Continuing on the Breaking the Gridlock kick, foreign labor opponents are keen to depict foreigners as a threat to the host nation’s economic self-interest. At their most beneficent, opponents argue against an influx of unskilled labor, which would hurt unskilled labor currently in the country. In theory, this argument is valid. As Lant Pritchett notes, however, evidence suggests the impact is marginal:

The evidence of the Mariel boatlift of a huge influx of workers into a single labor market (Miami) shows little impact on employment or wages (Card 1990). Even Borjas’s (1999) regression evidence that the labor movement of nationals is affected by the patterns of migration and hence the impact on the national labor market needs to be considered shows that only 4 percent of the decline in the real wage of high-school-educated workers can be attributed (and the cross-state regression evidence was apparently driven by the experience of California).

Given that national legislation involving a similarly “huge influx of workers” is politically impossible, the economic fate of low-skilled nationals will not be much affected by foreign labor for the foreseeable future. For those whose concerns stand unabated, Pritchett takes another tact:

The economists’ usual response to distributional arguments against efficient policies is “instruments to targets,” and for economists to resist migration on this ground while advocating free trade is intellectually inconsistent.

For fear of some anti-free traders remaining unimpressed, I would add that we also don’t allow distributional considerations to take precedence over more efficient technological innovations.  I don’t expect this counter-argument to impress anti-free traders in isolation, but free labor has the advantage over free trade in that the direct benefits accrue to those most in need; folks against an unskilled labor influx out of a concern for distributional effects would do well to consider Pritchett’s points in the previous post on the morality of labor mobility.

It would do the case for labor mobility a disservice, however, to simply argue that it wont harm national interests. I won’t waste kilobytes on the obvious benefits of allowing in more labor that firms want to pay to create products, but Pritchett does offer useful clarity on foreign labor as a way to address the problems facing aging industrial countries:

The populations of Germany, Japan, and Italy have already begun to shrink and, for Italy and Japan, are projected to be only 60 percent of their 2000 size by 2050. France and the United Kingdom will remain roughly the same size during the next fifty years. Among large industrial countries, only the United States is expected to continue to experience sizable population growth (these projections already assume some level of migration).
…
Current projections show support [to retiree] ratios falling in Germany from 4 to 2, and in the more dramatic cases of Italy and Japan they fall to about 1.5—only 1.5 workers for every retiree. The systems of social transfers in Europe can be sustained only with very high tax rates even at current support ratios and program design parameters (which include a combination of tax rates, ages, benefits, and so on). But if support ratios fall to anything like projected levels, then it is not clear that there are politically feasible combinations of design parameters that can make the systems solvent—either tax rates need to be too high or retirement benefits drastically curtailed.

This country-specific focus foretells of Pritchett’s final recommendations for bilateral labor agreements, which I’ll explore soon. More generally, it stirs a hope that the industrial nations will soon understand that it is in their economic interest to allow in young, tax-paying workers to correct their demographic imbalances.

Returning for another round (first round: the illiberal global labor market) of Breaking the Gridlock, Lant Pritchett attacks international organizations’ assumption that economic development should focus on the nation-state, rather than the national, as the primary unit of interest. This nation-centric perspective pervades most international institutions and frustrates support of labor mobility. If you didn’t know any better, you might believe that the primary objective is to increase the productive capacity of low-yield geographic areas rather than the economic well-being of the inhabitants. Still the perception of economic development as a national phenomena would be of little concern if it wasn’t often at odds with the interests of the nationals themselves. For example, the de facto measure of development progress, GDP, presents the migration of a productive national to another country for a better paying job as a loss. The real benefits of labor mobility are only apparent when development is centered on people, not arbitrary lines.

To begin with a truism, the capacity of a region to support a population changes over time.  For example, Ireland’s potato famine precipitated a mass exodus. However, because of the corresponding reduction in labor supply, “real wages in Ireland relative to the United Kingdom never fell and gross domestic product (GDP) per capita never fell.”  Similarly, the collapse of industry towns in US met with a decline in population that also mitigated wage losses. When the optimal level of population decreases, a commensurate migration is best for all involved.

Pritchett notes:

In contrast, Bolivia had a clear negative shock as well, but one that occurred in a period in which there was little or no international labor mobility. So, rather than the shock being accommodated by changes in population while real wages of Bolivians remained constant (both in Bolivia and elsewhere), real wages in Bolivia fell spectacularly.

There was no brain drain in Bolivia, but it didn’t help matters.  Trapped labor simply drove down the wages of all the unfortunate souls stuck within the Bolivian borders.

Pritchett then looks to Zambia, where the population has grown from 3.5 million at its GDP-per-capita peak in 1964  to 10 million today, with a GDP per capita that measures 59 percent of the 1964 mark: “to raise output per person just to its previous peak, the populations would have to fall to 36 percent of their current levels.” Like Bolivia, wages have fallen as a bloated Zambian population is forced to make due within its borders.

The economics are simple:

If labor demand falls in a region and labor is trapped in that region, by national boundaries for instance, the labor supply is inelastic and all the accommodation has to come out of falling wages. A region that cannot become a ghost (losing population) becomes a zombie economy—the economy might be dead, but people are forced to live there.

The American (and Irish) experience portends that ghost towns are preferable to zombie economies, yet:

There are 10 million people in the Sahelian country of Niger; if there were globally free labor mobility and only 1 million lived in Niger now, how many people would move there? Though some people might say that this creates a case for more aid or freer trade, it is hard to believe that if people moved out of Kansas because farming was no longer an attractive opportunity, then the best that can be done for the people of Niger or Chad is that they get slightly more assistance and slightly better prices for the items they grow.
…
To be blunt, there is a significant possibility that millions, perhaps hundreds of millions, of people are living in nation-states that because of geographic and technological “shocks” to their economies have little or no possibility of sustaining their current populations (much less their projected future populations) with anything like decent standards of living.

