Libertarian Foot Fetish

By Robert H.

Ilya Somin has a post up arguing for the relative advantages of foot voting vs. ballot box voting.  The argument is drawn from his latest book, so see that for more.  I have two bones to pick with it.

1. Somin is missing, I think, the major critique of foot voting.  He says "I cover several standard objections to foot voting, the problem of moving costs, the danger of  'races to the bottom,' and the likelihood that political decentralization might harm unpopular racial and ethnic minorities."  But he misses the biggest problem with foot voting: it's hard to know what the hell people are voting for.

If a polity elects a politician, it's pretty clear that that happened because of what kind of politician she is.  Special interests or ignorant voters or wise crowds or whoever sat down and said, "this gal's going to a better job than the other guy," or at the very least "this gal belongs to the political team I belong to, and voting for her flatters my team pride."  Whatever the reasoning, the outcome is mainly a reflection of the selectorate's political calculations, political prejudices, political signaling, political whatever.   

But if I move to California, who the hell knows why I did it?  Maybe there's a gold rush.  Maybe I love the ocean.  Maybe I figure it's my last, best chance to be cast in a star trek film (these are presented from least to most likely).  But one thing is for dang sure, we can't know it's related to political anything. 

You can see this in demographics: our most populous states are New York (generally liberal government), Texas (generally conservative government), and California (generally incompetent government).  If good political policies determined foot voting, why are people voting for totally different political policies?  Or maybe your affinity for local politics, not political outcomes, determines foot voting.  In that case, why do huge minorities of republicans live in NYC or democrats live in Texas?  Or maybe Texas is attracting tons of migrants because of its good policies, and New York and California only retain large populations because some sort of population stickiness makes people stay in place.  Ok, but then won't population stickiness undermine the whole "we will get good policy when people vote with their feet" thing?  People won't vote with their feet, they'll just hang around where they live now.  Or maybe this only happens because the federal government is so much more important than state government that it fudges the outcome.  Ok, then, why haven't most Greeks moved to Germany?  

So all this adds up to a big problem.  If people move for lots of non-political reasons, relying on people moving as a way to determine political outcomes has problems.  The best policies in the world could fail to attract migrants for exogenous reasons, and the worst (ok, maybe not the worst) could take advantage of, say, a resource boom to attract lots of folks.  

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2. Here and elsewhere, I think Somin has been too down on voting voting.  Yes, voters are ignorant.  Yes, they are rationally ignorant, since their vote will normally never matter.  Yes, the heuristics voters could be using ("reward incumbents when things are good" being a classical one) don't really get you to great government.

No, that does not mean democracy is useless.  High praise time: despite those and other political economy constraints, democracy is pretty good at keeping politicians from passing policies that are disastrous for most people.  For example, I'm pretty confident that a party running on an "enslave most of the voters" platform would not win.  Under a rationally ignorant voter model, if the Enslave Everyone party ever comes close to winning then the relative gains from paying attention and voting would go up and lots of voters would stop being ignorant.  Under a median voter model, the median voter would not want to be enslaved.  I could keep going through different models, but come on.  People will rarely vote themselves into slavery. 

That may seem like a really low bar, but it is not!  Human government has just been incredibly freaking awful over the centuries, ranging from the genocidal to the overly bellicose to the (and this is most common) widely extractive.  Governments *have* enslaved most of their people.  At the very least, almost all governments have made women second class citizens.  Any system of government that can avoid that stuff and routinely churn out merely bad policy is doing great.  A few special interests shaving off some GDP and GDP growth?  Possible national debt crisis in 20 years?  Weird predilection for subsidizing the old rather than the poor?  Yes please!  So much better than being a serf!

Point being, the least bad governments have gotten there through representative democracy, and there are theoretical reasons for functioning democracies to give us not-terrible policies, despite voter ignorance. Foot voting, on the other hand, has not been used as often to reach good political outcomes, and doubts about the ability of good policy to attract migrants seriously undermine the theoretical case for relying on foot voting.  

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As I final point, I just want to be clear, if it is not obvious, that relying on voting and relying on foot voting are in tension.  For example, let's say you make American states autonomous power centers that can set their own policy because you want to create a world where people can move between them and foot vote.  Well, by necessity you just stripped folks of their ability to vote vote for a range of federal policies, namely those that would cut into state power.  

