Category Archives: Public Policy and Governance

The End Of Free Markets?

Last month, Time Magazine published an article asserting that the “free market” was effectively dead. The author then went on to speculate over what might replace.it. (For the record, I’m pretty skeptical of definitive pronouncements of this sort–as I used to tell my students, the real world is considerably more complicated than that.)

Time’s conclusion was evidently prompted by a recent meeting in the White House between President Biden and the CEOs of some of America’s largest companies, attended by the head of the U.S. Chamber of Commerce (whose “presence was enough to rock the political landscape” according to the article.)

“Washington’s most powerful trade group is having a political identity crisis,” wrote Politico. Two weeks later, a group of 150 CEOs, unaffiliated with the Chamber, followed suit, throwing their weight behind Biden’s COVID relief bill, which sailed through Congress. They have been similarly supportive of the additional $2 trillion the administration has now proposed for infrastructure spending – but they unsurprisingly don’t want corporate tax rates to be the means for paying for it.

The article went on to say that corporate America’s support for public investment is not a new or temporary phenomenon–rather, it’s evidence of the “most profound realignment in American political economy in nearly forty years,” and it cites the rise of ethno-nationalism on the right and democratic socialism on the left as evidence of a widespread disillusionment with conventional economic wisdom.

For the record, the “conventional economic wisdom” being undermined has only been conventional for some 40 years.

The article traces the evolution of free market absolutism, and acknowledges that prior to the 1970s, most economists had advocated fairly robust government action—countercyclical fiscal spending, management of the currency, tactical protectionism—to create long-term prosperity. The emergence and influence of what the article calls “free market apostles” changed that, and led to what we now call Reaganomics–the notion that virtually any government regulation of the market is unhelpful, if not illegitimate. (This required some cherrypicking of Adam Smith, but hey…)

Interestingly, in what may be the most insightful portion of the article, it connected this shift to an anti-government “free market” philosophy to racial politics. The need for government to take a “hands off” approach coincided with federal efforts to ameliorate some of the most egregious economic effects of state-sanctioned racism.

In any event, while the article argues that public and expert opinion have swung against what it labels “free-market orthodoxy,” what is actually happening–at least among people who are concerned with such things– is a return to a much more nuanced understanding of market economics.

Virtually all rich countries today have mixed economies, in which certain services are “socialized”–i.e., provided communally by government–and others are left to a market subject to reasonable regulation. Americans love “either/or” politics–it’s either capitalism or socialism, freedom or tyranny. That makes for great sloganeering, but bad politics.

The issue isn’t free markets versus socialism. The actual issues confronting policymakers are much more nuanced, and fall into two broad categories: 1) which services ought to be provided by government, and which should be left to the market? and 2) what regulations are needed to ensure the proper operation of that market and which are counterproductive? Just how “free” should markets be?

People of good will will have different answers to those questions, and it would be nice if the ensuing arguments were evidence based–although I’m not holding my breath.

I do know that those evidence-based conversations are not encouraged by headlines suggesting that a new emphasis on anti-trust enforcement or other regulatory activity is tantamount to the end of the free market.

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A Case In Point

It wasn’t just Donald Trump. For a number of years, Americans have been electing “celebrities”–actors and people famous for being famous–to government positions from mayors (Clint Eastwood) to governors (Arnold Schwarzenegger) to (most recently and unfortunately) President.

When Kanye West can announce a presidential campaign with a straight face, Caitlin Jenner assures people that knowing nothing about government qualifies her to govern California, and Matthew McConaughey is touted as a viable candidate for governor of Texas, the trend is hard to dismiss (although alcohol helps).

This willingness of voters to put people with absolutely no government experience into positions of authority is troubling on numerous levels, but what drives me absolutely bonkers is the lack of understanding of the day-to-day responsibilities of governance that the phenomenon represents, and the message it sends to less-famous candidates for public office, who have come to focus on public performance rather than attending to the unexciting “grunt work” of governing.

Indiana provides a case in point. (Well, okay, several. But today, I just want to focus on one.)

While our legislators are busy pontificating about abortion, vaccination, the Second Amendment, protecting developers from the need to protect wetlands, and awarding ever-increasing amounts of public funds to private religious schools, they are paying far less attention to basic governance issues like ordinary citizens’ ability to access  the rules and regulations with which they are expected to comply.

Toward the end of my academic life, I served as a very informal consultant for a project undertaken by Professor Ross Silverman and several colleagues. Silverman’s research required that he collect the laws of Indiana’s counties, and his results were published as a research methods piece in the American Journal of Public Health. 

Silverman is a Professor of Public Health & Law, and he holds a joint appointment at IU’s Fairbanks School of Public Health and the McKinney School of Law. As he noted in an email announcing publication of the research,

During our process we discovered that nearly half of all Indiana counties either do not publish their ordinances and regulations online or have only partial or out of date materials available electronically. As you also know, there’s no law requiring electronic publication or a central repository either.

To acquire these documents meant we drove 1000s of miles & scanned 25000+ pages ourselves at County government offices dotted around the state.