While blunt, Pritchett’s words are also profound. Still, many will read to this point and still be concerned with brain drain — the loss of the best and brightest.  For those folks, Pritchett explores a parallel argument for restricting capital flow to protect national development: “capital is good for development, therefore movements of capital out of poorer countries are bad for development, and therefore banks in rich countries should refuse to take deposits or investments from citizens of poor countries.” Such a position has virtually no credence in serious debate, yet, once again, the labor equivalent of the free trade/capital status quo fails to translate peaceably.

Next up, arguments against labor mobility based on industrial country self-interest.

Chris Blattman and Paul Romer provide a productive back-and-forth on Romer’s charter cities idea. Blattman posted a question of particular interest, “How is this different than Chicago’s notorious housing authority, and the failure that was Cabrini-Green?” He later adds, “Singapore stumbled upon a successful model, Chicago did not. Ex-ante, I think it may have been hard to predict which would succeed.

“A trial-and-error process would, without doubt, produce dozens of successful charter cities around the world. But the error and trial could have a very heavy human cost. A half century after its birth, Cabrini-Green and the Robert Taylor homes have been razed.”

I found Romer’s response a bit odd:

[Blattman and I] also agree that there is a risk associated with new systems. Sometimes they don’t work, as the public housing projects in Chicago demonstrate. Sometimes they work remarkably well. Architecturally similar high-rise buildings in Hong Kong and Singapore provided livable housing for large numbers of working poor in the 1960s and 1970s. (As an aside, Blattman and I seem to agree that the key difference between these cases lay not in the hardware or architecture but rather in the supporting rules, particularly those related to crime.)

From my understanding of the charter city concept, the parallel with the Chicago slums is false. The public housing movement failed due to its utopian central planning by elite technocrats playing god. They were given plots of land to work their magic with poor “consumers” without real means of exit – not much different than public schools.

If I understand properly, the charter city lessor would have quite different incentives. The charter city is more comparable to Facebook, which needs to convince both individuals to populate their site and web developers to develop relevant applications to increase its attractiveness to consumers.  Of course, the risk of failure that concerns Blattman is still present: businesses do fail. However, the incentives for smart, responsive management are far better than the public housing analogy would suggest.

In this context, the rest of Romer’s response makes far more sense. As a blog commenter noted, another appropriate analogy for the charter city is the franchise. A newly-opened McDonald’s isn’t guaranteed to succeed, but obviously its odds of success are far better than a new business and way beyond a public housing project. Another good analogy might be the University of California school system (if we insist on a public sector parallel): the UC Berkeley folks created additional franchises based on the same principles (adapted to the respective markets) and competed (albeit subsidized) for students. In all of these analogies, as Romer notes, “the risk of a failure falls primarily on the owners of the fixed assets that can’t leave, not on the labor income of workers who can leave.”

My lesson from the public housing project is that de facto restrictions on exit are bad for the consumer. Public housing dictated to a trapped consumer, charter cities would need to entice the interested but skeptical, indeed expanding the opportunities for many, including some of those otherwise trapped. The charter city concept is attractive because it resurrects the frontier. Neighborhoods are gentrified as more and more individuals share faith in the health of the neighborhood; the first gentrifiers (the frontiersmen) are able to get a great deal. The charter city holds the same potential, but for the world’s poor, not just yuppies.

Lant Pritchett concludes “Let Their People Come: Breaking the Gridlock on Global Labor Mobility” not by talking about amnesty, but bilateral temporary work agreements. In just 151 pages (available for free), Pritchett not only presents a convincing argument for the reduction of labor movement restrictions, but also thoughtfully and respectfully engages the anti-immigration ideas that keep labor mobility reform off the agenda. While unafraid to voice disagreement with these ideas, Pritchett is careful to acknowledge their political import, and -in a welcomed bow to pragmatism- produces his final recommendations in the context of these realities. This post will be the first in a series to explore Pritchett’s arguments, beginning with an introduction to the matter at hand and the morality of the foreign labor debate.

The great distortion in the international marketplace is not found in trade or capital, but in labor, probabilistically damning billions to lives of poor health, wealth, and education. While it has become easier for goods and money to find their most attractive market, regardless of country, labor laws have made it increasingly difficult for the world’s poor.

At a historically unique time of global consciousness, with tens of billions of dollars spent on development assistance and tens of thousands protesting perceived exploitation of the world’s poor, the world’s democratic powers are making it harder than ever to live and work within their borders. In the 19th century, the wage gap (adjusted for PPP) between Ireland and the US was 2.3:1; today the gap between the US and many countries is three times as great, and the distance between the enterprising foreign worker and the US has commensurately widened.

Pritchett notes that “a recent World Bank study has estimated the benefits of the rich countries allowing just a 3 percent rise in their labor force through relaxing restrictions. The gains from even this modest increase to poor-country citizens are $300 billion—roughly four and a half times that magnitude of foreign aid.” Not only does such reform promise great benefit to the worker, but “the current rich-country residents benefit from this relaxation on distortions to labor markets—so the net cost is in reality a net benefit of $51 billion. It would seem that the choice between spending $70 billion on foreign aid for an uncertain magnitude of gains versus a policy change with a net benefit to rich-country residents of $51 billion for gains to the world’s poor of $300 billion would, naively, be an easy one.”

