Let a Thousand Green Cities Bloom
The word is spreading across ideology because it transcends it. Enviro-blogger Alex Steffen grasps onto the idea–innovation in governance takes off when cities can experiment with different rule sets–and riffs. He sees Romer’s Charter Cities as an opportunity to create a renaissance for green cities:
In many ways, the Global North is as hamstrung in the face of bright green challenges as China was in the face of capitalism. What if the answer is a sustainability and social innovation equivalent of China’s answers: a sort of “Special Innovation Zone”?
Imagine a place — perhaps a shrinking city, or a badly savaged brownfield neighborhood — where laws were set up to strip rules and regulations down to a do-no-harm minimum (maintaining criminal laws and protecting health, safety, workers’ rights and civil liberties, but perhaps limiting liability and certainly slashing red tape and delays) allowing for wild deviations from existing patterns for buildings, systems and operations. Imagine a free-fire zone for sustainable innovations, where new approaches could be iterated and tested rapidly, and, when they work, sent to proliferate outside the Zone. Conversely, some of the freedom might paradoxically come from imposing boundary limitations that can’t yet be made practical or survive politically outside the Zone, such as bans on broad classes of chemicals or strict greenhouse gas emissions limits.
Free To Choose…If There Are Available Alternatives
Milton & Rose Friedman:
To some extent government is a form of voluntary cooperation, a way in which people choose to achieve some of their objectives through governmental entities because they believe that is the most effective means of achieving them.
The clearest example is local government under conditions where people are free to choose where to live. You may decide to live in one community rather than another partly on the basis of the kind of services its government offers. If it engages in activities you object to or are unwilling to pay for, and these more than balance the activities you favor and are willing to pay for, you can vote with your feet by moving elsewhere. There is competition, limited but real, so long as there are available alternatives.
As this quote shows, competition between governments is not a new view – the words above were written in 1979, and the Tiebout model was published in 1956. What is new, we believe, is the idea that competition is the primary route by which governments can be improved. Writing great rhetoric for the masses (like Free To Choose), forging political coalitions (the LP, liberaltarians, or Ron Paul), and “winning the war of ideas” in academia (like those smart fellows at GMU) are all enjoyable, appealing, and attractive. But the evidence of the last half-century is that, sadly, big wasteful government is robust to those methods. As long as the industry is an oligopoly, we customers will be badly served.
What the industry needs is more available alternatives – as would happen if we Let A Thousand Nations Bloom.
Competition is the Freedom to Act Differently From Others
When someone makes something better than I do, faster, cheaper, more beautifully–they’re doing so differently. If instead they imitated me to the micro-movement, they’d make an inferior product. They’d also live an inferior life. They could do better. Competition is the mother of a richer personality.
Everyone fears a monolithic society, but the greatest trick the bureaucrat ever played was marketing it as a change for the better. Many nation states decry “tax havens,” but what they really loathe is the idea of people acting differently from the way they do. A cartel of nations imposing a single tax table is a cartel of conformists.
There’s a great Op-ed in the NYTimes today on Swiss banking by Pierre Bessard, the president of the Liberales Institut in Switzerland. He argues for competition in tax rates and against the “transparent citizen,” that poor sap whose every move and resource is tagged, tracked, and weighed by the government:
We think government exists to serve us, not the other way around. We understand that we have to pay taxes — and we do, with numerous studies showing that the Swiss are extraordinarily honest about paying what we owe — but we do not think it is the government’s role to intrude on our privacy and wrench them from us.
A link at the Liberales Institut points to a thought-provoking paper on tax competition by Bessard. I highly recommend it, if only for viewing the “tax oppression” index. From the intro to the article:
By restricting tax competition, for instance by trying to harmonize tax policies or by fighting “tax havens”, high-tax states – tax hells – deprive their citizens of one of the great benefits of competition, experimentation. As Friedrich Hayek often pointed out, competition is a “discovery process”. In a purely imaginary world of perfect knowledge, competition would surely be unnecessary, for everyone would know what the best solutions to any problem are. But we are not in a world of this kind. Yet that is precisely what the high-tax states fighting against tax competition would like to make us believe. They assume that their tax policies are the best possible and that any competition would lead to a “race to the bottom”. But if the tax rates applied in the tax hells – for instance for the taxation of capital – were optimal, capital would not flee. For a long time, drastic foreign exchange controls have allowed many states to despoil capital. They cannot tolerate that their “tax slaves” can flee to more favorable areas. And yet, as this study so opportunely underscores, the whole world benefits from the existence of low-tax areas. For these areas not only lead to capital movement, but also create incentives to accumulate more capital.