We were most interested in the laws that may have an effect on the lives of people with substance use disorders, but once we got to see the primary source materials, we found they were usually kept in 3 ring binders organized by passage date, not topic, so there’s no quick way to pick out the relevant documents.

These types of obstacles and labor costs makes it very challenging to conduct statewide intrastate policy analysis, maintain up to date data, or even know your local laws.

Leaving aside the impediment to analysis this lack of a system represents, citizens’ ability to access the rules they must obey is a basic tenet of the rule of law.

How do we expect citizens to obey laws of which they are unaware? Why–in the age of the Internet–are ordinances not routinely digitized, categorized and made available online? Why–in a state like Indiana where “home rule” is a joke–can’t the members of the Indiana General Assembly pass a law requiring local units of government to make their rules accessible?

Granted, sponsorship of such a measure wouldn’t offer an opportunity for posturing, of appealing to a particular voting or donor constituency, or otherwise enhancing a politico’s name recognition, but it would certainly improve governance in a state that–to put it charitably–is not noted for excellence in that department.

Even Mussolini understood the importance–and political benefit–of making the trains run on time….

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I Guess Consistency IS The Hobgoblin Of Little Minds…

Surprise! Indiana’s pathetic Attorney General evidently has come around to a view long expressed by civil libertarians and Planned Parenthood.

Rokita has joined members of the General Assembly in defending citizens’ right to control their own bodies. According to multiple media sources, he has issued a (non-binding) opinion in support of that position, which was admirably articulated by Martinsville Representative Peggy Mayfield:

Hoosiers should have the right to make healthcare decisions that best suit their families, their personal medical circumstances, and a broad interpretation of their religious beliefs – a concept that we’re disappointed to see Indiana University has rejected.”

The genesis of this remarkable turnaround–not just by our desperate-for-attention AG, but from a number of firmly anti-choice legislators–was Indiana University’s decision to require students and employees to be vaccinated in order to return to in-person instruction. In an opinion that most lawyers–and several members of the General Assembly–described as “a reach,” Rokita is claiming that a  bill passed during the last legislative session prohibits the University from doing so.

I will leave the legal arguments to practicing lawyers (noting only that IU is advised by some pretty excellent legal experts and that I have never heard Rokita described as a particularly skilled lawyer) , but I can’t restrain myself from focusing on the unbelievable hypocrisy displayed by that quoted position and Rokita’s pious support for the “fundamental liberties” protected by the Bill of Rights.

The statement that Hoosiers should have the right to make healthcare decisions that best suit their families and religious beliefs is, without a doubt, correct. It is precisely the point of the pro-choice position, which I will note is not a “pro-abortion” position. The issue is not what decision is made–it is who has the authority to make it.

In both cases–pregnancy termination and vaccination–the decision should rest with the individual involved.

That does not mean that institutions like IU cannot act to protect the lives and health of their students and employees; it means that individuals who choose not to be vaccinated and who do not fall within permitted exceptions to IU’s policy may choose not to attend–just as women who make a personal medical choice inconsistent with the teachings of a particular religious institution may find themselves unwelcome there.

In neither case should state or federal government agencies or legislative bodies get involved. They certainly may not make those decisions for those individuals.

What is particularly ludicrous about this sudden concern for an individual’s right to control of his or her own body– coming as it does from rabidly “pro life” folks– is that it is so inconsistent with their willingness to trample those same constitutional protections in order to appeal to constituencies displaying absolutely no regard for the protection of personal autonomy.

Ironically, Indiana University’s decision to require vaccinations is self-evidently a “pro life” decision. The University is following the science and acting to protect the life and health of the University community. (Of course, the people they are protecting have already been born, which evidently makes a difference…)

When Ralph Waldo Emerson wrote: “A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines,” the point he was making was that only small-minded people refuse to rethink their prior beliefs.

Perhaps Indiana’s Attorney General isn’t as small-minded as he has seemed? Perhaps he is re-evaluating and rethinking his belief that government should get to decide what  citizens–including female citizens– can do with their bodies?

Or, on the other hand, perhaps he is simply too dim to recognize the inconsistency of the various positions he chooses to take in the course of his constant political pandering.

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Constitutions And The Future

One of the academic listservs in which I used to participate was devoted to law and courts-both in the U.S. and internationally. Discussions contained a healthy dose of constitutionalism. I say I “participated,” but I mostly lurked–reading the commentary posted by notable scholars in the field, and learning a lot.

One fascinating exchange a year or so ago was triggered by discussion of a case brought by a group of  American children who claimed that government’s inadequate measures to combat climate change deprived them of their implied constitutional right to a livable environment. The case was thrown out by the liberal Ninth Circuit in January of 2020, and someone posted a question to the listserv, asking whether there were any constitutions around the world that would have been more protective of what the questioner termed “inter-generational equity.”

It turned out that more than 50 constitutions have such “inter-generational equity” clauses. Responses also linked to several “protection of the environment” clauses among the 166 currently-in-force constitutions that say something about that topic. 

