a parody of smart-boy-adolescent-stupidity to me.

But I can see a move an Objectivist can make in response to your empirical observation that lots of apparently happy people aren't very rational. You just redefine happiness to be a measure of living the good life, whether subjectively satisfied or not, along the "I'd rather be Socrates dissatisfied than a pig satisfied" line.

Even though I'm not an Objectivist, I like that approach. I think there has to be some room for people to come up with controversial theories of what the good life involves. This inovles allowing that people can be wrong about what is the good life is, and even be satisfied with their wrongness.

The problem with Objectivisim is that it is an impoverished theory of what the good life is about, but its defenders are right to resist a purely subjective account of happiness.

Re: Sandefur on the Third Letter

Gareth — Thu, 03 Mar 2005 08:23:50 -0000

You could go all Rawlsian and banish Young Will's concerns to the private realm, but that isn't the same thing as answering them.

Re: Sandefur on the Third Letter

Gareth — Thu, 03 Mar 2005 12:49:23 -0000

But why would anyone give money to a libertarian think tank in an anarcho-capitalist society? So, in a sense, you are living off the avails of predation and parasistism on the assumption that taxes and government spending can be so characterized.

On the other hand, even in an anarcho-capitalist society, someone would have to do at least some of the jobs that public sector workers do now. All an anarcho-capitalist can possibly claim is that the market would supply these workers and they would be more efficeint. So why are they engaging in predation and parasitism, at least if they are doing their jobs conscientiously?

Re: Sandefur on the Third Letter

Gareth — Thu, 03 Mar 2005 14:05:44 -0000

I'm not really fond of people who lobby for tarrifs for the sugar industry, either. But what about people working for the construction industry who lobby for lower tarrifs on Canadian lumber? Heroes every one. Certainly, I'm glad they do it. But they might well be the same people with different clients.

Re: When is a Cut Not a Cut?

Gareth — Fri, 04 Mar 2005 07:15:59 -0000

On brooke's point, it seems to me that the normal English way of saying what was happening is that both contributions and benefits have been cut.

If we decrease taxes and highway spending, we would normally refer to both as "cuts." You can be for the cuts or against them, but no confusion is being perpetrated.

On Will's point on indexation, I don't think anyone would be confused if we call deindexation a cut if indexation is the status quo.

Re: Sandefur on the Third Letter

Gareth — Fri, 04 Mar 2005 09:15:45 -0000

In spreading their philosophy, Objectivists claim to be creating--selfishly--the type of society they would prefer to live in.

But on this account of selfishness, all goal-directed activity is selfish. After all, a communist is selfishly trying to create the type of society they would prefer to live in. Similarly, a person who sells all he hath and gives to the poor wants the poor to have the money.

Since people can't help but be "selfish" in this sense, it is pointless to advocate.

Re: Sandefur on the Third Letter

Gareth — Tue, 08 Mar 2005 07:19:03 -0000

There are three claims here:

1. Everyone should take the course of action they prefer over all the alternatives, with moral and other-regarding considerations included in preference.

2. The Kantian/Puritan claim that an action is only virtuous if you would rather not do it is false.

3. The most virtuous life is also the life that will (in the end) make you happiest, even if it involves taking actions one would not take if one excluded moral and other-regarding considerations.

4. There are no legitimate considerations in taking action other than one's own personal gratification.

The problem with #1 is that it is hard to see how anyone could act otherwise, so it can't be a guide to action. #2 is reasonable (although Rand clearly did not take the time to understand Kant before she criticized him). #3 is a venerable claim of the Western philosophical tradition, but it seems empirically false. #4 is what Rand is popularly taken to be saying, but I take it Objectivists don't really defend.

Re: You Should Buy Explaining Postmodernism

Gareth — Thu, 31 Mar 2005 07:53:23 -0000

I haven't read the book, but the claim that "post-modernism isn't just nihilist or anti-rationalist, but is uniformly leftist" is plain cartoon. Suspicion of metanarratives isn't nihilism. Anti-Rationalism isn't anti-rationalism. And, in its original French context, post-modernism was above all directed against Marxism, which was always the paradigm of a "metanarrative".

