Jeff’s Newsletter, Volume 6
Welcome to the sixth episode of this newsletter. I love hearing thoughts and reactions from you all. If you think a friend would enjoy this, please feel free to forward it along.
Ben Thompson’s Stratechery blog and podcast are consistently among my favorite places to learn about the business of technology. The content is usually strictly in the Facebook/Google/Microsoft/Oracle realm, so it was striking when this week’s podcast conversation made a hard pivot toward politics. Thompson and James Allworth had started off talking about the newspaper business, discussing a recent argument that maybe newspapers made a big mistake by moving to emphasize online content in the past decade, sowing the seeds of their own destruction. Thompson disagrees vehemently; there’s nothing the newspapers could have done. In his view, the main implication of the Internet (in many industries) has been a massive increase in competition. By writing a news/analysis blog, Ben Thompson is competing directly with newspapers. My time is limited, and I’d much rather read Stratechery than the San Francisco Chronicle’s business section. From this conversation they moved on to discuss disruption more generally–yes, I hate to use that smarmy word, disruption, but in this case it’s technically appropriate. From a societal perspective, the paradox of disruption is that it brings us great new stuff while leaving incumbents in the lurch. Wishing for the best of both worlds, Thompson got exasperated: “Where’s the pro-safety net, anti-regulation party?”
There’s a rallying cry for my own brand of politics. And I think this is more than an arbitrary pair of pillars for a political philosophy. I would reframe “pro-safety net, anti-regulation” as a simultaneous attentiveness to positive and negative conceptions of liberty. As you may begin to notice, nearly everything I write is ultimately about positive and/or negative liberty, so I won’t say much more on this right here. But, for the uninitiated, negative liberty is the absence of coercion or constraint; positive liberty is the opportunity to take control of one’s life and act out one’s free will. Those who rail against excessive regulation are concerned about negative liberty; those who call for social supports seek to build up positive liberty. Figuring out how to balance these two goods has, at certain narrow idyllic windows in our past, been the focus of our politics.
2. Thanks, Obama
Of course, it’s difficult to speak coherently about “regulation” as the term refers to many different things. Two of the best reasons to regulate, in my view, are (a) to block monopolistic consolidation, and (b) to limit externalities that threaten public health and safety. Recent essays reviewing the Obama administration’s efforts in two major industries remind us that, thanks to mighty lobbyists, we do too little of either.
First, ProPublica has a thoroughly reported piece on the Justice Department’s process of approving the American-United airline merger. Let me be on the record for the hundredth time that ProPublica is the crown jewel of American journalism. The story details how the Justice Department went from “Increasing consolidation among large airlines has hurt passengers” to approving the deal with few restrictions just a few months later. Rahm Emanuel was a key player: he wrote a letter to top Justice officials arguing in favor of the merger. The letter, it turns out, was drafted by American’s lobbyists. In the past I’ve been reluctant to sign on when people call Rahm and similar Democrats corporate shills, but it’s hard to turn a blind eye here. And politicians weren’t the airlines’ only allies. The flight attendants union was an important supporter of the merger. At least one reason for their support became clear when the union chief quit and took a new job as a consultant for American.
Second, Michael Pollan writes about the administration’s failure to take on Big Food despite Michelle Obama’s symbolic commitment to the issue. The Department of Agriculture has an antitrust enforcement division which would like to cut down on anticompetitive pricing by meat, dairy, and seed behemoths. But Congress has stripped funding from the division several years in a row. In line with one of Michelle Obama’s signature issues, the administration proposed a set of marketing rules to limit how much fat and sugar could be marketed to children. It’s no surprise that the Republican House killed the proposed guidelines, but even the food industry’s chief lobbyist for household grocery brands was “frankly surprised the administration never came back with a revised set of guidelines.” Pollan isn’t too hard on the Obamas, acknowledging that public opinion lags behind their ambitions. I’m filing this away as one unremarkable example of what we mean when we talk about the disproportionate lobbying effort devoted to special interests instead of the public.