Rules as Technology
Keeping up with the Charter Cities blog, I happily find Paul Romer remixing Thomas Jefferson and Saint Augustine. (As those two are recounted in a post by Lawerence Lessig.) Romer writes:
The distinction between objects and ideas is arguably the most important in economics. In a world with more people, each person has fewer objects but access to more ideas. So far, the benefit we derive from access to more ideas has far outweighed the disadvantage of fewer objects. People today have less arable land per capita, but still consume more food per capita because of all the ideas we have discovered and shared. Most of the work on the economics of ideas has focused exclusively on a subset of ideas, technologies. Economists have been slower to acknowledge the complementary set of ideas, rules.
The word technology comes from “techne,” the ancient Greek for skill or craft–in short, a way of doing things. The older meaning is much broader than our current conception. It included practices like farming and seamanship. But now, when we speak of technology, we speak mainly of iPhones. Here I find Romer rightfully restoring the broader meaning to the term: rules are a form of technology.
But unlike iPhones, a set of rules is not subject to the constraints of scarcity. In fact, they break them. So not only should we aim to spread superior rule sets–since we lose nothing in the spreading–we should also try to innovate better rule sets. And faster. We need a Silicon Valley for innovating rules.
Anyway, to return to history, here’s Thomas Jefferson, anticipating Romer, writing to Isaac Mcpherson in 1813 on the unlimited fruitfulness of ideas:
If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density at any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation.
And in a sermon, Augustine before him:
The words I am uttering penetrate your senses, so that every hearer holds them, yet withholds them from no other. Not held, the words could not inform. Withheld, no other could share them. Though my talk is, admittedly, broken up into words and syllables, yet you do not take in this portion or that, as when picking at your food. All of you hear all of it, though each takes all individually. I have no worry that, by giving all to one, the others are deprived. I hope, instead, that everyone will consume everything; so that, denying no other ear or mind, you take all to yourselves, yet leave all to all others. But for individual failures of memory, everyone who came to hear what I say can take it all off, each on one’s separate way.
Structural Activism vs. Policy Activism
Jacob Lyles’ seminal post on the distinction between structural libertarianism and policy libertarianism does a great job of explaining why policy libertarianism is a fundamentally incomplete political philosophy. But beyond that, the structural approach has another important advantage over policy approaches – it is less antagonistic, more inclusive, and ultimately more persuasive. There are two primary reasons why this is true – first, because people are not as emotionally invested in their political structures as they are in their policy preferences – and second, because policy failures are difficult to demonstrate empirically, while evidence of structural failures is harder to explain away.
For many people, politics is either the public manifestation of their religious beliefs, or a religion substitute. In the case of conservatives, opposition to gay marriage and abortion are non-negotiable, defining aspects of their political philosophy. For progressives, defending the environment, and ensuring broad access to health care, are more than mere policy preferences – they are moral imperatives. There’s no way to cross the partisan divide on these issues – no middle ground that would be the basis for consensus, no set of arguments that could persuade someone to abandon these positions. People are extremely attached to their ideologies.
However, a person’s ideology usually has a lot more to say about the specific policies that should be in place, and not the structures that should be in place, so people are generally far less invested in their structural preferences than their policy preferences. Even Bill O’Reilly, that stalwart defender of the War on Terror and all other aspects of the police state, joked that he was an anarchist on the Daily Show, after he realized that he was looking at eight years of Democratic governance. He’s not alone among conservatives in doing this – when out of power, conservatives generally sound a lot like Ron Paul, but when in power, they don’t find power structures all that distasteful.
Because people are less emotionally invested in their structural preferences, structural activism has a much greater chance of persuading someone than does policy activism. Not only does it avoid attacking someone’s emotional sensibilities – it does one better, in that a structural activist is making arguments about how a different system could facilitate the goals that the partisan might want to achieve.
Moving on, if we think about our policy prescriptions, there is an extreme lack of verifiability as to whether one side or another is correct. Most policies don’t get enacted at all, so people are free to speculate, correctly or incorrectly, about the utilitarian value of their preferred policies. Moreover, those policy changes that do happen generally happen on the margin – wholesale reform of a system is rare, and tweaks to the system are far more common. Add this to the fact that empirical studies of the effects of policies are very difficult, because of the myriad of possible alternate causes, and you have a situation in which it can be extremely hard to persuade someone that their policy is a bad idea.