Foucault was fervently anti-Soviet (although naive about China and later Iran) as a result of his experience as a gay man in Poland. Derrida was about as radical as Gerald Dworkin. Lyotard was an ex-Marxist.

Anyway, what does the politics matter? Wittgenstein was the very model of a naive, aristocratic admirer of Stalinism, but that doesn't seme to bother you.

Re: You Should Buy Explaining Postmodernism

Gareth — Thu, 31 Mar 2005 11:26:16 -0000

I don't read the post-structuralists as saying that there are no distinctions in the quality of reasons to believe things. It's just that the quality of our reasons has to be judged within an epistemic framework, and we can't give (non-circular) reasons for the epistemic framework we have.

Re: Inexcusable Failure of Vanity

Gareth — Fri, 01 Apr 2005 07:08:40 -0000

*SS has disability insurance and death benefit features that are obviously insurance.

*SS, like other defined benefit schemes, allows for spreading the actuarial risk that you will live longer than expected. True, a life annuity could do this as well, but it is still a spreading of risk, and therefore insurance.

*SS spreads investment risk. A diversified portfolio could do this too (but at a cost), but SS can also spread systemic risk between age cohorts.

Finally, if Friedman is right and SS is just a tax and a (logically independent) program, then talk of a SS crisis distinct from the solvency of the US Government is meaningless.

Re: Is There a Problem With “Libertarian Paternalism”?

Gareth — Fri, 01 Apr 2005 08:14:52 -0000

Default rules are inevitable, and should not be a problem for libertarians. You have to divide estates on intestacies, defeine what are and are not rights incident to land ownership (subject to changes by restrictive covenants, etc.), employment, sale, etc., etc. If the parties can agree to change the default rule, when they put their mind to it, it is hard to see how liberty or efficiency are compromised.

The real Hayek thought that default rules (e.g., intestacy) could justly be used to increase material equality. I don't really see the problem with using them to overcome cognitive quirks. The common law does this in innumerable invisible ways already.

Re: You Should Buy Explaining Postmodernism

Gareth — Tue, 05 Apr 2005 08:12:52 -0000

Zizek is always pulling your leg. He was part of some Slovenian liberal movement, until they wouldn't let him be Interior Minister, but just Minister of Culture. Now he likes to berate New Agey environmentally conscious sensitive identity politics as a betrayal of the revolution, citing Lenin and St. Paul with equal approval.

I read a fair bit (although not as much as he wrote), and I'm convinced his only sincere belief is that dim sum is gross.

Re: Distributed Wealth-Enabling Conditions and Collective Entitlement

Gareth — Fri, 15 Apr 2005 08:45:24 -0000

What's wrong with this argument:

1. Wealth (or income) variance depends (in part) on luck.

2. No one deserves their luck.

3. Therefore, wealth (or income) variance is (in part) undeserved.

4. Undeserved wealth (or income) variance is undesirable.

5. Therefore, public policy should try to reduce wealth (or income) variance (ceteis paribus, not at all costs).

That argument does not depend on the telekenetic dwarf principle that we ought to pay people an amount commensurate to the benefit we receive from them, even if they will do it for less.

Re: You Should Buy Explaining Postmodernism

Gareth — Mon, 25 Apr 2005 15:50:22 -0000

There's a market niche for someone on the pro-market right to say, "The po-mos were right, but the Austrians beat them to it." I still maintain that post-structuralism was, in its context, basically a sound reaction to PCF-style Marxism.

Re: Relatively Relativistic

Gareth — Thu, 28 Apr 2005 16:20:03 -0000

When the Pope, and everyone else other than you and Vellman, refers to "relativism," they mean the idea that there is no fact of the matter when it comes to moral propositions.

I don't think the Pope means that there are never any moral decisions where the norms of your culture are relevant. But I think he would say there is a distinction between "A is wrong" and "A is disapproved by my culture." And he's quite right about that.

So, it's morally right to drive on the left side of the road in England, but not in Maryland. But driving on the wrong side of the road isn't wrong because Marylanders disapprove of it; it's wrong because it could kill innocent people.

Where the Pope's off is his Thomist views about the purpose of sex. And drugs and rock 'n roll too.

