Phil Orenstein of Democracy Project has blogged about Glenn Beck's new protest group. Phil writes:
>"When I stood up to speak, introducing myself as a Republican and promoting certain candidates for public office as potential standard bearers for disenfranchised American patriots like us, I could sense the overall disdain for politicians and political parties. I got the idea that they have no use for the Republican, Conservative or Libertarian parties or the corresponding labels that define their alleged principles. They see their elected officials and party leaders mostly as petty, self serving, unprincipled charlatans, except perhaps for Rep. Peter King. Nothing I said regarding translating their anger into action at the polls in November, made any sense to them."
The disenfranchisement of many Americans stems from the excessive size of the Amnerican federal republic. When the nation was founded it had 3 million people and the states had an average of 231,000 people each. In 1995 and 1996 231,000 foreign immigrants came to New York City alone. 231,000 is the population of Plano, Texas. Los Angeles and Chicago alone have populations of about 3 million.
The nation has become too large to govern. The problem is aggravated by the conflicting commitments to democracy and to the welfare state. Both are incompatible with ever-increasing size. Service delivery must respond to local needs so that nationalized programs like Social Security are too inflexible. Democracy requires that voters have some input into electoral processes. But the small effect of a single vote in a nation with 50 states and an average population of six million per state means that voters have no reason to believe that their voice counts. Size stifles voice. Thus, voting rates tend to be low and voting is dominated by people with something to gain from advocacy of state wealth transfers. American government therefore discourages creativity and progress by taxing production. The federal government has become a cancer on the promise of American life to provide increasing improvement in technology and standards of living. For the past 36 years, since 1971, real hourly wages have declined as government spending has mushroomed.
The problem is compounded by practical limits on the size of Congress. In a state with 231,000 people, each Senator could represent 115,000 people. In a state with six million people, each Senator reprsents three million. Each Senator today has the same representation ratio that the president had in 1790. The first House of Representatives had 59-64 members. That is one Congressman for every 48,000 citizens. The 110th Congress had 434 members. That is one Congressman for every 691,000 citizens. The ratio has increased fourteen fold.
The Federalists based much of their thinking on Montesquieu, who argued that democracy was possible only in a small republic. Madison argued otherwise in the Federalist Number 10, that the potential magnitude of the United States would support democracy because factions or special interests would counteract each other.
The Montesquieu effect is that an individual's voice has greater effect the smaller the republic becomes. The likelihood of political action increases with decreasing size because action has efficacy. Personal reputation, public respect, and economic gain are more likely to be achieved. However, crowd emotion threatens democracy. In larger republics, such as the United States in 1790, interest groups form and counteract each other. The nation is still small enough that individuals can influence interest groups. Large size makes communication and transportation difficult. There is less responsiveness due to the larger size than in the smaller democracy. But the large size has the advantage of permitting dissidents to exit and encourages more reasoned discussion by interests. The Madison effect outweighed the Montesquieu effect in 1790 because interest groups can correspond to a legitimate range of public needs.
However, there is no reason to believe that this will be so indefinitely, that size can increase infinitely and the Madison effect will continue to outweigh the Montesquieu effect. It is quite likely that the Montesquieu effect will begin to outweigh the Madison effect when interest groups are too large to motivate individuals to participate or skewness in benefits from organization become marked.
Mancur Olson has outlined this process. When the benefits from organization outweigh the organizational costs to each individual, then organization is likely. Small groups with large benefits tend to be better at organizing. They contribute to politicians and have the most access. Politics increasingly becomes a matter of economic opportunism. Specific financial arrangements that depend on special interest organization, for example the monetary creation powers of the Federal Reserve Bank, governmental privileges of health care providers, laws protecting trial attorneys and the like delineate the contours of power. General public concerns become mired in cross conflict because reward structures are unclear. Interests such as Wall Street arrange $2.5 trillion subsidies while defense, government operations, education, and other governmental responsibilities are botched or co opted by specific interests. Thus, there is a tipping point where the Montesquieu effect outweighs the Madison effect. This began to occur a century or so ago. In 1884 the Mugwumps were still willing to organize a national outcry against supposed corruption of a presidential candidate, James G. Blaine. In 2008, corruption by congressmen occurs with impunity.
There are other factors that modify size effects, specifically the development of technology. It would seem that centralized media changed the Montesquieu effect. This may be why as America grew to large population in the 19th century the republic was able to function. Yellow journalism bound the nation together. This was reinforced by radio, then television. Centralized media made the nation smaller so that its large scale was less of an impediment. The effect of the corrupting influence from centralized economic actors, railroads and other large corporations, led to a Madisonian response: reforms proposed by the Mugwumps, the Progressives and the Roosevelt New Deal. But such reforms were ineffective. They assumed away the scale and rationality problems that confront large organizations. This was because the idea of cognitive limits on management was unknown. The Progressives, moreover, chiefly focused on state reform. By the 1930s, naivete about the management possibilities of large scale had escalated even business enterprise had arrived at decentralizing responses to limits on the ability to manage large organizations. The Roosevelt New Dealers claimed that they could surmount scale impediments to competent management that had stymied America's best managers.
The centralizing trend of the federal government continued unabated. There are numerous reasons why this trend would result in destructive, suboptimal outcomes. The interest group problem becomes exacerbated. Competent execution of programs is difficult. One program after the other has either failed to be discarded; has failed to respond to public needs; has responded instead to particular needs of special interests; and/or has been mismanaged.
Showing posts with label james madison. Show all posts
Showing posts with label james madison. Show all posts
Thursday, March 19, 2009
Friday, February 20, 2009
America Has Let Madison Down--Why?