Yet the nativism of the Know-Nothing Party has indeed carried the day. There are numerous justifications for opposition to foreign labor, and while I focus on the moral questions in this post, I’ll briefly introduce Pritchett’s list of common objections below (for the sake of clarity, I’ve spared the ellipses from this patched together list of quotes):

“- Nationality is a morally legitimate basis for discrimination.
- Proximity or physical presence in the same political jurisdiction is all that matters for moral obligations.
- “Development” is exclusively about nation-states, not nationals [living or working abroad]
- Labor movements are not “necessary” (or desirable) to raise living standards.
- Increased migration of unskilled labor will lower wages (or take jobs away from natives) and worsen the distribution of income in the receiving countries.
- Movers are a fiscal cost because they use more services than they pay in taxes.
- Allowing movement across borders creates risks of crime and terrorism.
- “They” are not like “us”—culture clash.”

The first and second points are relevant to today’s moral discussion. Pritchett notes, that “nearly every modern polity is now built around the notions of fairness and equity. Now, after centuries of struggle, it is widely regarded as morally illegitimate to limit people’s life chances because they were born a woman, are of a minority race or ethnicity, were raised in a certain religion, or have a physical disability. And yet, as chapter 3 documents, the single largest factor affecting a person’s life chances is the country in which he or she is born—this dwarfs gender or race or parents’ socioeconomic status as a determinant of well-being.”

Yet, to many, “as long as a specific Haitian is suffering while physically in Haiti, the moral obligation of the United States is nothing, or next to nothing. If that same Haitian manages to arrive on the soil of the United States, the moral obligation to that specific person increases almost infinitely. At the same time, it is perceived as moral to deploy violence to prevent that Haitian from setting foot on American soil by, for instance, interdicting his or her boat in international waters.”

Pritchett raises the question, “Why is it that people feel morally justified to use coercion to prevent people from crossing their national border to pursue voluntary economic transactions? And not only is that the prevalent attitude, but there is no truly significant agitation against that view from the development community.” Pritchett then proceeds to attack this moral presumption by first raising the specter of apartheid:

The analogy between apartheid and restrictions on labor mobility is almost exact. People are not allowed to live and work where they please. Rather, some are only allowed to live in places where earning opportunities are scarce. … The current international system of restrictions on labor mobility enforces gaps in living standards across people that are large or larger than any in apartheid South Africa. It is even true that labor restrictions in nearly every case explicitly work to disadvantage people of “color” against those of European descent. The obvious response is that with apartheid people of the same nation-state were treated differently while the apartheid of international barriers to mobility is treating people of different nation-states differently. People subject to the same laws should be treated the same based on conditions of birth. The fact that people are, by whimsy of birth, allocated to different nation-states and hence treated differently has no moral traction. In nearly all modern theories of justice and ethical systems, most conditions of birth—one’s sex, race, and ethnicity—are excluded as morally legitimate reasons for differences in wellbeing, and yet discrimination on the basis of nationality is allowed.
….
An Indian girl not having life chances equal to those of an Indian boy is widely regarded as morally unacceptable, while preventing an Indian girl (or Pakistani, Bolivian, or Egyptian girl—or her parents) from moving across national borders to have the same life chances as a German boy (or U.S., French, or Japanese boy) is considered morally acceptable.  …  But behind a “veil of ignorance,” who would agree to a system in which some people are born in Niger (or choose any poor country) and some in Switzerland (or choose any OECD country) and those born in Switzerland are entitled to use coercion to prevent those born in Niger from enjoying life chances equal to those born in Switzerland?

Pritchett acknowledges the many opinions on the philosophical foundations of justice, some of which might rebut that a valid “moral system is whatever emerges from an continued, uncoerced dialogue about values within a community of practice.” He notes, however, that “one question such a notion of justice cannot address is the justice of physical exclusion from the “community.” If the community is smaller than the nation-state, I would imagine that most nations would prevent communities from enforcing physical exclusion of others on “values” grounds—in fact, segregation was justified on precisely this “communitarian” grounds. If the “community” relevant for establishing a notion of justice coincides with the nation-state, this is a disaster. One can think of a long list of historical instances in which protecting the “community” and its beliefs led to physical exclusion (or expulsion)—but none of them positive. Though communitarian theories of justice are powerful and convincing on many grounds, I do not believe they can be relevant for this particular question.”

This moral nationalism has many implications for the foreign labor question, far beyond a simple rejection of the moral significance of the foreign born. Pritchett notes that such nationalism sabotages even the socially conscious who argue that immigration is desirable only on the condition that the laborers are treated at the same high standard as any citizen:

Crudely put, most people in most industrial countries think that tolerating excessive differential treatment of people within their national boundaries is “immoral” but have few qualms about the suffering of people outside their boundaries—and think it acceptable to force people to stay outside. The level of deprivation of people in Haiti causes almost no direct concern in the United States. But if a Haitian manages to reach the United States, his or her very physical presence on U.S. territory creates an enormous set of obligations and political concern.

This partly explains why the highest percentages of foreign-born workers are not found in the US (7.2%) or Europe (4.5%), but rather in the United Arab Emirates (73.8%), Kuwait (57.9%), Singapore (33.6%), Oman (26.9%), and Saudi Arabia (25.8%). The latter countries have no qualms with treating foreign laborers the same way the US and Europe treats tourists or visiting businessmen – individuals free to enter into voluntary agreements, but of no additional consequence to the state.

