Following Arguments Where They Lead
It follows that the social benefit—individual benefit summed over everyone—of my attending Harvard is much less than the private benefit, hence that individuals will be willing to spend much more on schooling than it is really worth. Putting it differently, it implies that each person's expenditure on schooling imposes negative externalities on other people. Frank appears to believe that this is true not only of money spent on going to Harvard but on the money spent by well off suburban taxpayers on the public schools that their children attend.
The usual view of economists is that acts imposing negative externalities ought to be discouraged, perhaps by taxing them. Schooling, however, is subsidized on an enormous scale, at both the K-12 level and above. So I asked Frank whether, on the basis of his expressed views, he would favor abolishing subsidies to schooling and taxing it instead. He never answered the question, perhaps because he viewed it as a digression from our central argument.
His failure to answer it raises a more general issue, not limited to Robert Frank or even to economists who share his political views. To what extent are they—I really mean we—willing to follow out the implications of our arguments when they lead to political conclusion we don't like?
Nuclear power is the one source of electric power that does not put carbon dioxide into the atmosphere and can be expanded more or less without limit—at a cost not wildly above the cost of power from fossil fuel. That ought to make it very attractive to those who believe that we face a threat of catastrophic proportions from global warming. Some environmentalists agree—most, at least so far as I can judge, do not. Similarly for the idea of geoengineering, holding the earth's temperature down by large scale projects to reduce the amount of sunlight the earth absorbs or to increase absorption of carbon dioxide, perhaps by fertilizing aquatic algae. In each case, there are undoubtedly arguments against as well as arguments for. But the arguments for do not seem to get much attention from those who, on the basis of their expressed views, ought to find them of great interest.
For libertarians, especially libertarian economists, a similar problem is raised by the issues grouped under the label of market failure—situations where individual rationality fails to lead to group rationality. Standard examples include public goods, externalities, adverse selection and private monopoly. In each case, good economic arguments can be made for the claim that interventions by government can lead to an improved outcome. Just as in the environmental case, the arguments are not conclusive; one can accept their validity while offering reasons to reject the conclusion (links to two different talks). But that approach is very different from the attempt to deny or evade the straightforward economic arguments in favor of intervention—as I believe some libertarian economists do. Libertarians who are not economists face a similar set of problems in justifying existing property holdings, many of which were not obtained by the means that libertarian political philosophy, going back to Locke, regards as legitimate.
Readers are invited to submit other examples—ideally ones associated with political positions they are sympathetic to.