Patriotism for dark times

2025-05-182025-05-19 PNRJ core principles, current events, ethics, inequality, politics, public policy #Scandinaviaisbetter, Britain, British Empire, Chile, colonialism, colonization, concentration camp, empire, England, fascism, France, genocide, hegemony, history, ICE, imperialism, Internet, military, military spending, Pax Americana, Roman Empire, Rome, secret police, South Korea, Trump

May 18 JDN 2460814

These are dark times indeed. ICE is now arresting people without warrants, uniforms or badges and detaining them in camps without lawyers or trials. That is, we now have secret police who are putting people in concentration camps. Don’t mince words here; these are not “arrests” or “deportations”, because those actions would require warrants and due process of law.

Fascism has arrived in America, and, just as predicted, it is indeed wrapped in the flag.

I don’t really have anything to say to console you about this. It’s absolutely horrific, and the endless parade of ever more insane acts and violations of civil rights under Trump’s regime has been seriously detrimental to my own mental health and that of nearly everyone I know.

But there is something I do want to say:

I believe the United States of America is worth saving.

I don’t think we need to burn it all down and start with something new. I think we actually had something pretty good here, and once Trump is finally gone and we manage to fix some of the tremendous damage he has done, I believe that we can put better safeguards in place to stop something like this from happening again.

Of course there are many, many ways that the United States could be made better—even before Trump took the reins and started wrecking everything. But when we consider what we might have had instead, the United States turns out looking a lot better than most of the alternatives.

Is the United States especially evil?

Every nation in the world has darkness in its history. The United States is assuredly no exception: Genocide against Native Americans, slavery, Jim Crow, and the Japanese internment to name a few. (I could easily name many more, but I think you get the point.) This country is certainly responsible for a great deal of evil.

But unlike a lot of people on the left, I don’t think the United States is uniquely or especially evil. In fact, I think we have quite compelling reasons to think that the United States overall has been especially good, and could be again.

How can I say such a thing about a country that has massacred natives, enslaved millions, and launched a staggering number of coups?

Well, here’s the thing:

Every country’s history is like that.

Some are better or worse than others, but it’s basically impossible to find a nation on Earth that hasn’t massacred, enslaved, or conquered another group—and often all three. I guess maybe some of the very youngest countries might count, those that were founded by overthrowing colonial rule within living memory. But certainly those regions and cultures all had similarly dark pasts.

So what actually makes the United States different?

What is distinctive about the United States, relative to other countries? It’s large, it’s wealthy, it’s powerful; that is certainly all true. But other nations and empires have been like that—Rome once was, and China has gained and lost such status multiple times throughout its long history.

Is it especially corrupt? No, its corruption ratings are on a par with other First World countries.

Is it especially unequal? Compared to the rest of the First World, certainly; but by world standards, not really. (The world is a very unequal place.)

But there are two things about the United States that really do seem unique.

The first is how the United States was founded.

Some countries just sort of organically emerged. They were originally tribes that lived in that area since time immemorial, and nobody really knows when they came about; they just sort of happened.

Most countries were created by conquering or overthrowing some other country. Usually one king wanted some territory that was held by another king, so he gathered an army and took over that territory and said it was his now. Or someone who wasn’t a king really wanted to become one, so he killed the current king and took his place on the throne.

And indeed, for most of history, most nations have been some variant of authoritarianism. Monarchy was probably the most common, but there were also various kinds of oligarchy, and sometimes military dictatorship. Even Athens, the oldest recorded “democracy”, was really an oligarchy of Greek male property owners. (Granted, the US also started out pretty much the same way.)

I’m glossing over a huge amount of variation and history here, of course. But what I really want to get at is just how special the founding of the United States was.

The United States of America was the first country on Earth to be designed.

Up until that point, countries just sort of emerged, or they governed however their kings wanted, or they sort of evolved over time as different interest groups jockeyed for control of the oligarchy.

But the Constitution of the United States was something fundamentally new. A bunch of very smart, well-read, well-educated people (okay, mostly White male property owners, with a few exceptions) gathered together to ask the bold question: “What is the best way to run a country?”

And they discussed and argued and debated over this, sometimes finding agreement, other times reaching awkward compromises that no one was really satisfied with. But when the dust finally settled, they had a blueprint for a better kind of nation. And then they built it.

This was a turning point in human history.

Since then, hundreds of constitutions have been written, and most nations on Earth have one of some sort (and many have gone through several). We now think of writing a constitution as what you do to make a country. But before the United States, it wasn’t! A king just took charge and did whatever he wanted! There were no rules; there was no document telling him what he could and couldn’t do.

Most countries for most of history really only had one rule:

L’Etat, c’est moi.

Yes, there was some precedent for a constitution, even going all the way back to the Magna Carta; but that wasn’t created when England was founded, it was foisted upon the king after England had already been around for centuries. And it was honestly still pretty limited in how it restricted the king.

Now, it turns out that the Founding Fathers made a lot of mistakes in designing the Constitution; but I think this is quite forgivable, for two reasons:

They were doing this for the first time. Nobody had ever written a constitution before! Nobody had governed a democracy (even of the White male property-owner oligarchy sort) in centuries!
They knew they would make mistakes—and they included in the Constitution itself a mechanism for amending it to correct those mistakes.

And amend it we have, 27 times so far, most importantly the Bill of Rights and the Fifteenth and Nineteenth Amendments, which together finally created true universal suffrage—a real democracy. And even in 1920 when the Nineteenth Amendment was passed, this was an extremely rare thing. Many countries had followed the example of the United States by now, but only a handful of them granted voting rights to women.

The United States really was a role model for modern democracy. It showed the world that a nation governed by its own people could be prosperous and powerful.

The second is how the United States expanded its influence.

Many have characterized the United States as an empire, because its influence is so strongly felt around the world. It is undeniably a hegemon, at least.

The US military is the world’s most powerful, accounting for by far the highest spending (more than the next 9 countries combined!) and 20 of the world’s 51 aircraft carriers (China has 5—and they’re much smaller). (The US military is arguably not the largest since China has more soldiers and more ships. But US soldiers are much better trained and equipped, and the US Navy has far greater tonnage.) Most of the world’s currency exchange is done in dollars. Nearly all the world’s air traffic control is done in English. The English-language Internet is by far the largest, forming nearly the majority of all pages by itself. Basically every computer in the world either runs as its operating system Windows, Mac, or Linux—all of which were created in the United States. And since the US attained its hegemony after World War 2, the world has enjoyed a long period of relative peace not seen in centuries, sometimes referred to as the Pax Americana. These all sound like characteristics of an empire.

Yet if it is an empire, the United States is a very unusual one.

Most empires are formed by conquest: Rome created an empire by conquering most of Europe and North Africa. Britain created an empire by colonizing and conquering natives all around the globe.

Yet aside from the Native Americans (which, I admit, is a big thing to discount) and a few other exceptions, the United States engaged in remarkably little conquest. Its influence is felt as surely across the globe as Britain’s was at the height of the British Empire, yet where under Britain all those countries were considered holdings of the Crown (until they all revolted), under the Pax Americana they all have their own autonomous governments, most of them democracies (albeit most of them significantly flawed—including the US itself, these days).

That is, the United States does not primarily spread its influence by conquering other nations. It primarily spreads its influence through diplomacy and trade. Its primary methods are peaceful and mutually-beneficial. And the world has become tremendously wealthier, more peaceful, and all around better off because of this.

Yes, there are some nuances here: The US certainly has engaged in a large number of coups intended to decide what sort of government other countries would have, especially in Latin America. Some of these coups were in favor of democratic governments, which might be justifiable; but many were in favor of authoritarian governments that were simply more capitalist, which is awful. (Then again, while the US was instrumental in supporting authoritarian capitalist regimes in Chile and South Korea, those two countries did ultimately turn into prosperous democracies—especially South Korea.)

So it still remains true that the United States is guilty of many horrible crimes; I’m not disputing that. What I’m saying is that if any other nation had been in its place, things would most like have been worse. This is even true of Britain or France, which are close allies of the US and quite similar; both of these countries, when they had a chance at empire, took it by brutal force. Even Norway once had an empire built by conquest—though I’ll admit, that was a very long time ago.

I admit, it’s depressing that this is what a good nation looks like.