Re: Relatively Relativistic

Gareth — Fri, 29 Apr 2005 07:42:33 -0000

Yeah, liking anything that came out after the Thomist went to seminary is a venal sin.

Re: Investment and Ignorance

Gareth — Fri, 29 Apr 2005 07:57:23 -0000

This seems like a libertarian version of the "socialist man" fallacy. It is an observable fact about human nature that people do not plan rationally for their retirement or for the risk of disability or premature death. They already have plenty of incentive to do so. So the libertarian says that if we just change public policy, people will magically change into far-seeing retirement planners.

And if they don't? Well, then we just have a lot of destitute old people. But it was their fault they invested all their money in that "no-risk" scheme that guaranteed double digit returns.

Re: My Socks are Cold Feet Insurance!

Gareth — Thu, 05 May 2005 16:01:22 -0000

Libertarian: It's not an insurance system because people want to live to be old. That's not a risk.

Socrates: But outliving your savings is a risk. And an actuarially predictible one. So it makes sense to pool that risk. Which is what insurance is.

Libertarian: OK. I can imagine a private company providing that kind of service. But they would have to fund their future liabilities.

Socrates: Dude, Social Security funds its liabilities for years and could do so in perpetuity using slightly more optimistic assumptions. Anyway, if that's your problem, we can tinker a bit and solve it.

Libertarian: But Social Security can't have real assets...

Socrates: US Government Bonds aren't real assets? Would it bother you if the insurance company was 100% invested in US Government Bonds?

Former Libertarina, now anarcho-capitalist crazy: Beer funds! Repudiate the debt and give bondholders a share of Yellowstone!

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Fri, 06 May 2005 08:00:23 -0000

Will:

I wonder about your ontology.

What is the distinction between "illusory" property in which everyone believes and which they respect in their actions and "real" property? I am genuinely having trouble with the distinction.

Re: My Socks are Cold Feet Insurance!

Gareth — Fri, 06 May 2005 08:03:26 -0000

Jeffrey:

I'm not sure whether you are putting forward a serious point or not.

If you are saying people can't insure against the risk of living longer than average, then you are just wrong. People can (for a price) trade capital for a life annuity.

If you are saying that these contracts have problems of adverse selection, then you're right, but that's an argument for compulsory universal insurance.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Fri, 06 May 2005 09:44:23 -0000

Anton,

I used this example before, but a British citizen cannot sue for relief if Parliament takes away her house without compensation. But British citizens have "real" property rights in their homes because it is (at least for now and in the foreseeable future) politically unthinkable for any Parliamentary majority to do that.

(Note: I'm not arguing against justiciable property rights in constitutions. I'm just saying that even if they don't exist, property rights still may. And, conversely, a justiciable right in the constitution, as the People's Republic of China now has, will not do any good if the judicial system will not reliably enforce it.)

Since property rights exist only when it is politically unthinkable to interfere with them, Will and Cato's statements that they aren't property rights can't be evaluated as a neutral description of reality, but as an attempt to change that reality.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Fri, 06 May 2005 10:29:28 -0000

Well, the Social Security Administration can't just refuse to give you a social security cheque if you qualify under the current rules. You could indeed get judicial recourse if that happened.

What is true is that you can't sue Congress for changing the level of benefits. So the analogy with the UK Parliament's theoretical power to expropriate your house without compensation is a good one.

If it is unthinkable for Congress to repudiate the obligations of the general account to the trust fund, then that is all the property rights anyone can ever have. And if the social security debate goes the way it looks like it's going, then it will indeed be unthinkable to the same degree as it is unthinkable for Congress not to respect the governmetn bonds in the portfolio of the private insurance company.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Sat, 07 May 2005 10:51:01 -0000

Nicholas:

I'm not saying that property exists at the whim of the State. On the contrary, I'm saying that secure property rights exist only when it is politically unthinkable for a goverment to take them away.

But I would say that property rights are necessarily socially constructed. An individual might be mistaken about what property he holds, but only because his subjective view conflicts with the social view. A society can't be mistaken about the property rights that exist within it, anymore than I can be mistaken about whether I have a headache.