As if to emphasize the salience of the issue, it was during the listserv discussion that the German Federal Constitutional Court decided a case in which it rejected the then-current plans of the German government to meet climate targets. The decision obligated the German government to rework its plans, and commence planned measures sooner, if not immediately, so as to avoid putting the burden of meeting environmental targets on future generations.

The press release of the Court (in English) is here.

As one scholar opined:

The decision invoked the duty to protect positive rights as part of the obligation to protect negative rights. Or, less abstractly, the decision argues that the only way to protect a negative right (the right to life, toward which the state has the obligation to refrain from interference) is to also protect positive rights (the right to health and the positive side of the right to life, both of which oblige the state to engage in affirmative protection). Other courts have understood the protection of positive rights as necessary for the protection of negative rights like this – particularly courts in the global south like India, Colombia and South Africa – but it has not been so common for global North courts to make this link. This is a huge leap for Germany.
The decision explicitly engages in the intertemporal assessment of rights protection. It weighs the burden on the liberty of people in the future when tough climate goals will kick in against the liberty of those in the present who give themselves a break by putting hard decisions off. And the Court finds that the current government assesses this balance wrongly by not leveling out the burden across generations. The Court therefore defends the intertemporal protection of liberty. Again, a first.

Lest you think that the German Federal Constitutional Court has taken a great leap off into judicial activism in defending against climate change, however, it’s important to note the language of the Basic Law with which they are working. Article 20A of the constitution says the following:

“Mindful also of its responsibility toward future generations, the state shall protect the natural bases of life by legislation and, in accordance with law and justice, by executive and judicial action, all within the framework of the constitutional order.”

In short, the German constitution explicitly requires the state to engage in intertemporal assessment (“mindful of future generations”) and also that the state has an affirmative duty to protect the “natural bases of life.” The Federal Constitutional Court was giving life, so to speak, to this provision and not inventing a right to environmental justice out of thin air. That said, the reasoning of the Court is nonetheless remarkable, especially if the two principles I mentioned above are going to become basic principles of interpretation with regard to other rights as well.

How would American constitutional interpretation change if our courts were required to take intergenerational justice into consideration?

Somehow, I find it hard to believe that our so-called “right to life” Justices would recognize such measures as a necessary consequence of their piously declared “reverence for life,” a reverence that apparently terminates at birth. 

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Forgiveness

One of the problems inherent in all public policy discussions is the degree to which various aspects of our communal lives are connected–and the even greater degree to which those connections are unseen and/or under-appreciated.

As an example, a recent study from the Brookings Institution detailed the multiple ways in which student loan debt affects Americans, and illustrates the way lack of understanding of those connections distorts discussion of proposals to forgive at least some portion of it.

There is one element of student debt that is widely understood, of course–its size. In the last quarter of 2020, the Federal Reserve calculated the national student debt at $1.7 trillion, spread across 45 million borrowers. That is a monumental amount, and a monumental burden on both the borrowers and the economy.

Research suggests that forgiveness of some or all of that burden would prompt a variety of economically consequential behaviors–everything from eating out more frequently to  making large purchases that the level of debt currently doesn’t permit: houses, cars, appliances and furnishings. Respondents to one survey also cited returning to school, and saving more for emergencies.

In a study cited by Brookings,

Higher amounts of student debt forgiveness were associated with other investment behaviors like starting a business or savings for a down payment on a home, as well as a willingness to spend more on entertainment….

These results [of the study cited] show two things. First, they show how extensively student debt affects debt holders. The responses to this experiment indicate that student debt is strongly influencing decisions that can have large implications for household economic stability (e.g., emergency savings) and mobility (e.g., saving for a down payment on a home, starting a business). In addition, student debt may be altering the structure of families themselves. Roughly 7 percent of respondents reported that they would be more likely to get married (results not shown) or have children if their student debt were forgiven, indicating that this debt burden is affecting even fundamental decisions about debt holders’ life trajectories.

Second, these results show that the level of student debt forgiveness matters. In particular, setting a student debt forgiveness target too low may not lead to broad-based changes in households’ economic behaviors. However, setting a student debt forgiveness amount at a point where the average debt holder would have more than a quarter of their debt forgiven may yield large changes in savings behaviors, human capital investments (e.g., returning to school), and business starts, without leading to large changes in labor supply.

It is undisputed that even a modest amount of debt forgiveness would remove what is currently a large drag on the economy. There are, obviously, other considerations: many people who have dutifully paid off their loans object to what they see as unfairness of giving later-comers relief that was unavailable to them. Others argue that any forgiveness should prioritize low-income borrowers, and avoid “bailing out” higher income folks.

Going forward, my own preference would be to replace the current, complicated student loan environment with a program that pays for at least two years of college in return for a year or two of military or civic service (a la Americorp).

Whatever the policy approach, we need to recognize that debt of 1.7 trillion dollars constitutes an enormous drag on Amreica’s economic growth. It isn’t simply an impediment to business formation–it prevents many individuals from taking lower-paying but gratifying jobs in the nonprofit sector– and it is a significant fiscal and psychic burden to individuals. It has become unsupportable.

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