The Thing

1
The Thing.Itself

• Michael Munger
• Duke University
• November 7, 2005

2
The Thing Itself

• Difference between Samuelsonian public goods
  problem and the problem of making choices
  collectively
• "In vain you tell me that Artificial Government
  is good, but that I fall out only with the Abuse.
  The Thing! the Thing itself is the Abuse!"

3
Collective v. Public
Property of Choice Property of Good Individual Decision I can choose, alone and without interference Collective Decision Choices are made by a group, and are binding on all
Private Decision My choice has no consequence for your welfare Liberty of the individual What socks should I wear? Whom should I marry? Tyranny of the majority Invasion of privacy Theft of property rights
Public Decision My choices affect your welfare Underinvestment, or else theft by the minority Air or water pollution Education Liberty of the group How much to spend on defense? How to take care of the poor?
4
Socialist Calculation Debate

• This is not a dispute about whether planning is
  to be done or not. It is a dispute as to whether
  planning is to be done centrally, by one
  authority for the whole economic system, or is to
  be divided among many individuals. Planning in
  the specific sense in which the term is used in
  contemporary controversy necessarily means
  central planningdirection of the whole economic
  system according to one unified plan.
  Competition, on the other hand, means
  decentralized planning by many separate persons.
  The halfway house between the two, about which
  many people talk but which few like when they see
  it, is the delegation of planning to organized
  industries, or, in other words, monopoly.
  (Hayek, 1945).

5
Hayek.Again

• The peculiar character of the problem of a
  rational economic order is determined precisely
  by the fact that the knowledge of the
  circumstances of which we must make use never
  exists in concentrated or integrated form but
  solely as the dispersed bits of incomplete and
  frequently contradictory knowledge which all the
  separate individuals possess. The economic
  problem of society is thus not merely a problem
  of how to allocate "given" resourcesIt is rather
  a problem of how to secure the best use of
  resources known to any of the members of society,
  for ends whose relative importance only these
  individuals know. Or, to put it briefly, it is a
  problem of the utilization of knowledge which is
  not given to anyone in its totality. (F.A.
  Hayek, 1945, AER).

6
The Right Thing

• There may not be any one right thing to do. It
  depends.
• It is the nature of collective choices that they
  are unitary One defense budget, one standard
  for pollution, and so on.
• Asking What Will We Do? begs the question. The
  real question is
• Why Do You Think There is a We?

7
P.J. ORourkeInformation and Scope Problems of MR

• Now, majority rule is a precious, sacred thing
  worth dying for. Butlike other precious, sacred
  things, such as the home and the familyit's not
  only worth dying for it can make you wish you
  were dead. Imagine if all of life were determined
  by majority rule. Every meal would be a pizza.
  Every pair of pants, even those in a Brooks
  Brothers suit, would be stone-washed denim.
  Celebrity diets and exercise books would be the
  only thing on the shelves at the library.
  Andsince women are a majority of the population,
  we'd all be married to Mel Gibson. (Parliament of
  Whores, 1991, p. 5).

8
Step back for a moment.The Fundamental Human
Problem(according to Munger)

• How can we construct or preserve institutions
  that make individual self-interest not
  inconsistent with the common good?

9
Origins of Government Institutions

• What if we all wanted the same thing? Would
  government even be necessary?
• It would. Because we do all want the same thing
  more.
• On disagreement, Charles IV
• My cousin Francis and I are in perfect accordhe
  wants Milan and so do I.

10
Two Approaches to Solving the Fundamental
Problem

• Madisonian
• Ambition must be made to counteract ambition
• Rousseauvian
• Transform the self, solve the problem of amour
  propre. Inscribe the law on the hearts of men.
  Some preferences are better than others.

11
Madisonian Institutions

• MarketsSmiths baker
• PoliticsFederalist 51
• Men are not angels
• Men are not ruled by angels
• Ambition must be made to counteract ambition

12
Democracy Unbound.Rousseau

• But it is asked how a man can be both free and
  forced to conform to wills that are not his own.
  How are the opponents at once free and subject to
  laws they have not agreed to?
• I retort that the question is wrongly put. The
  citizen gives his consent to all the laws,
  including those which are passed in spite of his
  opposition, and even those which punish him when
  he dares to break any of them. (From The Social
  Contract)

13
Democracy Unbound.

• When in the popular assembly a law is proposed,
  what the people is asked is not exactly whether
  it approves or rejects the proposal, but whether
  it is in conformity with the general will, which
  is their will.
• When therefore the opinion that is contrary to my
  own prevails, this proves neither more nor less
  than that I was mistaken, and that what I thought
  to be the general will was not so.
• If my particular opinion had carried the day I
  should have achieved the opposite of what was my
  will and it is in that case that I should not
  have been free.

