Jeff’s Blog #15

Jeff’s Blog, Volume 15

I’m owning up to calling it a blog because there’s not much news in here. If only blogging weren’t dead.

1. Dynamics of the good life
Edmund Phelps’s Mass Flourishing is an ambitious attempt to place dynamism at the center of economic history, economic policy, and conceptions of the good life. Phelps is Nobel winner in economics, although not for the material discussed in this book, which became his obsession late in life (this was published in his 80s!). His historical thesis is that the period 1820-1960 was the golden age of modern capitalism because it was a time of dynamism, which he defines as the propensity for ordinary people to tinker, build businesses, and rapidly succeed and fail, creating the modern world as byproduct. His political thesis is that in the postwar period, governments inadvertently clamped down on dynamism and replaced it with corporatism, which is his unwieldy catch-all term for the welfare and regulatory state. His philosophical thesis is that dynamism is important not just because it contributes to growth but because it is the essence of the good life. He translates Aristotle’s term eudaimonia as “flourishing” rather than “happiness” and traces a lineage of vitalism through quests in early modern literature to Jefferson’s “pursuit” to Nietzsche’s sense of will fulfillment to NASA’s influence on the midcentury American imagination. I found myself most persuaded by the historical argument, intrigued and miffed by the philosophical one, and not much persuaded on the political.Joel Mokyr, a leading historian of the Industrial Revolution whose research Phelps uses selectively, has an excellent review that accords with my reaction to the book, but with greater eloquence and authority. As the Mokyr review suggests, Phelps tends to skip over well-known, well-respected areas of scholarship that either complicate his thesis or beat him to the punch. The strangest might be his discussion of Schumpeter’s Capitalism, Socialism, and Democracy (1942), the founding text of the perspective that innovation and new ideas are the essence of economic life. Phelps is committed to denying that Schumpeter really appreciated the nature of innovation, because early in his career Schumpeter held that innovation came only from science, not from businesspeople tinkering. By the way, this is where Phelps misuses Mokyr–the lesson of Mokyr’s work is that theoretical science and amateur tinkering were symbiotic during the Industrial Revolution, not that tinkering alone drove innovation. In any case, Phelps brushes off the fact that Schumpeter, influenced by Hayek, came around to this more balanced view in the famous 1942 book. The historical chapters walk through the many inventions of modern capitalism that made risk-taking possible: joint stock companies, merchant banks, limited liability, urbanization, social insurance. This is all very interesting if familiar; you might think amid so much discussion of economic institutions there would be reference to Why Nations Fail (in fairness published only a year earlier), or, amid discussion of a “culture of dynamism,” reference to Deirdre McCloskey’s work on bourgeois virtues. I did find Phelps’s strict definition of dynamism useful. He argues that “indigenous innovation” is essential, so countries that copy outside innovations and pursue catch-up growth don’t count as dynamic.

There is some reason to believe that our economy is now less dynamic than a century ago. The rate of small business creation has been declining, as shocking as that might be to those of us in Northern California. But Phelps’s arguments about post-war politics didn’t give me a strong insight into why. The big problem is that his concept of “corporatism” is too broad. It’s about regulatory capture, and interest group politics, and the welfare state, and industrial policy. Mussolini’s Italy is the original and perhaps most coherent example of corporatism–but European social democracies and the U.S. count too (at times he uses a sliding scale of corporatism, but if the U.S. is the least corporatist, why is this the right concept for addressing American dynamism?). Although Phelps is very sour on regulation, it’s important to note that he isn’t your basic Reaganite. For one, his timeline doesn’t line up with familiar story about over-regulation; his golden age was closer to the 1880s than 1980s. He also has creative, heterodox views on the relationship between finance and innovation. He wants more lending and less derivative speculation, and even thinks passive mutual fund management is bad because it inhibits active identification and funding of the best companies (see Bhide (1993) for more on this). Finally, Phelps thinks dynamism requires cultural nourishment in addition to the correct regulatory environment. To this end he dislikes a version of the American Dream articulated by both Clintons and Obama: “If you work hard and play by the rules, you’ll be rewarded.” Phelps objects the mechanical guarantee. He’d rather everyone believe that it requires special insight, vision, and good fortune to innovate and build something new.

And this brings us to Phelps’s philosophical vision, one which I found both exciting and incomplete. He is attracted to a pragmatist conception, which emphasizes gaining practical knowledge, learning to solve problems, and developing one’s capabilities (see Voltaire, Dewey, Rawls, Sen). But he finds this insufficiently exciting, lacking dynamism, and so turns to the vitalist conception I mentioned above. Throughout the book he speaks of “modern culture” as one inspired by the vitalist ethic–in contrast to “traditional culture” which values home, family, tradition, and loyalty. This dichotomy leads to his strangest view: that people who do not participate in the dynamic parts of the economy are actively choosing traditional culture, and therefore do not deserve social transfers created by taxing dynamism. It would be unjust to “siphon some of the rewards of the least advantaged of the economy to those who exit from the economy for another life, as if the latter were disadvantaged collaborators. They are not disadvantaged, just different.” Those classified as “different” include caregivers, non-profit employees, the clergy, and stay-at-home parents. No doubt this strikes you as wrong. The basic flaw, I think, is his false separation of the modern and traditional spheres. Community and tradition are more compatible with dynamism than he thinks. Risk-taking is possible in the context of education, social support, and nurturing. Moreover these values are certainly compatible with pragmatism, a conception of the good life I find more attractive in the first place.

2. Sit under your own vine and fig tree
For a more compelling vision of the good life and critique of how modernity inhibits it, I heartily recommend Wendell Berry’s The Unsettling of America: Culture and AgricultureOn one level this is an indictment of agribusiness and a paean to small family farming which helped launch some of the trends in small, local food production that we know and love. I don’t know very much about those topics but learned some from Berry’s introduction. What I could really appreciate was Berry’s wisdom on work, ownership, and progress. “The disease of the modern character is specialization:” the disintegration and scattering of the various elements of character: workmanship, care, conscience, responsibility. The specialist is competent to produce nothing but money (see Marx and Tonnies here; Durkheim for a slightly more optimistic view on what he calls “organic solidarity”). And community wholeness is impossible without personal wholeness. I find Berry’s diagnosis of specialization and its consequence genius. He says “We have made it our overriding ambition to escape work, and as a consequence have debased work until it is fit to escape from.” Specialization helps debase work, and, I would add, makes work fit for automation by breaking it into component parts. This got me thinking about generalist work as a possible antidote for the threat of automation. Generalist work can be rediscovered in preventative health work, in teaching and counseling, and in nurturing land and community (a good tweet: Sean McElwee: “the problem isn’t that we’re running out of work, it’s that we’re running out of “jobs” considered valuable by capitalists. different things”).