A great example of this is minimum wage legislation. Libertarians have been making the argument seemingly since time began (well, at least since Milton Friedman) that minimum wage legislation is bad for the poor because it reduces demand for low-skilled labor. But verifying this empirically has been difficult, because the minimum wage is low enough that very few people are structurally unemployed because of it, and there’s enough noise and alternate causality to get the causal relation to express itself in the data. In fact, there are even studies (the Card study most notably) that claim to show that minimum wage increases actually lead to an increase of employment. Like every other attempt to verify an economic policy’s efficacy, these studies face the problem that there is no way to manufacture an effective control for an economic experiment. You can’t put two different economies into two different test tubes, change one ingredient, and then see which one does better. And without such a control, everyone is free to draw their own conclusions (which unsurprisingly are similar to their initial hypotheses.)
This contrasts with structural activism. Structural libertarianism is much more persuasive than policy libertarianism, because while everyone can summon evidence to their side about why their policy might be best, no one can delude themselves into thinking that the democratic system can achieve their ends, not after progressives have gained complete control over the executive and legislative branches and still can’t get their legislation passed.
As a demonstration of the persuasive power of this failure – we suddenly have three major, moderate, pragmatic, progressive bloggers – Ezra Klein, Matt Yglesias, and Matt Taibbi – making radically structuralist arguments, only seven months into the Obama administration. The structural movement is just starting, and it provides an answer for the incoming floods of disheartened progressives. We’ve still got a whole seven and a half years for progressives to become disillusioned. Attack progressives on their policies, and they will get defensive. Convince them that it’s not their fault, that they are not wrong, and show them that there is another way to get the policies that they prefer, and we may well have an effective liberaltarian alliance, as opposed to one based on trading “policies” that no one could implement if they tried.
Matt Taibbi: Future Advocate of Competitive Government
Matt Taibbi has an AHA! moment on health care reform:
The reason a real health-care bill is not going to get passed is simple…because that’s not the way our government works. Our government doesn’t exist to protect voters from interests, it exists to protect interests from voters. The situation we have here is an angry and desperate population that at long last has voted in a majority that it believes should be able to pass a health care bill. It expects something to be done. The task of the lawmakers on the Hill, at least as they see things, is to create the appearance of having done something…This whole business, it was a litmus test for whether or not we even have a functioning government. Here we had a political majority in congress and a popular president armed with oodles of political capital and backed by the overwhelming sentiment of perhaps 150 million Americans, and this government could not bring itself to offend ten thousand insurance men in order to pass a bill that addresses an urgent emergency. What’s left? Third-party politics?
Unfortunately, third party politics is not the solution. I love Ron Paul as much as anyone, but the two-party system has shown itself to be a remarkably stable equilibrium. And even if somehow you were able to get a third party system in power, they’d be subject to the same double bind of reform that current legislators are.
If the problem is systemic, then the solution isn’t going to come from trying to reform the system from within, because our vaunted reformers are not angels, but humans, and humans respond to incentives. Pressure has to be put on the system from outside, to make it adapt, or wither away.
In the meantime, Taibbi should read some Mancur Olson. If he hasn’t already.
States’ Rights Showdown, Texas Style
Texas Governor Rick Perry threatens to invoke the 10th Amendment to fight Obamacare.
Don't mess with Texas
Gov. Rick Perry, raising the specter of a showdown with the Obama administration, suggested Thursday that he would consider invoking states’ rights protections under the 10th Amendment to resist the president’s healthcare plan, which he said would be “disastrous” for Texas.
Interviewed by conservative talk show host Mark Davis of Dallas’ WBAP/820 AM, Perry said his first hope is that Congress will defeat the plan, which both Perry and Davis described as “Obama Care.” But should it pass, Perry predicted that Texas and a “number” of states might resist the federal health mandate.
“I think you’ll hear states and governors standing up and saying ‘no’ to this type of encroachment on the states with their healthcare,” Perry said. “So my hope is that we never have to have that stand-up. But I’m certainly willing and ready for the fight if this administration continues to try to force their very expansive government philosophy down our collective throats.”