14
Loyal Opposition?

• This conception of democracy is logical. The
  actions of government are driven by the people
  the general will is sovereign. Opposition to the
  general will is treason, and must be punished.
  No need for two parties only one general will.
• All those countries with Peoples Democratic
  Republic of ___ were not perversions of
  democracy, but examplars. That is what pure
  democracy, with no limits on scope, looks like.
  Cannot be otherwise.
• Democracy, in and of itself, is an attractive
  concept that must constitute a recipe for
  tyranny, unless the scope of collective
  sovereignty is strictly limited.

15
Che Guevaras Man and Socialism in Cuba (1965).

• Society as a whole must become a huge
  school....We can see the new man who begins to
  emerge in this period of the building of
  socialism. His image is as yet unfinished in
  fact it will never be finished, since the process
  advances parallel the development of new economic
  forms. Discounting those whose lack of education
  makes them tend toward the solitary road, towards
  the satisfaction of their ambitions, there are
  others who, even within this new picture of
  over-all advances, tend to march in isolation
  from the accompanying mass. What is more
  important is that people become more aware every
  day of the need to incorporate themselves into
  society and of their own importance as motors of
  that society

16
A movie Pure Democracy in Action
17
Coherence and Legitimacy

• Can a group of people who disagree come to a
  consensus? How would this work? Why would we
  believe that the consensus is any more than an
  imperfect choice?
• Do the choices of majorities tell us anything
  about the right thing to do?
• Is there such a thing as the majority, which we
  just have to discover through voting or some
  political process?
• I wantyou wantwhat do we want?

18
Problem of the U.S. in Iraq
19
Democratic Choices War in Iraq

• Youve got to help me out hereplay along!
• Preferences and beliefs, on the little card.
  REALLY! Accept the premise, and act like those
  are your preferences. Three choices
• No war N
• Aggressive war W
• Police/political means P

20
Choices War in Iraq

• One possibility isolationist variant of Powell
  doctrine
• N gt W gt P
• We should not get involved.
• But, if we do, we should go in with overwhelming
  force.
• Worst thing is to expose our troops/workers in a
  limited police action, depend on the U.N.

21
Choices War in Iraq

• Another possibility Rummy World
• W gt P gt N
• Iraq/Saddam is an imminent threat, will develop
  WMD.
• If not war, then must vigorously pursue sanctions
• Worst thing is to do nothing, relax sanctions and
  let Iraq become nuclear power

22
Choices War in Iraq

• Final possibility Prudent Dove
• P gt N gt W
• Let sanctions and inspections do their work,
  because Iraq is a potential danger to its
  neighbors and the world
• We have no good claim to just war, so next best
  is to do nothing
• Worst thing is to use war against a nation that
  has made no overt attack on the U.S.

23
Choices War in Iraq

• Sowe have disagreement
• Prudent dove wants to use P, police action
• Rummy wants war
• Isolationists would prefer to stay far away from
  foreign entanglements, so do nothing.

24
Choices War in Iraq

• Lets use democracy, the pure kind where the
  people make the choice directly.
• First, lets decide whether to use force, or do
  nothing.
• Vote P vs. W to decide which activity is better,
  and then vote that against N. That way, we are
  comparing the best do something against do
  nothing.

25
Choices War in Iraq

• Consider what just happened. Simply by changing
  the order in which we consider the alternatives,
  I could generate as the winner any one of the
  three alternatives.
• Choosing the agenda, then, is tantamount to
  choosing the outcome.
• Is this just a conjurers trick, or does it tell
  us something about democracy?

26
Choices War in Iraq

• If there are three (or more) alternatives, and
  there is disagreement, then democracy may be
  radically indeterminate.
• More simply, there is no correct answer to the
  question, What do the people want?
• In fact, some majority opposes every alternative.

27
Choices War in Iraq

• Here is the problem
• I/P Rummy Prud Dove
• N W P Best
• W P N Middle
• P N W Worst
• Majority preferences
• W gt P gt N gt W
• Endless, infinite cycling over alternatives. Not
  a tie, but a literal perpetual motion machine

28
But this is nonsense meetings end

• That is what should terrify you meetings end,
  and things get decided. The point is that we are
  rarely presented with three or more alternatives.
  We usually are presented with two. How are
  those two chosen?
• The Charney Revolution coalitions form,
  charismatic people take power. Not the will of
  the people, but the force of will of some
  demogogue or tyrant
• If the rules matter to this extent, that means
  that procedures, not preferences, determine
  outcomes. And elites control procedures.

29
Democracy works fine. So long as everyone agrees

• But if there is disagreement, and at least three
  alternatives, then a majority opposes every
  available choice. So, democracy fails us when we
  need it most!
• Since some choice has to be made, we are left
  with an outcome that is either
• Imposed (tyranny)
• Arbitrary (random or procedure-driven)
• In either case, democratic choice is chimerical
• Dictatorship with the trappings of democracy

30
The worst of all worlds

• Democracy without constitutional liberalism
• 1. Rule of law, protections of property and
  liberty
• 2. Limits on scope of issues within the
  jurisdiction of collective choice
• Democracy without these is the most terrifying
  kind of tyranny you can imagine. Americans, and
  the West, are confused about good government.
  The key is constitutional liberalism, not
  democracy.