The benefit to the migrant worker is clear, a 2003 Jasso, Rosenzweig, and Smith paper found an increase of $17,000 to $37,989 (in PPP) for the same worker upon moving to the US.  Even a marginal increase in migrant workers to industrial countries could have an enormous impact (far greater than development aid) on the well-being of the world’s poor. Future posts will address the obstacles to labor mobility that emerge from the perceived self-interest of the industrial world’s general public and false notions of development. The final post will look at Pritchett’s proposal to reconcile the great potential of labor mobility with these obstacles.

D North, J Wallis, and B Weingast (NWW) offer a “conceptual framework for interpreting recorded human history” in their new work Violence and Social Orders. As a fan of North’s defining institutional economics work, as well as Weingast’s papers on China, I was pleased that Arnold Kling found so much to like about the new book, and decided to pick it up myself. I am happy to say that Violence lives up to its potential, crystallizing NWW’s earlier work in a simple and useful framework and clearly explaining its application. I found so much to like about the book, that I’ve decided to write up a post on each of the seven chapters. (Will I have the endurance? We’ll see.)

The next post will highlight my favorite insights from the second chapter on natural societies, but first it’s necessary to define our terms. To that end, Chapter 1 “lays out a set of concepts that show how societies have used the control of political, economic, religious, and educational activities to limit and contain violence over the last ten thousand years. In most societies, political, economic, religious and military powers are created through institutions that structure human organizations and relationships. These institutions simultaneously give individuals control over resources and social functions and, by doing so, limit the use of violence by shaping the incentives faced by individuals and groups who have access to violence. We call these patterns of social organization social orders.”

WIth the title explained, NWW introduce their taxonomy of natural and open access societies:

Natural states use the political system to regulate economic competition and create economic rents; the rents order social relations, control violence, and establish social cooperation. … Open access societies regulate economic and political competition in a way that uses the entry and competition to order social relations.

The character of a particular state and society is formed by the process by which its elites have managed to monopolize violence.

NWW differentiate their analysis in their treatment of the state as a multi-faceted and often delicate balance of interests, rather than as a “single actor “representative agent”".  When the state is assumed away as a single actor, the “fundamental problem of how the state achieves a monopoly on violence” is missed, and it is that very process by which the structure of the society emerges. Indeed, you must “begin with the problem of structuring the internal relationships among the individuals who make up the organization of (potential) enforcers.” Violence treats the state as an organization, with its defining feature being a monopoly on violence. Organizations, in turn, are defined “tools that individuals use to increase their productivity, to seek and create human contact and relationships, to coordinate the actions of many individuals and groups, and to dominate and coerce others.”

Taking the natural state for an example, NWW explain:

By overlooking the reality that all states are organizations, this approach misses how the internal dynamics among elites within the dominant coalition affect how states interact with the larger society. Systematic rent creation through limited access in a natural state is not simply a method of lining the pockets of the dominant coalition; it is the essential means of controlling violence. Rent-creation, limits on competition, and access to organizations are central to the nature of the state, its institutions, and the society’s performance. Limiting the ability to form contractual organizations only to members of the coalition ties the interests of powerful elites directly to the survival of the coalition, thus ensuring their continued cooperation within the coalition.

Finally, to keep this intro brief, a quick overview reveals the principal differentiating characteristics between the open access and natural societies:

Open access societies

1. Political and economic development.
2. Economies that experience much less negative economic growth.
3. Rich and vibrant civil societies with lots of organizations.
4. Bigger, more decentralized governments.
5. Widespread impersonal social relationships, including rule of law, secure property rights, fairness, and equality — all aspects of treating everyone the same.

Limited access or natural societies

1. Slow-growing economies vulnerable to shocks.
2. Polities without generalized consent of the governed.
3. Relatively small numbers of organizations.
4. Smaller and more centralized governments. A predominance of social relationships organized along personal lines, including privileges, social hierarchies, laws that are enforced unequally, insecure property rights, and a pervasive sense that not all individuals were created or are equal.

Next stop, I’ll explore NWW’s chapter on the natural society, and possible lessons for fragile and failed states.

The current recession has induced a barrage of criticism of the economics profession for its failure to foresee the impending crisis. While these criticisms often aim to indict classical liberal economic thought, a more accurate analysis would not label this as a failure of economics, but as a blind spot to all disciplines: the crisis was just the most recent example of a “cascading failure,” a phenomena that no one has done a particularly good job of foreseeing or preventing. Wikipedia cites a few other examples of cascading failure -which the site defines as “a failure in a system of interconnected parts in which the failure of a part can trigger the failure of successive parts”- most appropriately, the power grid failures we’ve all come to know and love, as well as ischemia, a health event I’ve come to known from my time in health care.

I greatly enjoyed Melanie Mitchell’s overview (Complexity: A Guided Tour) of the current state of complexity science for the very reason that complexity scientists are exploring chaos, dynamic, and network theory, which are fundamental to better understanding the dark recesses that frustrate many disciplines. As Duncan Watts says, “Next to the mysteries of dynamics on a network – whether it be epidemics of disease, cascading failures in power systems, or the outbreak of revolutions- the problems of networks that we have encountered up to now are just pebbles on the seashore.”

The best “unorthodox” economists like Robert Schiller can muster are vagueries like “animal spirits,” which really add very little to the much-maligned classical liberal discussion.  Most likely, the insights which will revolutionize our understanding of epidemics, bank runs, power failures, and social revolutions, will come from an unforeseeable corner of this academic continuum; as a variety of disciplines touch upon complex systems, the more academics appreciate and engage these network failures as what they are, the greater the probability that we will see the intellectual advance we seek.

