Tyler Cowen Alex Tabarrok on Tom Slee's "No One Makes You Shop at Wal-Mart"

Nobody makes Tyler Cowen Alex Tabarrok shop at Wal-Mart, but Tyler Cowen Alex Tabarrok thinks that the government should not make him not shop at Wal-Mart:

Marginal Revolution: No one makes you shop at Wal-Mart: [Tom] Slee['s No One Makes You Shop at Wal-Mart] attacks MarketThink:

In the world according to MarketThink, the combination of choice and the market is a mechanism for solving problems and improving outcomes in areas as diverse as education, city growth and culture.Hmmm...sound familiar?  (The links, also ironic, are mine not Slee's.) Let the irony continue, I recommend No One Makes You Shop at Wal-Mart. 

Slee's book is the best of the anti-market books: it is well written, serious, and knowledgeable about economics.  In fact, I regard Slee's book as an excellent primer on asymmetric information, free riding, externalities, herding, coordination problems and identity - Economics 301 for all those budding young Ezra Klein's.... Here is one bit.  Early on Slee makes a good point about preferences and outcomes:

The prisoner's dilemma shows how, as soon as one person's choice alters the outcome for another person... choices do not reveal preferences... instead of thinking about choices as revealing preferences, it pays to think of choices as 'replies' to the actions or likely actions of others.  The best choice you can make is the best reply to the likely actions of others.

Later, he drives the point home with a nice example:

Faced with the observation that few children walk to school anymore, we commonly hear that this tendency represents our preferences: that "people won't walk" anymore.  But this is oversimplified.  What we are seeing is one equilibrium among many, and perhaps not the best one.  There is an equilibrium in which no one wants their children to walk along empty streets, and so no children walk, but there is another equilibrium in which many children enjoy walking with groups of other children, and parents feel safe about their children because there is safety in numbers on the busy sidewalks.... Too many cities have concluded that empty sidewalks are a result of our preferences... but once a city takes it as a given that most children will be driven to school, there is no need for the city to even build sidewalks in new subdivisions, and there is more temptation to build fewer, bigger schools rather than more, smaller, easily accessible schools.  With these decisions, the empty-sidewalks equilibrium becomes even more entrenched: we are trapped in an outcome that was the result of individual choices, but that may not represent our true preferences.

Naturally, I have some criticisms.... As noted, the heart of the book is a well-written primer on let's call it new economics.  As such, this book would make a good supplement to an advanced undergraduate class....

As [a] primer, it's fine to illustrate with examples and move on but as an attack on markets one expects a balanced consideration of opposing theories.  For example, Slee looks at beer micro-breweries vs. mass brewers arguing that we are currently stuck in the bad mass-equilibrium because micro-breweries rely on word-of-mouth but the institutions which sustain the word-of-mouth equilibrium only work when there are already lots of micro-breweries about which one can talk.  Nice, but here is an alternative theory.  Economies of scale made mass produced beer cheaper and when push came to shove consumers chose the cheaper good product over the more expensive but slightly better product (I don't eat at 5 star restaurants every night).  New technologies, however, have made micro-brewing more economic and as they have done so we are moving to the mass-customization world that Slee prefers.  Consumers have gotten the best of all worlds - given scarcity - in both time frames.  The beer activists in England that Slee likes moved the process along but in the direction that it was already going.

There is no comparative analysis in the book at all.  No discussion, for example, of how free riding, asymmetric information, herding etc. distorts government choice.  Also, no appreciation that what some of us MarketThink people really advocate is civil society which includes non-profits and voluntary collective action of all kinds.  And, no we are not all corporate shills (p. 106). 

It's true that outcomes do not always illustrate preferences but often they do.... Tom seems all too eager to call in the government to force us into the better equilibrium.  I worry when people start talking about how government can help us to express our true preferences.... 

The chapter on power is terrible, I did throw the book against the wall.  Perhaps in order to prepare us to welcome government as the deliverer of our true preferences, Slee wants to diminish the distinction between liberty and coercion.  But a true liberal should never write things like this:

...the formal structure of democracy and free markets is not enough to rule out exploitation and plunder - characteristics usually associated with repressive regimes....

