Reihan Salam wondered how Luis Zingales’s proposals for a “pro-market populist” politics that defends “defends freedom of entry in all cases” translates into policy proposals. As I said yesterday, a major political problem with any “pro-market populist” politics is that there are a lot more stakeholders in the status quo than just Big Business and Big Government. There are a log of risk averse people who might be better off under a different system, but are scared to take the plunge into the unknown.
That doesn’t mean that there is nothing to be done. One obvious thing that could be done would be to increase the number of stakeholders in a reformist politics and begin the process of institutional change while limiting the direct threat of change to the mass of people who aren’t ready for change just yet. There are policy proposals that can accomplish some of this. Yuval Levin and Ramesh Ponnuru have suggested adopting a flat health insurance tax credit for those who do not have access to employer-provided care. This would (along with other changes – including the repeal of the coverage mandates in Obamacare) allow many of the uninsured to purchase consumer-driven health insurance without directly threatening the insurance arrangements of those who are happy with their employer-provided policies. Another thing Republicans can do as a group (this to include the party at all levels of government) would be to push for more states and municipalities to adopt the Indiana state government model of Health Savings Accounts and catastrophic coverage for government employees. This approach has saved Indiana money, increased the take home pay of the employees, and maintained secure health care for those employees. As more state and municipal government budgets are stressed by employee health care costs, a move toward the Indiana model could eventually find significant support from state and local elected Democrats. What the tax credit and the Indiana model have in common is that they can both plausibly increase the number of people on consumer-driven policies without threatening very many of those who don’t want those policies just yet. There would also be follow on effects. Since you would have a larger number of people who would be more cost conscious consumers of routine health care, there would be a larger constituency for government policies that allow for more routine care to be handled by nurse practitioners and physicians assistants. There would be a larger constituency for mandating greater price transparency in health care and for allowing more open access for new, higher productivity health care providers. And, as more of the public sees that people on consumer-driven policies are doing okay, resistance to larger reforms will tend to shrink somewhat.
July 23rd, 2012 | 11:26 pm
http://www.project-syndicate.org/commentary/orphan-ideas.
The real problem with pro-market populism as Zingales discusses it, is that “populism” is basically a function of advertising/branding, which is its own market with its own laws. That is while there is a clear distinction between the free market and what is good for a particular business, the branding of what is good for a particular business tends to eat the space as soon as the angle is possible to sell.
Thus Zingales is more or less correct when he says: ” Unfortunately, rather than leveling the playing field, the battle of ideas may skew US politics even further in favor of big business.
The importance of ideas can be seen from the simplest things. Congressional bills aimed at benefiting powerful constituencies are generally given appealing (and misleading) names. For example, a tax holiday to repatriate foreign earnings was called the “American Job Creation Act.” It is easier to sell a bill that (allegedly) benefits everyone in society, not just a small group of its most privileged members.”
July 24th, 2012 | 9:02 am
Comment #1 is more of a slight refinement on imperfect information, or simply an aknowledgement of ignorance, and dependence upon modes of information. It ends up boiling down the the difference between branding and substance. Even here there is evidence that Congressional capacity to “brand” effectively is more or less dead. “American Job Creation Act”= 12% congressional approval rate.
In terms of opposition to a politics that “defends freedom of entry in all cases”, I have to agree that there are a lot more stakeholders in the status quo than just Big Business and Big Government.
The simple fact is that there are multiple areas where “freedom of entry” simply is not desired by those who create the market. So the seller doesn’t want “freedom of entry”, and he doesn’t market “freedom of entry”.
Take for example the rightfully maligned education degree. Education schools are selling the “accreditation”, which in turn means that education majors are buying the “accreditation”. Accreditation is the process of comodifying/topiarizing(for marxist flair)…ya da ya da the student. So at the end of the day the education major has a liscense which she has purchased which guarantees a market which is restricted as to entry.
There is just way too much business, which is conducted on the basis or agreements to not compete, to waive discovery/”perfect information”, or to liscense a certain aspect of a product while restricting another(in a market).
A politics that defends freedom of entry in all cases, is in fact revolutionary, as it would destroy the Intellectual Property that a great many people purchase, sell and negotiate for.
It isn’t just the education degree that would go from a fair valuation of 80k to somewhere around 5k overnight. If your ham handed micro-economic theory narrowly tailored to commodities like corn destroy the “value” of the education, are you going to at least make the student loans dischargeable in bankrupcy?
The status quo works via promissory estopel, because markets are the way they are…”bourgeois power structure” or whatever, the market ends up pricing in these “rational basis”+contractual barriers to entry.
Of course there are a lot of “automatic stabilizers” built in. For example, as “copyright/puffery/advertising/subjective theorizing” crests, the value of Trademark/Accreditation/objectivity increases.
So it isn’t actually true that an education major doesn’t have some technical skills and knowledge which provide a rational basis for erecting the barrier to entry.
In fact almost all barriers to entry have some “rational basis” or justification.
One of course is ignorance, and the capacity to bluff a rationalization…
This for example is somewhat scary: “there would be a larger constituency for government policies that allow for more routine care to be handled by nurse practitioners and physicians assistant.”
I mean in my abstract theory there is already that constituency. Fewer legal obstacles on barriers to entry, that is less commodification/codeing, let the nurse practitioners and physician assistants do more!(will they also be paid more? if so there goes the saving? If not welcome to the topiarized industrial reserve army!) Of course we also don’t really know what sort of trainning or ability a nurse practitioner or physician assistant has! In addition a lot of these legal obstacles are actuarial/for insurance purposes, and built up from medical malpractice liability. That is enough of a rational basis to scare me off a generalized micro-economic theory.
That is you are still on the puffery/copyright theory side of the fence fighting Trademark and certification (everything which is a “rational basis” barrier to entry/substitutes.)
July 24th, 2012 | 9:49 am
“If your ham handed micro-economic theory narrowly tailored to commodities like corn.”
This was a bit much, corn is a classic commodity which in theory can be grown by anyone, thus we say that growing corn is an economic activity where there are no barriers to entry. (minus Wickard v. Filburn, wheat?)
This is not actually true of growing corn commercially. The frontier is dead, not everyone can be a corn farmer, to get economies of scale it requires considerable capital investment. These are also barriers to entry (but not legal ones, but there are legal ones as well, zonning/nuisance.) So Zonning is a barrier to entry.
Houston is a classical example of a city without Zonning. Defending freedom of entry in all cases, in terms of Zonning would start with Houston.
On the other hand a move to make all cities like Houston, would provoke serious outcry from all sorts of business. This is because once you have a barrier to entry, it provides an economic premium or “exceptionalism”.
If you are buying a “bar” that has been grandfathered into the zonning that is situated in the middle of a University which has since expanded, you are going to pay a killer premium. Lets say you buy the bar, and the person who sold it to you is on city council and after selling the bar, petitions to change the zonning(barrier to entry) and open a new bar, nearby (this is where you sue your attorney for not including a non-compete clause…)
July 24th, 2012 | 10:33 am
John. “The real problem with pro-market populism as Zingales discusses it, is that “populism” is basically a function of advertising/branding” I think that Zingales’s article that you cite says the opposite – that his preferred polices are good but that contemporary interest group politics is not structured in such a way to give those ideas much attention. Whether is it MERELY marketing depends on the policy analysis. Would there be widespread benefits from policies that (in practice) undermined the position of incumbent providers and allowed for greater productivity gains? I can think of lots of objections (productivity gains won’t happen, or they will be captured by a small group, or incumbent providers have a moral right to benefits from current model regardless of productivity concerns and costs to others…)
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