Taking the Short View: Politics and Privatising

One of the main takeaways of Ben’s and my posts on electoralism here, here and here is that politicians take the short view. They pander to a forgetful populace, so they aren’t really answerable for the long-term costs of a short-term fix. And even when they have to—when the long-term costs of a policy decision erupt into a short-term crisis—they can always cite indeterminacy and evade responsibility.

This leads to some pretty perverse policy. Take, for example,* Chicago’s $1.1 billion sell-off of its parking meters. This deal nets Chicago exactly $1.1 billion, right now—at the expense of forfeiting all future proceeds from parking meters for the next 75 years. In actuarial terms, that’s a raw deal. It’s like bartering away the golden goose for a couple dozen of its eggs. But it’s also a political windfall. Mayor Richard Daley reaps the reputational gain of balancing the budget short-term, without being haunted by its long-term budgetary impact. Whatever the future financial woes of the City of Chicago, too many factors will have intervened since to attribute it to Daley. And yet Daley gets the short-term credit for fixing a broken budget.

I’m constantly apprehensive about privatisation—but not because of any ideological fondness for government or aversion to business or anything. I’m apprehensive because any privatisation worth talking about is privatisation palatable to lawmakers. (Otherwise, your efforts would fall on deaf ears.) But consider that subset of privatisation: its defining characteristic is a compatibility with the short-sighted agenda of politicians. What we end up talking about, then, are only those privatisations with electoral value—a value built on short-term expedients and independent of (and often contrary to) the public welfare. That’s not to say privatisation isn’t desirable in the abstract—I think it is. But as manifested in any given policy proposal, it almost always negates its abstract worth.

*As a second example of this phenomenon, see the trend in privatising prisons. There’s an obvious short-term gain here: cheaper labour, competitive bids, etc. But consider the long view: you have a contractor staking its livelihood on people filling its cells. The last thing it would want is to rehabilitate itself out of demand. So, keep those inmates returning—recidivism is good for business. A successful penal programme by the government might not be cheaper at the outset, but it would make up this difference (and then some) in the long-run. Housing 100 inmates for $x is always cheaper than 120 for $x(.9).

From a Faux Market in Real Votes to a Real Market in Faux Information

At the risk of turning this blog into an experiment in the fractal geometry of ideas, John’s post below on the closed, zero-sum market in votes got me thinking about the massive market that has sprung up around the vote market as an adjunct to the main event. The best analogy I can think of is Las Vegas, where the main event, the casinos, are why everyone goes, but they are almost completely closed economies, where you live, eat, drink, and recreate, all with its own currency. Around the casinos, however, is everything else – 24 hour buffets, theme parks, arcades, and a major metropolis have all sprung up around these semi-closed economies where people go to relieve themselves of disposable income.

With the voter economy the same thing happens. The election is the casino, and the 24 hour surf ‘n’ turf buffet is a combination of magazines, newspapers, blogs, t.v. channels, books, and other various sundries that trade on voters’ need to feel informed, whether they are or not.

And that leads me to a final point: information is especially expensive in politics—and American politics in particular. None but the wonkiest of us can make out differences in the shop displays. Each proprietor hawks a standard suite of apple pie and vanilla platitudes. And none of it seems worth penetrating enough to justify the distributed benefits of doing an attenuated part in choosing right. (Which is sort of what inspires Yglesias to call for greater accountability.)

Because the average voter can’t usually make out a meaningful difference between the two candidates, they use tired issues and punditry as surrogates for knowledge. For example, most of us don’t have a really deep emotional reaction to the issue of abortion, but we all fall on one side of the fence or the other – we use that issue to mark a difference between the Donkey and the Elephant. Here is where the money comes in – people’s desire to be right drives them to consume materials that they agree with, rather than materials they can really engage and challenge themselves with. There are plenty of political entertainment materials out there, and each one makes an effort to appeal to one confirmation bias or the other, no matter how “fair,” “balanced,” or “impartial” they claim to be.

And now the question that comes up in each post: Ben, where the hell are you going with this? It’s the money of course! MSNBC is owned by one of the largest corporations in the world, Fox News is owned by one of the wealthiest people in the world, the Grey Lady is a city paper that has worldwide circulation and Time is a news outlet that literally goes out of its way every year to make news – what else is the point of the “person of the year?” All this money is generated by voters who want to feel their vote isn’t wasted, just like the Circus Circus generates money because of vacationers who want to justify their excessive drinking and gambling under the guise of a ‘family vacation.’ Whether Newsweek really informs a voter meaningfully, or whether Vegas is really a family-friendly vacation spot are irrelevant, because we feel like they are.

Rush Limbaugh is a billionaire, Rachel Maddow went from winning a talk radio contest to being her own brand, and Sarah Palin has ridden a failed run not at the White House, but at the U.S. Naval Observatory into a lucrative career as a professional critic of those in power. All this money comes as an adjunct to the completely closed market in votes, and if the voters either stopped trying to inform themselves or became more interested in real information that would actually help them make good decisions, the money that goes to these resources would dry up.

Markets in Statesmen: A Follow-up

Earlier this week, Ben made some cogent points about how voters select their leaders. I think it’s useful to conceptualise the process thus: we (consumers of statesmen) drive supply (the total makeup of officeholders) by exercising whatever distinctive market powers we manage to muster. In this respect, the franchise sort of serves as a non-transferable “citizen’s dividend” in the market for political representation—whatever resources we lack (say disposable income for issue ads or the legal expertise to initiate impact litigation), we still command one highly influential asset: our vote.* (In fact, “highly influential” is an understatement. Votes are the currency of politics. However much a candidate might relish getting his mug on Meet the Press, it’s only worth the votes it earns at election time.)