1. Bad incentives 2. ? 3. Crisis!

By Robert H.

I am made very nervous by public choice stories that end in doomsday.  Take these examples: 1. As soon as the people realize they can vote themselves subsidies, they will vote themselves more and more until the economy collapses.  2. Because a possible debt crisis is a long way off but tax hikes and budget cuts happen now, politicians will always face pressure to please current voters and hurt future ones, never getting serious about the deficit until crisis is upon us.  3.  If markets start poking up interest rates and servicing our debt becomes a crushing burden, the fed will feel pressured to enact looser and looser policy to keep rates down until an inflationary disaster.

To state the obvious, in a rich, transparent democracy like America, there is a huge and powerful constituency that wants to avoid doomsday (everyone) and widespread access to good data about the likelyhood of doomsday.

So, to take one example, are politicians pressured to borrow now at the expense of future generations?  Probably.  Will this lead to a fiscal crisis?  Probably not.  You would expect rational voters likely to see a fiscal crisis in their lifetime push for balanced budgets.  If it looks like the debt to GDP ratio won't be sustainable in 20 years, maybe the 80 year olds don't care (they will be dead by then).  But the 20, 40, and maybe 60 year olds do.  As we approach fiscal crisis danger territory, older and older voters should start getting politically involved for austerity until the fiscal crisis is averted, later than would be optimal but far earlier than is dangerous.

Because the constituency against doomsday is so large and powerful, it is hard to tell public choice stories where rational actors end up dooming America.  Doomsday takes either 1. Ignorant voters (and why do you think you are so much smarter) or 2. Bad institutions that a.  hide key facts from voters, b. make coordination hard (IE, climate change is a global problem but there are no global institutions capable of dealing with it), or c. Put power in the hands of people who prefer doomsday to the alternative (IE, ruling junta would rather control a collapsing economy then risk losing control of a free one).  I would say Europe has suffered from a mix of all three factors under 2, hence the crises there.

What Magic Tricks do People Actually Use Smoke and Mirrors For?

by Robert H.

The Washington Post declares that much of 2011's austerity was "not real," simple budgeting tricks, mostly consisting of programs that were already scheduled to be cancelled anyway.  Tyler Cowen, who is fond of being pessimistic when it comes to balancing budgets, exults.

Sorry, deficit scolds, but you don't get to have it both ways on this.  If a department is only helping balance the budget on paper, not making "real" cuts, I can think of two ways to think about it:

1. It is real deficit reduction.  Spending less money is spending less money, it doesn't "not count" because the decision to do so was already in the pipeline.  Just so, congress letting programs die and not routing their funds to new programs is a significant political victory, and a blow to people who claim that bureaucracies never shrink and congress is never responsible for public choice reasons.
2. It is gimmicks, but that's good.  Much of the deficit was caused by smoke and mirrors and/or bad accounting, so we can get rid of it with smoke and mirrors and/or good accounting.   Turns out the deficit wasn't as bad as we thought, we just needed some better accounting practices.

Deficit scolds seem to want to reject one but not fully think through two.  If I can reduce our deficit with an accounting trick, it means that part of the deficit was the result of dumb accounting.  Whoever drew up the baseline didn't realize that that program was slated to be cancelled anyway, so I get to make a reduction vs the baseline just by letting a program that was going to die die.  And that is just as good of news as actually enacting austerity, because it has the same basic result: we are closer to balancing the budget.   Basically the lesson here is either "the deficit wasn't as bad as we thought, some of it was mostly the result of poor accounting and we've cleaned that up" or "hooray, congress was able to exercise real restraint and reduce the deficit!"  Neither result is "fake," it's either a political victory or accounting innovations getting us meaningfully closer to a balanced budget than we thought we were.

Now a deficit scold can respond with, "Maybe, but this is still low hanging fruit.  There won't be many more accounting innovations that will reveal the budget situation to be better than we thought, and/or there won't be many more ways congress can save money just by letting programs die."  And I agree!  But did anyone on earth think the first round of deficit reduction wouldn't go after low hanging fruit?