I think part of the reason why so many on the left imagine the United States to be uniquely evil is that they want to think that somewhere out there is a country that’s better than this, a country that doesn’t have staggering amounts of blood on its hands.

But no, this is pretty much as good as it gets. While there are a few countries with a legitimate claim to being better (mostly #ScandinaviaIsBetter), the vast majority of nations on Earth are not better than the United States; they are worse.

Humans have a long history of doing terrible things to other humans. Some say it’s in our nature. Others believe that it is the fault of culture or institutions. Likely both are true to some extent. But if you look closely into the history of just about anywhere on Earth, you will find violence and horror there.

What you won’t always find is a nation that marks a turning point toward global democracy, or a nation that establishes its global hegemony through peaceful and mutually-beneficial means. Those nations are few and far between, and indeed are best exemplified by the United States of America.

Trump has proposed an even worse budget

2025-05-112025-05-05 PNRJ current events, politics, public policy budget, deficit, DEI, federal budget, military spending, NASA, probability of superiority, RFK, Trump, USAID

May 11 JDN 2460807

I didn’t really intend for my blog this year to be taken over by talk about Trump. But all the damage that Trump is doing to America and the world is clearly the most important thing going on in economics right now, and it’s honestly just hard for me to think about anything else.

Trump has proposed a budget. (Read at your own risk; what’s on the White House website is more screed than budget proposal. And it’s pretty clearly written by Trump himself, perhaps with some editing.)

It will come as no surprise to all of you that it is a terrible budget, even worse than what the Republicans recently passed.

First of all, Trump is cutting discretionary spending by $163 billion. This is a huge cut—it removes almost one-fourth of all non-military discretionary spending. Trump naturally claims that he’s just reducing waste, shutting down DEI programs (for the right wing this is considered a good thing), what Trump calls “Green New Scam funding” (read: anything remotely related to environmental sustainability or climate change), and what Trump claims are “large swaths of the Federal Government weaponized against the American people” (read: any other departments Trump doesn’t like, whether or not he actually understands what they are for).

And lest you think that these draconian cuts are being done for fiscal responsibility in the face of an utterly massive federal deficit, Trump also proposes to increase military spending by 13%; multiplying that by our current $850 billion budget means he’s adding $110 billion to the military; and he also says he wants to add a further $119 billion in the mandatory budget. This means he’s cutting $163 billion from non-military spending and adding $239 billion in military spending—which will actually increase the deficit.

Trump is ending programs like the Cybersecurity and Infrastructure Security Agency (sure, let’s just let Chinese hackers in! Why not? It’s not like there’s anything important on those Pentagon servers!) and Fair Housing (amid a historic housing crisis), as well as slashing the EPA (because who needs clean air and water anyway?).

Unsurprisingly, he’s also ending anything that resembles DEI, which includes both some really good necessary programs, and also some stuff that is genuinely ineffective or even counterproductive. Most people who work at firms that have DEI programs think that the programs do more good than harm, but there are big partisan differences, so cutting DEI will play well with the Republican base. But I for one do not want to play the word game where we say out loud every time “diversity, equity, and inclusion”, because there is a big difference between the fundamentally laudable goals of diversity, equity and inclusion, and the actual quite mixed results from DEI programs as they have been implemented. It’s awful that Trump is cutting DEI with a chainsaw, but we really should have been cutting it with a scalpel for awhile now.

Trump is also throwing money at the border, increasing the budgets of CBP (whatever) and ICE (very, very bad!). This is probably the worst thing about the budget, though it also isn’t a big surprise. Part of the increased ICE spending is “50,000 detention beds”, which since ICE lately has been arresting and detaining people without warrants or trials and courts have specifically ruled that they are violating due process, I believe we can fairly say constitutes a concentration camp. If and when they start actually giving everyone—everyone, dammit—due process, then you can call it a detention center.

Trump is eliminating USAID and folding what’s left of it into DFC; but these institutions had quite different goals. USAID had two goals: Advance America’s interests, and make the world a better place. And while it did have significant flaws, overall it did quite a good job of achieving both of those goals—and indeed, publicly making the world a better place can advance America’s interests. DFC’s goal is to promote economic development by financing investments that otherwise could not be financed. That can also promote America’s interests and make the world a better place, but it excludes many of the vital roles that USAID has played in providing humanitarian aid and disaster relief as well as promoting democracy and advancing environmental sustainability. (And when I say “promoting democracy”, I don’t mean the way the CIA does it, by orchestrating coups; I mean things like helping Ukraine remove its dependency on Russia.) There is more to life than money—but I don’t think Trump really understands that.

Trump is canceling a bunch of subsidies to renewable energy, but honestly I’m not too worried about that; the technology has matured so much that renewable energy is actually the cheapest form of energy for most purposes. (And it kinda makes sense: The sun and wind are already there.) Removing the subsidies will make it harder to compete with oil (because oil is still heavily subsidized); but I still think renewables can win. Basically the past subsidies have done their job, and it’s probably okay to remove them.

There’s a really weird proposal involving food, which I think I will just quote in its entirety:

The Budget also supports the creation of MAHA food boxes, that would be filled with commodities sourced from domestic farmers and given directly to American households.

This sounds… kinda… Maoist? Definitely some kind of communist. Why are we circumventing the highly-functional capitalist market for food with massive in-kind transfers? (Despite scaremongering, groceries in the US are still pretty affordable by world standards.) And how are we going to do that, logistically? (Produce does need to be kept fresh, after all.) Does Trump think that markets have trouble providing food in this country? Does he not understand that SNAP exists, and already prioritizes healthier food?(Or does he plan to get rid of it?) Does he think that the reason most Americans don’t eat a very good diet (which is objectively true) is that they aren’t able to get fresh produce? (And not, say, subsidies for factory-farmed meat and high-fructose corn syrup, or mass marketing campaigns by corporations that make junk food?) I’m not so much against this program as I am really baffled by it. It seems like it’s trying to solve the wrong problem by the wrong means. (I’m guessing RFK Jr. had a hand in this, and I recently learned that he doesn’t believe in germ theory. He is a god-tier crank. Like, his views on vaccines and autism were bad enough, but this? Seriously, you put this guy in charge of public health!?)

There are some things in the budget that aren’t terrible, but they’re mostly pretty small.

One actually good thing about Trump’s new budget is the expansion of VA services. I don’t really have any objection to that. It’s a fairly small portion of the budget, and veterans deserve better than they’ve been getting.

Trump says he won’t be cutting Social Security (so perhaps we dodged a bullet on that one). Of course, if he actually cared in the least about the budget deficit, that’s probably what he would cut, because it’s such a huge proportion of our spending—about one-fifth of all federal spending.

I’m not sure what to think about the changes Trump is making to education funding. He’s shutting down the Department of Education, but it seems like most of what it does (including offering grants and handling student loans) is just going to be folded into other agencies. It doesn’t actually seem like there have been substantial cuts in their services, just… a weird and unnecessary reorganization. My guess is that after Trump had already publicly committed to “end the Department of Education”, some staffer quietly explained to him what the Department of Education actually does and why it is necessary; since he’d already committed to shutting it down, he didn’t want to pivot on that, so instead he shut it down in name only while preserving most of what it actually does in other agencies.

Trump is also investing heavily in charter schools, which… meh. Some charter schools are really good, some are really bad. There isn’t a clear pattern of them being better or worse than public schools. Overall, the preponderance of evidence suggests that the average charter school is worse than the average public school, but there’s a lot of variation in both, so the odds that any particular charter school is better than any particular public school are still quite high. (I recently learned about this measure of effect size, probability of superiority, and it’s now my new favorite measure of effect size. Eat your heart out, Cohen’s d!)

Trump is also diverting funding to apprenticeships; he’s introducing a new “Make America Skilled Again” (ugh) grant that States would be required to spend at least 10% on apprenticeship. I’m pretty okay with this in general. 10% is not a lot, and we totally could use more apprenticeship programs in fields like welding and pipefitting.

Another good thing Trump is doing is increasing funding for NASA; he’s clearly doing it out of a sense of national pride and hatred of China, but hey, at least he’s doing it. We might actually be able to pull off a human Mars mission (several years from now, mind you!) if this higher funding continues.