31
More Generally.

• There are limits to what government can do. One
  of the first people to recognize this was the man
  who put the dismal in the dismal science, Parson
  Thomas Malthus. He discovered a general
  principle that will sound familiar to everyone
• The more you have of something, the more you
  need!
• In third world countries, we have found that if
  all you do is give people enough resources to
  make them a little bit healthier, you increase
  births. Births continue until the society comes
  up against the new resource constraint. People
  are still starving, but now there are lots more
  of them. Sri Lanka incredible success story.
• 2004 20 m 1950 7.5 m 1901 3.6 m

32
Malthusian Logic is Everywhere

• In cities and counties, the same logic applies to
  roads if you make commuting cheaper by building
  or widening roads, it isn't long before people
  are once again, stopped and staring at the
  stationary taillights ahead of them. There are
  six lanes of gridlock now, instead of two, but
  people respond to the costs of the activity until
  the cost rises. If cost of commuting drops,
  more people live there, until the marginal cost
  rises again to its previous level.

33
You CANT Help People

• Sometimes we try to get around this problem by
  subsidizing an activity we think we value.
  Suppose, for example, we all think family farms
  are good. But we look around, and see that
  family farmers are all poor or going out of
  business. So, Congress or the state legislature
  passes a law that subsidizes farm crops.
  Everyone who owns farmland gets a one-time wealth
  transfer from consumers and taxpayers. So far,
  so good farmers (briefly) are wealthier.

34
You CANT Help People

• Over time, though, people sell the land, or deed
  it to their children. But these people now
  implicitly pay a higher price for the land, a
  price that capitalizes the subsidy on the crop.
  If you ever cut the subsidy, the farmers will go
  bankrupt. But if you leave the subsidy, the
  farmer (at best) only breaks even, barely
  scraping by. We all still hear stories about the
  poor farmers, and wonder how this can be, when we
  are spending all this money on farm support.

35
You CANT Help People

• This is how it can be after the one-time wealth
  increase for people who own land, new people
  enter (or farmers or their children stay on their
  farms). Profits fall back to subsistence levels,
  and farmers are once again poor, just indifferent
  between staying and leaving. Only now, we are
  all paying high prices for crop support programs,
  and taxes for subsidies! Lots of pain for us, no
  gain for the poor farmers!

36
Rent-Seeking

• If proposals for funding are competitive, instead
  of pure pork barrel, can get dissipation or even
  super-dissipation
• HUD-Chapel Hill
• HUD-Charlotte
• Bentham In political economy, there is much to
  learn, and little to do

37
Three Histories

• Plato
• Shakespeare
• Plutarch

38
Plato Democracy Means Tyranny

• Democracy is precisely the constitution out of
  which tyranny comes from extreme liberty, it
  seems, comes a slavery most complete and most
  cruel.When a democratic city gets worthless
  butlers presiding over its wine, and has drunk
  too deep of libertys heady draught, then, I
  think, if the rulers are not very obliging and
  provide plenty of liberty, it calls them
  blackguards and oligarchs and chastises themand
  any who obey the rulers they trample in the dust
  as willing slaves and not worth a jot.
  (Republic, Book VI, 560a-564b)

39

• Shakespeares Tragedy of Coriolanus Act II, Sc
  3
• BOTH CITIZENS. The gods give you joy, sir,
  heartily! (Exeunt citizens)
• CORIOLANUS. Most sweet voices!
• Better it is to die, better to
  starve,
• Than crave the hire which first we
  do deserve.
• Why in this wolvish toge should I
  stand here
• To beg of Hob and Dick that do
  appear
• Their needless vouches? Custom
  calls me to't.
• What custom wills, in all things
  should we do't,
• The dust on antique time would lie
  unswept,
• And mountainous error be too highly
  heap'd
• For truth to o'erpeer. Rather than
  fool it so,
• Let the high office and the honour
  go
• To one that would do thus. I am
  half through
• The one part suffered, the other
  will I do.

40
ARISTIDES FROM PLUTARCHS LIVES

• Aristides being surprised and asking if
  Aristides had ever done him any injury, "None at
  all," said he, "neither know I the man but I am
  tired of hearing him everywhere called the just."
  Aristides, hearing this, is said to have made no
  reply, but returned the sherd with his own name
  inscribed. At his departure from the city,
  lifting up his hands to heaven, he made a prayer
  (the reverse, it would seem, of that of
  Achilles), that the Athenians might never have
  any occasion which should constrain them to
  remember Aristides.