As a matter of degree, I would accept that taking away people's houses without compensation is even more unthinkable in American society than not paying Social Security benefits. But the point is that Cato and Will are simultaneously saying the problem with Social Security benefits is that they aren't secure property rights, while trying to bring about the situation it is complaining of.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Mon, 09 May 2005 08:02:52 -0000

Will:

In your example, we all believe two things:

(1) No one is lawfully married unless the marriage is presided over by a person with the authority to do it.

(2) Bob is lawfully married to Alice.

But it turns out (contrary to our belief):

(3) The person who presided over Bob and Alice's wedding did not have the authority to do it.

First off, Bob might not legally be entitled to an anullment from Alice, even if (3) turns out to be the case, particularly if (3) is found out after Alice and Bob have had three kids, a mortgage and so on. So, your counter-example isn't necessarily one, even on the more specific level.

But, anyway, a belief that Social Security benefits are property is more like (1) than (2). I can, of course, be mistaken about my Social Security entitlement. The Social Security Administration can be mistaken about it. But the whole society can't be mistaken as to whether Social Security is an entitlement at all.

And I know when I'm having a headache.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Mon, 09 May 2005 15:11:44 -0000

Was Jefferson mistaken that he owned Sally Hemings, or was he correctly informed, but a jerk?

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Tue, 10 May 2005 09:37:05 -0000

I would say slavery was an abhorrent system of property rights, rather than an unreal one. But this is beginning to sound like the really boring debate about legal positivism.

The point is that one of the good things about non-abhorrent systems of property rights is they provide a zone of security beyond the whims of the political process. Social democrats think these good things can come with SS benefits, if we there is a sufficiently resounding against the would-be expropriating-without-compensation Bolshevists at the Cato Institute. Why are we wrong?

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Tue, 10 May 2005 12:01:37 -0000

If I own a bunch of 30 year treasury bonds, I'm "forcing" the next generation to pay for my retirement. What's the difference?

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Tue, 10 May 2005 14:32:00 -0000

I would consider defaulting on debt, unless you really had to, immoral, not just unwise. It is a species of fraud. Ex ante expectations matter. We consider lending money to the government to be no risk, if low in reward. It would be immoral to alter that expectation, which is why deliberate hyper-inflation (which, I might tangentially add, is the logical denoument of the Bush fiscal experiment) is wrong.

If I lend money at high interest to a corporate vehicle for a high interest rate, then I still expect the company to try to pay me back, but it is a bit different.

Anyway, if you don't think there is any moral difference or difference in status as "property right" between Social Security and owning bonds, then my work here is done.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Wed, 11 May 2005 07:54:26 -0000

Nicholas,

Your argumentation is circular, in the sense that it can only convince an already-committed libertarian. For you, promises backed by taxes are always wrong. If I accepted that, then, of course, I would be committed to getting rid of Social Security (although I don't see why Bush or Cato's scheme would be an improvement).

But, of course, I don't think that. Promises backed by taxes can be good, depending on the consequences.

Social Security is similar in principle to, but better than, ownership of government bonds (or, if you are that purist, a federally insured bank deposit). A promise to pay $X 30 years from now is nice, but a promise to pay 60% of your pre-retirement income up to a maximum is better, because it spreads various risks that the first promise doesn't.

This program is widely popular. If the Democrats kick Bush's butt on this, then it will, in effect, be a property right.

On the question of posterity's obligation to pay public debt, I think you need to distinguish between the morality of accumulating the debt in the first place and the morality of paying it back. Accumulating the debt in the first place will be immoral unless it is invested in ways that leave posterity with assets worth more than the inherited liabilities. However, even if the debt should not have been accumulated, to repudiate it is just an unjustified transfer from bondholders to taxpayers generally. Not to mention that the transfer will make everyone worse off.

Re: Social Security, Now Less Than Ever

Gareth — Wed, 11 May 2005 20:48:51 -0000

Tabarrok didn't make an argument, so I'll ignore him.

Yglesias did. He said defined benefit plans are good things, that private corporations (even with tax subsidies and heavy regulation) aren't good at delivering them, and that shows why Social Security is good.

You seem to be saying that financial markets can easily deliver the equivalent of defined benefit plans. But you don't show that. You just show that the Cato plan has some (inferior) defined benefit element.