Trump is also redirecting DEA spending to Mexico, Central America, South America, and China; since most fentanyl in the US is made in Latin America from Chinese ingredients, this actually makes sense. I still don’t think that criminalization is the best solution to drug abuse, but fentanyl is genuinely very dangerous stuff, so we should definitely be doing something to reduce its usage.

Finally, and somewhat anticlimactically, Trump is creating some kind of new federal fire service that’s supposedly going to improve our response to wildfires. Given that we already have FEMA, a significant improvement seems unlikely. But hey, it’s worth a try!

These small good things should not distract us from the massive damage that this budget would cause if implemented.

It was not necessary to shift $160 billion from non-military to military spending in order to increase funding for NASA and the VA. It was not necessary to cut hundreds of programs and eliminate USAID—the agency which did what may literally be the very best things our government has ever done. DEI programs had their flaws, but it was wrong to eliminate all of them, instead of finding out which ones are effective and which ones are not.

And while it’s a tiny portion of the budget, the cuts to the EPA will kill people. Most likely thousands of Americans will die from the increased air and water pollution. It will be hard to pinpoint exactly who: Would that kid with asthma have died anyway if the air were cleaner? Was that fatal infection from polluted water, or something else? But the statistics will tell us that there were thousands of unnecessary deaths. (Unless of course Trump falsifies the statistics—which he very well might, since he routinely calls our world-class economic data “fake” when it makes him look bad.)

The large federal budget deficit will be in no way reduced by this budget; in fact it will be slightly increased. If we were in a recession, I’d be okay with this kind of deficit; it was actually a good thing that we ran a huge deficit in 2020. But we aren’t yet—and when one does inevitably hit (given the tariffs, I think sooner rather than later), we won’t have the slack in our budget to do the necessary Keynesian stimulus.

I don’t see any mention of what’s going to happen to Medicare and Medicaid; given that these two programs together constitute roughly one fourth of the federal budget—and nearly twice the military budget—this is a very conspicuous absence. It’s possible that Trump’s leaving them alone because he knows how popular they are, but this once again reveals the emptiness of Republican deficit hawkishness: If you really wanted to reduce the deficit by cutting spending, you’d do it by cutting the military, Social Security, Medicare, and Medicaid. Those four things together comprise the majority of the federal budget. Yet it seems that Trump’s budget cuts none of them.

Mind you, I don’t actually want to cut Social Security, Medicare, or Medicaid; so I’m relieved that Trump isn’t doing that. I’m pretty okay with cutting the military, but I’ll admit I’m less enthused about that since the start of the Ukraine War (I think some moderate cuts are still in order, but we should still have a very big military budget to protect ourselves and our allies). But these are the only budget cuts that could realistically reduce the deficit.

What I actually want to happen is higher taxes on rich people. That’s how I want the budget to be balanced. And Trump very obviously will not do that. Indeed he’s almost certainly going to cut them, making our deficit even larger.

So we’re building a concentration camp, the Chinese are going to hack the Pentagon, we’re going to buy more tanks we don’t need, we won’t be able to properly respond to the next recession, and thousands of people will die from air and water pollution. But at least we got more NASA funding!

The Republicans passed a terrible budget

2025-05-042025-04-28 PNRJ current events, inequality, politics, public policy budget, current policy baseline, debt, deficit, Democrat, federal budget, House of Representatives, national debt, Republican, Trump

May 4 JDN 2460800

On April 10, the US House of Representatives passed a truly terrible budget bill. It passed on an almost entirely partisan vote—214 Democrats against, 216 Republicans for, 2 Republicans against. So I think it’s quite fair to say that the Republicans passed this budget—not a single Democrat voted for it, and only 2 Republicans voted against it.

So what’s so bad about it?

Well, first of all, in order to avoid showing just how much it will balloon the national debt, the new budget operates on different accounting rules than normal, using what’s called “current policy baseline” instead of the standard method of assuming that policies will end after 10 years.

In addition to retaining $3.8 trillion in tax cuts that were supposed to expire, this budget will cut taxes by $1.5 trillion over 10 years, with the vast majority of those cuts going to the top 1%—thus the real increase in the deficit is a staggering $5.3 trillion over 10 years. This is absolutely not what we need, given that unemployment is actually pretty good right now and we still have a deficit of $1.8 trillion per year. (Yes, really.) That kind of deficit is good in response to a severe recession—I was all in favor of it during COVID, and it worked. But when the economy is good, you’re supposed to balance the budget, and they haven’t.

The richest 1% stand to gain about 4% more income from these tax cuts (which adds up to about $240 billion per year), while the combination of tax cuts and spending cuts would most likely reduce the income of 40% of the population.

They aren’t even cutting spending to offset these tax cuts. This budget only includes a paltry $4 billion in spending cuts—less than 0.1% of the budget. (I mean, sure, $4 billion is a lot of money for a person; but for a whole country as rich and large as ours? It’s a rounding error.) And then it includes $521 billion in spending increases, over 100 times as much.

They are talking about making more cuts, but they’ve been cagey as to where, probably because the only plausible ways to save this much money are the military, Medicaid, Medicare, or Social Security. Obviously Republicans will never cut the military, but the other three programs are also enormously popular, even in deep-red states. It would be not only very harmful to millions of people to cut these programs—it would also be harmful to the Republicans’ re-election chances. They could also get some savings by cutting income security programs like SNAP and TANF, which would probably be less unpopular—but it would also cause enormous suffering.

This new budget is estimated to add some $6.9 trillion to the national debt over 10 years—and even more after that, if the policies actually continue.

I am not exactly a “deficit hawk”; I don’t think the budget should always be balanced. But this is not the time to be increasing the deficit. When times are good, we should balance the budget, so that when we have to go into debt during bad times, we can afford to do so.

And bad times are probably on the horizon, since Trump’s tariff policy is already such a disaster. So are we going to borrow even more then? While bond yields are rising? We’re going to end up spending most of our budget on debt payments! And all this injection of money into the system won’t be good for inflation either (and on top of the tariffs!).

The only sensible thing to do right now is raise taxes on the rich. We need that revenue. We can’t just keep going deeper into debt. And the rich are the ones who would be least harmed by raising taxes—indeed, if you focused the hikes on billionaires, they would barely feel anything at all.

But the Republicans don’t care about what’s in the interest of ordinary Americans. They only care about the interests of the rich. And that’s why they passed this budget.

I can’t not talk about tariffs right now

2025-04-132025-04-07 PNRJ current events, market failure, politics, public policy export, Great Depression, history, import, Krugman, Smoot-Hawley, tariff, tax, tax incidence, trade, Trump

Apr 13 JDN 2460779

On the one hand, I’m sure every economics blog on the Internet is already talking about this, including Paul Krugman who knows the subject way better than I ever will (and literally won a Nobel Prize for his work on it). And I have other things I’d rather be writing about, like the Index of Necessary Expenditure. But on the other hand, when something this big happens in economics, it just feels like there’s really no alternative: I have to talk about tariffs right now.

What is a tariff, anyway?

This feels like a really basic question, but it also seems like a lot of people don’t really understand tariffs, or didn’t when they voted for Trump.

A tariff, quite simply, is an import tax. It’s a tax that you impose on imported goods (either a particular kind, or from a particular country, or just across the board). On paper, it is generally paid by the company importing the goods, but as I wrote about in my sequence on tax incidence, that doesn’t matter. What matters is how prices change in response to the tax, and this means that in real terms, prices will go up.

In fact, in some sense that’s the goal of a protectionist tariff, because you’re trying to fix the fact that local producers can’t compete on the global market. So you compensate by making international firms pay higher taxes, so that the local producers can charge higher prices and still compete. So anyone who is saying that tariffs won’t raise prices is either ignorant or lying: Raising prices is what tariffs do.

Why are people so surprised?

The thing that surprises me about all this, (a bit ironically) is how surprised people seem to be. Trump ran his whole campaign promising two things: Deport all the immigrants, and massive tariffs on all trade. Most of his messaging was bizarre and incoherent, but on those two topics he was very consistent. So why in the world are people—including stock traders, who are supposedly savvy on these things—so utterly shocked that he has actually done precisely what he promised he would do?

What did people think Trump meant when he said these things? Did they assume he was bluffing? Did they think cooler heads in his administration would prevail (if so, whose?)?

