In an otherwise outstanding primer on Scandinavian economic policy, Timothy Taylor remarks:
I won’t try to make the case here either for or against the Scandinavian model of capitalism. Strong majorities of people living in those countries seem to like the tradeoffs, which is all the justification that is needed.
“All the justification that is needed”?! Frankly, this is a textbook case of what I call “democratic fundamentalism.”
Almost all economists, regardless of ideology, would scoff at the following argument: “Market decisions are voluntary, so we should respect market outcomes.” But say, “Political decisions are democratic, so we should respect political outcomes,” and even economists salute.
Every economics textbook explain how market outcomes can go wrong. Externalities. Monopoly. Asymmetric information. Irrationality. Democratic outcomes can easily go wrong for all the same reasons. Is it possible that Scandinavians simply underestimate the severity of the disincentives their policies generate? Is it possible that they ignore the externalities their welfare state imposes on others – most obviously, by providing a rationale for immigration restrictions? Is it possible that Scandinavians vote for what sounds good, even if the actual effects of their preferred policies are bad?
Sure, you could object, “Couldn’t Americans be making analogous mistakes?” The answer, of course, is: “Of course.” My point is simply that political popularity proves next to nothing. Scandinavians could be wrong. Americans could be wrong. Both could be wrong. And if they are, bad policies will normally win by popular demand.
READER COMMENTS
Mark Z
Nov 10 2018 at 12:26am
In defense of Taylor, he may merely be saying that, if a large enough preponderance of people prefer a set of policies in the voting booth, then it’s probably fairly concordant with the optimal set of policies, even by market standards. Obviously, if everyone unanimously supports a policy, then the distinction between what optimal in the economic sense of the word and the democratic sense disappears. But if 95% prefer a policy, one might argue the disutility rendered to the 5% is probably much smaller in magnitude than the utility rendered to the 95%.
Of course, there is no reason at all to extrapolate that Scandinavian polices are desirable anywhere else; the argument would be inherently circular. How do we know Scandinavians like Scandinavian polices? Because they overwhelmingly vote for them. Good for them. Value is subjective though. If a country doesn’t vote for such polices, it’s a good indication they don’t like said polices.
To argue that we should impose policies popular in Scandinavia in the US, where they’re unpopular, because they are popular in Scandinavia, would be like arguing that, if most people in one country eat hamburgers for lunch (i.e., they vote, democratically for hamburgers for lunch), we ought to force everyone in a different country to eat hamburgers for lunch, because of how much citizens of the other country like them.
Alan Goldhammer
Nov 10 2018 at 8:53am
Mark Z provides an excellent riposte to Professor Caplan’s argument. I’ll only add that a more intriguing response is the Pynchonian discussion of the elect and the preterite found in ‘Gravity’s Rainbow.’
jc
Nov 15 2018 at 2:22pm
Was, or has, slavery ever been politically popular? If a majority voted in favor of it, is that all the justification that’s needed?
That’s obviously too extreme an example to be directly relevant. Degree matters, whether we’re talking about how much aspirin to take or how much of a person’s labor can/should be taken from them.
But it does quickly show that just because a majority wants something, that doesn’t automatically mean that giving them what they want is the correct thing to do.
Is it here? If we dial back the extremity in degrees of “reasonableness”, is there a point where majority sentiment is automatically “correct enough”?
Robert EV
Nov 15 2018 at 10:03pm
When the minority can relatively straightforwardly escape it by moving across a border?
2/3rds of the Scandinavian nations are members of the EU, and their citizens can relatively straightforwardly move across a border. The other 1/3rd is a member of the EEA and can do so too.
Isn’t this free movement one of the libertarian fundamentals vis-a-vis the concept of statehood and state-enforced laws? Well, they’ve got it, so what’s the problem?
Thaomas
Nov 16 2018 at 4:57pm
Huh? Economist are constantly arguing against popular (or at least electorally successful) policies — trade restrictions, deficits at full employment, austerity during recessions, lack of congestion pricing of streets and roads, lack of CO2 emissions taxation.
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