As the United States prepares to commemorate the tenth anniversary of the 9/11 attacks this weekend, one of the most striking contrasts is between a country that was united in the face of a foreign enemy a decade ago, and that same nation today, which is so bitterly divided as it confronts domestic challenges of equal, if not greater, magnitude.
Most Americans do agree on one thing — the polarization and paralysis are the fault of failed politicians and a flawed political system. As a unifying rallying cry, this pox-on-all-their-houses approach has much to recommend it.
But what if the problem goes deeper than politics and politicos? Maybe America’s national discord is rooted in structural factors that even the most talented leader and effective political system would struggle to fix.
That is one of the arguments in a provocative book by Cornell economist Robert H. Frank, published this month. Frank is an economist for the rest of us — his métier is to write about big ideas for a broad audience — and he is often ahead of the curve: he was an early enthusiast of the now trendy behavioral economics and he began writing about the winner-take-all economy long before the idea became conventional wisdom.
His new work, The Darwin Economy, builds on those interests to focus on one paradox of economic life: behavior which makes sense for a particular individual can harm the community as a whole. Frank’s favorite example is from the natural world — the massive antlers of bull elks.
For the individual bull, engaging in the antler arms race is smart — the bull with the biggest antlers is most likely to win fights with other bulls and thus mate with the most cows. But for bull elks as a group, the antler wars are destructive, making it easier for wolves to trap bulls in the forest.
Frank doesn’t claim to have discovered this problem of collective action — indeed, as the book’s title indicates, his intellectual inspiration is Charles Darwin — but he believes it has become particularly acute in globalized, high-tech, twenty-first century capitalism. America’s bull elk are the winners in that capitalist contest and their antlers — so useful to themselves, but harmful, Frank argues, to the community at large — are their very large incomes.
The problem, he believes is that like the bull elks, the rest of us are driven to compete with the super-elite, spending more than we can afford on our equivalent of antlers — homes, schools, and status symbols like the suits we wear to job interviews. Just as the bull elks, as a community, “would be better off if each animal’s antlers were much smaller,” our economy would function more effectively overall if the super-elite, who set the frame of reference for everyone else, consumed less.
But even if you buy Frank’s argument — and he sets himself the ambitious task of winning over libertarians, his toughest potential audience — getting to that collectively better equilibrium could be very hard to do.
To understand why, read a 2009 paper by Raghuram Rajan, the former chief economist of the International Monetary Fund who is now a professor at the University of Chicago’s Booth School of Business. Rajan’s subject is political paralysis in developing countries: why, he asks, is economic reform so difficult to achieve in poor countries, even when they are democratic? After all, if reform would make the country as a whole richer, surely a majority of voters should support it.
But just as Frank argues that the self-interest of individuals can be at odds with an outcome which would benefit the group as a whole (including those individuals), Rajan finds that the interests of different economic constituencies may clash and thus make it hard to build a political consensus for reform. As each group seeks to preserve its meager advantages in an underdeveloped economy, “the collective choice is poverty.”
I asked Rajan, who earned his first two academic degrees in his native India, how his arguments about “paralysis” in developing countries could be applied to the politics of the country where he now makes his home.
“Where you stand effects what you see and what you believe,” Rajan said. “Take the working rich. A fair number will say, ‘you don’t need to spend more, you just need to spend more effectively.’ They have somehow convinced themselves that, yes, we need to improve education, but no, we don’t need to spend more money. That is very convenient.”
Constituencies — Rajan prefers the term to interest groups — on the left make the same sort of self-interested arguments: “The flip side is the liberal who says all we need is more taxes and just to protect good union jobs. That is refusing to see the reality that those good union jobs are history and trying to protect them means you will just continue to fall behind.”
The point, as with the bull elks, is that collectively harmful policies can make sense for you and your community. Which is why cookie-cutter appeals to the common good and to common sense — and disparagement of bad politicians — don’t capture the scale of the problem in countries which are democratic, but deeply economically divided.
“This notion that if only our politicians in Washington could behave and act like adults, I find very naive,” Rajan said. “Don’t blame Washington or the system, blame the divided constituencies that sent people there.”
Foxxdrake:
That was the most logical, accurate and enjoyable post I’ve read in a month. I’m still grinning.
Here’s my take…
When the uber-rich are finished eating their young (the economically lower and middle classes, et al)they will have no one left to chew on but themselves. Sure would like to see that.