But I will admit that even I am surprised at just how big the tariffs are. I knew they would be big, but I did not expect them to be this big.

How big?

Well, take a look at this graph:

The average tariff rate on US imports will now be higher than it was at the peak in 1930 with the Smoot-Hawley Act. Moreover, Smoot-Hawley was passed during a time when protectionist tariffs were already in place, while Trump’s tariffs come at a time when tariffs had previously been near zero—so the change is dramatically more sudden.

This is worse than Smoot-Hawley.

For the uninitiated, Smoot-Hawley was a disaster. Several countries retaliated with their own tariffs, and the resulting trade war clearly exacerbated the Great Depression, not only in the US but around the world. World trade dropped by an astonishing 66% over the next few years. It’s still debated as to how much of the depression was caused by the tariffs; most economists believe that the gold standard was the bigger culprit. But it definitely made it worse.

Politically, the aftermath cost the Republicans (including Smoot and Hawley themselves) several seats in Congress. (I guess maybe the silver lining here is we can hope this will do the same?)

And I would now like to remind you that these tariffs are bigger than Smoot-Hawley’s and were implemented more suddenly.

Unlike in 1930, we are not currently in a depression—though nor is our economy as hunky-dory as a lot of pundits seem to think, once we consider things like the Index of Necessary Expenditure. But stock markets do seem to be crashing, and if trade drops as much as it did in the 1930s—and why wouldn’t it?—we may very well end up in another depression.

And it’s not as if we didn’t warn you all. Economists across the political spectrum have been speaking out against Trump’s tariffs from the beginning, and nobody listened to us.

So basically the mood of all economists right now is:

Extrapolating the INE

2025-04-062025-04-01 PNRJ critique of neoclassical economics, current events, inequality, public policy CPI, education, GDP per capita, growth, healthcare, housing, income, Index of Necessary Expenditure, INE, inflation, Putin, Trump

Apr 6 JDN 2460772

I was only able to find sufficient data to calculate the Index of Necessary Expenditure back to 1990. But I found a fairly consistent pattern that the INE grew at a rate about 20% faster than the CPI over that period, so I decided to take a look at what longer-term income growth looks like if we extrapolate that pattern back further in time.

The result is this graph:

Using the CPI, real per-capita GDP in the US (in 2024 dollars) has grown from $25,760 in 1950 to $85,779 today—increasing by a factor of 3.33. Even accounting for increased inequality and the fact that more families have two income earners, that’s still a substantial increase.

But using the extrapolated INE, real per-capita GDP has only grown from $43,622 in 1950 to $85,779 today—increasing by only a factor of 1.97. This is a much smaller increase, especially when we adjusted for increased inequality and increased employment for women.

Even without the extrapolation, it’s still clear that real INE-adjusted incomes have were basically stagnant in the 2000s, increased rather slowly in the 2020s, and then actually dropped in 2022 after a bunch of government assistance ended. What looked, under the CPI, like steadily increasing real income was actually more like treading water.

Should we trust this extrapolation? It’s a pretty simplistic approach, I admit. But I think it is plausible when we consider this graph of the ratio between median income and median housing price:

This ratio was around 6 in the 1950s, then began to fall until in the 1970s it stabilized around 4. It began to slowly creep back up, but then absolutely skyrocketed in the 2000s before the 2008 crash. Now it has been rising again, and is now above 7, the highest it has been since the Second World War. (Does this mean we’re due for another crash? I’d bet as much.)

What does this mean? It means that a typical family used to be able to afford a typical house with only four years of their total income—and now would require seven. In that sense, homes are now 75% more expensive today than they were in the 1970s.

Similar arguments can be made for the rising costs of education and healthcare; while many prices have not grown much (gasoline) or even fallen (jewelry and technology), these necessities have continued to grow more and more expensive, not simply in nominal terms, but even compared to the median income.

This is further evidence that our standard measures of “inflation” and “real income” are fundamentally inadequate. They simply aren’t accurately reflecting the real cost of living for most American families. Even in many times when it seemed “inflation” was low and “real income” was growing, in fact it was growing harder and harder to afford vital necessities such as housing, education, and healthcare.

This economic malaise may have been what contributed to the widespread low opinion of Biden’s economy. While the official figures looked good, people’s lives weren’t actually getting better.

Yet this is still no excuse for those who voted for Trump; even the policies he proudly announced he would do—like tariffs and deportations—have clearly made these problems worse, and this was not only foreseeable but actually foreseen by the vast majority of the world’s economists. Then there are all the things he didn’t even say he would do but is now doing, like cozying up to Putin, alienating our closest allies, and discussing “methods” for achieving an unconstitutional third term.

Indeed, it honestly feels quite futile to even reflect upon what was wrong with our economy even when things seemed to be running smoothly, because now things are rapidly getting worse, and showing no sign of getting better in any way any time soon.

A new theoretical model of co-ops

2025-03-302025-03-24 PNRJ critique of neoclassical economics, inequality, market failure, mathematical models, public policy co-op, competition, efficiency, entrepreneur, finance, monopoly, monopsony, productivity, share, shareholder

Mar 30 JDN 2460765

A lot of economists seem puzzled by the fact that co-ops are just as efficient as corporate firms, since they have this idea that profit-sharing inevitably results in lower efficiency due to perverse incentives.

I think they’ve been modeling co-ops wrong. Here I present a new model, a very simple one, with linear supply and demand curves. Of course one could make a more sophisticated model, but this should be enough to make the point (and this is just a blog post, not a research paper, after all).

Demand curve is p = a – b q

Marginal cost is f q

There are n workers, who would hold equal shares of the co-op.

Competitive market

First, let’s start with the traditional corporate firm in a competitive market.

Since the market is competitive, price would equal marginal cost would equal wage:

a – b q = d q

q = a/(b+f)

w = d (a/(b+f)) = (a d)/(b+f)

Total profit will be

(p – w)q = 0.

Monopoly firm

In a monopoly, marginal revenue would equal marginal cost:
d[pq]/dq = a – 2 b q

If they are also a monopsonist in the labor market, this marginal cost would be marginal cost of labor, not wage:

d[d q²]/dq = 2 f q

a – 2 b q = 2 f q

q = a/(2b + 2f)

p = a – b q = a (1 – b/(2b + 2f)) = (a (b + 2f))/(2b + 2f)

w = d q = (a f)/(2b + 2f)

Total profit will be

(p – w) q = ((a (b + 2f))/(2b + 2f) – (a f)/(2b + 2f))a/(2b + 2f) = a²/(4b + 2f)

Now consider the co-op.

First, suppose that instead of working for a wage, I work for profit sharing.

If our product market is competitive, we’ll be price-takers, and we will produce until price equals marginal cost:

p = f q

a – b q = f q

q = a/(a+b)

But will we, really? I only get 1/n share of the profits. So let’s see here. My marginal cost of production is still f q, but the marginal benefit I get from more sales may only be p/n.

In that case I would work until:

p/n = f q

(a – b q)/n = fq

a – b q = n f q

q = (a/(b+nf))

Thus I would under-produce. This is the usual argument against co-ops and similar shared ownership.

Co-ops with wages

But that’s not actually how co-ops work. They pay wages. Why do they do that? Well, consider what happens if I am offered a wage as a worker-owner of the co-op.

Is there any reason for the co-op to vote on a wage that is less than the competitive market? No, because owners are workers, so any additional profit from a lower wage would simply be taken from their own wages.

If there any reason for the co-op to vote on a wage that is more than the competitive market? No, because workers are owners, and any surplus lost by paying higher wages would simply be taken from their own profits.

So if the product market is competitive, the co-op will produce the same amount and charge the same price as a firm in perfect competition, even if they have market power over their own wages.

Monopoly co-ops

The argument above doesn’t assume that the co-op has no market power in the labor market. Thus if they are a monopoly in the product market and a monopsony in the labor market, they still pay a competitive wage.

Thus they would set marginal revenue equal to marginal cost:

a – 2 b q = f q

q = a/(2b + f)

The co-op will produce more than the monopoly firm..

This is the new price:

p = a – b q = a(1 – b/(2b+f)) = a(b+f)/(2b + f)

It’s not obvious that this is lower than the price charged by the monopoly firm, but it is.

