The Thing….Itself Michael Munger Duke University November 7, 2005

The Thing….ItselfThe Thing….Itself

Michael MungerMichael Munger

Duke UniversityDuke University

November 7, 2005November 7, 2005

The Thing ItselfThe Thing Itself

Difference between Samuelsonian Difference between Samuelsonian “public goods” problem and the “public goods” problem and the problem of making choices problem of making choices collectivelycollectively

""In vain you tell me that Artificial In vain you tell me that Artificial Government is good, but that I fall Government is good, but that I fall out only with the Abuse. The Thing! out only with the Abuse. The Thing! the Thing itself is the Abusethe Thing itself is the Abuse!" !"

Collective v. PublicCollective v. PublicProperty of Property of ChoiceChoice

Property of Property of GoodGood 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?

Socialist Calculation DebateSocialist Calculation Debate

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

Hayek….AgainHayek….Again““The peculiar character of the problem of a rational The peculiar character of the problem of a rational

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

““The” Right ThingThe” Right Thing There may not be any one right thing There may not be any one right thing

to do. It depends. to do. It depends. It is the nature of collective choices It is the nature of collective choices

that they are unitary: One defense that they are unitary: One defense budget, one standard for pollution, budget, one standard for pollution, and so on.and so on.

Asking “What Will We Do?” begs the Asking “What Will We Do?” begs the question. The real question isquestion. The real question is… …

Why Do You Think There is a ‘We’?Why Do You Think There is a ‘We’?

P.J. O’Rourke—Information and P.J. O’Rourke—Information and Scope Problems of MRScope Problems of MR

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

Step back for a moment….Step back for a moment….The Fundamental Human The Fundamental Human

ProblemProblem(according to Munger)(according to Munger)

How can we construct or How can we construct or preserve preserve institutionsinstitutions that make that make individual individual self-interestself-interest not not inconsistentinconsistent with the common with the common goodgood??

Origins of Government Origins of Government InstitutionsInstitutions

What if we all wanted the same thing? What if we all wanted the same thing? Would government even be Would government even be necessary?necessary?

It would. Because we It would. Because we dodo all want the all want the same thing: same thing: more….more….

On disagreement, Charles IV: On disagreement, Charles IV: ““My cousin Francis and I are in perfect My cousin Francis and I are in perfect

accord—he wants Milan and so do I.”accord—he wants Milan and so do I.”

Two Approaches to Solving the Two Approaches to Solving the “Fundamental Problem”“Fundamental Problem”

MadisonianMadisonian

““Ambition must be made to counteract Ambition must be made to counteract ambition…”ambition…”

RousseauvianRousseauvian

Transform the self, solve the problem Transform the self, solve the problem of of amour propreamour propre. Inscribe the law on . Inscribe the law on the hearts of men. Some the hearts of men. Some preferences are better than others.preferences are better than others.

Madisonian InstitutionsMadisonian Institutions

Markets—Smith’s bakerMarkets—Smith’s baker Politics—Federalist #51: Politics—Federalist #51:

Men are not angelsMen are not angels

Men are not ruled by angelsMen are not ruled by angels

““Ambition must be made to counteract Ambition must be made to counteract ambition…”ambition…”

But it is asked how a man can be both free But it is asked how a man can be both free and forced to conform to wills that are and forced to conform to wills that are not his own. How are the opponents at not his own. How are the opponents at once free and subject to laws they have once free and subject to laws they have not agreed to?not agreed to?

I retort that the question is wrongly put. I retort that the question is wrongly put. The citizen gives his consent to all the The citizen gives his consent to all the laws, including those which are passed in laws, including those which are passed in spite of his opposition, and even those spite of his opposition, and even those which punish him when he dares to break which punish him when he dares to break any of them…. (From any of them…. (From The Social ContractThe Social Contract))

Democracy Democracy Unbound….RousseauUnbound….Rousseau

When in the popular assembly a law is When in the popular assembly a law is proposed, what the people is asked is not proposed, what the people is asked is not exactly whether it approves or rejects the exactly whether it approves or rejects the proposal, but whether it is in conformity proposal, but whether it is in conformity with the general will, which is their will…. with the general will, which is their will….