In the Federalist Number 10 James Madison described faction, or special interest activism, as the chief threat to republican government. In our era special interest lobbying has arisen as an increasing threat to the American republic, just as Madison prophetically predicted. The monotone media support for the Wall Street and banking "bailout"; the absence of intelligent discussion on television; the continued exponential growth in the federal budget in which both parties participate; the Democrats' use of the "bailout" as an excuse to subsidize special interests; the Republicans', including Ronald Reagan's, inability to meaningfully cut government; and both parties' loyalty to the Federal Reserve Bank's ever-escalating subsidization of Wall Street all portend ever steeper decline in American wealth, power and freedom. The two party system has failed. Yet, Americans lack the competence or education to identify the underlying problems. Why has America let Madison down? Why do the voters repeatedly elect the same corrupt politicians, beholden to special interests? Why have so few presidents displayed a fraction of the vision or leadership ability of the presidents of an earlier age?
Even in the 1780s factional rivalry challenged popular government. Madison defined faction as "a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community."
His definition suggests a few possible reasons for the failure of twenty-first century American democracy. First, in the Progressive era, which occurred a century ago, Herbert Croly and John Dewey argued that democracy is an end to itself. They defined away the possibility that the majority could oppress the individual or a minority. This was a paramount concern to Madison but of no concern to Croly or Dewey. The Progressives' fetishization of democracy continues today even in many libertarian circles. Excessive democracy fails because the public is easily manipulated by wealthy factions.
The extension of democracy in the Progressive era, specifically, the direct election of Senators and the creation of the primary system in the two parties, opened the door to manipulation of public opinion. By increasing choice the Progressives reduced choice. Today's Congressmen, like the general public, are incompetent to discuss key issues such as the Federal Reserve Bank. Nevertheless, public opinion is more easily manipulated than Congress's, and more democracy has meant that public decision making has deviated from the public interest to a greater degree than Madison hoped. Madison believed that elected representatives would refine public opinion. Instead, the public is so dazed that it repeatedly elects representatives who act against its economic interests and who are themselves incompetent to discuss policy.
The second reason that democratic faction may no longer be recognized is the education system. The public has been educated to believe that Congress and the bureaucratic apparatus of the federal government make rational decisions; that the Federal Reserve Bank is a necessary and optimal institution; that politicians act in their interest; and that they are like children who must depend on the federal government. In the 18th and 19th centuries Americans were not so indoctrinated. A sheepish, indoctrinated populace is incapable of self government.
A third reason that faction has been increasingly triumphant is the mediazvestia*. In Madison's day there was a host of opinion sources. Newspapers, public debate and local discussion permitted a diversity of opinion. Today's mediazvestia is on a lower intellectual level than the newspapers of Madison's day, yet the public passively accepts its numerous distortions, lies and errors (the reporters themselves are badly educated so make frequent errors of interpretation and judgment). One wonders why a viewer would take CNN seriously. But millions do.
Thus, excessive democracy; indoctrination through the education system; and indoctrination through the mediazvestia are reasons for the public's inability to cope with democratic faction.
Madison goes on to argue that although the causes of faction cannot be eliminated the effects can be. Here he makes honest errors that economists identified two centuries later. First, he believes that if a faction consists of a minority, the democratic process will defeat it through a majority vote. This is an error, as I will discuss. Second, when majority faction arrives at a "scheme of oppression" the safeguard that Madison proposes is republican government and large size, neither of which work because of modern technology and the scope of government.
Since, argues Madison, small numbers of citizens are most easily captured by momentary emotion that leads to oppressive faction, republican safeguards such as representative government inhibit what de Tocqueville later termed "tyranny of the majority". He argues that "the two great points of difference between a democracy and a republic are delegation to a small number of elected representatives" who are potentially more rational than the citizens themselves and "secondly, the greater number of citizens and greater sphere of country over which the latter may be extended."
But a small number of elected representatives cannot serve as a safeguard if they have been brainwashed by an ideological educational system that teaches them to support special interests. Today's elite educational system impresses upon its subjects the importance of subsidizing Wall Street. As well, the great land mass over which the nation eventually extended was diminished first by print media, then radio, then television. Television has rendered the nation the equivalent of a small town by which the public is easily riled to violent emotion.
Contrary to Madison's hopes, as the country has grown larger, the quality of leadership has declined. A nation of 310 million produces leaders of vastly inferior quality to a nation of 3 million, the approximate population of the United States in 1790. One must wonder why a large nation like America has produced a failed, despised Congress; and presidents who are fools.
There are several interpretations of leadership. Among the most famous is the distinction between transactional and transformational leadership. Transactional leadership involves quid pro quo. The leader provides expertise and resources while the followers provide effort and other contributions. With respect to government, transactional leadership would amount to overseeing of factions. Congress and the president provide benefits to various factions. In turn, the factions offer support to Congress and the President. Transactional leadership is necessarily redistributive. It is not inspirational and is inconsistent with the Lockean values on which the nation is based. Yet it is the basis of both Progressivism and New Deal liberalism.
The alternative view of leadership is tranformational. Transformational leaders inspire. They project values and vision that motivate belief and commitment. They are likely charismatic (which was Max von Weber's term for this kind of leader). In order to be transformational, a leader must project the American value system. In American history, there have been several transformational leaders: Washington, Jefferson, Jackson, Lincoln and both Roosevelts. Until the Roosevelts all of the leaders projected Lockean values. Theodore Roosevelt and Franklin D. Roosevelt rejected Lockean values. Since then there has been a basic value conflict within the United States. Many people, called conservatives or libertarians, continue to believe in Lockean values. Many others called "liberals" have rejected American values in favor of a European value system. Still others are indifferent.