(a (b + 2f))/(2b + 2f) – a(b+f)/(2b + f) = (a (2b + f)(b + 2f) – 2 a(b+f)²)/(2(b+f)(2b+f))

This is proportional to:

(2b + f)(b + 2f) – 2(b+f)²

2b² + 5bf + 2f²– (2b² + 4bf + 2f²) = bf

So it’s not a large difference, but it’s there. In the presence of market power in the labor market, the co-op is better for consumers, because they get more goods and pay a lower price.

Thus, there is actually no lost efficiency from being a co-op. There is simply much lower inequality, and potentially higher efficiency.

But that’s just in theory.

What do we see in practice?

Exactly that.

Co-ops have the same productivity and efficiency as corporate firms, but they pay higher wages, provide better benefits, and offer collateral benefits to their communities. In fact, they are sometimes more efficient than corporate firms.

Since they’re just as efficient—if not more so—and produce much lower inequality, switching more firms over to co-ops would clearly be a good thing.

Why, then, aren’t co-ops more common?

Because the people who have the money don’t like them.

The biggest barrier facing co-ops is their inability to get financing, because they don’t pay shareholders (so no IPOs) and banks don’t like to lend to them. They tend to make less profit than corporate firms, which offers investors a lower return—instead that money goes to the worker-owners. This lower return isn’t due to inefficiency; it’s just a different distribution of income, more to labor and less to capital.

We will need new financial institutions to support co-ops, such as the Cooperative Fund of New England. And general redistribution of wealth would also help, because if middle class people had more wealth they could afford to finance co-ops. (It would also be good for many other reasons, of course.)

Reflections on the Index of Necessary Expenditure

2025-03-242025-03-17 PNRJ inequality, macroeconomics, public policy, statistics college, education, family, healthcare, housing, income, Index of Necessary Expenditure, INE, inequality, inflation, population, prices, student loans

Mar 16 JDN 2460751

In last week’s post I constructed an Index of National Expenditure (INE), attempting to estimate the total cost of all of the things a family needs and can’t do without, like housing, food, clothing, cars, healthcare, and education. What I found shocked me: The median family cannot afford all necessary expenditures.

I have a couple more thoughts about that.

I still don’t understand why people care so much about gas prices.

Gasoline was a relatively small contribution to INE. It was more than clothing but less than utilities, and absolutely dwarfed by housing, food, or college. I thought maybe since I only counted a 15-mile commute, maybe I didn’t actually include enoughgasoline usage, but based on this estimate of about $2000 per driver, I was in about the right range; my estimate for the same year was $3350 for a 2-car family.

I think I still have to go with my salience hypothesis: Gasoline is the only price that we plaster in real-time on signs on the side of the road. So people are constantly aware of it, even though it isn’t actually that important.

The price surge that should be upsetting people is housing.

If the price of homes had only risen with the rate of CPI inflation instead of what it actually did, the median home price in 2024 would be only $234,000 instead of the $396,000 it actually is; and by my estimation that would save a typical family $11,000 per year—a whopping 15% of their income, and nearly enough to make the INE affordable by itself.

Now, I’ll consider some possible objections to my findings.

Objection 1: A typical family doesn’t actually spend this much on these things.

You’re right, they don’t! Because they couldn’t possibly. Even with substantial debt, you just can’t sustainably spend 125% of your after-tax household income.

My goal here was not to estimate how much families actually spend; it was to estimate how much they need to spend in order to live a good life and not feel deprived.

What I have found is that most American families feel deprived. They are forced to sacrifice something really important—like healthcare, or education, or owning a home—because they simply can’t afford it.

What I’m trying to do here is find the price of the American Dream; and what I’ve found is that the American Dream has a price that most Americans cannot afford.

Objection 2: You should use median healthcare spending, not mean.

I did in fact use mean figures instead of median for healthcare expenditures, mainly because only the mean was readily available. Mean income is higher than median income, so you might say that I’ve overestimated healthcare expenditure—and in a sense that’s definitely true. The median family spends less than this on healthcare.

But the reason that the median family spends less than this on healthcare is not that they want to, but that they have to. Healthcare isn’t a luxury that people buy more of because they are richer. People buy either as much as they need or as much as they can afford—whichever is lower, which is typically the latter. Using the mean instead of the median is a crude way to account for that, but I think it’s a defensible one.

But okay, let’s go ahead and cut the estimate of healthcare spending in half; even if you do that, the INE is still larger than after-tax median household income in most years.

Objection 3: A typical family isn’t a family of four, it’s a family of three.

Yes, the mean number of people in a family household in the US is 3.22 (the median is 3).

This is a very bad thing.

Part of what I seem to be finding here is that a family of four is unaffordable—literally impossible to afford—on a typical family income.

But a healthy society is one in which typical families have two or three children. That is what we need in order to achieve population replacement. When families get smaller than that, we aren’t having enough children, and our population will decline—which means that we’ll have too many old people relative to young people. This puts enormous pressure on healthcare and pension systems, which rely upon the fact that young people produce more, in order to pay for the fact that old people cost more.

The ideal average number of births per woman is about 2.1; this is what would give us a steady population. No US state has fertility above this level. The only reason the US population is growing rather than shrinking is that we are taking in immigrants.

This is bad. This is not sustainable. If the reason families aren’t having enough kids is that they can’t afford them—and this fits with other research on the subject—then this economic failure damages our entire society, and it needs to be fixed.

Objection 4: Many families buy their cars used.

Perhaps 1/10 of a new car every year isn’t an ideal estimate of how much people spend on their cars, but if anything I think it’s conservative, because if you only buy a car every 10 years, and it was already used when you bought it, you’re going to need to spend a lot on maintaining it—quite possibly more than it would cost to get a new one. Motley Fool actually estimates the ownership cost of just one car at substantially more than I estimated for two cars. So if anything your complaint should be that I’ve underestimated the cost by not adequately including maintenance and insurance.

Objection 5: Not everyone gets a four-year college degree.

Fair enough; a substantial proportion get associate’s degrees, and most people get no college degree at all. But some also get graduate degrees, which is even more expensive (ask me how I know).

Moreover, in today’s labor market, having a college degree makes a huge difference in your future earnings; a bachelor’s degree increases your lifetime earnings by a whopping 84%. In theory it’s okay to have a society where most people don’t go to college; in practice, in our society, not going to college puts you at a tremendous disadvantage for the rest of your life. So we either need to find a way to bring wages up for those who don’t go to college, or find a way to bring the cost of college down.

This is probably one of the things that families actually choose to scrimp on, only sending one kid to college or none at all. But because college is such a huge determinant of earnings, this perpetuates intergenerational inequality: Only rich families can afford to send their kids to college, and only kids who went to college grow up to have rich families.

Objection 6: You don’t actually need to save for college; you can use student loans.

Yes, you can, and in practice, most people who to college do. But while this solves the liquidity problem (having enough money right now), it does not solve the solvency problem (having enough money in the long run). Failing to save for college and relying on student loans just means pushing the cost of college onto your children—and since we’ve been doing that for over a generation, feel free to replace the category “college savings” with “repaying student loans”; it won’t meaningfully change the results.

The Index of Necessary Expenditure

2025-03-162025-03-16 PNRJ core principles, critique of neoclassical economics, current events, inequality, politics, public policy, statistics childcare, education, healthcare, income, INE, inequality, inflation, median income, necessitization, necessity, prices

Mar 16 JDN 2460751

I’m still reeling from the fact that Donald Trump was re-elected President. He seemed obviously horrible at the time, and he still seems horrible now, for many of the same reasons as before (we all knew the tariffs were coming, and I think deep down we knew he would sell out Ukraine because he loves Putin), as well as some brand new ones (I did not predict DOGE would gain access to all the government payment systems, nor that Trump would want to start a “crypto fund”). Kamala Harris was not an ideal candidate, but she was a good candidate, and the comparison between the two could not have been starker.

Now that the dust has cleared and we have good data on voting patterns, I am now less convinced than I was that racism and sexism were decisive against Harris. I think they probably hurt her some, but given that she actually lost the most ground among men of color, racism seems like it really couldn’t have been a big factor. Sexism seems more likely to be a significant factor, but the fact that Harris greatly underperformed Hillary Clinton among Latina women at least complicates that view.