Berry also has important things to say about place and home. “As many as possible should share in the ownership of the land and thus be bound to it by economic interest, by the investment of love and work, by family loyalty, by memory and tradition” (this would have been a good framework for my discussion of American Indian land rights last week). He says the history of our time has been the movement of the center of consciousness away from the home: “When people do not live where they work, they do not feel the effects of what they do.” Once, the governing human metaphor was pastoral: the point of life is to nurture the land. The modern metaphor is the machine: “All of Creation is raw material to be transformed into a manufactured Paradise.” And while more powerful technologies require more advanced skills of moral restraint to be used properly, the demands of immediate use tend to overwhelm all else. Berry’s discussion of “housewifery” was so surprising and thought-provoking that I couldn’t decide whether it was as regressive as it seemed at first blush; he says running a home was once a complex and noble discipline, rife with pragmatist problem-solving and flourishing, but has been reduced (by the postwar era, that is) to the monotony of purchasing (the regressive part is just the notion that only women should be responsible for this work, which itself was less of a division on traditional farms). Berry supports some of these ideas with loving exegeses of The Odyssey, Confucius, and Andean multi-altitude agriculture. My roster of intellectual heroes now includes two Kentuckians committed to liberty, democratic anti-authoritarianism, and the virtue of smallness: Louis Brandeis and Wendell Berry.

3. Home is where the deployment of credit is
Matt Stoller argues that home isn’t just the centerpiece of human identity and dignity, but the linchpin in the American social contract–a contract that recent housing policy and the foreclosure crisis have eroded. In this 2012 paper “The Housing Crash and the End of American Citizenship,” Stoller traces American housing policy through the 20th century. In the postwar era, personal savings, mortgage lending, the banking system, and Federal Reserve management were tightly linked: “Americans put their savings into regulated savings institutions, which made mortgage and commercial loans. This allowed the Federal Reserve to have a remarkable degree of control over lending and borrowing in the economy, or the “transmission belt” from finance to the real economy.” Housing was a “non-controversial fulcrum for credit deployment,” in contrast to the present where there is little bipartisan consensus on how to spend money. He says the first major change to this social contract came in the Reagan era, which brought stagnant wages yet higher credit availability. “The fundamental change in the banking system was that control of credit creation passed from public to private entities.” Mortgage financing relied on securitization and nonbank originators. Stoller’s story of the housing market collapse is that the Reagan model of credit growth substituting for wage growth collapsed under its own weight. He has harsh words for the Obama administration for not putting a strong mortgage modification program (to save underwater borrowers) into the stimulus package. The HAMP program was a step in this direction, but it gave banks discretion on which mortgages to accommodate and only ended up helping a small share of underwater borrowers (here was David Dayen, the expert on this stuff, criticizing HAMP back in the day). Stoller’s policy suggestions are the revival of the New Deal-era HOLC program to write down housing debt to manageable levels and changing bankruptcy laws to empower judges to write down mortgages on primary residences. But Stoller was mostly pessimistic, shouting that the social contract had broken before most of us were aware of such a possibility. He said the new contract would likely be a more authoritarian model. All in all, I have concluded since the election that Matt Stoller is one of the people I should have been listening to for years (remember this essay too).

4. The word ergodicity really isn’t necessary to explain this
Nassim Taleb is reliably one of the most frustrating intellectuals I’m aware of. He is unjustifiably pompous, claims other people’s ideas as his own, and is uncharitable with his critics and peers. But he does have some brilliant ideas, and so I find myself unable to ignore him entirely. Take the most recent example, this essay on inequality and Piketty. I’ll start with the good stuff. Taleb contrasts static and dynamic inequality. Dynamic inequality accounts for a person’s movement across the income distribution over the life cycle. Persistent dynamic inequality–what Taleb sees as truly unjust–would have the rich remain rich, and the poor remain poor. Instead, “The way to make society more equal is by forcing (through skin in the game) the rich to be subjected to the risk of exiting from the one percent.” He cites evidence from Hirschl and Frank that this appears to be the current state of things: 12% of Americans find themselves in the top 1% of incomes for at least a single year, and 56% spend at least a year in the top 10%. I think this is an important distinction and we should all contemplate it, but I don’t find these numbers as devastating to the conventional wisdom on inequality as Taleb does. Most importantly, we already know wealth inequality is much larger and more persistent than income inequality (see Piketty & Zucman 2013, 2014). Second, we shouldn’t be surprised that people have major outlier years in the positive or negative direction. Finally, now that we’re thinking about the trends of income changes over the lifetime, the next question should be whether there is inequality in those trajectories themselves.

Where Taleb gets out of hand is lambasting Piketty and “the Mandarin class.” Piketty’s theory about increasing returns to capital in relation to labor can’t be “wrong,” as Taleb states without justification, insofar as it was a ream of data, not a theory (although it can be (a) disproportionately related to the housing stock and (b) unlikely to persist, as Matt Rognlie has argued). But Taleb’s main issue is that Piketty’s methods were flawed. Taleb’s point, which he has detailed in two papers, is that surveys of top incomes tend to be upwardly biased because of sampling error in the long tail. Taleb has proposed a better sampling procedure to account for this. The main thing to notice here is that there isn’t anything to notice here; this is the routine process of people proposing slightly better methods, not some earthshaking invalidation of Piketty’s findings. Indeed, Piketty happily cites Taleb’s method in a subsequent paper. The irony is that this methodological critique doesn’t even apply to Piketty’s main data source: the critique is about survey sampling, while Piketty uses administrative tax data where possible. Certainly nothing justifies Taleb’s rant about how Piketty, Krugman, and the whole economics profession are ignoring his smoking gun, even though it was “about as ironclad a piece of work one can have in science.” I think a crucial side of intellectual work is learning what you can from anyone, being charitable to opponents, and recognizing that even the geniuses stand on the shoulders of giants. Taleb seems to have no appreciation for this. Keep this in mind when he mentions other people’s ideas in Black Swan and Fooled by Randomness.

Jeff’s Newsletter #14

Jeff’s Newsletter, Volume 14

Hey there, readers old and new. If we haven’t talked in awhile (or ever), I’d love to hear from you. Let me know what you’re enjoying about this newsletter, what you’d like to see more of, any suggestions on structure, what you’re reading and thinking about these days. And if you’re a fan, add your friends to the list.


