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“…humans have a poor record of understanding risk in complex systems, full of interdependencies, feedback loops, and nonlinear responses. Perhaps humility and caution and consideration are warranted.”
To start, I’m just going to put this right here:
Am considering a blog post for this week that revolves around getting my readers to understand the concept of a counterfactual.
— (Stephanie) Slade (@sladesr) May 11, 2014
@sladesr This is heartily endorsed.
— Squarely Rooted (@squarelyrooted) May 11, 2014
— (Stephanie) Slade (@sladesr) May 12, 2014
Slade’s piece is, in essence, a defense of conservative anti-poverty policy as expressed through a critique of progressive/social democratic anti-poverty policy and its critique of conservative anti-poverty policy. I made it sound confusing, when actually it wasn’t – Slade focuses on defending conservative anti-poverty policy by explaining that the conservative counterfactual to the status quo is not the current pre-transfer distribution of income but instead a larger pie and fewer barriers to work and entrepreneurship.
As Slade suspects, I disagree, though obviously there is some overlap between Slade’s conservativism, which is definitely libertarian-flavored, and my own preferences – more immigration, less war-on-drugs, less occupational licensing, etc. What I want to dig into, though, is more Counterfactuals 202, and for that I want to hone in on this part of Slade’s piece:
It’s important to realize here that standing against a certain policy proposal is not the same as standing with the status quo. When right-of-center reformers say Obamacare is a bad law, they’re not endorsing the health care system that was in place immediately before its passage. Similarly, when conservatives and libertarians question the wisdom of the “war on poverty,” we are not putting a stamp of approval on the levels of poverty that existed 50 years ago, or on the ones that remain today. Our position isn’t that poverty does not matter. We just recognize the chosen prescription has turned out to be a poor one.
The Obamacare example in particular is a productive one to discuss, since it’s much more narrow in scope – a single, well-defined, recent reform package as opposed to half-a-century of a broad philosophy of governance – and because the issue of Obamacare and counterfactuals cuts both ways.
You may recall that, in addition to the larger and more-vocal right-wing opposition movement to Obamacare, there was a smaller but no less vocal or strident progressive opposition movement, perhaps best epitomized by Marcy Wheeler dubbing the Senate bill “neo-fuedalism.” While I don’t agree with that perspective, I am not wholly sanguine about Obamacare. Firstly because of specific problems or drawbacks to the act as written and enacted, but also because I vastly prefer adopting a single-payer or even nationalized system – universal coverage, better outcomes, and a trillion dollars a year? Yes, please.
But I supported and advocated for the passage of Obamacare. Why? Well, I could have, like Slade, simply stated “I prefer my counterfactual to Obamacare; ergo, oppose” and moved on; but instead, I looked at my preferred counterfactual probabilistically – what are the likely actual counterfactuals to Obamacare? Do I support those more than Obamacare? And the answer to that question was “absolutely not” – I would much rather, even though a kludge too friendly too industry, expand coverage to the uninsured and experiment with serious cost-control reforms then leave the status quo in place indefinitely, which was the overwhelmingly likely actual counterfactual in the case of Obamacare.
I’m not certain how much this applies to the conservative counterfactual case; it’s entirely possible that many conservatives genuinely believe that Obamacare is a net negative development. I would argue, though, that conservatives passed up a tremendous amount of leverage in shaping Obamacare, which Democratic leaders from the President on down would have gladly exchanged for political buy-in. So the conservative counterfactual in the case of Obamacare should be something more like “knowing that Obamacare would be enacted and Obama would be reelected, should we have played ball with the inevitable and shape it more to our liking rather than dig in to indefinite total opposition?” An interesting question.
And while this logic is, as I said above, much harder to apply to the overall war on poverty, it’s not impossible. A point I always try to stress to conservatives is that the opposite of welfare-state social democracy is not conservatism; it’s Communism. The modern welfare states of Western Europe and the United States fundamentally emerged as the capitalist response to the then-seemingly-inexorable growth of Communist power. “We can have our cake of economic growth and individual freedom and eat social justice too,” was the message, to totally dismember the metaphor.
I’m not certain, from reading Slade’s piece, exactly how the contours of her conservative counterfactual to welfare-state democracy differ from the policy status quo of the Eisenhower Administration. But I will ask her to think a little harder on Michael Lind’s question of “why are there no libertarian countries?” and to consider not just the idea of a preferred counterfactual, but the odds of that counterfactual coming to pass, and coming to pass in the way you imagine it, and working out the way you think it might. Which is not to say that principle should always be sacrificed on the altar of hyper-realistic incrementalism; just that a realism in the realm of political economy has as much to say to ideological priors as vice-versa.
So Ashok and I sparred a bit on Twitter re: the meaning and effect of taxation and spending (and probably pestered the heck out of James Pethokoukis and Joe Weisenthal in the process). I’m not sure how to embed Twitter conversations (if anyone knows how, I’m all ears), but the long-and-short of it is that the actualities of taxes and spending are weirdly different from the optics.
The trick is to remember that every policy change is a change from some baseline. So, from whatever the baseline currently is, there is no fundamental or economic difference between:
1) Cutting taxes by X on some activity, and
2) Spending X subsidizing that activity
assuming that they are both funded identically (though identical tax hikes, spending cuts, or debt incursions).
Now, in practice, there will be differences. Scott Sumner’s thought experiment about the society that taxes 100% of GDP by taxing 100% of income then writing welfare checks equal to taxed income demonstrates that, since we would expect that society really would look different than the one that taxed nothing at all (if only because such a program would have some overhead). But those differences would be based in behavioral economics, not classical or neoclassical economics.
And the same in real-world examples. There would definitely be differences between these two alternative scenarios:
1) A 2% payroll tax cut (debt-funded).
2) A check mailed to every American for the exact same amount (debt-funded).
But those differences would be instutional, not economics (the check-cashing industry, for example, would obviously prefer the second policy to the first). But there’s no reaosn to think they would "crowd out" (or for that matter, "crowd in") different activities.
The real point is, as Matt Yglesias says, the tax share of GDP is a very poor to think about the “size of government.”
Matt Yglesias is a little too pithy in his dismissal of the power of Twitter in support of social and political revolutionary activity. Certainly this case has been overstated by many, but Ygelsias’ argument – essentially "the internet makes everything easier" + "one only has so much time in a day" + "there were revolutions before Twitter" proves both too much and too little at once.
From where I stand the Twitter question is twofold:
- Does Twitter’s ability to share information spread revolutionary ideas in a way faster or more resiliant than before Twitter existed?
- Is Twitter provide a logistical advantage to revolutionaries once actual action has begun?
My answer to the first question is "unclear, at best." The internet can certainly be a tool for the spreading of information and ideas, but is also a tool for spreading disinformation, polarization, and nonsense. Further study required, etc.
But the second question to me seems to be a resounding "yes." Twitter is, if nothing else, an extremely effective real-time mass communication and organization tool. In years past, this is something that state actors have often had access to in forms of well-established heirarchical organizations equipped with radio technology, whereas revolutionaries and protestors had no such thing. But the vastly reduced cost of vastly improved technology means protestors now have all this cool stuff, and in both North Africa and on Wall Street are using it to great effect to spread important logistical information and organize action. Whether Hosni Mubarak would still be in power if there was no Twitter is an interesting counterfactual, but it seems silly to deny the very obvious fact that Twitter has proven useful to the Egyptians who tossed him.