Complexity science is an nascent stage -what exactly makes a system complex itself is still up for debate- but, in my eyes, its value is clear. The discipline holds the promise of discovery because it has already carved out a series of analogical problems that have frustrated disciplines from economics to epidemiology to biology to political science and articulated the values that unite these admittedly complex problems. We don’t have the answers yet, but at least now we can properly define the question. Frankly, were I prognosticator, I would pick the complexity sciences and political economy as the two fields most likely to yield revelations that vastly improve governance and policy. In turn, I would recommend any student concerned with governance and public policy to delve deeply into the fields of complexity and political economy.

Jane Jacobs ushered in a revolution in city planning with her classic Death and the Life of Great American Cities in 1961, inspiring a generation of urbanites to fight off the technocratic meddling of big government. She fostered an appreciation for the natural ecology of the city, the emergence of an exciting and productive spontaneous order. She rallied against central planning, mounting a Hayekian stand to defeat Robert Moses, the Great Man of NYC development. Jacobs’ New Urbanism represents a unique conciliation of Austrian economics and the political left. In Death and the Life of Great American Cities, Jacobs spins a tale of well-intentioned but brutally wrongheaded urban planners -some of the the smartest folks of the time- whose hubris leads to nothing but destruction and blight. Austrian economists, such as Hayek, have been telling this story for years, in all areas of government, but never managed the success of Jacobs.
Her story is really no different than that of L V Mises or K Popper: all bulwarks against the unending charge of high-minded, power-hungry technocrats, who are certain they understand how to poke and prod complex systems to induce a desired result.

Yet while the political left is suspicious of most economists, Jacobs is beloved. This mystery is partly explained by her evident passion for the city; economists have not done a good job convincing the left that their opposition to central planning for schools, for instance, is born of a similar commitment to education. For another example, M Friedman supported redistribution via tax credits, but the left saw his opposition to centrally-planned and executed poverty programs as a reflection of a disinterest in helping the poor more generally. Jacobs walked the fine line exceedingly well, opposing the high-minded plans of the best and brightest while maintaining her liberal bonafides.

Jacobs popularization of urbanism is even more impressive in the face of unyielding Jeffersonian rural romanticism. She turned the caricature of the city -a cold, uncaring, unnatural assemblage of vagrants, vagabonds, and villians- on its head. She communicated the miracle of spontaneous order better than A Smith and Hayek, translating the abstract logic of emergent economic order into something palpable – the city.

Only once she communicated the tremendous value of this emergent order could she enlist the political left in fighting off giants like Le Corbusier and Moses. Economists must realize that they will only succeed if they sell their narrative with Jacobs’ vigor and tangibility. Whether they enlist the philosophy of Popper, the urbanism of Jacobs, or draw from the new field of complexity science, the economist must make every effort to bridge the gap that Jacobs filled so well in urban planning.

I had meant to read up on Thoreau for quite some time now, and took the opportunity yesterday to read the Project Gutenberg text of Civil Disobedience on my Kindle. I found the essay well-conceived, enjoyable, and dripping with an arrogance that only comes with a supreme confidence in one’s intellect, moral standing, and social status. That said, while I was impressed by Thoreau’s well-articulated respect for the individual, his moral outrage at the crimes of slavery and the Mexican War, and his criticism of those who recognized the injustice and paid but lip service, I found his Rousseau-like worldview naive and his writing self-indulgent. Below I have written up some of my initial thoughts; they should not be read as conclusive opinions, but hopefully will spark some discussion.

Thoreau begins with the question at hand: “Unjust laws exist: shall we be content to obey them, or shall we endeavor to amend them, and obey them until we have succeeded, or shall we transgress them at once? Men, generally, under such a government as this, think that they ought to wait until they have persuaded the majority to alter them. They think that, if they should resist, the remedy would be worse than the evil.”

As the author later lets on, he deigns it morally wise to transgress them at once: “If the injustice is part of the necessary friction of the machine of government, let it go, let it go: perchance it will wear smooth–certainly the machine will wear out. If the injustice has a spring, or a pulley, or a rope, or a crank, exclusively for itself, then perhaps you may consider whether the remedy will not be worse than the evil; but if it is of such a nature that it requires you to be the agent of injustice to another, then I say, break the law. Let your life be a counter-friction to stop the machine. What I have to do is to see, at any rate, that I do not lend myself to the wrong which I condemn.”

The machine is an excellent metaphor, and it is difficult to argue with Thoreau here. I’ll also note that he believes breaking the law is best because he sees no way to remedy the evil through the state.

Brief tangent: Thoreau’s thinking is remarkably self-obsessed. This essay is not principally concerned with remedying a moral crime, but in how best a man can be a good man in the face of such outrage. He acknowledges that there are legal means to rectifying evils, but in his quoted rebuttal below, note that he does not reject them because they will take too long and allow for the moral atrocity continue, but that they will take too long relative to the interests of one Henry David Thoreau!

They take too much time, and a man’s life will be gone. I have other affairs to attend to. I came into this world, not chiefly to make this a good place to live in, but to live in it, be it good or bad. A man has not everything to do, but something; and because he cannot do everything, it is not necessary that he should be petitioning the Governor or the Legislature any more than it is theirs to petition me; and if they should not hear my petition, what should I do then? But in this case the State has provided no way: its very Constitution is the evil.