1. Education without end
I am often guilty of a certain reductionism where, if you look close enough, every human ill is really a problem of education. If we need more creative workers, more deliberative citizens, more nurturing parents, or more noble leaders, then surely better schooling is the only way to mold them. At the same time, I try to be mindful of the warning I once encountered in an education reform book: that we have always demanded too much from our school system. We ask it to reduce inequality, build civic consciousness, integrate immigrants, out-perform other nations, and meanwhile do the frontline work of the public health and social services systems. But if this is too much to ask, Paulo Freire, the late Brazilian philosopher, goes several steps further in arguing that education should be, above all, the site of moral and political development. Of course you’ve heard that education should be a lifelong endeavor, but Freire provides a rigorous grounding for this idea in Pedagogy of Freedom. He says the human condition is defined by a “radical unfinishedness.” Because we are unfinished, we are continuously immersed in the process of “becoming oneself” (or, maturing). The fuel for this process of becoming is “ingenuous curiosity”–the intuition that we don’t understand the world. We advance as learners when we recognize our ingenuous curiosity as such and begin to refine it into a self-aware, critical epistemology. I took this point as an argument for why some people fall off the lifelong learning track. Naive curiosity is naturally childlike; if it doesn’t get validated or formalized before adulthood, intellectual complacency will set in and humility drain away.

From these principles, Freire expounds a vision of ethical teaching. He rejects what he calls the “banking model” of filling students with knowledge as so many empty vessels (here, a debt to Rousseau). “To teach is not to transfer knowledge but to create the possibilities for the production or construction of knowledge.” Because the teacher is a human, and unfinished, he or she must be open-minded, prepared to be wrong, and eager to learn from the students as an equal. Most of all, the teacher must realize that “education never can be neutral or indifferent in regard to the reproduction of the dominant ideology.” Politically neutral education produces politically neutered citizens, prepared to accept their roles in society without question. Freire is beloved in progressive education circles, but I’d like to see if anyone argues against his principles, or at least against their practical application. Also, if you know a school with an unusual emphasis on moral or political education, I’d love to hear about it. The Democracy Prep schools may be one example.

2Against monopoly, against antitrust?

Let me share two takes on the issue of monopoly and antitrust law: both thought-provoking, neither fully convincing. On Ezra Klein’s podcast, Tim Wu spoke up for the view that corporate consolidation and corporate power is a major social problem. I agree. His preferred solution is an ad-hoc regime of trust-busting, as he spoke cavalierly about several large companies “we” (he does some work for the FTC) should break up. Klein was, correctly, somewhat horrified at the level of discretion Wu’s approach would grant to the federal government, yes that same government now in the capable, tiny hands of Donald J. Trump. It seems obvious that the companies with the best lobbyists would avoid dismemberment and the enemies of the regime would land on the chopping block. To be fair, lobbyists played a major role in greasing the wheels of corporate consolidation “even” under the Obama administration, as I discussed a few weeks ago re: the U.S. Air / American merger.

Although on opposite sides of the political spectrum, Klein’s concerns and my own align us with Edwin Rockefeller, author of The Antitrust Religion. I am fundamentally opposed to Rockefeller on the role of  big business in society–“We do not need to fear corporate consolidation”–but found myself sympathetic to his complaints about antitrust law. Actually, he argues that there is no coherent thing called antitrust law. There are two foundational statutes, the Sherman Act of 1890 and Clayton Act of 1914, neither of which clarify the key issues: how to distinguish between contracts that “unreasonably constrain trade” and those that don’t; how to distinguish between “willful acquisition of monopoly power” and effective business practice; and how to tell whether a merger may lessen competition. In place of the rule of law, Rockefeller sees the rule of men: capricious regulators, the lobbyists who ply them, and a cabal of antitrust lawyers who revel in the unpredictability of the whole affair. He shows how the government’s attitude toward mergers has vacillated over the decades, from the Warren Court which blocked every major merger for over a decade to the merger frenzy of the late 90s and 2000s. In my view Rockefeller shouldn’t be complaining, since his side has largely won. Starting with Robert Bork’s antitrust revolution, the economistic focus on consumer welfare (which tends to justify consolidation à la Wal-Mart) has trumped all other concerns.

In reading about antitrust, it struck me how much the entire paradigm is concerned with prices, and how they are affected by various forms of corporate organization (e.g. horizontal/vertical integration, etc). But what if prices are not the only important consequence? The Brandeisian critique of monopoly has always been about the harmful effects on small business, on the one hand, and the political system, on the other. I agree with that focus, but I would further argue that even if we restrict our focus to consumers, monopolists engage with consumers not just through price-setting but through data collection. Increasingly, consumer transactions run in two directions: consumer gets a product, corporation gets data. In this setup, the corporation takes on a governance and surveillance function beyond its role as merchant. I’d like to think more about the implications of monopoly on personal privacy and autonomy.

3. In land we trust
Ok, now that I’ve given you the usual critical take on big business, it’s big government’s turn. I’m embarrassed to confront how little I know about the American Indian experience, especially in the modern era. Sometimes it’s nice to jump into a topic from a highly opinionated angle; although you’ll start off with a bias, this strategy can draw your attention to the interesting debates more quickly than a more neutral introduction would. With this justification, at least, I was fascinated to listen to Terry Anderson’s take on the economics of modern American Indian life, on EconTalk. Anderson is a critic of the reservation system, particularly the way in which it falls short of providing real property rights. Reservation land is held in trust by the federal government. While this setup was originally intended to sequester Indians on their land, it is now more optimistically framed as “protecting” the land. In either case, people on reservations cannot be property owners. They can’t get a mortgage, because no bank could seize the land in the case of foreclosure. “We are the highest regulated race in the world,” says a Crow official in this Atlantic article.

Anderson’s preferred path forward would capitalize on the fact that Western reservations are disproportionately located on top of energy reserves: “almost 30 percent of the nation’s coal reserves west of the Mississippi, 50 percent of potential uranium reserves, and 20 percent of known oil and gas reserves—resources worth nearly $1.5 trillion, or $290,000 per tribal member.” From this angle, the Standing Rock Sioux vs. Dakota Access Pipeline saga takes on a dark irony uncomfortable to our liberal sensibility that environmental protection and disadvantaged groups should be on the same side. Anderson points out several other tribes that have managed to gain ownership over their land and profit from leasing pipeline rights or even operating their own oil wells and pipelines. This is a deep, tricky issue! It’s one of the most striking illustrations I’ve seen of the tension between tradition and modernity. How do you balance the prospect of selling out your heritage with the reality that American Indians face the highest poverty rate of any ethnic group? Historically, Americans are collectively responsible for the physical, economic, and apparently legal segregation of Indians. Now, the Trump administration is interested in privatizing energy-rich Indian land. A new low of mistreatment or the first step to rectification? I have little faith in how the details will work out, but must admit I’m more sympathetic to the idea than I would have been last week.