That’s an excellent jumping off point for Ben’s post. As he rightfully notes:

“[Voters] have rational reasons for not going out of their way [to be informed consumers]. This creates an incentive for democratic leaders to invest in the most visible measures, rather than the ones which make the most sense.”

Let’s unpack that. Like I said, voters receive an automatic endowment every election cycle that is crucial in determining the market in statesmen. Suppliers rise and fall on the success they have in attracting it. And consumers are massaged into parting with it—just like a customer walking past window displays in a mall. Only so much franchise (one per person), ever so many vendors. But the analogy stops there, and with it the patterns of consumption we’ve come to assume.

For one, the thousand-dollar-bill we carry around isn’t liquid. It’s a one-time coupon for a very specialised good, none of which is convertible. (That hasn’t stopped people from trying; congressmen salivate over the thought of their votes being tradable for cash.) But that right there diminishes the “value” of our vote. Sure, it’s a thousand-dollar-bill in the marketplace for Congressmen—it’s worth exactly nil everywhere else. Just like a $7 groupon for a yoga class, it’s only worth $7 if you’re certain to enrol. (If yoga’s not your thing, it’ll just end up in the spam box.) But that means that for anyone not turned on by politics, it won’t seem worth that much.

Which brings me to my next point: it’s hard to agonise over pennies. If the relative loss to you feels insignificant, there’s no reason you should bear the opportunity cost of spending wisely. Indeed, the transaction cost of showing up at the polls might even seem prohibitive. (This all goes a long way in explaining why crude heuristics like ideology, party, or “highly visible move[s]” by incumbents drive votes: they’re informationally cheap.)

And that leads me to a final point: information is especially expensive in politics—and American politics in particular. None but the wonkiest of us can make out differences in the shop displays. Each proprietor hawks a standard suite of apple pie and vanilla platitudes. And none of it seems worth penetrating enough to justify the distributed benefits of doing an attenuated part in choosing right. (Which is sort of what inspires Yglesias to call for greater accountability.)

In sum, it’s not at all surprising that candidates act the way they do (or statesmen eyeing reelection). They’re suppliers chasing demand—and experts in their market. All of them know the advertising gimmicks, the foibles of their clientele. And they calibrate their strategies accordingly. But as Ben pointed out, that doesn’t necessarily mean we’re satisfied.

Feed me comments!

*Most of us, anyway. Felons don’t count. (Nor do women before 1920, blacks in the antebellum South, or anyone currently living in DC.)

Faux Market, Faux Preferences: Cities, Suburbs, and Choice

It’s a common refrain—the rallying cry of car-loving libertarians everywhere: “[i]f most Americans clearly prefer suburbs, then why would our elected representatives choose to pick a fight with them?”

It’s a talking-point meant to erode the free-market support for urbanism, density, and cities. “If the people are so fond of walkability,” the argument goes (or public transit, entertainment variety, etc.), “then why do they vote with their feet and leave?” Why—over half a century—have they consistently outmigrated to the suburbs whenever they have the means?

It’s an argument meant to undermine the paternalistic impulse to encourage (i.e. subsidise) “smart growth.” If we can’t trust ourselves to make lifestyle choices, then why expect our political overlords to fare better? Sure, riding the train could free up time for my morning emails, but something about my inner rational agent tells me “no.” It tells me to “drive!” It tells me “revel in the whimsy of the open road! (even if it means crawling along at a snail’s pace on the I-95).”

The standard response woefully eludes the issue. “Sustainability,” it is argued, trumps the uninhibited maximisation of each party’s self-interest. Why? It’s a tragedy-of-the-commons problem. The optimal utility of the whole (and each of its parts) goes unrealised by letting each party siphon off what they can. Pretty soon you run out of commons. Roads, like grazing fields, get consumed into scarcity—and everyone ends up the worse.

I don’t think that’s a convincing refutation. I think it works for oil—we can (and are) sucking the Earth dry. It’s a finite resource no matter now much we drill. But roads are limited only by our willingness to fund them. Tragedies-of-the-commons apply where a given resource is exhaustible, but that’s a big leap from merely being rival at any given time x. I think roads are rival—but that’s only a necessary (and not itself sufficient) precondition for exhaustibility.*

What is the economics argument against suburbs, then? And more importantly, does it countenance libertarians who object to externality-intensive “sustainability” models? I think the answer is yes. The reasoning is twofold:

1) First, you have to start with a prioris. The heart of the libertarian paradigm is revealed preference, and our consumption choices are a reasonable proxy. Revealed preference can only exist where it’s free from interference—or else it’s not “preference” and reveals nothing—but this only an aspirational hypothetical not really tenable in an imperfect world. So, libertarians aim to approximate it by minimising the barriers for the maximal amount of people. They do this because of a second a priori: rational egoism—that is, the belief that by maximising revealed preferences we can maximise social welfare. This results in opposition to (among other things) social norms, slavery, contracts of adhesion, subsidies, etc.

2) Second, you have to identify the opposition’s fallacy. They assume their initial point: outmigration to the suburbs is conflated with revealed preference. It’s a classic petitio principii. Does the choice to live in the suburbs arise unobstructed, as in the theoretic ideal—or is it indeed the product of those obstructions? Are we choosing an auto-centric lifestyle, for example, because we intrinsically default to it, or are we just suckers for a juicy handout? Do we love single-family detached two-stories because we’re drawn to embodying stereotypes, or are we just exploiting the mortgage-interest loophole?

Ultimately, the classic libertarian critique of urbanism leaves a lot to be desired. But its single most egregious shortcoming is a failure to abide by its own terms. This is why here, as in the future, I will be citing to many of my “market urbanist” fellow travellers. Some can be found in the Blogroll—others to be peppered throughout the posts.

*Note that I depart in this view from the common consensus that roads are neither exhaustible nor rival. And I’m not alone on that score.