A lot of voters insisted that they voted on “inflation” or “the economy”. Setting aside for a moment how absurd it was—even at the time—to think that Trump (he of the tariffs and mass deportations!) was going to do anything beneficial for the economy, I would like to better understand how people could be so insistent that the economy was bad even though standard statistical measures said it was doing fine.

Krugman believes it was a “vibecession”, where people thought the economy was bad even though it wasn’t. I think there may be some truth to this.

But today I’d like to evaluate another possibility, that what people were really reacting against was not inflation per se but necessitization.

I first wrote about necessitization in 2020; as far as I know, the term is my own coinage. The basic notion is that while prices overall may not have risen all that much, prices of necessities have risen much faster, and the result is that people feel squeezed by the economy even as CPI growth remains low.

In this post I’d like to more directly evaluate that notion, by constructing an index of necessary expenditure (INE).

The core idea here is this:

What would you continue to buy, in roughly the same amounts, even if it doubled in price, because you simply can’t do without it?

For example, this is clearly true of housing: You can rent or you can own, but can’t not have a house. And nor are most families going to buy multiple houses—and they can’t buy partial houses.

It’s also true of healthcare: You need whatever healthcare you need. Yes, depending on your conditions, you maybe could go without, but not without suffering, potentially greatly. Nor are you going to go out and buy a bunch of extra healthcare just because it’s cheap. You need what you need.

I think it’s largely true of education as well: You want your kids to go to college. If college gets more expensive, you might—of necessity—send them to a worse school or not allow them to complete their degree, but this would feel like a great hardship for your family. And in today’s economy you can’t not send your kids to college.

But this is not true of technology: While there is a case to be made that in today’s society you need a laptop in the house, the fact is that people didn’t used to have those not that long ago, and if they suddenly got a lot cheaper you very well might buy another one.

Well, it just so happens that housing, healthcare, and education have all gotten radically more expensive over time, while technology has gotten radically cheaper. So prima facie, this is looking pretty plausible.

But I wanted to get more precise about it. So here is the index I have constructed. I consider a family of four, two adults, two kids, making the median household income.

To get the median income, I’ll use this FRED series for median household income, then use this table of median federal tax burden to get an after-tax wage. (State taxes vary too much for me to usefully include them.) Since the tax table ends in 2020 which was anomalous, I’m going to extrapolate that 2021-2024 should be about the same as 2019.

I assume the kids go to public school, but the parents are saving up for college; to make the math simple, I’ll assume the family is saving enough for each kid to graduate from with a four-year degree from a public university, and that saving is spread over 16 years of the child’s life. 2*4/16 = 0.5; this means that each year the family needs to come up with 0.5 years of cost of attendance. (I had to get the last few years from here, but the numbers are comparable.)

I assume the family owns two cars—both working full time, they kinda have to—which I amortize over 10 year lifetimes; 2*1/10 = 0.2, so each year the family pays 0.2 times the value of an average midsize car. (The current average new car price is $33226; I then use the CPI for cars to figure out what it was in previous years.)

I assume they pay a 30-year mortgage on the median home; they would pay interest on this mortgage, so I need to factor that in. I’ll assume they pay the average mortgage rate in that year, but I don’t want to have to do a full mortgage calculation (including PMI, points, down payment etc.) for each year, so I’ll say that they amount they pay is (1/30 + 0.5 (interest rate))*(home value) per year, which seems to be a reasonable approximation over the relevant range.

I assume that both adults have a 15-mile commute (this seems roughly commensurate with the current mean commute time of 26 minutes), both adults work 5 days per week, 50 weeks per year, and their cars get the median level of gas mileage. This means that they consume 2*15*2*5*50/(median MPG) = 15000/(median MPG) gallons of gasoline per year. I’ll use this BTS data for gas mileage. I’m intentionally not using median gasoline consumption, because when gas is cheap, people might take more road trips, which is consumption that could be avoided without great hardship when gas gets expensive. I will also assume that the kids take the bus to school, so that doesn’t contribute to the gasoline cost.

That I will multiply by the average price of gasoline in June of that year, which I have from the EIA since 1993. (I’ll extrapolate 1990-1992 as the same as 1993, which is conservative.)

I will assume that the family owns 2 cell phones, 1 computer, and 1 television. This is tricky, because the quality of these tech items has dramatically increased over time.

If you try to measure with equivalent buying power (e.g. a 1 MHz computer, a 20-inch CRT TV), then you’ll find that these items have gotten radically cheaper; $1000 in 1950 would only buy as much TV as $7 today, and a $50 Raspberry Pi‘s 2.4 GHz processor is 150 times faster than the 16 MHz offered by an Apple Powerbook in 1991—despite the latter selling for $2500 nominally. So in dollars per gigahertz, the price of computers has fallen by an astonishing 7,500 times just since 1990.

But I think that’s an unrealistic comparison. The standards for what was considered necessary have also increased over time. I actually think it’s quite fair to assume that people have spent a roughly constant nominal amount on these items: about $500 for a TV, $1000 for a computer, and $500 for a cell phone. I’ll also assume that the TV and phones are good for 5 years while the computer is good for 2 years, which makes the total annual expenditure for 2 phones, a TV, and a computer equal to 2/5*500 + 1/5*500 + 1/2*1000 = 800. This is about what a family must spend every year to feel like they have an adequate amount of digital technology.

I will also assume that the family buys clothes with this equivalent purchasing power, with an index that goes from 166 in 1990 to 177 in 2024—also nearly constant in nominal terms. I’ll multiply that index by $10 because the average annual household spending on clothes is about $1700 today.

I will assume that the family buys the equivalent of five months of infant care per year; they surely spend more than this (in either time or money) when they have actual infants, but less as the kids grow. This amounts to about $5000 today, but was only $1600 in 1990—a 214% increase, or 3.42% per year.

For food expenditure, I’m going to use the USDA’s thrifty plan for June of that year. I’ll use the figures assuming that one child is 6 and the other is 9. I don’t have data before 1994, so I’ll extrapolate that with the average growth rate of 3.2%.

Food expenditures have been at a fairly consistent 11% of disposable income since 1990; so I’m going to include them as 2*11%*40*50*(after-tax median wage) = 440*(after-tax median wage).

The figures I had the hardest time getting were for utilities. It’s also difficult to know what to include: Is Internet access a necessity? Probably, nowadays—but not in 1990. Should I separate electric and natural gas, even though they are partial substitutes? But using these figures I estimate that utility costs rise at about 0.8% per year in CPI-adjusted terms, so what I’ll do is benchmark to $3800 in 2016 and assume that utility costs have risen by (0.8% + inflation rate) per year each year.

Healthcare is also a tough one; pardon the heteronormativity, but for simplicity I’m going to use the mean personal healthcare expenditures for one man and woman (aged 19-44) and one boy and one girl (aged 0-18). Unfortunately I was only able to find that for two-year intervals in the range from 2002 to 2020, so I interpolated and extrapolated both directions assuming the same average growth rate of 3.5%.

So let’s summarize what all is included here:

Estimated payment on a mortgage
0.5 years of college tuition
amortized cost of 2 cars
7500/(median MPG) gallons of gasoline
amortized cost of 2 phones, 1 computer, and 1 television
average spending on clothes
11% of income on food
Estimated utilities spending
Estimated childcare equivalent to five months of infant care
Healthcare for one man, one woman, one boy, one girl

There are obviously many criticisms you could make of these choices. If I were writing a proper paper, I would search harder for better data and run robustness checks over the various estimation and extrapolation assumptions. But for these purposes I really just want a ballpark figure, something that will give me a sense of what rising cost of living feels like to most people.

What I found absolutely floored me. Over the range from 1990 to 2024:

The Index of Necessary Expenditure rose by an average of 3.45% per year, almost a full percentage point higher than the average CPI inflation of 2.62% per year.
Over the same period, after-tax income rose at a rate of 3.31%, faster than CPI inflation, but slightly slower than the growth rate of INE.
The Index of Necessary Expenditure was over 100% of median after-tax household income every year except 2020.
Since 2021, the Index of Necessary Expenditure has risen at an average rate of 5.74%, compared to CPI inflation of only 2.66%. In that same time, after-tax income has only grown at a rate of 4.94%.