4. Polar vortex
Probably the most intelligent conversation I heard this week was between Ezra Klein and Ta-Nehisi Coates, largely focused on Coates’s Atlantic blockbuster retrospective on the first black president. A theme that really stood out to me–and apparently the subject of Klein’s first book, were he to write it–was the partisan polarization of everything. Klein has been citing this research from Michael Tesler for a few years now which shows how opinions about racial issues became way more polarized during the Obama presidency.


While the divide between Republicans and Democrats on the O.J. Simpson verdict was actually quite slim, something as banal as whether 12 Years a Slave should win an Oscar now splits the parties down the middle. Obama and Trump have both contributed to structuring the two parties along racial lines–Trump deliberately so, Obama simply by existing. But it’s not just race: there was no clear reason why GamerGate should have become a political controversy, or why Republicans’ sentiment about Putin’s Russian should have flipped so strongly in the past few weeks. The sphere of unpolarized topics is precious and rapidly diminishing.

5. When HBR is the best critic of neoliberalism… 
The paragraph of the week comes from an incisive essay in defense of cosmopolitanism (h/t Max):

“While they might sound similar, cosmopolitanism is not the same as globalization. One is a fragile personal attitude, the other is a relentless socio-economic force. One strives to humanize the different, the other to homogenize it. One celebrates curiosity, the other convenience. (Curiosity is often inconvenient.) One is embracing, the other expansive. One is easy to lose, the other hard to stop. Nationalism and globalization are more similar to each other than to cosmopolitanism, that way. And cosmopolitanism is what might help us counter nationalism and humanize globalization, pushing it to be a vehicle of freedom and opportunity for most, not just a privileged few.
That might just be the mission statement I didn’t know I was looking for.

Jeff’s Newsletter #13

Jeff’s Newsletter, Volume 13


1. Never go in against a Sicilian
This week I read a self-help book by Robert Putnam called Making Democracy Work. Putnam, who you may know from Bowling Alone and Our Kids, has spent his career thinking about the interpersonal requirements for a healthy democratic society. Some of the themes in those later, more popular books–social capital, group membership–seem to have been developed here in his academic magnum opus. His basic question is: what are the conditions for creating effective, representative political institutions? It’s a hard question to answer with international comparisons because each country’s history is relatively unique. But modern Italy provided an unusual opportunity: in 1970, Italy was divided into twenty administrative regions, all of which gained significant independent powers. Putnam took this as a natural experiment and sought, over the next 25 years, to determine which regions developed strong institutions and why. His main finding is that the regions with the strongest civic engagement–as measured by number of community and athletic groups, number of newspapers, and electoral turnout (especially for referenda as opposed to candidates who can help you personally)–had the best governments. Things get Hobbesian fast. For the less civic regions, “In the absence of solidarity and self-discipline, hierarchy and force provide the only alternative to anarchy.”

But perhaps this doesn’t satisfy you. Why, after all, do some regions become so “civic” in the first place? If you sense there must be something else going on here, you’re right: all the most civic regions are in northern Italy while the least civic ones are in the south. So 1970 proves an insufficient starting point. Try 1100. For the rest of the book, Putnam races through the last millennium of Italian history in an effort trace cooperative vs. hierarchical forms of social organization back to their roots. So much for the comparative political science, by the way. The basic story is that Italy was, historically, not a single country. You had Frederick II, the Holy Roman Empire, running a feudal state in Sicily and the south while small northern city-states developed banking,  long-distance trade, and mutual aid societies. While northerners learned to rely on one another, the story goes, southerners trusted no one except powerful lords or, later, mafia dons. Putnam: “The relevant distinction is not between the presence and absence of social bonds, but rather between horizontal bonds of mutual solidarity and vertical bonds of dependency and exploitation.” Or, if you prefer: “Never go in against a Sicilian when death is on the line.”

Putnam provides somewhat convincing evidence that regional differences in civic spirit are more stable over time than wealth levels. If you believe his story, you should conclude that small-scale norms of reciprocity and networks of civic engagement are the key to building a democratic society. But in a fickle land, who is brave enough to extend the first hand? And so we return, as always, to the prisoner’s dilemma. Besides all this good fodder for democratic theory, this book helped expand my conception of Italy. It struck me that since most Italian-Americans hail from southern Italy, Americans develop a wildly unrepresentative picture of what Italy is like. For example, Putnam observes strong separation of church and state in northern Italy and even negative correlations between Catholic religiosity and civic life.

2. Material for your next argument with your Boomer parents
A friend shared this post about reading (non-fiction) books vs reading summaries. My argument for reading books is that you’re not just looking for facts, you’re immersing yourself in a worldview or framework for making sense of anything you might encounter in the future. It is in that spirit that I would recommend David Frum’s strange, contrarian book about the 1970s, How We Got Here. This is not the most professional, authoritative history of the decade which I believe was the dawn of our current political situation. For that I would recommend Rick Perlstein’s series of Nixon books, or maybe Jefferson Cowie’s book about the end of labor politics (which is on my list). Frum’s book is strongest as cultural history and polemic. It embodies two worldviews to which I can hardly relate, but which I enjoyed inhabiting for a few days. One: the mind of a cultural conservative disgusted by the laxity, permissiveness, and decadence of America in the malaise of late modernity. Two: the mind of a Baby Boomer, consumed with disdain for his fellows and nostalgic for the Greatest Generation. Frum’s basic position is that the generations forged by the Depression and two World Wars developed an admirable set of values: obedience, loyalty to family and country, thrift, stoicism, faith in God and institutions. The Boomers, born into a world of increasing plenty, squandered these values and replaced them with narcissism, rebelliousness, profligacy, and promiscuity. The 70s were the moment of crack-up: “the rebellion of an unmilitary people against institutions and laws formed by a century of war and the preparation for war.” Vietnam and Watergate loom large in the telling of how Americans lost faith in public life and turned inward to self-fulfillment, but Frum emphasizes many other causes. One that really stood out to me was violent crime, which was the foremost issue on voters’ minds in the early 70s. What’s the story behind the crime wave of that decade? I feel like I haven’t read much about the underlying crime dynamics in the run-up to mass incarceration policies under Nixon and Reagan.