Most likely, Perry is full of bluster and no bite, but it’s refreshing to see states’ rights being invoked against the coming diktat from Washington. Many Texans have seen their health care options improve from the state going its own way back in 2003, and it’s possible that Perry would have considerable support should he follow through on his smack.
Aside: if ever a pic fit the story of a Texas sheriff defending his turf, the one accompanying the article hits the spot.
Policy Libertarians and Underpants Gnomes
Recently I attended FreedomFest with Patri and a few other members of the Seasteading crew. Most of the lectures were fairly uninteresting – partially because the conference was selling speaking slots, and partially because most of the people there were thoroughly invested in the underpants gnomes‘ theory of politics:
Phase 1: Talk about why small government would be awesome
Phase 2: ?
Phase 3: Profit
The most hilarious example of this was Nelson Hultberg’s speech entitled “The Ron Paul Revolution: Why We Must Form A Third Political Party To Win It.” Hultberg is the head of Americans for a Free Republic, a non-profit which seems to have little purpose other than selling Hultberg’s book. But the mission statement provided on the website gives us some excellent material to rip apart.
Most Republican politicians begin their careers with the desire to slay this spending dragon on the Potomac. They imagine themselves as Jimmy Stewart in the famous movie Mr. Smith Goes to Washington; but they soon cave in to the reality of the system and realize they must tax and spend like the Democrats in order to be re-elected. They learn early on that the easiest way to power is to maintain the tools of wealth redistribution, i.e., fiat money inflation and the progressive income tax.
Excellent analysis! This Hultberg fellow would fit in well here at ATN.
Thus the evil of our present political system can never be ended by trying to change Republican behavior. It can only be ended by changing the monetary and tax systems that lie at the root of the contemptible “vote buying” in which our politicians partake.
Uh-oh. It seems we are in something of a pesky double bind. The very people we need to change the monetary and tax systems have a direct incentive not to do so, because they need those systems to get elected. But fear not, Hultberg has a solution: A Third Party!
The only hope to do this is with a third political party…It cannot be just another conventional third-party like the ones we see operating in America today, such as the Libertarian Party and the Constitution Party. These parties needlessly marginalize themselves because they don’t understand the fundamental law of politics — incrementalism. They both have ideal visions of the way that society should be organized, and they attempt to implement their visions all at once through the political process.
So let’s see if we have this straight. Libertarians will somehow win an election, despite the fact that only about 15% of the population identifies as libertarian and our first-past-the-post system is extraordinarily biased against third parties, and once they do that, they send a whole bunch of Mr. Smiths’ to Washington, who will then enact a massive radical reform of the Fed and the tax system. Splendid Idea! Except that, because they will be doing so in an incremental fashion, this group of Mr. Smiths will do the exact same thing that Republican legislators have done, and realize that tax and spend is essential to their re-election prospects.
But the looniness doesn’t stop there:
AFR’s third-party strategy will bring this about. It is big time, TV oriented, major league politics that will rock the nation and make history. Millions of voters will rally around such a cause. At least 15%-20% of the American people are thoroughly fed up and will firmly commit to the Two Pillars of reform for the Federal Reserve and the income tax. Americans want a prudent, rational program that will offer them freedom, order, and justice in their lives. They want a party that will end Washington’s relentless expansion and domination of our society.
The Conservative American Party (if led by the right candidate) will have a huge, galvanizing appeal, which will allow it to bring in major money and capture 15%-20% of the vote in 2012, then 35% in 2016 and victory in a three-man race. The Demopublican establishment’s corrupt game of buying votes through debasement of the currency and confiscatory taxation will be over. Big government will die, and freedom will be reborn.
There are people who think that entrepreneurial legal system creation is utopian, unrealistic, and highly unlikely to work. They might be right. But at least we have a Phase 2 that isn’t a giant question mark.
The TED Blog has Running notes from Paul Romer’s presentation this morning on his model of competitive government, which he’s currently calling a Charter City:
When the first slide does appear he urges us look at the picture of African students doing their homework under streetlights because they have no electricity in their homes. He zeroes in on one of the students and christens him Nelson. “I’ll bet Nelson has a cell phone,” Romer remarks. He then asks the audience why Nelson would have a cutting edge technology like a cell phone but no access to electricity. His answer — rules. Romer explains that in this country the electric company has to provide electricity at a subsidized price, and so cannot make profit. They have no incentive or ability to reach more customers. The president has tried to change pricing but protests broke out from businesses and the public.