Great leaders cannot be transactional. The reason is that the brokerage of special interests limits the scope of leadership. It involves manipulation. It is inconsistent with the vision on which the nation's Constitution rests. Great leadership is visionary. It is transformational. It is impossible in post-New Deal America. Great leadership is not possible in a nation with disjointed values because Americans do not agree. Ronald Reagan disturbs social democrats. Barack Obama disturbs individualists. It will not be possible to mend the rifts in the American value system because those who advocate the European-style value system are as committed to it as those who advocate the American approach. America is divided so that great vision and leadership are impossible.
Moreover, and unfortunately, Madison was wrong in his hope that the fittest would be selected as representatives for the same reason that he was wrong that minority factions would not succeed. He did not understand the economic incentives at play in the post-New Deal democracy. These concerns were less true in the era of limited government, until say, 1950, when the federal government spent only 10 percent of gross national product. As the stakes have been raised, so has the corruption level.
The best do not enter government for a host of reasons. The selection process in politics involves a training period during which an amibitious college graduate is expected to confrom to a political machine. Only someone with flexible values, capable of ignoring corruption and stupidity, would be able to see through this apprenticeship. Second, the opportunities for gain are greater in other fields. Third, specialization is greater in the modern world than it was in the 1790s so that people who choose to specialize in science or business are unlikely to consider or be considered for a political career.
With respect to public indifference to poor leadership, costs of education about politics inhibit the population from thinking carefully about their representatives. Costs of organization inhibit public spirited groups from forming. In contrast, special interests enjoy economic advantages because their stakes are high. Wall Street gains billions from the Fed. It pays for Wall Street to organize. If each American each year pays a "tax" of $500, it is not worth it to fight them.
Special interests enjoy asymmetric incentives and low organization costs because corporations, Wall Street banks and similar lobbies are few in number. The gain from Fed counterfeiting and special interest regulation are skewed to favor a few groups but the costs are spread over a large number of voters. Therefore, minority factions triumph and inferior representatives are elected because of the costs and benefits that face voters. It is costly to learn about one's state legislator or Congressman. One person can educate himself, but to what avail? He cannot influence the election's outcome anyway.
Morals and idealism do not trump economics in most cases, unless the problems that special interests create become large enough to interfere in the daily lives and economic plans of Americans in a visible way.
Of course, the endless regulations and special interest arrangements that hamstring Americans already do interfere significantly in Americans' ability to function; to innovate; and to progress. Socialism has already done incalculable harm to progress. But the harm needs to be visible and sufficiently egregious so that the costs of organization to any one American are covered by the losses sustained due to efforts to correct the problem. Apparently, this has yet to occur. The majority does not see the current situation as warranting self education. Moreover, the mediazvestia supplies considerable disinformation, confusing most Americans and raising the costs of practical action. For instance the claim that the "bailout" is essential has been hammered home via almost every media outlet. How many Americans are not bamboozled?
Madison notes that smaller societies have fewer individuals who are more easily manipulated while larger states with more citizens are more difficult to manipulate. "Extend the sphere and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens; or if such a common motive exists, it will be more difficult for all who feel it to discover their own strength and to act in unison with each other."
Again, Madison fails to understand the insights that Mancur Olson grasped in "Logic of Collective Action" and "Rise and Fall of Great Powers" and that George Stigler notes in his "Theory of Economic Regulation". Economic incentives cause groups to form and to agitate in ways that are predictable based on benefits from lobbying and organizational costs. Size defers but does not eliminate faction. Rather, small groups of corporations or labor unions find it convenient and profitable to form. Large groups are difficult to organize and so cannot resist the smaller groups.
One of the things that kept faction in check until the 1950s was limitation on the scope of government. As the power to tax increased, the incentive to manipulate the state increased. Today, we have the bailout and increased subsidy of the wealthy because the average American has been tricked into believing that subsidization means helping the poor.
Madison's final point is that the influence of factious leaders will be limited by geography. But television excels at flaming tyrannical emotion among the majority. The public is easily fooled by supposed experts who parade on national television, each one less competent and less informed than the last. Television conquered Madison's vision. It has destroyed the ability of republicanism to restrain tyranny. Lockean Americans are right to resist the "liberal media". Even if the media was conservative or libertarian it would pose a threat. By linking the mass mind it recreates the small town, the direct democracy. Heretofore the chief manipulator of the public mind has been Wall Street. It is entirely possible that a fascist or other totalitarian movement could replace it and play the same role.
Madison could not have anticipated the development of technology. Mass market newspapers and yellow journalism flowered in the post Civil War era and were followed by the expansion of Progressivism. Nikola Tesla patented the key elements of radio and television in 1897, at the beginning of the Progressive moment and the height of the late 19th century's innovative explosion. The practical implementation took somewhat longer but the military had begun using it by 1912, the year of Woodrow Wilson's election and it had been adapted to commercial use by the 1920s. The shift to social democratic Progressivism was effected in 1930, at the height of the radio age. Television was adopted in the 1950s, and the massive expansion of federal power occurred soon thereafter.
Madison believed that distance and population enhanced republicanism. Technology has successively reduced distance through improved transportation and, most of all, through more rapid communication. Rapid communication enhances the extent of decmocracy. Emotion such as outrage and superficially thought out strategies such as the bailout are passed off by interested economic actors as "policy". Economists for hire parade before the television camera, claiming that multi-billion dollar subsidies to firms that happen to have contributed to the universities that employ them are essential to economic progress. The public lacks the ability to rationally digest these claims. Crackpot schemes tack hold rapidly.
Much as Hitler and Mussolini were products of the radio age and New York Times social democracy was the chief product of the television age, so will the advent of the Internet influence the course of history.