Frum’s narrative is most frustrating when he heaps sarcasm and scorn on women and minorities, a persistent thread in the book. His position is something like: disadvantaged groups surely deserve the rights they won in the 60s and 70s but what a shame that they haven’t made better use of them. Women have the right to get divorced, gay people have the right to have non-marital sex, liberals have the right to integrate schools through busing–but none of this makes a better or more virtuous society. Frum’s misreading of why America turned conservative after LBJ (paraphrase: conservatives just hate handouts to those who aren’t working; race is peripheral) damns the book to irrelevance as political history. I found the argument fairer when Frum turned his ire on the collective instead of subgroups. I’m willing to entertain the notion that California psychobabble, NIMBYism, aggressive tort litigiousness, and a culture of “do what’s right for you” (to mark a few 70s trends) really did mark the birth of a more selfish society. If nothing else, this book provides a slew of entertainingly contrarian ideas. Such as: without the Pentagon Papers there would have been no Watergate, Robert Moses was consistently principled for trampling on the property rights of rich Long Islanders just as much as the rights of Bronx tenement-dwellers, and deinstitutionalization of the mentally ill was irresponsible. Frum also does a remarkably good job illustrating his points with scenes from the popular movies of the day.

3. Regressive era
I have been on something of a Progressive Era Trutherism kick, trying to sort out the admirable, replicable elements of anti-corporate populism from the statist impulses and corporate capture that seem so often to go along with it. Thomas Leonard’s appearance on EconTalk was perfectly timed for all this. In his book Illiberal Reformers Leonard shows how the Progressive economists and sociologists–people committed to minimum wages, redistribution, and the plight of the American worker–were bound up in a eugenicist worldview of white supremacy. A leading argument for the minimum wage, for example, was that Chinese immigrants only needed meager portions of rice to survive and so were willing to work for almost nothing. Higher minimum wages would prevent them from undercutting American workers and thereby keep them out of the labor force. Do note that contemporary California ballot proposition extraordinaire Ron Unz supports a higher minimum wage for the same reason. The really interesting part of Leonard’s book is his diagnosis for why the Progressives, to an unprecedented degree in American intellectual history, thought of the State as a natural, organic community. He cites an explosive combination of their German social science training (I need to read a book about the importance of Prussian administrative reformers on all subsequent governance), Social Darwinism, and American social gospel idealism. The result is a conviction that the State is a natural aggregation of the People and should take the leading role in organizing economic and social life. Stay tuned for Gabriel Kolko’s The Triumph of Conservatism to see how this worldview (and the Progressive movement) is so easily captured by the powerful.

4. Chicks dig the long vol
I’ve been blazing through the excellent Invest Like the Best podcasts and learning just enough heterodox financial theories (without sufficient grounding in the basics!) to be dangerous. Here are two ideas that stuck with me.

First, Ted Seides, a guy who knows everything about hedge funds after a career of seeding them (investing the initial capital), was on talking about hedge funds. He was asked a simple and important question: since hedge fund fees are higher than most other investments, and hedge funds haven’t been doing so well (they just about broke even in 2015), why are people still investing in them? Seides explained that most hedge fund money comes from large asset allocators (pension funds, sovereign wealth funds, endowments) who are using the hedge fund part of their portfolio for a very specific purpose. Imagine an institutional investor that has most of its money exposed to stock market, a “long-only equity portfolio” as they say (so I’ve learned). What the investor could do is borrow money and sell futures pegged to the broad market index, thus hedging exposure to the market. It could then take any money left over and hand it to a hedge fund, which would pursue an investment strategy uncorrelated with the market. This hedge fund is now in the business of seeking portable alpha, extra returns with no exposure to overall market risk (beta). If you’re getting most of your returns from the index, you only hope for 1% or 2% returns from the hedge fund. But that’s still no guarantee that there’s any alpha to go around!

Second, Christopher Cole is an extremely pessimistic, contrarian hedge fund manager who is worried about market turmoil stemming from a global debt crisis, political instability, and maybe, in the long run, automation-induced social upheaval. He thinks we will live in interesting times. As such, his fund is oriented entirely around volatility. He says you should categorize hedge funds not by their asset class (fixed income, equity, macro) but by the nature of their exposure to volatility. “Regardless of the asset class, the true source of alpha seems to be moving between short and long volatility exposure—the volatility risk process and not the underlying asset. In 2008, many institutional investors woke up to the harsh reality that although they may have been asset-class diversified, in reality they were simply 100% short volatility.” Cole’s portfolio is designed to lose a little bit of money in most years and go up 40% when crazy things happen. His specific returns aren’t available for free but you can see an index of nine funds (including him) that take a long volatility bias here (down 1% last year, down 3% this year, up 45% in 2008). This whole concept was somewhat revelatory for me as my only two rules in investing are (1) diversify and (2) get out of the way. And then along comes this guy telling me that while I may be diversified in asset classes, I’m not actually diversified against volatility. A much more informed friend disputes Cole’s logic: “This could make sense in imaginary worlds where assets behave. The points at which these relationships break down and change directions would jeopardize a reading of the volatility tea leaves. You might short vol one day and be long the next if the relationship suddenly changes in gold and dollars.” In other words, positioning in volatility is extrinsic to security selection, not something you can engineer ahead of time. I need to think more about this. In any case, I’d highly recommend the interview with Cole. He applies his framework of making lots of small bets with rare, disproportionately nonlinear payoffs to film, improv, relationships, and more.

5. Where’s the quadrant for people who make 2x2s
In this edition of Weekly Framework, I present to you: a typology of knowledge-intensive organizations (from Blackler 1995: “Knowledge, knowledge work and organizations: An overview and interpretation”).

We talk about lots of organizations as “knowledge-intensive.” Blackler says we can distinguish them based on whether they emphasize collective behavior or key individuals and whether they work on familiar problems or novel problems. I find this most useful for thinking about automation. In the top left, picture a large accounting firm with detailed procedures. Almost everything can be automated. In the bottom left, picture a hospital, which relies on the “embodied competency” of its doctors. Certain tasks are susceptible to automation, but experts are still needed for charismatic persuasion. On the right side of the matrix, creativity becomes essential. In the top right, picture a digital marketing agency. Automation is a tool for distributing creative products out into the world at scale, but does not interfere with internal communication and collaboration. In the bottom right, picture a software-as-a-service company. This is the one automating everything else.