“How can we change rules? ” Romer asks.
…
He moves our attention to China. China, he says, demonstrates both the strengths and weaknesses of working with rules. They developed steel and gunpowder, but never developed rules for spreading those. Then, they developed rules that cut them off while other countries were zooming ahead. However, in the late 1970s, growth took off in China. Something changed. Romer shows that the brightest spot in China is Hong Kong. Hong Kong was a small bit of China that for most of the 20th century operated under a different set of rules, that were copied from working market and under the care of Great Britain. Hong Kong, he says, became a model people could copy when the rest of mainland moved to the market model. The demonstrated successes there led to a consensus on a market model move throughout the economy.Romer asserts that we must preserve choices for people and operate on the right scale. A village is too small and a nation too big. Cities give you the right balance. The proposal is he conceives of is a charter city with investors to build infrastructure, firms to hire people and families who will raise children there. All he wants is some good rules, uninhabited land and choices for leaders, which he thinks should translate to partnerships between nations.
…
At the end of the talk, Chris Anderson does a quick audience poll by a show of hands. “What do you think? Mad or exciting?” Anderson asks. Overwhelmingly, the hands say exciting.
We previously covered Romer’s earlier version of this talk. He has a bare-bones website up at CharterCities.org, including a blog, which I suspect we may be linking to on occasion. The introductory post:
Welcome to the Charter Cities blog. It will bring together news reports, case studies, and analytical pieces that bear on the concept of new cities with innovative systems of governance. Relevant posts can draw on economics, engineering, technology, finance, law, political science, and international relations.
The format is that of a blog, but our goal is to build a community with norms like those of Wikipedia. We hope that posts have lasting value as reference material, and we strive for objectivity. Comments are welcome, and the most useful comments on a post are those that lead to an important revision or extension that can be re-posted as an update. Comments that are directed at a person rather than an idea are discouraged. We hope to build a community of contributors over time. As an alternative to commenting on a post, you also can reach us via the web form on the contact page.
I’m glad to see the wraps coming off this project, it’s great to see someone of Romer’s caliber working in this crucial and under-served area.
(HT @Openworld)
Rendering Partisanship Irrelevant
We are all assuming the motives of other people, all the time. It’s the definition of empathy. And, for the most part, humans are quite skilled at analyzing the motives of human beings in social situations and economic transactions.
It’s good that we are able to do this, otherwise we’d have almost no ability to function socially. Correctly diagnosing the motives behind people’s actions is key to understanding how they willl behave in the future. If someone punches you in the face after you insult their mother, incorrectly diagnosing their motive for doing so, and proceeding to insult their mother again, leads to obvious problems.
But as good as we are at assessing people’s motives in the social and economic realms, we are absolutely awful at doing it in the political realm.
How many times have you heard a pro-choice liberal deride a conservative as “hating women?” (I recently did this – certainly not my best moment.) On the converse, how many times have you heard conservatives deride liberals as “hating America?” It might be satisfying to think that your political opponents are also people intentionally trying to destroy everything good and true in the world, but there is no necessary correlation between what we find satisfying and the truth.
The real truth is that nearly everyone thinks that their set of policy prescriptions will lead to a better society. Very few people are tangibly selfish about their political ends. Even Henry Paulson and crew probably believe that the bailout pattern they supported was the best for the economy. And yet the presumption of selfishness is inherent in political discourse.
It’s important to understand why we find such thoughts satisfying. The realm of policy is a zero-sum game. If we get the policies we desire, our opponents don’t, and vice versa. So if we were to grant that our opponents had decent, good, and true motives, and this acquiescence led them to get their policies enacted, then we would lose. This gives us an incentive to engage in the sort of rabidly partisan rhetoric that makes politics such a mind-killer.
The beauty of competitive government is that it creates an environment in which political ideologies compete, but do not conflict. If a group of people holds to a certain ideology that differs from the rest of the group they are a part of – they can move, create their own society, and demonstrate that their ideology is superior, or not. And those who remain in a society have no incentive to presume the worst of these people – merely to assume that they have an idea for what would make a better society, and then patiently see if they are right.
An environment like that would render partisanship irrelevant. Your political views could be recognized as nothing more controversial than your preference for a certain type of cuisine. Peaceful, don’t you think?
Let A Thousand Nations Bloom 
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