Point 3 is the one that really stunned me. The only time in the last 34 years that a family of four has been able to actually pay for all necessities—just necessities—on a typical household income was during the COVID pandemic, and that in turn was only because the federal tax burden had been radically reduced in response to the crisis. This means that every single year, a typical American family has been either going further and further into debt, or scrimping on something really important—like healthcare or education.

No wonder people feel like the economy is failing them! It is!

In fact, I can even make sense now of how Trump could convince people with “Are you better off than you were four years ago?” in 2024 looking back at 2020—while the pandemic was horrific and the disruption to the economy was massive, thanks to the US government finally actually being generous to its citizens for once, people could just about actually make ends meet. That one year. In my entire life.

This is why people felt betrayed by Biden’s economy. For the first time most of us could remember, we actually had this brief moment when we could pay for everything we needed and still have money left over. And then, when things went back to “normal”, it was taken away from us. We were back to no longer making ends meet.

When I went into this, I expected to see that the INE had risen faster than both inflation and income, which was indeed the case. But I expected to find that INE was a large but manageable proportion of household income—maybe 70% or 80%—and slowly growing. Instead, I found that INE was greater than 100% of income in every year but one.

And the truth is, I’m not sure I’ve adequately covered all necessary spending! My figures for childcare and utilities are the most uncertain; those could easily go up or down by quite a bit. But even if I exclude them completely, the reduced INE is still greater than income in most years.

Suddenly the way people feel about the economy makes a lot more sense to me.

More on Free Will

2024-10-272024-10-22 PNRJ cognitive science, core principles, ethics, inequality, Logic of Kindness, public policy choice, circumstances, crime, free will, GDP, GDP per capita, Hannah Arendt, operant conditioning, poverty, psychology

Oct 27 JDN 2460611

In a previous post, I defended the existence of compatibilism and free will. There are a few subtler issues with free will that I’d now like to deal with in this week’s post.

The ability to do otherwise

One subtler problem for free will comes from the idea of doing otherwise—what some philosophers call “genuinely open alternatives”. The question is simple to ask, but surprisingly difficult to answer: “When I make a choice, could I have chosen otherwise?”

On one hand, the answer seems obviously “yes” because, when I make a choice, I consider a set of alternatives and select the one that seems best. If I’d wanted to, I’d have chosen something else. On the other hand, the answer seems obviously “no”, because the laws of nature compelled my body and brain to move in exactly the way that it did. So which answer is right?

I think the key lies in understanding specifically how the laws of nature cause my behavior. It’s not as if my arms are on puppet strings, and no matter what I do, they will be moved in a particular way; if I choose to do something, I will do it; if I choose not to, I won’t do it. The laws of nature constrain my behavior by constraining my desires; they don’t constrain what I do in spite of what I want—instead, they constrain what I do through what I want. I am still free to do what I choose to do.

So, while my actions may be predetermined, they are determined by who I am, what I want, what experiences I have. These are precisely the right kind of determinants for free will to make sense; my actions spring not from random chance or external forces, but instead from my own character.

If we really mean to ask, “Could I (exactly as I was, in the situation I was in) have done otherwise (as free choice, not random chance)?” the answer is “No”. Something would have to be different. But one of the things that could be different is me! If I’d had different genes, or a different upbringing, or exposure to different ideas during my life, I might have acted differently. Most importantly, if I had wanted a different outcome, I could have chosen it. So if all we mean by the question is “Could I (if I wanted to) have done otherwise?” the answer is a resounding “Yes”. What I have done in my life speaks to my character—who I am, what I want. It doesn’t merely involve luck (though it may involve some luck), and it isn’t reducible to factors external to me. I am part of the causal structure of the universe; my will is a force. Though the world is made of pushes and pulls, I am among the things pushing and pulling.

As Daniel Dennett pointed out, this kind of freedom admits of degrees: It is entirely possible for a deterministic agent to be more or less effective at altering its circumstances to suit its goals. In fact, we have more options today than we did a few short centuries ago, and this means that in a very real sense we have more free will.

Empirically observing free will

What is really at stake, when we ask whether a person has free will? It seems to me that the question we really want to answer is this: “Are we morally justified in rewarding or punishing this person?” If you were to conclude, “No, they do not have free will, but we are justified in punishing them.”, I would think that you meant something different than I do by “free will”. If instead your ruling was “Yes, they have free will, but we may not reward or punish them.”, I would be similarly confused. Moreover, the concern that without free will, our moral and legal discourse collapses, seems to be founded upon this general notion—that reward and punishment, crucial to ethics and law (not to mention economics!) as they are, are dependent upon free will.

Yet, consider this as a scientific question. What kind of organism can respond to reward and punishment? What sort of thing will change its behavior based upon rewards, punishments, and the prospect thereof? Certainly you must agree that there is no point punishing a thing that will not be affected by the punishment in any way—banging your fist on the rocks will not make the rocks less likely to crush your loved ones. Conversely, I think you’d be hard-pressed to say it’s pointless to punish if the punishment would result in some useful effect. Maybe it’s not morally relevant—but then, why not? If you can make the world better by some action, doesn’t that, other things equal, give you a moral reason to perform that action?

We know exactly what sort of thing responds to reward and punishment: Animals. Specifically, animals that are operant-conditionable, for operant conditioning consists precisely in the orchestrated use of reward and punishment. Humans are of course supremely operant-conditionable; indeed, we can be trained to do incredibly complex things—like play a piano, pilot a space shuttle, hit a fastball, or write a book—and, even more impressively, we can learn to train ourselves to do such things. In fact, clearly something more than operant conditioning is at work here, because certain human behaviors (like language) are far too complex to learn by simple reward and punishment. There is a lot of innate cognition going on in the human brain—but over that layer of innate cognition we can add a virtually endless range of possible learned behaviors.

That is to say, learning—the capacity to change future behavior based upon past experience—is precisely in alignment with our common intuitions about free will—that humans have the most, animals have somewhat less, computers might have some, and rocks have none. Yes, there are staunch anthropocentrist dualists who would insist that animals and computers have no “free will”. But if you ask someone, “Did that dog dig that hole on purpose?” their immediate response will not include such theological considerations; it will attribute free choice to Canis lupus familiaris. Indeed, I think if you ask, “Did the chess program make that move on purpose?” the natural answer attributes some sort of will even to the machine. (Maybe just its programmer? I’m not so sure.)

Yet, if the capacity to respond to reward and punishment is all we need to justify reward and punishment, then the problem of free will collapses. We should punish criminals if, and only if, punishing them will reform them to better behavior, or set an example to deter others from similar crimes. Did we lose some deep sense of moral desert and retribution? Maybe, but I think we can probably work it back in, and if we can’t, we can probably do without it. Either way, we can still have a justice system and moral discourse.

Indeed, we can do better than that; we can now determine empirically whether a given entity is a moral agent. The insane psychopathic serial killer who utterly fails to understand empathy may indeed fail to qualify, in which case we should kill them and be done with it, the same way we would kill a virus or destroy an oncoming asteroid. Or they may turn out to qualify, in which case we should punish them as we would other moral agents. The point is, this is a decidable question, at least in principle; all we need are a few behavioral and psychological experiments to determine the answer.

The power of circumstances

There is another problem with classical accounts of free will, which comes from the results of psychology experiments. Perhaps the most seminal was the (in)famous experiment by Stanley Milgram, in which verbal commands caused ordinary people to administer what they thought were agonizing and life-threatening shocks to innocent people for no good reason. Simply by being put in particular circumstances, people found themselves compelled to engage in actions they would never have done otherwise. This experiment was replicated in 2009 under more rigorous controls, with virtually identical results.

This shows that free will is much more complicated than we previously imagined. Even if we acknowledge that human beings are capable of making rational, volitional decisions that reflect their character, we must be careful not to presume that everything people do is based upon character. As Hannah Arendt has pointed out, even the Nazis, though they perpetrated almost unimaginable evils, nonetheless were for the most part biologically and psychologically normal human beings. Perhaps Hitler and Himmler were maniacal psychopaths (and more recently Arendt’s specific example of Eichmann has also been challenged.), but the vast majority of foot soldiers of the German Army who burned villages or gassed children were completely ordinary men in extraordinarily terrible circumstances. This forces us to reflect upon the dire fact that in their place, most of us would have done exactly the same things.

