On Markets, Government, and American Exceptionalism

On Election Day, Carmen Medina outlined ten beliefs underlying her views on the world and on politics. Read her whole post. It’s short, sharp, and thought-provoking.

Here’s what she wrote about regulations:

1. More often than not government (all) regulations do not entirely achieve their intended effects. Their unintended effects can be positive or negative. This is due to the world’s and society’s infinite complexity. Thus, I am skeptical of most grand efforts to “fix a problem”.

and a few points later on climate change:

4. Climate change is real and it is currently driven by humans. Given that regulatory approaches are often flawed, solutions should be emergent and market and locally-based. (See point 1) Thirty years ago I was debating pollution and energy with a friend in an English pub. He was advocating a large government program. I asserted that the first successful electric car would be created by a private company.

I don’t know enough about public policy to know whether her first point — specifically, “more often than not” — is true, although Carmen, as a long-time civil servant, would know infinitely more about this than me. I’m curious, however, what she means by “market-based solutions” in this light.

All markets are regulated, in the sense that someone gets to define the rules by which a market plays. Those rules impact how those markets work and whom they benefit. We saw this play out on Tuesday. Elections are a kind of market that serve as the cornerstone of our democracies. All elections are also regulated. Someone decides who gets to vote, the mechanisms by which they vote, and how those votes are counted. Subtle differences in those rules can have massive effects on their outcomes. This is true of all markets.

This complexity plays out in her electric car example. I assume she’s talking here about Tesla, whose founder, Elon Musk, has loudly endorsed market-based solutions to climate change (such as a carbon tax) and opposed government subsidies. However, he also happily accepted a $450 million loan from the federal government in 2010, which enabled him to scale up production of Tesla’s Model S (and which Tesla paid back with interest three years later). I’m also willing to bet that a good portion of the scientific and technological foundations on which Tesla and other electric cars are based were funded by the government. One might argue that these are all examples of market-based interventions rather than regulations. I’m not sure that the distinction is that clean or that it matters at all.

I think the more important point is that there’s no such thing as the perfect structure. Whatever you put into place will have unintended consequences (a point that Carmen makes right from the start). Without alignment around the desired consequences and a fair, equitable system for making adjustments (i.e. regulations), that structure will fail. Therein lies the rub, especially when it comes to elections. Elections are supposed to be that fair, equitable system for making adjustments, but if they start off flawed (the way all intentionally-designed systems in a complex world do), we are now relying on a flawed system to fix a flawed system. Messy, right?

(This is also what galls me about the current capitalism / socialism rhetoric. Most of the time, when I hear someone railing about one or the other, I have no idea what they’re talking about. Is the U.S. capitalist or socialist? It’s both, and it always has been, although the degrees have shifted over the years. The challenge is in finding the right mix, whatever you want to call it in the end, not in replacing one with a more “pure” version of the other and calling it a day.)

Earlier this week, Stephen Bates published a piece in Lawfare on Reinhold Niebuhr, where he wrote:

For Niebuhr, [Charles] Merriam-style complacency is all too common in the United States. Americans like to ascribe their success to moral virtue rather than good luck. Thanksgiving, he once remarked, is a time for “congratulating the Almighty upon his most excellent co-workers, ourselves.” Americans smugly presume that they have the gold-standard democracy against which all others must be measured. The framers, they think, fashioned stable, incorruptible, self-correcting institutions. Whenever part of the system goes haywire, the other parts compensate, and constitutional homeostasis prevails.

Not so, according to Niebuhr. “There are no such natural harmonies and balances …[,]” he wrote in a Hutchins Commission memo. “Whatever harmony exists at a particular moment may be disturbed by the emergence of new factors and vitalities.” In his view, the price of liberty isn’t merely eternal vigilance; it’s also eternal trial and error. New solutions create new problems. Virtues in one situation become vices in another. Measures to suppress abuses of freedom can end up suppressing freedom. Reason advances justice in some circumstances and camouflages injustice in others. The expansion of knowledge sometimes fuels global understanding and other times fuels imperialism. A free society, Niebuhr believed, demands ceaseless recalibration of unity and diversity, freedom and order, mores and mandates, state power and corporate power. The challenge is “a perpetual one,” he told [Henry] Luce, “for which no single solution is ever found but upon which each generation must work afresh.”

In this vein, I enjoyed how Carmen reframed American Exceptionalism:

10. America is the world’s most multicultural nation. That is its only true exceptionalism. We will prove to be either a successful example or a tragic one.

2 replies to “On Markets, Government, and American Exceptionalism”

  1. Additionally, the government offered tax credits to incentivize people to purchase electric vehicles.

    And were a lot of people really thinking that the government would build the first electric car? Like you imply, the world is not nearly so black and white. There’s lots of gray out there. Even a “carbon tax” would be levied by the government, so it’s not exactly a “free market”. It’s just a “market”.

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