So, if I were a real economist, I’d spend a few weeks doing these estimates. Kudos to anyone who wishes to take a crack.

How in a country where most people don’t need a penny of income transfers to begin with, can we spend $1.5 trillion on income transfers and still have material want?

This is odd. And it is wrong.

Do critics of markets actually understand what axiomatic principles are? Do critics of markets actually understand what the term “institutions” means? For those of us who are classically liberally oriented and prefer a much more market oriented economy, THE very fundamental premise of our economic and political worldview is the non-aggression axiom. Individuals may contract with one another and otherwise behave in ways that pursue their own interests so long as in doing so the property of others is not violated. If individuals violate the property of others, there is just cause for the situation to be rectified (let’s ignore how). In other words, the default “anarchist” position on things like pollution is, “no pollution allowed.”  And that position derives from the axiom that the rest of the classical liberal framework evolves from. For our utilitarian friends, upon what such axiomatic foundation does “environmental externalities are bad” derive? Keep searching … keep searching … keep searching … there is, of course, no such foundational reason outside of expediency.

Seriously, go ask someone what they think the default position of “free-marketers” is on pollution and I guarantee they’ll argue that “people who support free-markets are enemies of the environment.” But the default position of true market proponents is that injunctions against and damages for all forms of contamination of land, water and air are required when actual nuisance and damage occurs. Sure, there are cases when relying on the body of common-law and tort to deal with these intrusions will be costly or impossible, but the basic market approach provides a framework for understanding when this is likely and also a way to think about when those barriers to such implementation are likely to fall.

The ignorance, the almost proud ignorance, of anti-capitalists on this matter would be laughable if they didn’t have guns. The Keystone issue would be a good application. Does the fact that a pipeline exists mean that pollution is inevitable (ignoring the fact that there are already dozens of pipelines across the same area, and that pipeline safety is far better than transporting fuel in other ways)? Does the current body of environmental law, and the record of torts on environmental issue suggest that builders of the pipeline are going to be more or less sensitive to potential damages today than in the past? In this case too, you might think the conditions upon which market transactions can occur effectively would be violated – but it is clear where the pipeline would be travelling, and it is not hard to imagine that with today’s computing and communication technology that the pipeline owners could negotiate with all potential damaged parties to make it clear what might happen should a leak or explosion occur. Where in the entire discussion was the public made aware of what typically happens if a pipeline has an issue? Where in the entire discussion was the public made aware of tools they might have to become involved in the negotiations? Where in the entire discussion was the fact that Ogallala aquifer is a common-pool resources that is as much the source of the problem as the pipeline itself? Do you think if Warren Buffet owned the entire aquifer we’d have the same issues?

Finally, the existence of pollution and so-called externalities presents an opportunity for profit-seeking entrepreneurs to solve the problem. And while I understand that we don’t really want the problems to emerge in the first place, it is usually because of our problems that we are able to advance. For example, without copper prices skyrocketing, maybe we never stumble upon fiber optics.

But beyond that, and really the reason I wanted to write this post, is to remember that there are people in the current intellectual environment who believe that smart regulation creates jobs. Let’s not dispute that. Then the same exact argument can be applied to the spurring of market solutions to externality problems. The same … exact … argument. Do anti-capitalists think that market forces harness greed only when it comes to doing damage and not preventing or cleaning damage? So we are only greedy when it wrecks the lives of others and wrecks the planet. Under what model are you operating if that is in fact your worldview?  So you may want to argue for regulation, but you really ought not do so on the premise that it creates jobs first because it obviously doesn’t, and second, if it does, it doesn’t appear that it would create ‘em any differently than would emerge otherwise particularly if the legal system works well.

These sorts of “purity” litmus tests of how “good” a libertarian (or Marxist or Progressive or what have you …) bother me and I am sure they bother most people. I see their allure, I really do. But I think two points should be made. First, while I understand that having the pure and consistent idea held by folks is a way to make people know that such views exist, without qualifying such positions they are virtually assured to turn everyone off. For example, one “extreme” view that I hold is the immediate and complete abolition of government from the K12 schooling enterprise. But by saying that people immediate think I am advocating for knocking down every single school, sending every unionized teacher to Siberia, and forcing stupidity on a generation of students. My belief is that to intelligently argue for the abolition of government schooling  a clear vision of what that means has to be presented, and so too does a clear vision for what a transition looks like and that we must anticipate what the worries of folks might be. In short, I simply do not think the chances for ending government schooling are nonzero if we simply argue for this extreme position.