This doesn’t undermine free will entirely, but it does force us to reconsider many of our preconceptions about it. Court systems around the world are based around the presumption that criminal acts are committed by people who are defective in character, making them deserving of punishment; in some cases this is probably right (e.g. Jeffrey Dahmer, Charles Manson), but in many cases, it is clearly wrong. Crime is much more prevalent in impoverished areas; why? Not because poor people are inherently more criminal, but because poverty itself makes people more likely to commit crimes. In a longitudinal study in Georgia, socioeconomic factors strongly predicted crime, especially property crime. An experiment at MIT suggests that letting people move to wealthier neighborhoods actually makes their children less likely to commit crimes. A 2007 report from the Government Accountability Office explicitly endorsed the hypothesis that poverty causes crime.

Really, all of this makes perfect sense: Poor people are precisely those who have the least to lose and the most to gain by breaking the rules. If you are starving, theft may literally save your life. Even if you’re not at the verge of starvation, the poorer you are, the worse your life prospects are, and the more unfairly the system has treated you. Most people who are rich today inherited much of their wealth from ancestors who violently stole it from other people. Why should anyone respect the rules of a system that robbed their ancestors and leaves them forsaken? Compound this with the fact that it is harder to be law-abiding when you are surrounded by thieves, and the high crime rates of inner cities hardly seem surprising.

Does this mean we should abandon criminal justice? Clearly not, for the consequences of doing so would be predictably horrendous. Temporary collapses in civil government typically lead to violent anarchy; this continued for several years in Somalia, and has happened more briefly even in Louisiana (it was not as terrible as the media initially reported, but it was still quite bad.) We do need to hold people responsible for their crimes. But what this sort of research shows is that we also need to consider situational factors when we set policy. The United States has the highest after-tax absolute poverty rate and the highest share of income claimed by the top 0.01\% of any First World nation—an astonishing 4%, meaning that the top 30,000 richest Americans have on average 400 times as much income as the average person. (My master’s thesis was actually on the subject of how this high level of inequality is related to increased corruption.) We also have the third-highest rate of murder in the OECD, after Mexico (by far the highest) and Estonia. Our homicide rate is almost three times that of Canada and over four times that of England. Even worse, the US has the highest incarceration rate in the world. Yes, that’s right; we in the US imprison a larger portion of our population than any other nation on Earth—including Iran, China, and Saudi Arabia.

Social science suggests this is no coincidence; it is our economic inequality that leads to our crime and incarceration. Nor is our poverty a result of insufficient wealth. By the standard measure Gross Domestic Product (GDP), an estimate of the total economic output a nation produces each year, the United States has the second-highest total GDP at purchasing power parity (China recently surpassed us), and the sixth-highest GDP per person in the world. We do not lack wealth; instead, we funnel wealth to the rich and deny it from the poor. If we stopped doing this, we would see a reduction in poverty and inequality, and there is reason to think that a corresponding reduction in crime would follow. We could make people act morally better simply by redistributing wealth.

Such knowledge of situational factors forces us to reconsider our ethical judgments on many subjects. It forces us to examine the ways that social, political, and economic systems influence our behavior in powerful ways. But we still have free will, and we still need to use it; in fact, in order to apply this research to our daily lives and public policies, we will need to exercise our free will very carefully.

Why is America so bad at public transit?

2024-09-082024-09-01 PNRJ development economics, inequality, politics, public policy buses, Canada, cars, China, climate change, France, Germany, infrastructure, Italy, Japan, Kenya, public transit, Russia, trains, transit, United States, Venezuela, welfare

Sep 8 JDN 2460562

In most of Europe, 20-30% of the population commutes daily by public transit. In the US, only 13% do.

Even countries much poorer than the US have more widespread use of public transit; Kenya, Russia, and Venezuela all have very high rates of public transit use.

Cities around the world are rapidly expanding and improving their subway systems; but we are not here in the US.

Germany, France, Spain, Italy, and Japan are all building huge high-speed rail networks. We have essentially none.

Even Canada has better public transit than we do, and their population is just as spread out as ours.

Why are we so bad at this?

Surprisingly, it isn’t really that we are lacking in rail network. We actually have more kilometers of rail than China or the EU—though shockingly little of it is electrified, and we had nearly twice as many kilometers of rail a century ago. But we use this rail network almost entirely for freight, not passengers.

Is it that we aren’t spending enough government funds? Sort of. But it’s worth noting that we cover a higher proportion of public transit costs with government funds than most other countries. How can this be? It’s because transit systems get more efficient as they get larger, and attract more passengers as they provide better service. So when you provide really bad service, you end up spending more per passenger, and you need more government subsidies to stay afloat.

Cost is definitely part of it: It costs between two and seven times as much to build the same amount of light rail network in the US as it does in most EU countries. But that just raises another question: Why is it so much more expensive here?

This isn’t comparing with China—of course China is cheaper; they have a dictatorship, they abuse their workers, they pay peanuts. None of that is true of France or Germany, democracies where wages are just as high and worker protections are actually a good deal stronger than here. Yet it still costs two to seven times as much to build the same amount of rail in the US as it does in France or Germany.

Another part of the problem seems to be that public transit in the US is viewed as a social welfare program, rather than an infrastructure program: Rather than seeing it as a vital function of government that supports a strong economy, we see it as a last resort for people too poor to buy cars. And then it becomes politicized, because the right wing in the US hates social welfare programs and will do anything to make sure that they are cut down as much as possible.

It wasn’t always this way.

As recently as 1970, most US major cities had strong public transit systems. But now it’s really only the coastal cities that have them; cities throughout the South and Midwest have massively divested from their public transit. This goes along with a pattern of deindustrialization and suburbanization: These cities are stagnating economically and their citizens are moving out to the suburbs, so there’s no money for public transit and there’s more need for roads.

But the decline of US public transit goes back even further than that. Average transit trips per person in the US fell from 115 per year in 1950 to 36 per year in 1970.

This long, slow decline has only gotten worse as a result of the COVID pandemic; with more and more people working remotely, there’s just less need for commuting in general. (Then again, that also means fewer car miles, so it’s probably a good thing from an environmental perspective.)

Once public transit starts failing, it becomes a vicious cycle: They lose revenue, so they cut back on service, so they become more inconvenient, so they lose more revenue. Really successful public transit systems require very heavy investment in order to maintain fast, convenient service across an entire city. Any less than that, and people will just turn to cars instead.

Currently, the public transit systems in most US cities are suffering severe financial problems, largely as a result of the pandemic; they are facing massive shortfalls in their budgets. The federal government often helps with the capital costs of buying vehicles and laying down new lines, but not with the operating costs of actually running the system.

There seems to be some kind of systemic failure in the US in particular; something about our politics, or our economy, or our culture just makes us uniquely bad at building and maintaining public transit.

What should we do about this?

One option would be to do nothing—laissez faire. Maybe cars are just a more efficient mode of transportation, or better for what Americans want, and we should accept that.

But when you look at the externalities involved, it becomes clear that this is not the right approach. While cars produce enormous amounts of pollution and carbon emissions, public transit is much, much cleaner. (Electric cars are better than diesel buses, but still worse than trams and light rail—and besides, the vast majority of cars use gasoline.) Just for clean air and climate change alone, we have strong reasons to want fewer cars and more public transit.

And there are positive externalities of public transit too; it’s been estimated that for every $1 spent on public transit, a city gains $5 in economic activity. We’re leaving a lot of money on the table by failing to invest in something so productive.

We need a fundamental shift in how Americans think about public transit. Not as a last resort for the poor, but as a default option for everyone. Not as a left-wing social welfare program, but as a vital component of our nation’s infrastructure.

Whenever people get stuck in traffic, instead of resenting other drivers (who are in exactly the same boat!), they should resent that the government hasn’t supported more robust public transit systems—and then they should go out and vote for candidates and policies that will change that.

Of course, with everything else that’s wrong with our economy and our political system, I can understand why this might not be a priority right now. But sooner or later we are going to need to fix this, or it’s just going to keep getting worse and worse.

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Human Economics

Cognitive development economics: Understanding the mind in order to feed the world

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