Tuesday, August 25, 2015

Scott Sumner on policy and civility

Scott discusses "How bad government policies make us meaner".  It's hard to excerpt, but the basic idea is that if we legislate favorable contracts, we create incentives for discrimination and abuse.  A landlord of a rent controlled apartment has no incentive to treat tenants fairly.  There will be a line of tenants ready to take the current tenant's place, in any case.

Proponents of the minimum wage frequently reference these factors in defense of minimum wages - the idea of efficiency wages, that there will be lower turnover, and that employers will have a larger potential labor force because workers will be more incentivized to take the higher wage jobs.  Among the outcomes, in other words, employers will have more leeway to be abusive and prejudiced in their hiring decisions, and workers will be more apt to put up with indignities in order to keep their jobs.

This is related to my post from the other day about the importance of freedom of entry.  Really, this is all related to Mike Munger and Sam Wilson's Euvoluntary Exchange project.  I must be honest that in some ways I am still wrapping my head around the conceptual insights of EE.  But, a foundational element of the concept is that the availability of nearly equivalent alternatives is probably the most important element in creating a culture of fair dealing.  If you crawl out of the desert, parched, to an oasis, the difference in ethical context of meeting one person with some water versus meeting 2 or 3 people with water is enormous.

Policies that intend to help workers or consumers by lifting particular contracts away from available alternatives are very short sighted.  They are inimical to a civilized and fair society.


  1. This reminds me of a surprising admission from a well known socialist, Herb Gintis;


    'By focusing on the marketability of particular things, [Michael] Sandel misses the larger effect of an economy regulated by markets on the evolution of social morality. Movements for religious and lifestyle tolerance, gender equality, and democracy have flourished and triumphed in societies governed by market exchange, and nowhere else.

    'My colleagues and I found dramatic evidence of this positive relationship between markets and morality in our study of fairness in simple societies—hunter-gatherers, horticulturalists, nomadic herders, and small-scale sedentary farmers—in Africa, Latin America, and Asia. Twelve professional anthropologists and economists visited these societies and played standard ultimatum, public goods, and trust games with the locals. As in advanced industrial societies, members of all of these societies exhibited a considerable degree of moral motivation and a willingness to sacrifice monetary gain to achieve fairness and reciprocity, even in anonymous one-shot situations. More interesting for our purposes, we measured the degree of market exposure and cooperation in production for each society, and we found that the ones that regularly engage in market exchange with larger surrounding groups have more pronounced fairness motivations. The notion that the market economy makes people greedy, selfish, and amoral is simply fallacious.'

    Which I once had the opportunity of reminding Gintis that he'd written that. That was over his review of one of Thomas Sowell's books at Amazon.com. He didn't appreciate it.

    1. Thanks for the link. Gintis has got some interesting work. He looks like he applies sharp critiques to all POVs.

  2. I am against the minimum wage--if we do everything possible to legalize push-cart vending.

    Imagine being able to start your own business for a few hundred dollars. A large cauldron of soup, and you are good to go. Or you can sell socks, or CDs, or jewelry etc. Maybe you own paintings.

    It is done in large parts of the world.

    In Los Angeles, they say the cheapest restaurant costs $250k to open, but really double that. Retail space is really expensive.

    People who rent space hate the food trucks. In a way, I do not blame them. After all, the ground rules were no food trucks. Then the food trucks started coming.

    But the benefits of free enterprise usually outweigh the costs. Retail space will become worth less, buildings will become worth less. Costs will go down, with push-cart vendors.

    No wonder they will never be legalized.

    Now, if we can get rid of single-family detached zoning....

    1. Yep. I think anyone over 40 years old or so probably knew someone who cut hair in their den or their garage part time, or worked on cars in their garage. Not very common any more, and probably illegal most of the time.