[R]epressive governments around the world threaten, rob, torture and murder with impunity.  Courageous individuals have died trying to escape such regimes while others have died fighting for their rights.  No matter how great are differences in wealth, it is morally wrong to equate what goes on in repressive regimes with capitalist acts between consenting adults.

Comments

[elliottg]

What's with the Tyler Cowen obsession lately. Is Berkeley recruiting him?

[nick]

"...the formal structure of democracy and free markets is not enough to rule out exploitation and plunder - characteristics usually associated with repressive regimes...."
--at the present time, in the present country, it seems VERY weak for a reviewer to be taking issue with this claim..........(shorter Cowen: the chapter on power hates our freedoms)

[anon]

Cowen seems to have missed Slee's point that not all economic interactions in capitalist societies are "between *consenting* adults." Numerous moneyed actors have the resources to coerce others into transactions that are not in their economic self-interests. Examples include purchased legislation intended to stifle competition, violent union busting, and extortive use of monopoly power. Economists are going to become little more than a laughing stock in the eyes of the public if they don't wake up to these issues.

[Philip Wallach]

That post was actually by Tabarrok, not Cowen.

[JRoth]

Does Tyler Cowen know about Homestead, PA? Calumet, MI? Ludlow, CO? Does he know what exploitation and plunder even mean?

How does an American get beyond high school, much less achieve whatever advanced degrees Cowen presumably possesses, without being fully aware that American Capitalists have, when permitted, killed American Workers when the alternative was allowing them to express their preferences freely?

And why does Professor Brad DeLong approvingly quote Cowen without noting this stunning omission?

[andres]

I'm with nick here. I would take more issue with Cowen's statement:

"No matter how great are differences in wealth, it is morally wrong to equate what goes on in repressive regimes with capitalist acts between consenting adults."

There is no clear, easy definable border between consenting choice and coercion, and in fact "coercion" is just a shorthand for a set of choices which don't come anywhere close to maximizing an individual's utility function under constraints in comparison to another plausible set of constrained choices. The constraints, of course, come from other individuals with whom we interact.

Am I a consenting adult because I agree to let a criminal take my wallet at gunpoint? Most people would say no, and yet many individuals face choices in the world of the market which differ only in the degree of "coercion" and not in its essential nature. The prime duty of government, and that which distinguishes civilized societies from anarchy, is to use the threat of "coercion" on a global scale (the threats being in published form known as the law) in order to prevent some individuals from "coercing" other individuals.

However, in actually existing societies with capitalist markets and representative governments, there are many choices that adults face which can in many ways be viewed as "coercive". There are many hypothetical freedoms which ethics indicate individuals should enjoy but which do not exist due to "coercion" in democratic-capitalist societies. These include:

* The freedom to organize labor unions for collective bargaining without facing vocal disapproval from management at best and actual union busting threats at worst.

* The freedom to _avoid_ certain forms of speech by blanking it out on an individual basis, commercial advertising being the most prevalent. The nearest thing we have to this freedom is the ability to ff television commercials with TiVo, which have caused a lot of complaints by advertisers. Unfortunately, there is no way to avoid other forms of advertising such as billboards.

* The freedom to avoid breathing in and being subjected to _unnecessary_ amounts of pollutants, eg by a single person driving a Hummer when he could be riding a compact or even using a bicycle.

* The freedom to consume goods and services in an informed manner, eg, to avoid goods which have been produced with "coercive" or destructive techniques such as unnecessary pollution, abuse of labor, or potentially harmful product alteration such as some forms of genetic engineering.

There are others, of course. But the point is that unlike Cowen and other libertarians, I see the difference between actually existing representative capitalist governments and more dictatorial, repressive regimes as one of degree, not of overall direction. The representative capitalist governments that exist today are certainly better in terms of human freedom than anything that came before, but we can still do better. And from that I don't budge.