Jeff’s Newsletter #12

Jeff’s Newsletter, Volume 12


1. I got the shotgun, you got the briefcase…
I think I first became aware of a ‘heroin crisis’ in early 2014 when Vermont Governor Peter Shumlin devoted his entire State of the State speech to the topic. Like most people not directly affected, I was almost a decade behind the times. Dreamland by Sam Quinones is a riveting, meticulously reported investigation of exactly how heroin and prescription painkiller abuse took root, became America’s foremost drug epidemic, and rebranded addiction as a white, middle-class phenomenon. The book’s main framing device is two tides, one from each coast, meeting in the middle of America. From the west, the young men of a single Mexican town, Xalisco, branch out in hundreds of self-organizing teams, selling black tar heroin with the finest customer service American drug users had ever seen. Suburban kids who might never have ventured into a ‘bad neighborhood’ could get heroin delivered on-demand. The ‘Xalisco boys’ abjured violence, skirted cities with established gang infrastructure, and relied on just-in-time logistics to avoid ever carrying enough heroin to attract serious police attention. They were the Domino’s of drug dealers. From the east, meanwhile, Purdue Pharma released OxyContin, an opioid painkiller that was (a) easier to crush and inject than any of its predecessors and (b) aggressively pushed on doctors by a newly minted army of sales reps. A flimsy, one-paragraph research note claimed that opioid painkillers were addictive in only 1% of patients; Purdue seized on this claim and hammered it into the minds of any doctor who would listen. Nakedly criminal ‘pill mills’ sprouted up to sell OxyContin prescriptions on a conveyor belt, but even regular, well-meaning doctors routinely escalated pain treatment to pills, simply upping the dosage when patients needed more. These two waves met somewhere around Ohio and Kentucky, a region that provides the most lurid scenes of the book, including a town economy transacted entirely in denominations of OxyContin and shoplifted goods. The ‘Xalisco boys’ learned to follow the OxyContin epidemic, providing free samples outside methadone clinics and doctors offices. Over 25,000 Americans now die each year from opioid (pills + heroin) overdoses, and drug overdoses as a whole recently passed car accidents and guns as the country’s leading accidental cause of death (some helpful numbers here).

One of the main takeaways from this book was the astonishing power of human ingenuity, especially in the face of addiction or desperation. Addicts go to ridiculous lengths to steal from Wal-Mart; dealers work 14-hour days, ready to swallow a mouthful of wrapped heroin balloons if a cop approaches. Entrepreneurial ambition is in ample supply. There are some incentives we can’t do much about: the morphine molecule has transfixed humans for thousands of years and probably always will. But our medical system should use it as a last resort (oxycodone was once used primarily in cancer treatment), not an opening gambit for lower back pain and athletic aches (see Steve Kerr’s recent comments on Vicodin vs marijuana). The book is also a marvel of old-school reporting. Quinones tracked down some of the most influential heroin entrepreneurs, longtime addicts, families of the dead, and the police and public health officials who first cracked what was going on.

2. Corporate raider
It’s a real shame Ralph Nader pulled the Ralph Nader, because otherwise he might remembered, deservingly, as one of the bravest democratic populists of the 20th century. Presumably you know he’s the reason we have airbags and seatbelts in our cars. He’s also the author of Cutting Corporate Welfareone of the most efficient, important little books you can read in not much more than an hour. The book came out in October 2000, and his clear disappointment with the Clinton administration’s lack of populist teeth helps me understand why he ran that year (I’m not defending the choice…). The book is a catalogue of the many ways in which state, local, and federal governments give handouts to big corporations, in turn disadvantaging small businesses, consumers, and the political process. Indeed, Nader is often referred to as a “consumer advocate” but the book suggests small businesses (and, of course, the public interest) are foremost among the screwed. I’ll share a few examples of the kinds of handouts we’re talking about. Local relocation blackmail, where in exchange for not moving a factory, a corporation will exact tax exemptions, eminent domain claims on homes they’d like to bulldoze, and exemptions from environmental liabilities. In 1996, for example, Toledo exacted $300 million in benefits for keeping a few thousand jobs in town (after reading a few of these stories, you realize the current Carrier ordeal is par for the course, not some unprecedented travesty). The 1872 Mining Act allows companies (including foreign ones) to mine gold, silver, and other metals from public lands without paying the U.S. government anything close to market value for mining rights. It is protected by a handful of Senators from Western states at the expense of public coffers, their own local tourism revenue, and the environment. The Pentagon’s merger subsidy program pays defense contractors to merge with one another, reducing competition for government bids and increasing the lobbying power of the resulting mega-firms. Federal patent transfer programs award corporations exclusive rights to inventions created under public research auspices, without competitive bidding. A long tradition of bailing out Wall Street for speculative lending (e.g. after the Mexican peso crisis in 1994 or the South Korean crisis in 1997) is the textbook definition of moral hazard. And then there are unambiguous tax carve-outs, like $19 million in the 1997 tax bill for Amway soon after founder Richard DeVos (yup) gave $500,000 to the RNC. Nice ROI. No-nonsense as always, Nader has pages of specific legislative solutions to corporate welfare, most of which would have no chance of passing even when Democrats run Congress. But at least he knew how to name the problem.

3. Inequality all the way down
Lest you think there are no consequences to the above, Piketty, Saez, and Zucman are hot off the presses with the newest inequality numbers, drawing on a new method of combining overall national income data (note this includes capital income!) with household survey accounts. I’ll quote the main finding in full:

First, our data show that the bottom half of the income distribution in the United States has been completely shut off from economic growth since the 1970s. From 1980 to 2014, average national income per adult grew by 61 percent in the United States, yet the average pre-tax income of the bottom 50 percent of individual income earners stagnated at about $16,000 per adult after adjusting for inflation. In contrast, income skyrocketed at the top of the income distribution, rising 121 percent for the top 10 percent, 205 percent for the top 1 percent, and 636 percent for the top 0.001 percent.

Note that’s a share of total pre-tax income on the y-axis. They do find a small rise in post-tax income for the bottom 50%, but it’s all in-kind transfers, mostly healthcare. No increase in money you can spend.

