Tuesday, October 20, 2015

Harry Frankfurt's Hand Grenade

Harry Frankfurt’s Hand Grenade

I failed my test in Macroeconomics yesterday.  I blame the instructors.

I was sitting with an economist discussing, among other things, Harry Frankfurt’s new monograph, “On Inequality”.  While veering among the hieroglyphics he wrote on a white board, diminishing marginal utility, dollar stores in poor neighborhoods, regulation of banks, values-based investing, and tax simplification while maintaining progressivity, I asked what I thought was a reasonable question “If you were King, what would you do?”  He didn’t like it, and he effectively turned it around on me.  What would I do, if I were in charge?  The answer I gave was logical, in light of my rather sparse understanding of how the economy actually works, but it was dead wrong.  I said I would hire smart people. 

Suffice to say, I will not be called to Stockholm next year.  The reason why that answer is so poor is because it turns its back on something I do know a fair amount about—politics.  In a democracy, voters make the threshold decision—they choose the direction of economic policy by electing the people to enact it.  The “smart people” merely refine and implement it.  By metaphorically throwing my hands up in the air, and essentially telling my friend “you know better than I do, I trust you” I was not just admitting my lack of knowledge, I was abrogating my basic responsibility to gain that knowledge.  That was my failure. 

Like any good student, I feel blame properly rests on the shoulders of those who taught me—in this case, the politicians.  And, if you will excuse the bad analogy, politicians are clearly not economists. 

What ambitious office-seekers (and office-holders) tend to be is tacticians and not theoreticians. Nuance doesn’t sell, nor does a carefully crafted, specific set of policy suggestions.  So they grasp a handful of certitudes, push them out there, mix in some hormones, and the battle is half won.

On the angry social issues—things like immigration, guns, privacy, gays, reproductive rights, race and religion—this works brilliantly.  It is altogether possible to get a voter who has an emotional attachment to a particular topic to completely ignore his own self-interest on other things.  When the gut kicks in, the brain detaches itself. 

You cannot apply that approach to the economic challenges we face.  Right now, we have multi-decade arc of a stalled middle and working class, just at the very time the full weight of the Baby Boomer Generation lands on our two most important entitlement programs, Social Security and Medicare.   And we have two political parties who are still locked into mid-20th Century binary thinking.

Look at the debates.  Watching Bernie Sanders gave me flashbacks to my childhood.  He was like a favorite family member who was a “hi-fi” enthusiast.  He’d wave his arms around, say, “listen to this Grundig—from my bedroom I can hear the entire world—clear as a bell—who needs those tinny transistors?”

But, what’s the difference between Sanders and, say Jeb Bush or any of the other Republican candidates?  Different pitch, of course, but substantively, Jeb is selling the same Grundig—just with different music coming out. Dress them in period clothes (I don't think Bernie would need a new wardrobe) and film in black and white and, without a scorecard, you would think you were back in the Eisenhower Era.  Both sides take the same basic approach--stale ideas without innovation, wrapped in a proto-morality to give it heft.  It’s either greedy plutocrats getting ever wealthier through favoritism, exploitation, and extraction, or “takers” who are wooed with “free stuff.”  That is the limit of their vocabularies.

That is why Frankfurt’s little book, and his work, is so important.  He is not an economist, and his grasp of economic concepts can be tenuous. He doesn’t offer specific solutions, which can be maddening. What he does is some ways far more useful.  By blasting away (that’s the correct phrase) at some comfortable, reflexive frameworks, he provides us with a workable vocabulary for discussion.  

Frankfurt does not believe in equality for equality’s sake.  He rejects, rather ruthlessly, any claim to moral superiority that a comfortable liberal might have in talking about universal brotherhood, egalitarianism, etc.  Economic equality is not, in its own right, a morally compelling social value—in fact, to the extent that the focus is on righting the perceived wrong of inequity it may draw away attention from more fundamentally important questions.  Even other types of “equalities” such as opportunity, respect, rights, consideration, concern, are dismissed by him, “My view is that none of these modes of equality is intrinsically valuable…none has any underived moral wealth.”  

It’s a scalding evaluation, so harsh that George Will happily quotes him.  But, you have to be careful here not to overreact to what, at first blush, seems to be an apologia for not merely the pursuit of unbridled wealth, but unbridled wealth that buys unequal treatment.  Because the other side of the equation is equally unsparing.  Frankfurt, while rejecting egalitarianism, also says, “To focus on inequality, which is not in itself morally objectionable, is to misconstrue the challenge we actually face.  Our basic focus should be on reducing both poverty and excessive affluence.”  What Frankfurt wants is what he calls the “doctrine of sufficiency”—that is, that everyone should have enough. As long as that is true, it is irrelevant that others have more.

And with those few words, Frankfurt demolishes the thinking of every conventional politician out there.  Massive income redistribution as a way of promoting economic equality has no moral basis. Economic equality, on its own, is not virtuous unless it arises through an impossible combination of equal talent, effort, and opportunity.  But “insufficiency” when we have the means to do better, is a moral problem.  Solving that problem is the task.  Not to make every person rich, but that as many as possible can have enough as “needed for the kind of life a person would most sensibly and appropriately seek for himself”.

Which brings back to point I started at—how I failed my economics exam.  I failed it because I was unwilling to choose either the Democratic or Republican approach.  Both seem to me demonstrably wrong.  80 years of social programs and 50 years of the Great Society have helped ameliorate the hardest edge of poverty, but they have not produced a sufficiently vibrant economy so that we could do without them. And 35 years of trickle-down, coupled with globalization, have wildly enriched a comparative few, while leaving the rest to muddle along as best they can.

In short, neither approach has fostered what the Nobelist Edmund Phelps called the “Good Economy”—one that has dynamism, a free flow of capital for those willing to take productive risk, rewards for innovation, ease of entry to participate at a level befitting your energy and talents, and as its bedrock, the opportunity for meaningful, satisfying work. 

Isn’t that what we all want?  A society that is more just because it strives not to make us equal, but rather to provide  the opportunity for sufficiency for as many as possible, and a fair chance to choose our own path, and make our own priorities?

We don't need our politicians picking winners and losers.  What we need are policy choices that make the goal of sufficiency more attainable.  

In the meantime, I have to call my economist friend and see if he gives make-up exams.  Next time I will bring Harry Frankfurt's Hand Grenade.

October 20th, 2015

Michael Liss (Moderate Moderator)

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