When therefore the opinion that is contrary When therefore the opinion that is contrary to my own prevails, this proves neither to my own prevails, this proves neither more nor less than that I was mistaken, more nor less than that I was mistaken, and that what I thought to be the general and that what I thought to be the general will was not so. will was not so.

If my particular opinion had carried the day I If my particular opinion had carried the day I should have achieved the opposite of what should have achieved the opposite of what was my will; and it is in that case that I was my will; and it is in that case that I should not have been free.should not have been free.

Democracy Democracy UnboundUnbound….….

Loyal Opposition?Loyal Opposition?This conception of democracy is logical. The This conception of democracy is logical. The

actions of government are driven by the people; actions of government are driven by the people; the general will is sovereign. Opposition to the the general will is sovereign. Opposition to the general will is treason, and must be punished. general will is treason, and must be punished. No No needneed for two parties: for two parties: only one general willonly one general will..

All those countries with “Peoples’ Democratic All those countries with “Peoples’ Democratic Republic of ___” were not perversions of Republic of ___” were not perversions of democracy, but examplars. That is what pure democracy, but examplars. That is what pure democracy, with no limits on scope, looks like. democracy, with no limits on scope, looks like. Cannot be otherwise.Cannot be otherwise.

Democracy, in and of itself, is an attractive Democracy, in and of itself, is an attractive concept that concept that must constitute a recipe for must constitute a recipe for tyrannytyranny, unless the scope of collective , unless the scope of collective sovereignty is strictly limited.sovereignty is strictly limited.

Che Guevara’s “Man and Che Guevara’s “Man and Socialism in Cuba” (1965).Socialism in Cuba” (1965).

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

A movie: Pure Democracy in A movie: Pure Democracy in ActionAction

Coherence and LegitimacyCoherence and LegitimacyCan a group of people who disagree come Can a group of people who disagree come

to a consensus? How would this work? to a consensus? How would this work? Why would we believe that the Why would we believe that the “consensus” is any more than an “consensus” is any more than an imperfect choice?imperfect choice?

Do the choices of majorities tell us Do the choices of majorities tell us anything about “the right thing to do”? anything about “the right thing to do”?

Is there such a thing as “the majority,” Is there such a thing as “the majority,” which we just have to discover through which we just have to discover through voting or some political process?voting or some political process?

I want…you want…what do I want…you want…what do wewe want? want?

Problem of the U.S. in IraqProblem of the U.S. in Iraq

Democratic Choices: War in Democratic Choices: War in IraqIraq

You’ve got to help me out here…play along!You’ve got to help me out here…play along!

Preferences and beliefs, on the little card. Preferences and beliefs, on the little card. REALLY! Accept the premise, and act like REALLY! Accept the premise, and act like those are your preferences. Three choices:those are your preferences. Three choices:

No war: No war: NN

Aggressive war: Aggressive war: WW

Police/political means: Police/political means: PP

Choices: War in IraqChoices: War in Iraq

One possibility: isolationist variant of Powell One possibility: isolationist variant of Powell doctrinedoctrine

N > W > PN > W > P

We should not get involved. We should not get involved.

But, if we do, we should go in with But, if we do, we should go in with overwhelming force.overwhelming force.

Worst thing is to expose our troops/workers in Worst thing is to expose our troops/workers in a limited police action, depend on the U.N.a limited police action, depend on the U.N.

Choices: War in IraqChoices: War in IraqAnother possibility: Rummy World Another possibility: Rummy World

W > P > NW > P > N

Iraq/Saddam is an imminent threat, will Iraq/Saddam is an imminent threat, will develop WMD. develop WMD.