It’s interesting to take these numbers as context for revisiting a Matt Bruenig post outlining his prefered ‘egalitarian program.’ Starting, as the French economists do, with total national income, he says the first plank of egalitarianism should be to reduce the market income share and increase the welfare benefit share. The logic, I think, is that once you get to market income, you still have to deal with capital income vs labor income, and even once you get to labor income, you have to deal with high earners’ share vs low earners’ share. It’s inequality all the way down. Given that, why not skip worrying about the market income system altogether and just push more money into redistribution? It’s an important question. My primary instinctual disagreement is that work and wages have more meaning than money alone. Mike Konczal astutely notes that Trump always talked about wages, not poverty. And wages have stronger built-in defenses than transfers:

One obstacle I hit is that while getting wages up is a hazy and complicated process, redistribution can be done and measured with clinical precision. It can also be taken away with that same precision. “Post-tax-and-transfer” inequality, the thing everyone was cheering as the way forward, is going to be a major causality in the next four years, probably the next 8 months even, conceptually as a Trump administration doesn’t think that way at all, and practically as the conservatives destroy transfers and progressive taxation.

4. The best of times, the worst of times
Related to inequality, Brad DeLong asks: what will future historians emphasize about the 20th century? He argues that it will be the first century where economic history is the most important history. This got me reflecting that, indeed, most history I learned in school was political history (with some social history sprinkled on). As I’ve gotten into economic history in the past few years (tip: it’s much more interesting and important than economics), I’ve wondered about this disconnect between what I learned and what I feel I should have learned. But maybe that was the proper balance for previous centuries. When our children and grandchildren learn about the 20th century, we should expect economic historiography to move into the mainstream. If so, DeLong thinks they’ll learn that: (1) material wealth exploded; (2) thanks to technological and organizational advances, tyrannies became much more brutal than ever before; (3) huge inequality gulfs grew; and (4) governments couldn’t figure out how to manage their economies, so crashes and depressions proliferated. He also acknowledges the Polanyian social disruption wrought by economic growth: the notion that “the only rights that really mattered were property rights ran into people’s very strong belief that they had rights to maintain their communities, receive their incomes, and work in their occupations.”

5. A podcast about Vanguard wouldn’t be very exciting but…
As if I needed another podcast to add to the weekly rotation: I’ve been hooked on Patrick O’Shaughnessy’s blog and podcast, Invest Like the Best. It’s less self-helpy than it sounds! O’Shaughnessy is a prolific reader and thoughtful quant investor. The podcast brings on portfolio managers ostensibly to talk about public markets and investing strategy, but also about reading, learning, and decision-making. The investing talk is pretty rigorous; as someone who reads about finance occasionally but has no formal background, I feel like I understand 70% of it and am constantly learning. I especially enjoyed the second episode with Michael Mauboussin. His thoughts on value investing are compatible with a broader orientation toward truth-seeking that many of us value but don’t always associate with finance. Mauboussin is a prolific writer in his own right; I enjoyed perusing this research brief on how U.S. companies have allocated capital over the past 40 years. It’s a really impressive compendium of extant research on M&A, capital expenditures, divestitures, dividends, buybacks, and R&D. The funniest part of the interview was hearing Mauboussin, after an hour of erudite disquisition on active management strategies, admit that all of his personal money is in index funds. Hmmm…

6. Don’t ship the org chart
Any future essay on org charts will be bound by law to link to this epic treatment from Steven Sinofsky. The frame is the (admittedly false) dichotomy between unit orgs and functional orgs. A refresher: functional orgs (like Apple) are organized around divisions like Legal, HR, Engineering; unit orgs (like Amazon) are organized around products like Kindle, Logistics, AWS. Obsessing over org charts gets stale fast, but I think Sinofsky is correct in his conviction that, especially in knowledge industries where people are the main asset, how you organize those people in relation to one another is one of the few things you can control! Sinofsky worked at Microsoft for years and endured an apparently traumatic transition within the Windows team from unit to functional. That said, I found his evaluations relatively more favorable to the functional side, with a healthy heaping of “context matters.” One interesting pitfall of functional orgs is that it’s difficult for them to prioritize multiple products at once; for example some have criticized Apple for hardly paying attention to desktop Macs anymore. An interesting pitfall of unit orgs, on the other hand, is that they tend to produce redundancy. They promote a myth that each unit is the only place responsible for a given technology or market across the organization. They also twist apart from one another, seeking to escape their corporate bonds in pursuit of more intuitive, small organization autonomy. “I’ve seen units that say to be successful they need to recruit differently, need different beverages, need different performance appraisal, hire a different PR firm, different furniture, and more.” MBA students and consultants among you, soak up this article and spread the gospel that every org chart is wrong.

7. I might share this pleasure in being wrong…
I was pretty psyched to have Patrick Collison, by far my favorite Silicon Valley billionaire, on the Ezra Klein show this week. How this guy has time to run a unicorn (Stripe) and out-wonk the wonk on inequality, regulatory policy, and immigration reform is beyond me. My favorite part of the conversation dealt with a community of bloggers in the rationality/contrarianism space. Ezra had asked Patrick what voices he most values on the Internet, and Patrick named many of my own favorite writers and tweeters: Scott Alexander, Tyler Cowen, Julia Galef, Bryan Caplan. I’ve noticed that Ezra has become increasingly attentive to this subculture, whatever it is, and he asked Patrick to define what unites this group. It’s adjacent to rationality and effective altruism, but also distinct. They ended up calling it ‘crypto-rationalism’ but I enjoyed Patrick’s efforts to draw a common thread. It might be that these people all “take a subversive pleasure in discovering that they were wrong.” They’re also interested in rates and downstream effects where mainstream political discourse fixates on levels and direct ones. This conversation segued into one about truth-seeking. Ezra shared an incisive view that we tend to “biologize” the Enlightenment, concluding that the human brain is a truth-seeking machine because our society has learned to value the pursuit of knowledge. But this is almost certainly untrue: the brain seems to be if anything a tribal argument-winning machine, a “press secretary” rather than a “scientist.” The crypto-rationalists, ever wary of mood-affiliation, aspire to be the real scientists among us. Or is rationality, as Ezra suggests, a fancy way to dress up a tribalism all its own?

Jeff’s Newsletter #11

Jeff’s Newsletter, Volume 11


1. Improved means to an unimproved end
I’m a sucker for critics of modernity, and Neil Postman was one of the best. On the eve of the 21st century, Postman warned about where our civilization was headed: a cult of technology, instrumentalized education, and a return to tribalism in the absence of any other transcendent values. In Building a Bridge to the 18th Century, he argues that we have to look back to move forward: “If looking ahead means anything, it must mean finding in our past useful and humane ideas with which to fill the future.” His preferred past is the Enlightenment, the source of contemporary ideals like individual liberty and scientific progress but in a context of Deism and moral progress. My sense is that when Postman talks about the Enlightenment he’s really just talking about Rousseau (and subsequent Romantics like Thoreau), whose skepticism about progress without morality actually tended to contradict the prevailing rationalism. But the provenance of his sources aside, Postman offers a compelling criticism of technocratic society. We have too much information, he says, and not enough means for turning it into knowledge and wisdom. Knowledge: information organized to accomplish a goal. Wisdom: the capacity to know what body of knowledge is needed to solve a social problem. Postman is most famous as an education critic, and his best material tends to be his suggestions for radical curriculum overhaul. Here’s what he’d have us teach in school: the art of asking good questions; logic, semantics, and rhetoric; how to think scientifically and the history of science; critical appreciation of technology; and comparative religion.