[Alex Tabarrok]

Tabarrok should take the blame not Cowen. Indeed, I do know about Homestead, PA. A classic example of worker violence against capitalists - which is a lot more common than the reverse.

http://www.pbs.org/wgbh/amex/carnegie/sfeature/mh_horror.html

[RW]

The reviewer's stance appears to be proto-fascist or something akin -- this is often mistaken as a form of libertarianism because the "governments bad, markets good" rhetoric leaves the field of governance open to corporations and similar monopoly/rent-seekers implicitly rather than explicitly -- but regardless it is clear the reviewer is not a liberal of any stripe and displays sufficient ignorance regarding the thrust of liberal policy thinking and making as to possess little standing in regards to what a "true liberal" (whatever that is) ought or ought not write.

This combined with at what appears to be a series of non sequiturs or, perhaps, psychological projections of meaning not actually present in Slee's text -- that Slee is arguing for governmental enforcement of preference/choice as opposed to arbitration and/or protection of same; that any and all governments are repressive so Slee must somehow support repression, etc. ad nauseum -- make the entire review singularly incoherent and detached from the text it purports to analyze.

[kth]

Given today's microscopic information costs, there is no political outcome currently or historically achieved by force that could not also be achieved by the practice of blacklisting. Not just dystopian outcomes like the mass starvation of political or ethnic enemies, but benign ones as well ("Not willing to contribute to our poor relief fund? You're on the list!").

Blacklisting isn't a huge factor today, but that's, ironically, only due to government coercion in the form of civil rights and privacy laws. Were those regulations to disappear (indeed, they would be unconstitutional under the sort of regime favored by libertarians), and given again what is technologically possible, blacklists would be ubiquitous.

[George Rawick]

" A classic example of worker violence against capitalists - which is a lot more common than the reverse."

Perhaps in the Gamma Quadrant.

[jerry]

Grabbing popcorn....

[Lee]

Maybe I've been reading MR too long, but I am stunned when DeLong confuses Tabarrok and Cowen's posts (this isn't the first time). The two write very differently. I really cannot imagine Tyler writing that review. (Both are good writers, though).

[jerry]

Actually, I figured that Brad stopped his excerpt here:

" But a true liberal should never write things like this:

" ...the formal structure of democracy and free markets is not enough to rule out exploitation and plunder - characteristics usually associated with repressive regimes....

" [R]epressive governments around the world threaten, rob, torture and murder with impunity. Courageous individuals have died trying to escape such regimes while others have died fighting for their rights. No matter how great are differences in wealth, it is morally wrong to equate what goes on in repressive regimes with capitalist acts between consenting adults."

So that we could all see what nonsense Tabarrok was spewing.

One of the reasons I think that all academics and lawyers and politicians should blog is to remove the distance between them and the average ditch digger. Thanks to Tabarrok and Althouse and Insty et. al., I have a much better time feeling good about my beer drinking partners.

[andres]

Yes indeed, my comment above should have been aimed at Tabarrok, not Tyler Cowen. I'll have to double-check Brad's links more often.

[Rob]

Shorter Alex: My just so stories are better!

"No matter how great are differences in wealth, it is morally wrong to equate what goes on in repressive regimes with capitalist acts between consenting adults."

Contracting a killing is ok after all the victim is an externality!

[D-Slam]

andres: "There is no clear, easy definable border between consenting choice and coercion"

I would imagine libertarians disagree with you.

If X says to Y: "you had better do A, otherwise I will do B" is that coercion or not? I think the border between consenting choice and coercion could be drawn by asking "does X have the MORAL RIGHT to do B?" If not then it's coercion, otherwise it's just a business deal.

If A is "give me your wallet" and B is "I will shoot you", then this is coercion, obviously. You don't have the right to shoot people.

If A is "stop trying to organize that union" and B is "you're fired", is this coercion? A libertarian (I'm sure) would argue that it is not: employment is a voluntary relationship between employed and employer, and either of them can terminate it at will.