Thoreau’s argument for civil disobedience is incomplete, however, until he articulates his view of relationship between man and the state:

Confucius said: “If a state is governed by the principles of reason, poverty and misery are subjects of shame; if a state is not governed by the principles of reason, riches and honors are subjects of shame.” No: until I want the protection of Massachusetts to be extended to me in some distant Southern port, where my liberty is endangered, or until I am bent solely on building up an estate at home by peaceful enterprise, I can afford to refuse allegiance to Massachusetts, and her right to my property and life.
…
I perceive that, when an acorn and a chestnut fall side by side, the one does not remain inert to make way for the other, but both obey their own laws, and spring and grow and flourish as best they can, till one, perchance, overshadows and destroys the other. If a plant cannot live according to nature, it dies; and so a man.
…
For my own part, I should not like to think that I ever rely on the protection of the State. But, if I deny the authority of the State when it presents its tax bill, it will soon take and waste all my property, and so harass me and my children without end. This is hard. This makes it impossible for a man to live honestly, and at the same time comfortably, in outward respects. It will not be worth the while to accumulate property; that would be sure to go again. You must hire or squat somewhere, and raise but a small crop, and eat that soon. You must live within yourself, and depend upon yourself always tucked up and ready for a start, and not have many affairs.

Thoreau’s state is an exogenous consortium that man has no moral imperative to support. He prefers the state of nature, where the acorn and chestnut play by their own rules, making no allowances for the other, with the strongest surviving for another day. There’s a lot of Rousseau here; a romanticism for the natural world without the constraints of the state. Much like my criticism of Rousseau, I think Thoreau is operating with a very distorted sense of life in nature — one that can only come from spending a great deal more time in Cambridge than in the wilderness (his time spent in the “nature” just outside his neighborhood, notwithstanding.)

Thoreau fails to address the immense benefits that he derives from the state; from the quotes above, it appears he doesn’t believe he derives any benefit from the state, as he has not had the occasion to require its protection in the most literal sense. This failure doesn’t necessarily destroy Thoreau’s argument vis-a-vis civil disobedience, but it does call into question his worldview, more generally.

Thoreau’s rejection of the state grows more muddled and inconsistent throughout the essay. At first, he stands sternly against taxation in support of an unjust government, to the point of going to jail (which, once again, allows him to wax philosophic on a night in the slammer the way only a high-minded Harvard man can), but ends stressing that his rejection is less about literal support of the government but more a symbolic rejection of allegiance to the state:

I have never declined paying the highway tax, because I am as desirous of being a good neighbor as I am of being a bad subject; and as for supporting schools, I am doing my part to educate my fellow countrymen now. It is for no particular item in the tax bill that I refuse to pay it. I simply wish to refuse allegiance to the State, to withdraw and stand aloof from it effectually. I do not care to trace the course of my dollar, if I could, till it buys a man a musket to shoot one with–the dollar is innocent–but I am concerned to trace the effects of my allegiance. In fact, I quietly declare war with the State, after my fashion, though I will still make use and get what advantages of her I can, as is usual in such cases.

He then admits: “Seen from a lower point of view, the Constitution, with all its faults, is very good; the law and the courts are very respectable; even this State and this American government are, in many respects, very admirable, and rare things, to be thankful for, such as a great many have described them; seen from a higher still, and the highest, who shall say what they are, or that they are worth looking at or thinking of at all?”

Puzzling; as I finished the essay, I increasingly felt that Thoreau was giving me the round-about the entire time, and that he was less concerned with speaking of things as they were then telling of his personal moral journey.

Up until now, I have been fairly critical of the airs and intellectual indulgences that I perceive in Thoreau’s thinking: this essay is the product of academia, for both better and for worse. That said, I found the concluding paragraph of Civil Disobedience so strikingly beautiful I will let it conclude this post:

The authority of government, even such as I am willing to submit to–for I will cheerfully obey those who know and can do better than I, and in many things even those who neither know nor can do so well–is still an impure one: to be strictly just, it must have the sanction and consent of the governed. It can have no pure right over my person and property but what I concede to it. The progress from an absolute to a limited monarchy, from a limited monarchy to a democracy, is a progress toward a true respect for the individual. Even the Chinese philosopher was wise enough to regard the individual as the basis of the empire. Is a democracy, such as we know it, the last improvement possible in government? Is it not possible to take a step further towards recognizing and organizing the rights of man? There will never be a really free and enlightened State until the State comes to recognize the individual as a higher and independent power, from which all its own power and authority are derived, and treats him accordingly. I please myself with imagining a State at last which can afford to be just to all men, and to treat the individual with respect as a neighbor; which even would not think it inconsistent with its own repose if a few were to live aloof from it, not meddling with it, nor embraced by it, who fulfilled all the duties of neighbors and fellow men. A State which bore this kind of fruit, and suffered it to drop off as fast as it ripened, would prepare the way for a still more perfect and glorious State, which I have also imagined, but not yet anywhere seen.

Two years before, I arrived in Venice in the dead of winter as part of a study abroad program. Quite suddenly, the first wave of touristi crashed into Piazza San Marco just before Carnival. The streets would grow only more flooded as spring drew near. Most of the Venetians had long since departed I was told, with those remaining left to deal with the high tide, hoping the hand of god would turn it back before their city washed away. Venice had her pride – her Murano, her San Marco, her Salute – but not her relevance: she was beautiful, but benign.

Istanbul, I was sure, would be different: 11 million Istanbullus and the legacy of the great Ataturk, with his brilliant vision and unrelenting commitment to a modern Turkish state, would see to that. I would go to Istanbul to see its sights, but more than that, I would go to learn its secret.

In preparation for the journey, I picked up Orhan Pamuk’s Istanbul: Memories and the City, and John Freely’s Istanbul: The Imperial City. The former I knew of as a portrait of a novelist and his city, and the latter as a cut-and-dry run through 2000 years of history – from Byzantium to Constantinople to Istanbul.