But second I think the libertarian movement ought to take a lesson from behavioral economics. People have a psychological aversion to extremes and are psychologically much more comfortable with small changes — the classic frog in the pot story. So just as Hayek sometimes worried that incremental changes in the direction of central planning could get us over time to a very collectivized society, in part because it can change the psychology of a people, the process works in the other direction. I really do believe that people will welcome small movements toward freedom and in targeted areas. For example, most folks understand the Post Office is done. But rather than end it tomorrow (my preference), perhaps allowing first-class mail delivery in rural and expensive areas by private companies (i.e. the unprofitable routes that the post office tells us would never be served privately) would be a start. And over time as people become accustomed to the well-functioning of private mail delivery (after all, I know some people who use UPS and FedEx almost daily), then the freedom idea is very likely to be spread over to another area. The insights of behavioral economics clearly demonstrate that people have a far easier time “going full monty” on private education if we already are full monty on private postal service than if we jump right to it. In other words, you simply have to adjust the frame of reference for people when thinking of reforms.

By the way, the left has been extremely successful at doing just this for almost 100 years, and in fact it has been an express strategy on their part in several areas of policy. Examine Paul Starr’s political history of health care reform – and he clearly makes the point that all early compromises on health policy are acceptable because proponents of single-payer health care understand that moving incrementally toward it would be inevitable. Just get people comfortable, for example, that “the VA works and doesn’t pull the plug on Vets” … and then people get comfortable with more subsidies for Medicaid … and then people get more comfortable with additional government interventions. You might think of it as a sort of Trojan Horse strategy. And if it works in moves toward collectivism, then surely it will work in the other direction. Sadly, the non-left is not very deft at using this strategy and allows the left to completely demagogue any moves toward freedom as radical and scary.

Does this mean your mental preference for what society should look like ought not be full-monty? Not at all. But unless you are incredibly brilliant and charismatic it is going to be extremely hard to be taken seriously if such a pure vision is regularly presented. Of course, the fact that a classical liberal view of the world is considered extreme is depressing and requires many posts of its own.

I got to thinking about this the other day when I went through another round of working papers from the NBER – and predicted with 100% accuracy the conclusions of the papers by looking only at the name(s) of the author(s) on the papers (at least for the authors I knew, for those I did not, institutional affiliation was a pretty good indicator of the conclusion). Now, I don’t believe economics is a science, but surely the idea that any of us are dispassionately uncovering absolute economic truths with our research is farcical. By saying this I am actually not suggesting that it ought to be any different – I am of the school of thought that we should simply stop deluding ourselves and outsiders that we are actually dispassionate truth seekers. It might be the case that our discipline will advance better if the strongest partisan spin is put to all research – I cannot say, but it is moderately discomforting.

I suppose I am being a little smug. Maybe I earned it. My entire dissertation looks like it was written by my evil alter ego – and honestly I am not very proud of the work, which is some small reason why I have never written about it here. The issue is germane to current discussions in economics about “codes of ethics” that we are all supposed to follow. For example, if I write a paper arguing that the US is not polluted at all, I must reveal that my funding came from the paper manufacturing association of America, for example. That’s fine, I’m not going to delve into that topic for now. But if so much ink is being spilled over that Code of Ethics, I am utterly astonished that we have not addressed the far more problematic issue of our normative/political code of ethics.

My students know very clearly from early on that I am classically liberal, though I do not lecture directly on the idea and the reasons. And I do my very best to tell them when my mental view of the world is entering into our discussion. Of course, for doing this I am called crazy and all kinds of other things. But in my view, if we are going to spell out in gory detail all of the material that we are going to cover in our courses, it seems odd that political orientation is not openly advertised either (the students have a decent idea anyway). After all, taking an Intro Econ course from a Marxist is going to be very different than taking it from me. And professors should be honest about how and where these biases are likely to enter. For example, whether you are a Marxist or not, the supply and demand process works the same way, and prices play an informational and incentivizing role. However, the way we cover economic history may differ, and the importance that we place on particular market failure arguments may differ, and the confidence that we place in collective action may differ. Most important, the ethical aspects of economics will be presented entirely differently depending on one’s political biases. It is essential that this be made clear to students. And I am sure it rarely happens. I’ll provide particular examples over the coming months.

I remain perplexed at why there is not a stronger push for such “truth in advertising.” After all, the current situation leaves political impressions to students who cannot actually articulate what it is their professors are actually saying and to other professors who like to make their intellectual adversaries the subject of ridicule in their classes. This is not to say that I think there should be more intellectual diversity on campuses – I cannot even imagine how awful the policies would have to be in order to assure it nor do I think that getting more intellectual diversity would be a stable equilibrium. But that’s also a discussion for another day.

The point, in case it is not obvious, is that most of us are delusional about why we hold the particular views we do. In my mental model, we hold particular policy views because it helps us affiliate with groups and other ideas that we want to affiliate with. Is there an empirical test to run to verify that this is how we come to hold our worldviews? And do those of us who have changed at least some of our views over time stand out as anomalies or something else (for example, as recently as a decade ago, I was a vehement anti-free-trader, ask my wife if you don’t believe me).