But is the decentralization that will follow the Internet explosion be sufficient to counterbalance the longer term centralizing trend of television or radio?
Just as centralization of the federal structure enhanced and re-enforced the "small town" effects of television and radio, so decentralization will enhance and re-enforce the "big tent" effect of the Internet. Conflicting informational sources threaten and de-legitimize traditional centralized media. Even with the massive pro-bailout propaganda campaign on television and radio, the majority of the public remains unconvinced. Only Obama's fanatic followers on CNN and its mindless viewers think otherwise.
The Internet poses some hope to counteract the mass mind era of radio and television and its concomitant rejection of Lockean values. But Americans need to think about a new organization that will enhance the new Lockean revolution that can take root. Decentralization is consistent with the multi-faceted potential of computer and Internet technology. The centralizing trend of the last century can potentially be counteracted. But enhancement of Madison's vision requires the creation of a new frontier, a new form of diversity by which alternative social visions can coexist peaceably and the die hard rigidity of "Progressivism" and its pro-Wall Street fanaticism can be sidestepped. Of course, many liberals prefer the Wall Street liberalism of the New York Times and the Democratic and Republican Parties. But this aging system is increasingly incoherent. The academics who support it are increasingly self interested and foolish.
*In case your wondering, Izvestia was the official newspaper of the Soviet government. My point is that the American "media" is today little more than a propaganda organ for Wall Street.
Even in the 1780s factional rivalry challenged popular government. Madison defined faction as "a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community."
His definition suggests a few possible reasons for the failure of twenty-first century American democracy. First, in the Progressive era, which occurred a century ago, Herbert Croly and John Dewey argued that democracy is an end to itself. They defined away the possibility that the majority could oppress the individual or a minority. This was a paramount concern to Madison but of no concern to Croly or Dewey. The Progressives' fetishization of democracy continues today even in many libertarian circles. Excessive democracy fails because the public is easily manipulated by wealthy factions.
The extension of democracy in the Progressive era, specifically, the direct election of Senators and the creation of the primary system in the two parties, opened the door to manipulation of public opinion. By increasing choice the Progressives reduced choice. Today's Congressmen, like the general public, are incompetent to discuss key issues such as the Federal Reserve Bank. Nevertheless, public opinion is more easily manipulated than Congress's, and more democracy has meant that public decision making has deviated from the public interest to a greater degree than Madison hoped. Madison believed that elected representatives would refine public opinion. Instead, the public is so dazed that it repeatedly elects representatives who act against its economic interests and who are themselves incompetent to discuss policy.
The second reason that democratic faction may no longer be recognized is the education system. The public has been educated to believe that Congress and the bureaucratic apparatus of the federal government make rational decisions; that the Federal Reserve Bank is a necessary and optimal institution; that politicians act in their interest; and that they are like children who must depend on the federal government. In the 18th and 19th centuries Americans were not so indoctrinated. A sheepish, indoctrinated populace is incapable of self government.
A third reason that faction has been increasingly triumphant is the mediazvestia*. In Madison's day there was a host of opinion sources. Newspapers, public debate and local discussion permitted a diversity of opinion. Today's mediazvestia is on a lower intellectual level than the newspapers of Madison's day, yet the public passively accepts its numerous distortions, lies and errors (the reporters themselves are badly educated so make frequent errors of interpretation and judgment). One wonders why a viewer would take CNN seriously. But millions do.
Thus, excessive democracy; indoctrination through the education system; and indoctrination through the mediazvestia are reasons for the public's inability to cope with democratic faction.
Madison goes on to argue that although the causes of faction cannot be eliminated the effects can be. Here he makes honest errors that economists identified two centuries later. First, he believes that if a faction consists of a minority, the democratic process will defeat it through a majority vote. This is an error, as I will discuss. Second, when majority faction arrives at a "scheme of oppression" the safeguard that Madison proposes is republican government and large size, neither of which work because of modern technology and the scope of government.
Since, argues Madison, small numbers of citizens are most easily captured by momentary emotion that leads to oppressive faction, republican safeguards such as representative government inhibit what de Tocqueville later termed "tyranny of the majority". He argues that "the two great points of difference between a democracy and a republic are delegation to a small number of elected representatives" who are potentially more rational than the citizens themselves and "secondly, the greater number of citizens and greater sphere of country over which the latter may be extended."
But a small number of elected representatives cannot serve as a safeguard if they have been brainwashed by an ideological educational system that teaches them to support special interests. Today's elite educational system impresses upon its subjects the importance of subsidizing Wall Street. As well, the great land mass over which the nation eventually extended was diminished first by print media, then radio, then television. Television has rendered the nation the equivalent of a small town by which the public is easily riled to violent emotion.
Contrary to Madison's hopes, as the country has grown larger, the quality of leadership has declined. A nation of 310 million produces leaders of vastly inferior quality to a nation of 3 million, the approximate population of the United States in 1790. One must wonder why a large nation like America has produced a failed, despised Congress; and presidents who are fools.
There are several interpretations of leadership. Among the most famous is the distinction between transactional and transformational leadership. Transactional leadership involves quid pro quo. The leader provides expertise and resources while the followers provide effort and other contributions. With respect to government, transactional leadership would amount to overseeing of factions. Congress and the president provide benefits to various factions. In turn, the factions offer support to Congress and the President. Transactional leadership is necessarily redistributive. It is not inspirational and is inconsistent with the Lockean values on which the nation is based. Yet it is the basis of both Progressivism and New Deal liberalism.
