Thursday, September 16, 2010

Differing Time Horizons, But Similar Values

Via ED Kain, FLG finds this post by Scott Sumner in which he describes a new index of good governance that he devised. Apparently, smaller countries have an easier time of it.

So, first to the time horizons. Scott, who describes himself as "a right-wing liberal," "thinks incentives matter more than progressives believe they do." Which put simply means he's more concerned about the long-term, or alternatively and conversely progressives have a higher discount rate. Again, FLG has worn this ground pretty smooth by now.

Scott then continues:
So why has the US been so successful? Because good governance isn’t everything; it turns out small government also helps a lot. The early studies of the supply-side effects of high taxes (Lindsey, Feldstein, etc) showed the effect was powerful. Revisionist studies by Slemrod, Saez, Goolsbee, etc, suggested the effects were rather small. But I didn’t find the methodology of either group of studies to be at all convincing, as they measure immediate effects, whereas the important effects probably occur very gradually.

Again, Scott's saying he cares about the long-term and the studies only looked at the short run. Fine. That's all pretty clear. But then there's this:
In my view the left/right debate is this country is so vicious because we are debating second best policies in a policy-making regime that is profoundly dysfunctional. Thus Matt Yglesias and I probably disagree strongly about extending the Bush tax cuts for the rich, but we both favor a simple progressive consumption tax as the ideal. I see these small countries with good governance as models that point the way forward, past our stale ideological debates. The question is whether we will pay attention to the lessons they are providing.

So, up until this point, everything made sense. The more conservative person was more concerned about the long-term; the people on the left primarily concerned about the present. You know, basically aligning with my theory that a person's discount rate is the primary determinant of their political positions. But then Scott is saying he and Matt Yglesias disagree on most things, but only the second best alternatives. This posed a quandary. How could this be?

Well, first of all, the reason FLG reads Matt is because he does apply economic thinking. Yes, he values the present more than the future, but that's what makes him a progressive. But if it isn't differing time horizons, then what is it that these two men agree upon? And viola. There it was. They both agree on a primary goal that is materialistic, in the philosophical sense, not the colloquial meaning. That the most important thing is to maximize material well-being. Or more to the point, that the goal of public policy ought to be to maximize material well-being. For Yglesias, the progressive who is primarily concerned about the present, maximization of well-being often means redistribution. For Sumner, the right-wing liberal, that means maximization of economic growth over the long-term. But both ultimately agree on that fundamental point. Indeed, most of us, in this post-enlightenment, scientific, and very materialistic age, do agree on that fundamental point.

So, there's a point of agreement. However, FLG still thinks that their differing discount rates will cause all sorts of problems when it comes to any variety of different policies. There's no post-ideological age of good governance on the horizon.

UPDATE: I wanted to highlight this part from Sumner's post, but forgot:
A. What values should government policies embody?

B. What policies effectively deliver those values?

C. When there is a dispute about which policies work best, how should the dispute be resolved?

The first question is moral, and the answer I give is “utilitarianism.” Unlike 99% of people in the humanities, I regard utilitarianism as a radically egalitarian value system—where people put the best interest of society ahead of their own narrow self-interest. The second question is scientific, and my answer is ‘economistic’ policies, those that are implemented by people cognizant of the (counter-intuitive) way taxes and regulations often distort decision-making. The sort of fiscal regime you get if 100 Martin Feldsteins sat down and designed a country on a pad of paper. In other words—Singapore. The third question is political, and my answer is democracy. And I don’t mean just having elections; I mean a system where the people actually govern. Where every school is a separate school district. Where taxes must be approved by referenda. Where every decision is made at the lowest feasible level of government.

I believe the utilitarianism Sumner proposed is largely materialistic in nature because it makes it more easily quantifiable. Or perhaps because it is easily quantifiable, he leans toward utilitarianism. Doesn't matter really matter though. Most of us probably do base our preferred government policy on material factors.

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