October 11, 2006 9:45AM

Libertarians and Soccer Moms

A few years ago “soccer moms” were all the rage among political consultants. Then it was “NASCAR dads.” But only 4–5 percent of voters really fit the “soccer mom” profile, and only 2 percent were “NASCAR dads.” Tomorrow Cato will release a study showing that there are far more libertarian voters than soccer moms or NASCAR dads. Maybe politicos should pay attention to them.

My former colleague David Kirby, now executive director of America’s Future Foundation, obtained data sets from Gallup, Pew Research Center, and the American National Election Studies. He did some original calculations to find libertarians in those polls, and then he and I wrote up the results. Without scooping our own story, I’ll just say that we found that a substantial percentage of voters are libertarian — not libertarians who can compare and contrast Hayek and Rand, but people whose views on broad issues distinguish them from both liberals and conservatives.

We think our data undermine the whole idea these days that the electorate is polarized, that everybody’s either red or blue, that there’s no more swing vote. Indeed, one of the most interesting things we found is that libertarians are a swing vote. They voted very differently in 2004 from most previous years. How? Check our homepage Thursday.

October 11, 2006 9:23AM

Economic Reporting

Notes from the Business section of Tuesday’s Washington Post: There’s some evidence in the lead story that both politicians and journalists do learn economics. Writing about the award of the Nobel Prize in economics to Edmund Phelps, reporter Nell Henderson writes:

In a series of papers in the late 1960s and early 1970s, Phelps, 73, challenged the prevailing belief that policymakers could lower the nation’s long‐​term unemployment rate by accepting higher inflation.

That misguided notion contributed ruinously to Federal Reserve policies of the 1970s, which allowed easy credit to fan inflation to double‐​digit levels. The result was high inflation and high unemployment, a combination that came to be called stagflation.

Free‐​market economists often bemoan misguided economic assumptions in newspapers, not to mention bad policies promulgated by politicians, and they despair of getting basic economic concepts understood. But here’s a reporter who understands the failure of Phillips Curve economics in the 1970s, writing about a Federal Reserve that also came to understand that failure.

Inside the section, Vickie Elmer writes that “Some 77 percent of government workers say they’re happy at work, compared with 70 percent of those who work in private enterprise.” She offers some speculation about why that might be, including the fact that government agencies are hiring (but private‐​sector employment is also growing). What she doesn’t mention is that it could be because federal employees make exactly twice as much money as private‐​sector workers, as Chris Edwards wrote in the Post recently.

Finally, another story by Steven Mufson is headlined “Suspicion Surrounds Retreat in Gas Prices, Poll Finds.” It may actually be good news that according to the poll, only 30 percent of Americans think that gas prices are falling because the Bush administration is manipulating them in advance of the election. Last week Jerry Taylor praised Mufson’s previous story reviewing and deflating this conspiracy theory. It’s too bad that the idea is still alive.

October 10, 2006 4:21PM

Defining Justice Down

The National Association of Criminal Defense Lawyers (NACDL) recently bestowed its “Champion of Justice” award to former Attorney General Janet Reno. (Go here to see the standing ovation).

What’s up with that? NACDL is sorta like the ACLU–except it specializes in the criminal law area. Could this be the result of a sealed “deferred prosecution agreement” from the ’90s or something? (For a quick refresher on Ms. Reno’s record, go here, here (viewer discretion advised) and here (viewer discretion advised).

If you happen upon a watering hole frequented by lawyers, you might witness furious arguments between defenders of Reno and defenders of our current Attorney General, Alberto Gonzales. Buy a round for the house. Black coffee, of course. This “red‐​team‐​is‐​bad; blue‐​team‐​is‐​good” stuff has gotta stop.

October 10, 2006 4:20PM

The Fog Is Getting Thicker…

Over at Cato Unbound, Harold Meyerson argues that as employer‐​provided health benefits erode,

[c]ompanies that persist in offering such benefits are placed at a disadvantage when their competitors don’t. And consumers clearly can’t afford those benefits, either. As some recent surveys have made clear, precious few Americans can afford to buy medical insurance on their own or to utilize the Health Savings Accounts that the president is peddling.

Taking Meyerson’s points in reverse order:

  1. His comment that HSAs are unaffordable makes no sense. Does he mean premiums? HSAs are required to be coupled with high‐​deductible insurance, which has lower premiums than other types of insurance. So the insurance component of HSAs is more affordable than … well, anything else. Does he mean out‐​of‐​pocket expenses? Sherry Glied and Dahlia Remler report that “the groupresponsible for half of all medical spending would see no changeor a decline in cost sharing at the margin and on average” with HSAs. That is, the people who need the most medical care would have less financial exposure with HSAs. Soooo, Meyerson should like HSAs, right?
  2. Meyerson plays blame‐​the‐​victim with the individual health insurance market. Meyerson writes that “precious few Americans can afford to buy medical insurance on their own,” as opposed to having their employer purchase coverage for them. Let’s set aside that workers pay for the cost of those benefits through reduced wages. The feds and state officials have wrecked the individual market by (A) diverting consumers to employer‐​sponsored insurance and Medicaid, and (B) driving customers out with costly regulations. If Meyerson and I set up fruit stands on opposite sides of the street, and the government whacks people with a 2x4 whenever they tried to cross to Meyerson’s side, would he attribute his lack of business to, say, market failure?
  3. Meyerson fails to consider that the market may be sending him a message. He complains that consumers cannot afford to purchase for themselves the benefits that employers had been purchasing for them. Again setting aside that workers were paying for those benefits all along, might that mean that traditional employer‐​provided health benefits were unsustainable? Perhaps that they were contributing to rising health care prices & premiums?
October 10, 2006 11:38AM

Nobel Winner Phelps on Dynamism, Enterpreneurship, and Justice

This year’s newly minted Nobel Prize winner in economics, Columbia University’s Edmund Phelps, has a wonderful essay on the difference between the American economic model and the various forms of European social democracy in today’s Wall Street Journal.