The alternative view of leadership is tranformational. Transformational leaders inspire. They project values and vision that motivate belief and commitment. They are likely charismatic (which was Max von Weber's term for this kind of leader). In order to be transformational, a leader must project the American value system. In American history, there have been several transformational leaders: Washington, Jefferson, Jackson, Lincoln and both Roosevelts. Until the Roosevelts all of the leaders projected Lockean values. Theodore Roosevelt and Franklin D. Roosevelt rejected Lockean values. Since then there has been a basic value conflict within the United States. Many people, called conservatives or libertarians, continue to believe in Lockean values. Many others called "liberals" have rejected American values in favor of a European value system. Still others are indifferent.
Great leaders cannot be transactional. The reason is that the brokerage of special interests limits the scope of leadership. It involves manipulation. It is inconsistent with the vision on which the nation's Constitution rests. Great leadership is visionary. It is transformational. It is impossible in post-New Deal America. Great leadership is not possible in a nation with disjointed values because Americans do not agree. Ronald Reagan disturbs social democrats. Barack Obama disturbs individualists. It will not be possible to mend the rifts in the American value system because those who advocate the European-style value system are as committed to it as those who advocate the American approach. America is divided so that great vision and leadership are impossible.
Moreover, and unfortunately, Madison was wrong in his hope that the fittest would be selected as representatives for the same reason that he was wrong that minority factions would not succeed. He did not understand the economic incentives at play in the post-New Deal democracy. These concerns were less true in the era of limited government, until say, 1950, when the federal government spent only 10 percent of gross national product. As the stakes have been raised, so has the corruption level.
The best do not enter government for a host of reasons. The selection process in politics involves a training period during which an amibitious college graduate is expected to confrom to a political machine. Only someone with flexible values, capable of ignoring corruption and stupidity, would be able to see through this apprenticeship. Second, the opportunities for gain are greater in other fields. Third, specialization is greater in the modern world than it was in the 1790s so that people who choose to specialize in science or business are unlikely to consider or be considered for a political career.
With respect to public indifference to poor leadership, costs of education about politics inhibit the population from thinking carefully about their representatives. Costs of organization inhibit public spirited groups from forming. In contrast, special interests enjoy economic advantages because their stakes are high. Wall Street gains billions from the Fed. It pays for Wall Street to organize. If each American each year pays a "tax" of $500, it is not worth it to fight them.
Special interests enjoy asymmetric incentives and low organization costs because corporations, Wall Street banks and similar lobbies are few in number. The gain from Fed counterfeiting and special interest regulation are skewed to favor a few groups but the costs are spread over a large number of voters. Therefore, minority factions triumph and inferior representatives are elected because of the costs and benefits that face voters. It is costly to learn about one's state legislator or Congressman. One person can educate himself, but to what avail? He cannot influence the election's outcome anyway.
Morals and idealism do not trump economics in most cases, unless the problems that special interests create become large enough to interfere in the daily lives and economic plans of Americans in a visible way.
Of course, the endless regulations and special interest arrangements that hamstring Americans already do interfere significantly in Americans' ability to function; to innovate; and to progress. Socialism has already done incalculable harm to progress. But the harm needs to be visible and sufficiently egregious so that the costs of organization to any one American are covered by the losses sustained due to efforts to correct the problem. Apparently, this has yet to occur. The majority does not see the current situation as warranting self education. Moreover, the mediazvestia supplies considerable disinformation, confusing most Americans and raising the costs of practical action. For instance the claim that the "bailout" is essential has been hammered home via almost every media outlet. How many Americans are not bamboozled?
Madison notes that smaller societies have fewer individuals who are more easily manipulated while larger states with more citizens are more difficult to manipulate. "Extend the sphere and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens; or if such a common motive exists, it will be more difficult for all who feel it to discover their own strength and to act in unison with each other."
Again, Madison fails to understand the insights that Mancur Olson grasped in "Logic of Collective Action" and "Rise and Fall of Great Powers" and that George Stigler notes in his "Theory of Economic Regulation". Economic incentives cause groups to form and to agitate in ways that are predictable based on benefits from lobbying and organizational costs. Size defers but does not eliminate faction. Rather, small groups of corporations or labor unions find it convenient and profitable to form. Large groups are difficult to organize and so cannot resist the smaller groups.
One of the things that kept faction in check until the 1950s was limitation on the scope of government. As the power to tax increased, the incentive to manipulate the state increased. Today, we have the bailout and increased subsidy of the wealthy because the average American has been tricked into believing that subsidization means helping the poor.
Madison's final point is that the influence of factious leaders will be limited by geography. But television excels at flaming tyrannical emotion among the majority. The public is easily fooled by supposed experts who parade on national television, each one less competent and less informed than the last. Television conquered Madison's vision. It has destroyed the ability of republicanism to restrain tyranny. Lockean Americans are right to resist the "liberal media". Even if the media was conservative or libertarian it would pose a threat. By linking the mass mind it recreates the small town, the direct democracy. Heretofore the chief manipulator of the public mind has been Wall Street. It is entirely possible that a fascist or other totalitarian movement could replace it and play the same role.
Madison could not have anticipated the development of technology. Mass market newspapers and yellow journalism flowered in the post Civil War era and were followed by the expansion of Progressivism. Nikola Tesla patented the key elements of radio and television in 1897, at the beginning of the Progressive moment and the height of the late 19th century's innovative explosion. The practical implementation took somewhat longer but the military had begun using it by 1912, the year of Woodrow Wilson's election and it had been adapted to commercial use by the 1920s. The shift to social democratic Progressivism was effected in 1930, at the height of the radio age. Television was adopted in the 1950s, and the massive expansion of federal power occurred soon thereafter.