3. No one’s down with TPP
On Ezra Klein’s podcast, Joseph Stiglitz added one data point to my growing belief that all Baby Boomer progressive intellectuals default to the same set of solutions for income inequality. I probably owe the germ of this idea to Yuval Levin, who in Fractured Republic accuses conservatives of being stuck in nostalgia for the Reagan era and liberals, stuck in nostalgia for the Great Society. Whenever I listen to Stiglitz, or Robert Reich, or Bernie Sanders, I find them extremely persuasive on the role of financialization and financial deregulation in generating the inequality we know today. But it’s difficult to recreate the past by rolling back the elements of the last 40 years you don’t like and expecting all else to be the same. This is part of what I hear when these thinkers talk about solutions, which usually center around increasing the minimum wage and reinvigorating unions. To be clear, I don’t think these are necessarily bad ideas. I also know plenty of young people who are enthusiastic about them! But I am very skeptical that they are sufficient to address the effects of globalization and technological change that have also contributed to today’s income distribution, much less the further effects to come. Klein tried to tempt him in a more imaginative direction with a question about basic income. Stiglitz’s response was tepid, offering some praise but not much interest.
By the way, here’s a tremendous Atlantic story (h/t Catherine O.) on how Democratic politicians of the Boomer era abandoned populism. This is intimately related to my previous posts about Brandeis, Humphrey, and rise of corporate liberalism. It’s also useful background for why someone like Stiglitz instinctively reaches for Big Labor (rather than, say, trust-busting) as a counterweight to Big Business. The author makes a compelling case that conservative legal scholar Robert Bork’s ideas–monopolies are good as long as they deliver low prices–successfully infiltrated the Left. I’d like to read more about this ideological shift; David Frum has a book about the ’70s that might be useful here.
The most interesting part of the conversation was a detailed back-and-forth over the Trans-Pacific Partnership. If you’ve been following the TPP debate, you know that the most contentious issue (the basis for Elizabeth Warren’s vocal opposition) is the Investor-State Dispute Settlement (ISDS) system. This is a legal framework that lets multinational companies sue governments (in a private court judged by corporate lawyers) whose regulations hurt their profits (BuzzFeed had the best investigation into how this works). Klein pressed Stiglitz on the ISDS issue; Obama administration officials have acknowledged concerns and assured him (Klein) that the agreement allows the United States to regulate on a set of enumerated health, safety, and other grounds without fear of suit. Stiglitz brought up a passage that makes an exemption for regulating tobacco companies–why does there need to be such an exemption, he countered, if we’re allowed to regulate other industries (see one answer here)? As you can tell, this quickly got deep in the weeds. It left me thinking that nobody but an international trade lawyer could possibly make an informed decision to support or oppose TPP. One consequence of regulating based on exceptions and carve-outs, it seems, is that democratic debate becomes impossible. This reminds me of a story I heard that Milton Friedman claimed to oppose NAFTA because it wasn’t “really a free trade deal”–a real free trade deal could be printed on a single sheet of paper.
4. IQ: No longer racist; still not helpful
The book Hive Mind argues that while IQ may be a problematic measure for individuals, it’s a very reliable measure for entire nations and can predict all sorts of national development outcomes. By skipping over discussion of individual-level IQ, Garett Jones pulls of the tricky accomplishment of turning one of the most controversial, taboo topics in social science into fair grounds for research. Jones talks about IQ in a way that sidesteps a lot of the flaws in The Bell Curve. These days, IQ is usually measured with abstract spatial reasoning tests, so it’s probably not a function of language or cultural familiarity with the test. It tends to go up a lot over few generations, so it’s probably not fixed in place based on race. What is the cause of IQ gains? This is the huge elephant in the room throughout the book. Childhood nutrition seems to play an important but small role. The mental stress of poverty may be important. Education seems not to make much of a difference. The big question for me–the question that determines whether this book matters, whether it’s worthwhile to talk about IQ–is whether increasing IQ is a mechanical consequence of all the other development policies we already like. In other words, does focusing on IQ imply any different policies? Hive Mind has no answers here. Instead, most of the book is devoted to exploring why entire nations of high-IQ people might be better off than the sum of their parts would suggest. I’d summarize the argument like this: high-IQ people are able to obey economic rationality. So much of economic theory demands that people make calculations: of the optimal cooperative outcome in a prisoner’s dilemma, of the most efficient Coasean bargain, of the most rational way to vote, and of the most rational way to govern. In all of these situations, people must consider the long term and deny immediate gratification. Individual-level IQ research suggests that IQ and patience are highly correlated, so by extension Jones argues that entire high-IQ nations will be patient in their collective affairs. I find this a painfully reductive way to think about the formation of civic and political institutions. Jones has strong evidence that, at the national level, IQ is correlated with prosperity and good governance. But I’m going to need a better argument than a reification of rationality to consider it causal.