Phelps says the difference is the exceptional “dynamism” of the American free enterprise system:

[T]he free enterprise system is structured in such a way that it facilitates and stimulates dynamism while the Continental system impedes and discourages it.

Drawing on Hayek and Polanyi’s ideas about “personal knowledge” and entrepreneurship, Phelps explains how greater dynamism encourages a greater degree of innovation. Under capitalism, Phelps writes,

the financier and the entrepreneur do not need the approval of the state or of social partners. Nor are they accountable later on to such social bodies if the project goes badly, not even to the financier’s investors. So projects can be undertaken that would be too opaque and uncertain for the state or social partners to endorse.

Consequently, the U.S. has a remarkable record of innovation that much of the rest of the world, including the European social democracies, relies upon to maintain their own standards of living. This is a crucial point to hammer home when American statist liberals point to what they see as the success of the Western European institutions: the viability of European social democracy depends in part on the ability to, as Phelps puts it, “sail in the slipstream” of American innovation.

But the most fascinating part of Phelps’ essay is his attempt to justify capitalism in terms of John Rawls’ political philosophy. As one of a handful of classical liberals who think that Rawls identified something close to the correct method of political justification, I found Phelps’ appeal to Rawls darn interesting, even if he does slightly misinterpret him.

Like Rawls and Amartya Sen, Phelps denies that material resources alone are sufficient for well‐​being, and, again like Rawls and Sen, he leans heavily on the importance of self‐​realization through the exercise of our intellectual and creative capacities. Phelps notes that a higher degree of economic volatility is a pretty straightfoward consequence of a dynamic system in which enterpreneurs are free to shake things up without having to get buy‐​in from the state and all the veto‐​happy “stakeholders.” But if dynamism buys us higher productivity and higher incomes across the distribution, volatility will turn out to be a far cry from economic insecurity or precariousness. (Jacob Hacker, listen up.) And, Phelps thinks, more importantly, once we’ve passed a threshold of economic sufficiency, the concern for more profound matters such as self‐​realization becomes paramount. Capitalist dynamism offers greater opportunities for self‐​realization through challenge and the engagement of our higher capacities. And this is so not only for the enterpreneurs who are shaking things up, but for workers inside firms who are faced with the constant, stimulating challenge of creatively adjusting when things get shaken.

Instituting a high level of dynamism, so that the economy is fired by the new ideas of entrepreneurs, serves to transform the workplace–in the firms developing an innovation and also in the firms dealing with the innovations. The challenges that arise in developing a new idea and in gaining its acceptance in the marketplace provide the workforce with high levels of mental stimulation, problem‐​solving, employee‐​engagement and, thus, personal growth.

Now, Rawls’s standard for a just set of institutions is that it be the best feasible alternative in terms of the welfare of the “least advantaged.” In Rawls’s philosophy, advantage is understood in terms of “primary goods,” the necessary basic means to any meaningful and fulfilling human life. In addition to material goods, Rawls adds our moral rights, the availability of opportunites, and “the social bases of self‐​respect.” In justifying his theory, Rawls leans heavily on the the importance of “the Aristotelian Principle” that other things equal, we are better off if we engage our distinctively human capacities at a higher level. So it is not technically true that, as Phelps writes:

In the classic case to which Rawls devoted his attention, the lowest score is always that of workers with the lowest wage, whom he called the “least advantaged”…

The lowest score is always that of those who have the least primary goods, whatever those might be. But Phelps is right that most discussion of Rawls proceeds as if was talking about the distribution of money. So it turns out that Phelps’ self‐​realization‐​based argument for dynamically entrepreneurial capitalism is truer to Rawls than Phelps seems to think.

In an economy in which entrepreneurs are forbidden to pursue their self‐​realization, they have the bottom scores in self-realization–no matter if they take paying jobs instead–and that counts whether or not they were born the “least advantaged.” So even if their activities did come at the expense of the lowest‐​paid workers, Rawlsian justice in this extended sense requires that entrepreneurs be accorded enough opportunity to raise their self‐​realization score up to the level of the lowest‐​paid workers–and higher, of course, if workers are not damaged by support for entrepreneurship. In this case, too, then, the introduction of entrepreneurial dynamism serves to raise Rawls’s bottom scores.

If Ayn Rand and John Rawls had a love child, isn’t this what he’d say?

October 10, 2006 10:10AM

An Immigrant’s View

My friend Constantino Diaz‐​Duran, an immigrant from Guatemala and now a student at Columbia University, offers his views in the Columbia Spectator on the shameful violent shutdown of the “Minuteman forum” at Columbia, and on the benefits to the nation of immigrants, as well as the dangers of welcoming immigrants into the welfare state, rather than productive work. Constantino has written for Cato’s Spanish‐​language website, www​.elca​to​.org, and was involved in the production of Cato’s bilingual English‐​Spanish edition of the American Declaration of Independence and the Constitution of the United States.

October 10, 2006 10:10AM

Kaiser Flubs HSAs

A new report on health savings accounts (HSAs), published by the Kaiser Commission on Medicaid and the Uninsured, is wrong or misleading in nearly every particular. In essence, the report claims that HSAs are not good for poor people, when in fact all it shows is that poverty is not good for poor people.

I briefly considered doing a point‐​by‐​point response. But then I remembered that I had already done so, in a paper titled “Health Savings Accounts: Do the Critics Have a Point?”, released five months ago.