I plowed through the facts and fratricides of The Imperial City, absorbing relatively little, beyond a story of a Turkish army blinding 10,000 prisoners of war and leaving one of every hundred with a single good eye to lead their comrades home — that was pretty great.

The memoir was more tricky. I read elsewhere that Pamuk was something of an oddball, a member of the secular bourgeoisie (celebrated in Ataturk’s new republic) who found this new Turkey discomforting. Pamuk was troubled by developments other Turks were quick to call progress, and looked back longingly upon the few remaining vestiges of the city’s Ottoman past.

Yet while the novelist was an outsider in his own city, his own family, he wouldn’t think to leave. Pamuk’s rejection of modern Istanbul was undeniable, but his fealty to the city itself was unflinching.

I read the first couple hundred pages and stopped. The pictures interspersed every few pages had sharpened my hunger to bask in the Bosphorus and explore oddities like the forelorn yalis (wooden, strait-side Ottoman houses), but Pamuk’s tone was off-putting. I struggled to incorporate his critical view of the city into my expectations of a vital and timeless cosmopolis. I set the book down. I would wait until I had seen Istanbul myself. I was confident I would then feel comfortable dismissing the author’s biting critique as nothing more than misplaced nostalgia.

Tourists in Istanbul

We arrived in Istanbul late on November 25, 2008. A quick commute on the immaculate metro delivered us to the feet of the Hagia Sophia and Blue Mosque, where we arranged to spend our first night in the tourist district of Sultanahmet. A quick change of clothes and 30 minutes of Always Sunny In Philadelphia impressions later, we left the tourist trap behind — laughing at the backpackers who journeyed all the way to Istanbul only to hang out with… backpackers.

We headed for Taksim — by all accounts the epicenter of Istanbul nightlife. It was near midnight as we strolled down the large thoroughfare, Istiklal Caddesi, breathing in the Byzantine.

- I love how wide the streets are!
- We need more streets without cars!
- Look at all these people out in the street on a Tuesday night!

We eventually navigated our way to the Nevizade area, and followed our ears until we found live music playing outside a tavern. We grabbed a few beers and tracked down a table near the music. Shortly after, five young Turks grabbed the table next to us.

I can’t recall how the conversation began, but it quickly evolved into a night-long discussion of Istanbullus nightlife, proper Turkish soccer loyalties, and Turkish NBA players. Before the college students had departed, they had given us a soccer team fan club rubber wristband, Turkish beads, and a laundry list of night spots and tourist sites to check out.

- Can you believe how nice and helpful they were? Americans would never act like that to foreigners in a US bar!
- In the US people are too group-oriented; here people just go out to meet people and have fun
- Istanbul is like New York City but better; way more friendly and welcoming

We were smitten. On a random November Tuesday, Istanbul had rolled out the red carpet for three young Americans.

Our first day of sightseeing was slowed by a late start (due to a late night) and then consumed by the Hagia Sophia, one of the few creations in the world that may be best described as awesome. Afterwards, we planned a relaxing, slow evening for our last night in Sultanahmet, so that we’d have the energy for a long day sight-seeing in Sultanahmet before moving our camp to Taksim. These plans changed, however, as a large group of fun-loving Dutch students turned our early night-in into a late night out. The next day we could only shake our heads — we couldn’t have a slow night in Istanbul if we tried.

We continued to work down our tourist check list, scratching off the Blue Mosque the next day. Little children milled about, asking where we were from and giggling a few foreign words before heading off to find their next new friend. One of the boys wore a Boston College Abercrombie & Fitch (knockoff) sweatshirt — we shook our heads in disbelief. What a world we had stumbled in to.

Orhan’s Istanbul

It was Thursday night in Taksim. We had spent the early part of the night walking the streets, keeping an ear open for good times, before deciding to make a pitstop at an internet cafe on Istiklal Caddesi to give ourselves a bit more direction. I recalled hearing of a night spot – Babylon – as the best place for live music in Istanbul. and checked its schedule. We weren’t quit sure what a “NUBLU SOUND RELEASE PARTY with Wax Poetic, Brasil Love Trio and DJ’s from NYC,” would entail, but Cheese was familiar with the artists (what exactly it meant that Norah Jones used to be in Wax Poetic I did not know), and we headed out.

It was near 12 a.m. when we arrived at Babylon. We only caught the last minute 15 minutes of the show, but the music impressed nonethless. The crowd, electric; the drinks, quite expensive. The fact the show was actually over at 12:15 a.m. threw us for a loop — though I appreciated the idea of a show actually starting on time — and we followed the crowd out the door and through the streets to find the next destination.

It took a few blocks before we noticed that the excited throngs had dissipated into a few stragglers clearly on their way home. We asked a few of our fellow Babylonians where the scene was after a live show on a Thursday night. They rattled off a few names, but intimated that Thursdays weren’t necessarily the night-out we were used to in the US, and continued on their way home.

We checked out all the recommendations, giving the most promising places the college try before deciding to quickly down our beers and move on to the next destination. Finally we ended up back near Taksim Square, where we heard the clubs were the best bet for a Thursday.

The street was near empty, making the presence of one Turk steadily grilling us as we walked down the street all the more striking. One bouncer read a book as he worked a door. We asked if we could check it out.

- Where’s your girlfriend?
- In the US
- That’s not good. You can’t get in here without girls.

Cold-blooded. It appeared we had found the right places, but we weren’t the right people. But wait.

A minute later two American guys emerged from the club stairwell exasperated.

– You are not missing much: the place is dead empty

Our disappointment gave way to confusion. We tried a few more places out, but no signs of life.