[Julian Elson]

Perhaps I misunderstand Slee (and perhaps there's something Tabarrok's leaving out with those ellipses), It seems to me that the Prisoner's Dilemma is a remarkably bad choice for a game in which choices reveal strategic reactions rather than preferences. It's true that the cooperative solution is Pareto dominant to the Nash equilibrium (in a one-shot game), but that isn't due to either of the agents thinking strategically in a manner that means they forgo their real preferences due to strategic considerations. It's just that defection is always the preferred choice for each individual agent under all circumstances. Perhaps a Stag Hunt would be a better example of what Slee's going for here, with "empty sidewalks" being the risk-dominant Nash equilibrium? Or perhaps the reference to the Prisoner's Dilemma is supposed to imply a repeated partner game.

[derek]

It's the most basic of logical fallacies: "Courageous individuals have died trying to escape [repressive governments] while others have died fighting for their rights. Therefore, it is outrageous of Slee to insinuate that any courageous individuals have died trying to escape capitalist thugs, or that any others have died fighting for their rights." Tabarrok's libertarian outrage doesn't even begin to follow logically from his premises.

Once again, I'm saddened to find that a libertarian is just a "you can't say anything mean about corporations!" corporatist. He gets his recommended daily allowance of righteousness from not liking governments.

[andres]

D-Slam:

"If A is "stop trying to organize that union" and B is "you're fired", is this coercion? A libertarian (I'm sure) would argue that it is not: employment is a voluntary relationship between employed and employer, and either of them can terminate it at will."

For one, thing, if employment were truly a voluntary relationship between employed and employer, we would see employers getting fired as often as employees--I don't have access to data, but my guess is that the number of layoffs/firings/non-renewals substantially exceeds the number of voluntary quits. The problem is that there are imbalances in power and cost-of-severance in many so-called voluntary relationships.

As for morality, it is a funny thing. My idea of morality is that it is wrong to terminate or fail to renew a business contract for reasons that have nothing to do with overall performance of one side of the contract. Labor unions are not relevant in this respect since their job is to _renegotiate_ contracts.

Similarly, the core libertarian position is that government has no business telling employers that they cannot discriminate on the basis of race, gender, sexual orientation, or other performance-irrelevant characteristics. Noble sentiments, but I don't trust the markets to drive out discrimination the way most libertarians do. The market is not an even playing field, which means that one's conception of morality naturally has to be fought over in the realm of politics and government policy.

[Randy Owens]

But a true liberal should never write things like this:
...the formal structure of democracy and free markets is not enough to rule out exploitation and plunder - characteristics usually associated with repressive regimes....
[R]epressive governments around the world threaten, rob, torture and murder with impunity. Courageous individuals have died trying to escape such regimes while others have died fighting for their rights. No matter how great are differences in wealth, it is morally wrong to equate what goes on in repressive regimes with capitalist acts between consenting adults.

Aside from the other objections noted above, nobody seems to have pointed out the elephant in the room there: Slee didn't equate repressive regimes with capitalist acts. He pointed out a couple of attributes that they share. He didn't claim (at least within the context given) that those were the worst attributes of repressive regimes, or even amongst those that make such regimes objectionable, although I'd say they are, and if they weren't, Slee might have been guilty of being somewhat misleading with his rhetoric, a la guilt by association and "I bet Hitler breathed oxygen, too!" But he did use some of the undesirable (to most of us) attributes, so it is an eminently fair comparison.

[Sebastian Holsclaw]

"I don't have access to data, but my guess is that the number of layoffs/firings/non-renewals substantially exceeds the number of voluntary quits."

I'm almost certain that you are wrong about that. In most job markets, nearly all of the turnover is in voluntary quits. The standard saying is "People don't leave their job, they leave their boss."

[andres]

Sebastian: the state of my finances means that I can't actually bet anything more valuable than my nose hairs, but I think that you're mistaken, if only from the point of view of deciding who fires whom in the labor market. From that perspective, quitting your job in order to retire or go back to school doesn't really count--D-Slam and I are focused instead on workers who fire their managers because they are unhappy with them, not because there was a pre-planned reversion to education or retirement.

To look at the question empirically, we'd actually have to look at Labor Dept. or other surveys which measured not only the number of quits, but the actual reasons for them. Sounds like a good research project, but no doubt _somebody_ has probably gotten to it before me.