Ways of Changing the World

My son Patri has an interesting essay up on Cato Unbound, dealing with the question of how to change the world in a libertarian direction. He views most of the standard approaches, such as persuasion and policy studies, as tactics that worked for changing policy in the hunter-gatherer bands where humans spent most of their evolutionary history, since the numbers were small enough for one individual to affect outcomes, but that are ineffective in modern, large population societies. He concludes that we have to somehow change the dynamics of the system, the incentives that generate political outcomes, if we want different and better results. He discusses a variety of approaches, in particular his own project to develop a technology of floating housing—seasteading—in order to create something closer to a competitive market in governments. It's an interesting and persuasive essay and to a considerable extent correct, but I think he is missing one important alternative.

I see democracy as equipped, like a microscope, with a coarse control and a fine control. The fine control is special interest lobbying, the coarse control is majority voting. It is coarse because of rational ignorance. Voters know their vote has a negligible effect on outcomes and so have no incentive to acquire the information they would need in order to do a good job of making sure that governments do good things instead of bad things. The result is that how they vote and the outcome of their voting are largely driven by free information—what everyone knows, whether or not it is true.

Consider a few examples. At the moment, "everyone knows" that recent financial troubles threaten economic catastrophe on the scale of the Great Depression. It probably isn't true—my guess is that the current cure is considerably more likely to create economic catastrophe than the disease it is supposed to be curing—but, true or false, a lot of people believe it. The result is that it has been politically possible for Obama and the Democratic majority in Congress, with some help from the Republican minority, to engage in a program of vastly expanded government spending financed mostly by an enormous increase in the national debt—a program that would not have been politically viable five or ten years ago.

Or consider the longstanding issue of free trade vs protectionism. All economists know that tariffs, as a general rule with perhaps some exceptions, injure the country that imposes them as well as its trading partners. Everyone who isn't an economist "knows" that tariffs help the country that imposes them by protecting its industries from the threat of foreign competition and are bad only because other countries are likely to retaliate with tariffs of their own.

Part of the reason people believe that may be the same hard-wired hunter/gatherer mindset that Patri discusses in a different context, this time taking the form of a view of almost all issues as us against them. But another and perhaps more important part is that the wrong analysis of foreign trade is easy to understand, the right analysis is hard to understand, which is why the right analysis was not discovered until the early 19th century when David Ricardo worked out the theory of comparative advantage. One result of the mistaken popular understanding is to lower the political cost of passing tariffs and so to lower the cost to industries of buying such legislation.

Since political outcomes are in part driven by the free information that affects the political cost of alternative policies, one way of influencing outcomes is by influencing that free information. Patri's grandfather provides a striking example. His writing, speaking, and television programs had a substantial effect on what very large numbers of people believed, and so affected political outcomes. Other examples, working in the opposite direction, would be George Bernard Shaw and John Kenneth Galbraith. A still more important example, two centuries earlier, is Adam Smith.

Coming back to the case of tariffs, I suspect that one of the most important things I ever accomplished for public policy was to come up with a simple, intuitive explanation of the principle of comparative advantage—and thus of why tariffs hurt us. To find it and see some evidence of how widely it gets quoted, google on "growing Hondas."

As a contribution to economic theory what I did was worthless, since it added nothing to what Ricardo worked out almost two hundred years earlier. But putting the argument in an easily understood, easily repeated, quotable form changes the content of the free information available to voters. It means that more of them will see support for an auto tariff as a reason to vote against a politician, fewer as a reason to vote for him. Which will make it (a little) harder for the auto industry and their allies to get auto tariffs passed.

My conclusion is that while something like seasteading or crypto anarchy may indeed be the most hopeful path to a freer future, those are not the only sorts of approach worth attempting. An alternative, for academics, authors, newspaper columnists, anyone able to produce ideas and information and put them into circulation, is to try to alter the mix of free information that drives the coarse control mechanism of democracy.