2. All that’s known, overthrown
NYT science correspondent John Tierney says “The only successful war on science is the one waged by the Left.” After reading his essay, I believe this claim is definitely wrong, but has more merit than I would have guessed going in. I see three sub-claims here: (1) there is some anti-scientific stuff going; (2) the people doing that stuff are the Left; and (3) the Right is not doing something worse. Tierney tells several stories of sins against science. First, social scientists have a leftist bias which entails blanket approval of marginalized groups and hostility toward right-of-center groups like religious Christians. This seems true to me, although I think social science is fundamentally normative and shouldn’t pretend to be “scientific” in the first place. But in light of its pretensions of scientism, this criticism is fair. Second, there is a taboo against studying biological differences of race and gender. Here Tierney touts the book A Troublesome Inheritance, which argues that human evolution has been “recent, copious, and regional.” Some googling shows that the population geneticists whose work the book summarizes do not agree with its conclusions. I acknowledge that any research about genetic differences would face an uphill battle toward acceptance. In light of the history of using these kinds of arguments to justify eugenics and discrimination, I think it’s reasonable to have a strong prior against such claims being true. Third, Tierney discusses the history of leftist approaches to remaking society, from “scientific socialism” to population control and compulsory sterilization to dietary fads. I think this issue of putatively scientific social planning is one of the most important failure modes of modernity. But it’s not so easy to pin it on the Left, at least not in the contemporary American context. Both Left and Right are currently on the Authoritarian side of the Libertarian / Authoritarian dimension in the political compass.

Tierney’s last example is probably the most important for where you land on the politicization of science: climate science. He criticizes the “sneer-and-smear” techniques by which liberals disdain those who disagree about the risk of global warming. The much-cited figure that 97% of scientists believe that global warming is dangerous is, apparently, misleading: it originated in a poll of climate scientists asked whether global warming is man-made, not dangerous. A more recent poll of over 10 times as many climate scientists yielded 52% who think global warming is dangerous. I’m obviously unqualified to judge the merits, but I’d like to learn more about both perspectives. I’m sympathetic to a broad point Tierney makes, which is that even if you agree on the climate models, the resulting policies we might pursue “vary according to political beliefs, economic assumptions, social priorities, and moral principles.” I should add, though, that there are plenty examples of politically motivated denial of science from the Right that Tierney glosses over. Congress’s ban on CDC research on gun violence is an obvious one; so too the lack of research on medical marijuana as an alternative to opioid painkillers.

3. I’d like to be an algocrat when I grow up
There is a community of researchers in sociology, history, information studies, and law trying to study algorithms and their role in society. This research is exciting but scattered, in part because we don’t have much consensus on what we should be paying attention to. What, exactly, are we trying to ask about algorithms? What are the variables? In this context I appreciated John Danaher’s blog post on “the logical space of algocracy.” With this word algocracy he’s talking about situations where algorithms exert power over people, perhaps in subtle ways through constraints, incentives, or nudges. The point of the post is to propose a framework for describing an algocracy and comparing it to others. Here’s his framework:


The rows represent four common stages in an algorithmic decision-making procedure: sensing or ingesting some data, processing or analyzing it, acting by emitting a recommendation or decision, and finally learning from the results of that action. Several researchers have come up with a pretty similar list of stages (Zarsky 2013; Citron and Pasquale 2014). Danaher’s move is to connect this typology to a second one: the typology of divisions of labor between humans and algorithms. For each stage (row), we can specify how the labor is divided (column). A unique sequence of four numbers then describes a very specific type of algorithm. I’m going to play with this in my research and see if it’s a useful way to distinguish algorithmic systems from each other.

4. The Springsteen economic recovery agenda
No matter the role you think struggling, post-manufacturing towns played in the election, there’s a good case to be made for helping such places improve. Sure, we could focus policy on individuals and encourage everyone to move to thriving cities. But cities are more expensive to live in, and moreover many people prefer to live in smaller towns. Adam Ozimek argues that there are diminishing returns to making cities better, and likewise low-hanging fruit for investing in depressed rural areas: “When a place goes from 0% of the population having PhDs to 1%, there are a lot of benefits that you don’t get when you go from 30% to 31%. This deserves more attention from economists than it currently receives, so let me state it succinctly in economist-speak: Agglomeration is not the only human capital non-linearity that matters.” Ozimek points out that we often talk in unproductive all-or-nothing terms about rural America; think of the last time you heard “none of those manufacturing jobs are coming back.” He points to places like Lancaster County, PA, where manufacturing employment has indeed halved since 1990 but population has grown and the unemployment rate is below the national average. We should study places like this and figure out what is going right.

5. Just vouchsafe me some healthcare
Following Trump’s choice of Tom Price to run Health and Human Services, you may have heard talk about “turning Medicare into vouchers.” This topic bubbles up every few years or when Paul Ryan is in the room, but the Price selection finally inspired me to do some reading. For the curious, I highly recommend this 2012 interview with Henry Aaron of Brookings, who originally (in 1995) invented the concept that became bastardized as Medicare vouchers. He presents several reasons why vouchers, or the closely related “premium supports,” no longer make sense. The one that really stood out to me is that to the extent the Obamacare exchanges have failed, vouchers would fail even harder. In Ryan’s world, voucher recipients would buy insurance from one of several private companies competing in a regulated pool. Some might call it an…”exchange.” Here’s Aaron: “It’s close to wacky to repeal the exchanges called for by the Affordable Care Act, which will serve twenty-nine million comparatively healthy people, and then in the next breath propose to create something like them for close to fifty million people who are much sicker and frailer.” This point is one I’ve heard Ezra Klein make several times. If we think Obamacare hasn’t worked–which is a reasonable view, at least regarding the exchanges–the lesson should be that combined public-private insurance markets don’t work. This cuts against preferred Republican alternatives, and in favor of universal healthcare.