If not war, then must vigorously pursue If not war, then must vigorously pursue sanctionssanctions

Worst thing is to do nothing, relax Worst thing is to do nothing, relax sanctions and let Iraq become nuclear sanctions and let Iraq become nuclear powerpower


Final possibility: Prudent DoveFinal possibility: Prudent DoveP > N > W P > N > W

Let sanctions and inspections do their Let sanctions and inspections do their work, because Iraq is a potential danger work, because Iraq is a potential danger to its neighbors and the world to its neighbors and the world

We have no good claim to just war, so next We have no good claim to just war, so next best is to do nothingbest is to do nothing

Worst thing is to use war against a nation Worst thing is to use war against a nation that has made no overt attack on the U.S.that has made no overt attack on the U.S.

Choices: War in IraqChoices: War in IraqSo…we have disagreementSo…we have disagreement

1.1. Prudent dove wants to use P, police Prudent dove wants to use P, police actionaction

2.2. Rummy wants warRummy wants war

3.3. Isolationists would prefer to stay far Isolationists would prefer to stay far away from foreign entanglements, so away from foreign entanglements, so do nothing.do nothing.


Let’s use “democracy,” the pure Let’s use “democracy,” the pure kind where the people make the kind where the people make the choice directly. choice directly.

First, let’s decide whether to use First, let’s decide whether to use force, or do nothing….force, or do nothing….

Vote P vs. W to decide which activity Vote P vs. W to decide which activity is better, and then vote that is better, and then vote that against N. That way, we are against N. That way, we are comparing the best “do comparing the best “do something” against “do nothing.”something” against “do nothing.”

Choices: War in IraqChoices: War in IraqConsider what just happened. Simply Consider what just happened. Simply

by changing the order in which we by changing the order in which we consider the alternatives, I could consider the alternatives, I could generate as the “winner” any one of generate as the “winner” any one of the three alternatives.the three alternatives.

Choosing the agenda, then, is Choosing the agenda, then, is tantamount to choosing the outcome.tantamount to choosing the outcome.

Is this just a conjurer’s trick, or does it Is this just a conjurer’s trick, or does it tell us something about democracy?tell us something about democracy?

Choices: War in IraqChoices: War in IraqIf there are three (or more) If there are three (or more)

alternatives, and there is alternatives, and there is disagreement, then democracy disagreement, then democracy may be radically indeterminate.may be radically indeterminate.

More simply, there is no correct More simply, there is no correct answer to the question, “What answer to the question, “What do the people want?”do the people want?”

In fact, In fact, some majority opposes some majority opposes every alternativeevery alternative..

Choices: War in IraqChoices: War in IraqHere is the problem:Here is the problem:

I/PI/P RummyRummy Prud DovePrud DoveNN WW PP BestBestWW PP NN MiddleMiddlePP NN WW WorstWorst

Majority preferences:Majority preferences:W > P > N > WW > P > N > WEndless, infinite cycling over alternatives. Endless, infinite cycling over alternatives.

Not a tie, but a literal perpetual motion Not a tie, but a literal perpetual motion machinemachine

But this is nonsense: meetings But this is nonsense: meetings endend

That is what should terrify you: meetings end, and That is what should terrify you: meetings end, and things get decided. The point is that we are rarely things get decided. The point is that we are rarely presented with three or more alternatives. We presented with three or more alternatives. We usually are presented with two. How are those two usually are presented with two. How are those two chosen?chosen?

The “Charney Revolution”: coalitions form, The “Charney Revolution”: coalitions form, charismatic people take power. Not the will of the charismatic people take power. Not the will of the people, but the force of will of some demogogue or people, but the force of will of some demogogue or tyranttyrant

If the rules matter to this extent, that means that If the rules matter to this extent, that means that procedures, not preferences, determine outcomes. procedures, not preferences, determine outcomes. And elites control procedures….And elites control procedures….

Democracy works fine…. Democracy works fine…. So long as everyone agreesSo long as everyone agrees

But if there is disagreement, and at least three But if there is disagreement, and at least three alternatives, then a majority opposes every alternatives, then a majority opposes every available choice. So, democracy fails us when available choice. So, democracy fails us when we need it most!we need it most!