Madison believed that distance and population enhanced republicanism. Technology has successively reduced distance through improved transportation and, most of all, through more rapid communication. Rapid communication enhances the extent of decmocracy. Emotion such as outrage and superficially thought out strategies such as the bailout are passed off by interested economic actors as "policy". Economists for hire parade before the television camera, claiming that multi-billion dollar subsidies to firms that happen to have contributed to the universities that employ them are essential to economic progress. The public lacks the ability to rationally digest these claims. Crackpot schemes tack hold rapidly.
Much as Hitler and Mussolini were products of the radio age and New York Times social democracy was the chief product of the television age, so will the advent of the Internet influence the course of history.
But is the decentralization that will follow the Internet explosion be sufficient to counterbalance the longer term centralizing trend of television or radio?
Just as centralization of the federal structure enhanced and re-enforced the "small town" effects of television and radio, so decentralization will enhance and re-enforce the "big tent" effect of the Internet. Conflicting informational sources threaten and de-legitimize traditional centralized media. Even with the massive pro-bailout propaganda campaign on television and radio, the majority of the public remains unconvinced. Only Obama's fanatic followers on CNN and its mindless viewers think otherwise.
The Internet poses some hope to counteract the mass mind era of radio and television and its concomitant rejection of Lockean values. But Americans need to think about a new organization that will enhance the new Lockean revolution that can take root. Decentralization is consistent with the multi-faceted potential of computer and Internet technology. The centralizing trend of the last century can potentially be counteracted. But enhancement of Madison's vision requires the creation of a new frontier, a new form of diversity by which alternative social visions can coexist peaceably and the die hard rigidity of "Progressivism" and its pro-Wall Street fanaticism can be sidestepped. Of course, many liberals prefer the Wall Street liberalism of the New York Times and the Democratic and Republican Parties. But this aging system is increasingly incoherent. The academics who support it are increasingly self interested and foolish.
*In case your wondering, Izvestia was the official newspaper of the Soviet government. My point is that the American "media" is today little more than a propaganda organ for Wall Street.
Monday, August 18, 2008
The Federalists' Error: National Size and the Evolution of Faction: Progressivism's Hamiltonian Root
Montesquieu had argued that only small republics are possible, but Madison and Hamilton argued the reverse. Their claim was that small republics lead to conflict among factions, but that large size reduces factional conflict. In the Federalist No. 10 Madison argues:
"The question resulting is whether small or extensive republics are most favorable to the election of proper guardians of the public weal; and it is clearly decided in favor of the latter by two obvious considerations..."
The first, in Madison's view, is that because there is a greater absolute number of capable representatives in a large than in a small republic but because legislatures are limited in size, "the number of representatives in the two cases not being in proportion to that of the constituents, and being proportionally greatest in the samll republic, it follows that if the proportion of fit characters be not less in the large than in the small republic the former will present a greater option and consequently a greater possibility of a fit choice."
Also, in Madison's view, "as each representative will be chosen by a greater number of citizens in the large than in the small republic, it will be more difficult for unworthy candidates to practise with success the vicious arts by which elections are too often carried; and the suffrages of the people being more free, will be more likely to center on men who possess the most attractive merit and the most diffusive nad established characters."
However, Madison tempers his argument in the next paragraph by noting that "by enlarging too much the number of electors, you render the representative too little acquainted with all their local circumstances...as by reducing it too much you render him unduly attached to these, and too little fit to comprehend and pursue great and national objects.."
The second factor favoring large scale or size, in Madison's view is "the greater number of citizens and extent of territory which may be brought within the compass of republican than of democratic government; and it is this circumstance principally which renders factious combinations less to be dreaded in the former than in the latter. The smaller the society, the fewer probably will be the distinct parties and interests composing it; the fewer the distinct parties and interest, the more frequently will a majority be found of the same party; and the smaller the number of individuals composing a majority, and the smaller the compass within which they are placed, the more easily they will concert and execute their plans of oppression. Extend the sphere and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens."
In the Federalist No. 27, Hamilton argues:
"Unless we presume at the same time that the powers of the general government will be worse administered than those of the State governments, there seems to be no room for the presumption of ill will, disaffection or opposition in the people. I believe it may be laid down as a general rule that their confidence in and obedience to a government will commonly be proportioned to the goodness or badness of its administration. ..the general government will be better administered than the particular governments: the principal of which are that the extension of the spheres of election will present a greater option, or latitude of choice, to the people...And that on account of the extent of the country from which those, to whose direction they will be committed, will be drawn, they will be less apt to be tainted by the spirit of faction, and more out of the reach of those occasional ill humors or temporary prejudices and propensities which in smaller societies frequently contaminate the public deliberations, beget injustice and oppression of a part of the community, and engender schemes which, though they gratify a momentary inclination or desire, terminate in general distress, dissatisfaction and disgust."
First, notice that Hamilton's argument in favor of the expertise of the federal government is precisely the one used by the Progressives from the 1890s through the 1930s in arguing for enhancement of federal power. Hamilton argued that central government would be more rational, and the Progressives argued that centrally placed experts would be able to administer anti-trust and other regulatory systems more rationally.
Naturally, the federalist system works much better than the Anti-Federalists of the 1780s feared. However, it is also true that as the Progressives' centralizing strategy of enhancing the federal government has developed, faction has played an increasing role. Not necessarily the kind of faction about which the Federalists and the Progressives through Herbert Hoover were often concerned such as agricultural versus manufacturing interests, or labor versus management, i.e., broad social groupings, but rather special interests.