Why so-called libertarians think coercing people into defined contribution schemes is better than coercing them into defined benefit schemes (where the government has a real advantage), I still don't get.

Re: Ain’t Nothin’ Like the Real Thing, Baby

Gareth — Thu, 12 May 2005 09:34:19 -0000

Before I started commenting on this blog, I had no idea so many libertarians are big on government debt default.

If I understand your argument, it is that a bondholder is culpable in lending money to the government in the first place, since her security comes from future taxpayers who don't get to vote (and who didn't ask to be born!). So they deserve it if we just default, whether we have to or not.

In your world, pretty much every American must be culpable and deserving of punishment. Those bastards who have federally insured bank deposits for instance. Bonny and Clyde had the right idea! Those damn kids in public school. Don't ge me started about those seniors.

Basically, you are saying that anyone who does not abide by your sectarian libertarian morality (which few Americans would even understand, let alone consider binding) has no rights.

Re: Social Security, Now Less Than Ever

Gareth — Thu, 12 May 2005 16:04:28 -0000

Will, I am prepared to concede that it is harder to keep a DB plan solvent, if you will (finally) concede that, from the point of view of the individual, it has advantages that a DC plan with the same expected return does not.

Buying an annuity before retirement (particulary in an unregulated market) does not spread the risks a DB plan based on best or average earnings does.

What about this proposal? We freeze SS contribution rates, and give a trustee board discretion to fiddle with benefits if necessary. The right stops talking about beer funds, accepts that the Trust Fund is a legitimate claim on future general revenue, and further accepts that the general fund needs to be brought into balance, by tax increases if need be.

Re: The 2009 Shortfall

Gareth — Fri, 20 May 2005 08:29:31 -0000

Present Congresses bind future Congresses when they create rights it would be unconstitutional to eliminate. In particular, a Congress that passes a budget which adds to the federal debt creates something the validity of which cannot be questioned according to the Fourteenth Amendment.

Anyway, I am not saying that deals between classes are typically enforced through law, but through politics. As a positive matter, classes do make deals (although they revise them). As a normative matter, those deals create reasonable expectations and aid in political stability, so they should presumptively be respected.

Re: A Rare Triumph for Liberals

Gareth — Fri, 20 May 2005 15:58:48 -0000

Where to begin? I'll get asthma from all the straw Will's been shovelling around.

Characterizing SS as insurance is not, in itself, proof that it is a good thing. Not all insurance is good. But it does render irrelevant the very attacks Will then makes on it. Insurance is not intended to be charity. It is not intended to redistribute income. Insurance (or good insurance) is justified because it is efficient, not because it is redistributive.

Characterizing Social Security contributions as a "tax" is begging the question. If Social Security is a scheme of social insurance, then contributions aren't taxes, they are premiums. We don't worry about whether premiums are regressive. If you want to join in the fight to make the overall tax system more progressive, Will, that would be great. But that's not what Social Security is for.

Your claims about a mandatory defined contribution scheme are just claims. Anyway, implementing such a scheme now does absolutely nothing to deal with the actuarial liabilities of the existing scheme. That can only be done by raising contributions or reducing benefits. But you can raise contributions or reduce benefits without creating a mandatory defined contribution scheme. If you ignore the existing liabilities, of course your defined contribution scheme will pay a better "rate of return." If I designed a new defined benefit scheme, which just ignored the liabilities of the old scheme, then it would look great too.

The very first generation of retirees maybe got a good deal, but the current retirees don't take advantage of future generations. That's just a canard.

Re: Questions for Krugman

Gareth — Thu, 26 May 2005 14:52:08 -0000

(1) Would a rational person behind a veil of ignorance who knows all the relevant economic statistics for 2005 and 1980 choose to be a randomly selected worker in 1980 or in 2005?

Depends on what you mean by "worker". If you mean industrial worker, 1980 would be better.

(2) Do labor market and income volatility have anything important to do with "economic security?"

Yes.

(3) If all there is to economic security is a state "guarantee," why haven't people in socialist economies been more economically secure?

If all there is to headache mitigation is taking two asprin, why does taking two hundred kill you?