Since some choice has to be made, we are left Since some choice has to be made, we are left with an outcome that is either with an outcome that is either

Imposed (tyranny)Imposed (tyranny) Arbitrary (random or procedure-driven)Arbitrary (random or procedure-driven)

In either case, “democratic choice” is chimericalIn either case, “democratic choice” is chimerical

Dictatorship with the trappings of democracyDictatorship with the trappings of democracy

The worst of all worldsThe worst of all worlds

Democracy without Democracy without constitutional constitutional liberalism…liberalism…

1. Rule of law, protections of property and 1. Rule of law, protections of property and libertyliberty

2. Limits on scope of issues within the 2. Limits on scope of issues within the jurisdiction of collective choice…jurisdiction of collective choice…

Democracy without these is the most Democracy without these is the most terrifying kind of tyranny you can imagine. terrifying kind of tyranny you can imagine. Americans, and the West, are confused Americans, and the West, are confused about “good government.” The key is about “good government.” The key is constitutional liberalism, not democracy.constitutional liberalism, not democracy.

More Generally….More Generally….There are limits to what government can do. One of the There are limits to what government can do. One of the

first people to recognize this was the man who put the first people to recognize this was the man who put the dismal in the dismal science, Parson Thomas Malthus. dismal in the dismal science, Parson Thomas Malthus. He discovered a general principle that will sound He discovered a general principle that will sound familiar to everyone: familiar to everyone:

The more you have of something, the more you need!The more you have of something, the more you need! In third world countries, we have found that if all you do is In third world countries, we have found that if all you do is

give people enough resources to make them a little bit give people enough resources to make them a little bit healthier, you increase births. Births continue until the healthier, you increase births. Births continue until the society comes up against the new resource constraint. society comes up against the new resource constraint. People are still starving, but now there are lots more of People are still starving, but now there are lots more of them. Sri Lanka: incredible success story.them. Sri Lanka: incredible success story.

2004: 20 m2004: 20 m 1950: 7.5 m 1950: 7.5 m 1901: 3.6 m 1901: 3.6 m

Malthusian Logic is Malthusian Logic is EverywhereEverywhere

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

You CAN’T Help PeopleYou CAN’T Help People

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


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


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

Rent-SeekingRent-Seeking

If proposals for funding are competitive, If proposals for funding are competitive, instead of pure pork barrel, can get instead of pure pork barrel, can get dissipation or even super-dissipationdissipation or even super-dissipation

HUD-Chapel HillHUD-Chapel HillHUD-CharlotteHUD-Charlotte

Bentham: “In political economy, there is Bentham: “In political economy, there is much to learn, and little to do…”much to learn, and little to do…”

Three “Histories”Three “Histories”

PlatoPlatoShakespeareShakespearePlutarchPlutarch

Plato: DemocracyPlato: Democracy Means Tyranny Means Tyranny

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

Shakespeare’s Shakespeare’s Tragedy of CoriolanusTragedy of Coriolanus: Act II, Sc : Act II, Sc 33

BOTH CITIZENS. The gods give you joy, sir, heartily! (Exeunt BOTH CITIZENS. The gods give you joy, sir, heartily! (Exeunt citizens)citizens)

CORIOLANUS. Most sweet voices!CORIOLANUS. Most sweet voices! Better it is to die, better to starve,Better it is to die, better to starve, Than crave the hire which first we do deserve.Than crave the hire which first we do deserve. Why in this wolvish toge should I stand hereWhy in this wolvish toge should I stand here To beg of Hob and Dick that do appearTo beg of Hob and Dick that do appear Their needless vouches? Custom calls me to't.Their needless vouches? Custom calls me to't. What custom wills, in all things should we do't,What custom wills, in all things should we do't, The dust on antique time would lie unswept,The dust on antique time would lie unswept, And mountainous error be too highly heap'dAnd mountainous error be too highly heap'd For truth to o'erpeer. Rather than fool it so,For truth to o'erpeer. Rather than fool it so, Let the high office and the honour goLet the high office and the honour go To one that would do thus. I am half through:To one that would do thus. I am half through: The one part suffered, the other will I do.The one part suffered, the other will I do.

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

ARISTIDES: FROM PLUTARCH’S LIVES

Documents

The Thing….Itself Michael Munger Duke University November 7, 2005