Mancur Olson* posed the argument that small rather than large factions or groups are effective in the regulatory process. Large size stimulates special interest involvement in the legal and regulatory process to the benefit of small factions. The is counter-intuitive, and Hamilton and Madison did not have the advantage of as much historical evidence as Olson had. The reason is that as the scope of the republic gets larger, the benefit from special interest lobbying also gets larger. The larger the benefit, the greater the incentive for specific firms and industries to form factions and lobby. Larger size reduces the cost per citizen of rent extraction. Large size makes the formulation for scattered and poorly coordinated factions difficult, but corporations are compact. Corporations did not exist in the Federalist era. Thus, history revealed the opposite trend: the centralization of power in the Federalist era led to special interest factions having greater power than they had in the more decentralized nineteenth century. Of course, the corporate form of organization, which flowered in the late nineteenth century contributed to this, but so did the Progressives emphasis on expertise in a centrally situated state. The economic incentives are powerful enough that special interests are able to overcome the best efforts (if there are indeed such efforts) of centrally placed experts. Moreover, the factions are able to employ experts that are superior to the government's resulting in all too fequent cases of regulatory capture by corporations.
Decentralizing the economy would reduce the incentives for lobbying and raise the costs of lobbying. As a result, the advantage that corporations and small groups that face high benefits from lobbying gain in a more centralized federal system is likely to be reversed. First, the benefit will be on average 1/50th the size it currently is for each lobbying episode. Second, the costs of lobbying will be 50 times greater because there are 50 states. Clearly, lobbying will become more expensive and more complex, making regulatory influence more difficult.
Although Hamilton and Madison may have been right in the environment in which they lived, where there were no large corporations, where the entire US population was less than four million and where benefits from lobbying were negligible by today's standards, in today's world lobbying functions like a competitive auction. To the extent that it interferes with democracy, raising the transaction costs of lobbying and reducing the benefit from each lobbying episode will enhance democracy and limit the private gains at public expense that lobbyists can accrue.
"The question resulting is whether small or extensive republics are most favorable to the election of proper guardians of the public weal; and it is clearly decided in favor of the latter by two obvious considerations..."
The first, in Madison's view, is that because there is a greater absolute number of capable representatives in a large than in a small republic but because legislatures are limited in size, "the number of representatives in the two cases not being in proportion to that of the constituents, and being proportionally greatest in the samll republic, it follows that if the proportion of fit characters be not less in the large than in the small republic the former will present a greater option and consequently a greater possibility of a fit choice."
Also, in Madison's view, "as each representative will be chosen by a greater number of citizens in the large than in the small republic, it will be more difficult for unworthy candidates to practise with success the vicious arts by which elections are too often carried; and the suffrages of the people being more free, will be more likely to center on men who possess the most attractive merit and the most diffusive nad established characters."
However, Madison tempers his argument in the next paragraph by noting that "by enlarging too much the number of electors, you render the representative too little acquainted with all their local circumstances...as by reducing it too much you render him unduly attached to these, and too little fit to comprehend and pursue great and national objects.."
The second factor favoring large scale or size, in Madison's view is "the greater number of citizens and extent of territory which may be brought within the compass of republican than of democratic government; and it is this circumstance principally which renders factious combinations less to be dreaded in the former than in the latter. The smaller the society, the fewer probably will be the distinct parties and interests composing it; the fewer the distinct parties and interest, the more frequently will a majority be found of the same party; and the smaller the number of individuals composing a majority, and the smaller the compass within which they are placed, the more easily they will concert and execute their plans of oppression. Extend the sphere and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens."
In the Federalist No. 27, Hamilton argues:
"Unless we presume at the same time that the powers of the general government will be worse administered than those of the State governments, there seems to be no room for the presumption of ill will, disaffection or opposition in the people. I believe it may be laid down as a general rule that their confidence in and obedience to a government will commonly be proportioned to the goodness or badness of its administration. ..the general government will be better administered than the particular governments: the principal of which are that the extension of the spheres of election will present a greater option, or latitude of choice, to the people...And that on account of the extent of the country from which those, to whose direction they will be committed, will be drawn, they will be less apt to be tainted by the spirit of faction, and more out of the reach of those occasional ill humors or temporary prejudices and propensities which in smaller societies frequently contaminate the public deliberations, beget injustice and oppression of a part of the community, and engender schemes which, though they gratify a momentary inclination or desire, terminate in general distress, dissatisfaction and disgust."
First, notice that Hamilton's argument in favor of the expertise of the federal government is precisely the one used by the Progressives from the 1890s through the 1930s in arguing for enhancement of federal power. Hamilton argued that central government would be more rational, and the Progressives argued that centrally placed experts would be able to administer anti-trust and other regulatory systems more rationally.
Naturally, the federalist system works much better than the Anti-Federalists of the 1780s feared. However, it is also true that as the Progressives' centralizing strategy of enhancing the federal government has developed, faction has played an increasing role. Not necessarily the kind of faction about which the Federalists and the Progressives through Herbert Hoover were often concerned such as agricultural versus manufacturing interests, or labor versus management, i.e., broad social groupings, but rather special interests.
Mancur Olson* posed the argument that small rather than large factions or groups are effective in the regulatory process. Large size stimulates special interest involvement in the legal and regulatory process to the benefit of small factions. The is counter-intuitive, and Hamilton and Madison did not have the advantage of as much historical evidence as Olson had. The reason is that as the scope of the republic gets larger, the benefit from special interest lobbying also gets larger. The larger the benefit, the greater the incentive for specific firms and industries to form factions and lobby. Larger size reduces the cost per citizen of rent extraction. Large size makes the formulation for scattered and poorly coordinated factions difficult, but corporations are compact. Corporations did not exist in the Federalist era. Thus, history revealed the opposite trend: the centralization of power in the Federalist era led to special interest factions having greater power than they had in the more decentralized nineteenth century. Of course, the corporate form of organization, which flowered in the late nineteenth century contributed to this, but so did the Progressives emphasis on expertise in a centrally situated state. The economic incentives are powerful enough that special interests are able to overcome the best efforts (if there are indeed such efforts) of centrally placed experts. Moreover, the factions are able to employ experts that are superior to the government's resulting in all too fequent cases of regulatory capture by corporations.
Decentralizing the economy would reduce the incentives for lobbying and raise the costs of lobbying. As a result, the advantage that corporations and small groups that face high benefits from lobbying gain in a more centralized federal system is likely to be reversed. First, the benefit will be on average 1/50th the size it currently is for each lobbying episode. Second, the costs of lobbying will be 50 times greater because there are 50 states. Clearly, lobbying will become more expensive and more complex, making regulatory influence more difficult.
Although Hamilton and Madison may have been right in the environment in which they lived, where there were no large corporations, where the entire US population was less than four million and where benefits from lobbying were negligible by today's standards, in today's world lobbying functions like a competitive auction. To the extent that it interferes with democracy, raising the transaction costs of lobbying and reducing the benefit from each lobbying episode will enhance democracy and limit the private gains at public expense that lobbyists can accrue.
Monday, June 16, 2008
Publius on Localization of America
Let's do a thought experiment. Let's say the federal government agreed to download most of its responsibilities, such as social security, taxation, education (oh, I thought that was a state responsibility), medical care for the elderly, regulation of labor and industry and similar responsibilities onto the states. The states would have the power to reform or discard any or all of the progressive, New Deal and Great Society bureaucracies.
Continuing the thought experiment, under such a localization policy, some states might opt for greater freedom of enterprise and laissez faire. Other states might opt for subsidization of business, a central bank like the Fed, and eminent domain to subsidize real estate developers. Still other states might opt for governmental redistribution of wealth to enable the poor to contribute productively. It is likely that one of these models would be most successful. Would the successful states incur the unsuccessful states' wrath?
In the Federalist Papers number five (by Jay) and six and seven (by Hamilton) Publius, the pseudonym for Jay, Hamilton and Madison, addresses this question. Publius's argument is that decentralization will create animosity among the states or local confederacies of states. In Number 5, Publius (Jay) argues that "they ...would in no other sense be neighbors as they would be borderers." In turn, border conflicts and hatreds leading to war would evolve.
In Number Seven Publius (Hamilton) argues that:
Competition of commerce would be another fruitful source of contention. The States less favorably circumstanced would be desirous of escaping from the disadvantages of local situation, and of sharing in the advantages of their more fortunate neighbors. Each State, or separate confederacy, would pursue a system of commercial policy peculiar to itself."
States, muses Hamilton, might pass laws that justifiably benefit their own citizens, but in so doing incur the wrath of other states whose citizens are not benefited. An example might be tariffs set by coastal states like New York that expense inland states like Ohio. The result might be civil war.
The Constitution resolved the danger of warfare among the states. A decentralized system that relies on a federal government to resolve conflicts concerning interstate commerce, to set tariffs and conduct foreign policy, would be in keeping with the Constitution and permit improvement and modernization of decision making. A nation united by comparable values need not have but one bureaucracy.
It is likely that the most successful states, which I would guess would be the ones that adopted laissez faire policies, would incur the wrath of other states. But the magnificence of decentralization is that the wrath could be converted into productive action. States could learn from other states through mimesis. Thus, better and more productive methodologies would lead not to hatred and warfare, but rather to the spreading of ideas throughout the republic. Publius Wealth is not the result of resource endowment, but rather of human capital and technology. Greater diversity of experimentation from decentralization will reap benefits that far exceed the costs of multiple bureaucracies.
Continuing the thought experiment, under such a localization policy, some states might opt for greater freedom of enterprise and laissez faire. Other states might opt for subsidization of business, a central bank like the Fed, and eminent domain to subsidize real estate developers. Still other states might opt for governmental redistribution of wealth to enable the poor to contribute productively. It is likely that one of these models would be most successful. Would the successful states incur the unsuccessful states' wrath?
In the Federalist Papers number five (by Jay) and six and seven (by Hamilton) Publius, the pseudonym for Jay, Hamilton and Madison, addresses this question. Publius's argument is that decentralization will create animosity among the states or local confederacies of states. In Number 5, Publius (Jay) argues that "they ...would in no other sense be neighbors as they would be borderers." In turn, border conflicts and hatreds leading to war would evolve.
In Number Seven Publius (Hamilton) argues that:
Competition of commerce would be another fruitful source of contention. The States less favorably circumstanced would be desirous of escaping from the disadvantages of local situation, and of sharing in the advantages of their more fortunate neighbors. Each State, or separate confederacy, would pursue a system of commercial policy peculiar to itself."
States, muses Hamilton, might pass laws that justifiably benefit their own citizens, but in so doing incur the wrath of other states whose citizens are not benefited. An example might be tariffs set by coastal states like New York that expense inland states like Ohio. The result might be civil war.
The Constitution resolved the danger of warfare among the states. A decentralized system that relies on a federal government to resolve conflicts concerning interstate commerce, to set tariffs and conduct foreign policy, would be in keeping with the Constitution and permit improvement and modernization of decision making. A nation united by comparable values need not have but one bureaucracy.
It is likely that the most successful states, which I would guess would be the ones that adopted laissez faire policies, would incur the wrath of other states. But the magnificence of decentralization is that the wrath could be converted into productive action. States could learn from other states through mimesis. Thus, better and more productive methodologies would lead not to hatred and warfare, but rather to the spreading of ideas throughout the republic. Publius Wealth is not the result of resource endowment, but rather of human capital and technology. Greater diversity of experimentation from decentralization will reap benefits that far exceed the costs of multiple bureaucracies.
Subscribe to:
Posts (Atom)