This was Istanbul. A large number of Istanbullus had just been let out an electric live show in the middle of Taksim, the heart of Istanbul nightlife. It was Thursday night. What in the name of Ataturk was going on here?

…

Friday morning we admired the Bosphorus from the Galata Tower, allowing us for the first time to place the city and its sights in a proper context. We looked upon the Hagia Sophia and Blue Mosque in front of us, to Asia on our left side, and then back behind us toward Taksim. We would spend the day bouncing from corner to corner of this panorama on public ferries. Afterwards, we left behind the Bosphorus to aggravate the sellers at the Grand Bazaar with our disinterest in buying shitty knockoffs before heading to the Cağaloğlu Hamam for some much needed respite.

We were assigned to large, mustachioed attendants and headed to our respective rooms to disrobe. There’s something quiet surreal about walking down the stairs into a sweatroom antechamber in a towel and plastic shower shoes while being ogled by what could only be described as ‘regulars.’ Costanzo and Cheese waited for me in the hall as I got ready. A hairy ball-shaped man grabbed Cheese by the shoulder, staring him in the eye as he squeezed the flesh between his neck and shoulder. Cheese tensed up; the sweaty man nodded, clapped him on the shoulder, and walked away.

In the main room, the bald, fat attendants were already busy at work kneading the ill-defined lard of other visitors. We headed to a sideroom, and waited for the attendants to call us out, one-by-one, for the sweaty rubdown and exfoliation.

That night, we went through the list of recommendations we had accumulated from our Turkish encounters, and decided on a strip with two bars with outdoor seating and a good number of people drinking in the streets. Costanzo headed into the shit to bring us back a few Efes, the local (read: only) brew. En route, he stopped to talk to a Turkish girl about the nightlife and where else people might go on a Friday night. The girl had actually studied in the US before returning back to Istanbul — not just any college mind you, but Brown University, after turning down a full scholarship to Boston College and Duke, facts she made sure to restate despite our quite evident disinterest.

So where did this attractive, educated (and very obviously) wealthy Istanbulli think we should head for a great time on a Friday night?

Right where we were.

- This is where all the young intellectuals hang out!
- The writers, the painters, the cool young people…

We looked around.

- Really?
- Really?

Cheese and I had already made another beer run into one of the bars and returned brutally unimpressed with a scene that might pass for a good time in high school.

But she insisted. And told us to check out the second bar. Thankfully, we had nothing better to do, so we continued our sociological exploration of the Istanbul social scene. There’s no need to belabor the point, but needless to say, the downward spiral continued.

We continued our study for the rest of the trip, growing almost dogmatic in our insistence in following every lead, checking out every story — will the area by the soccer stadium really be crazy after a Fenerbace win — really?

As the shine on Istanbul began to fade, I increasingly reached for Pamuk’s Istanbul — “distance endows the scenery with magnificence and allows its dull, narrow, steep, filthy streets and its disordered heaps of houses and trees to be “colored by the palette of the sun.”" My distance from Istanbul had shrunk considerably in these few days.

The Ottoman and Byzantine relics still sparkled, but the Turkish state that now occupied the majestic Bosphorus was a far different beast: “when the empire fell, the new Republic, while certain of its purpose, was unsure of its identity; the only way forward, its founders thought, was to foster a new concept of Turkishness, and this meant a certain cordon sanitaire to shut it off form the rest of the world. It was the end of the polygot multicultural Istanbul of the imperial age; the city stagnated, emptied itself out, and became a monotonous monolingual town in black and white.”

Istanbul was not so dissimilar from Venice after all. There were 11 million Istanbullus, but these were not the Istanbullus of yesteryear. In the 1800s, Turkish, Greek, Armenian, Italian, French, English and hosts of other languages and dialects could be heard in the streets. Pamuk notes that the “cosmopolitan Istanbul I knew as a child had disappeared by the time I reached adulthood. After the founding of the Republic and the violent rise of Turkification, after the state imposed sanctions on minorities – measures that some might describe as the final stage of the city’s “conquest” and others as ethnic cleansing- most of these languages disappeared.”

Turkish nationalism eviscerated Istanbul of the cosmopolitan spirit that had allowed her to be a world capital for more than a thousand years: more minorities would leave Istanbul after the founding of the Turkish Republic than after the conquest of Constantinople by Mehmet II in 1453.

Pamuk saw the decline of Turkish society in the decay of the yalis, the extravagant wooden villas built by Ottoman aristocrats that gazed across the Bosphorus. He recalls: “for those of us who watched the city’s last yalis, mansions, and ramshackle wooden houses burn during the 1950s and 1960s, the pleasure we derived had its roots in a spiritual ache different from that of the Ottoman pashas, who thrilled to them as spectacles; ours was the guilt, loss, and jealousy felt at the sudden destruction of the last traces of a great culture and a great civilization that we were unfit or unprepared to inherit, in our frenzy to turn Istanbul into a pale, poor, second-class imitation of a western city.”

It is fitting then that the great Ataturk passed away in Istanbul’s Dolmabahçe Palace, constructed in the 1800s to impress upon visiting European dignitaries the wealth and prestige of the Ottoman Empire. The palace also happened to be our last tourist stop before heading to Ataturk airport to fly home.

Expectations were high. A friend of Costanzo’s living in Istanbul called the palace her favorite sight in all of Istanbul. Our Lonely Planet guide spoke of the world’s largest chandelier and crystal staircases. A few years earlier, we had visited Neuschwanstein Castle (the actual Disney Castle), and headed for Dolmabahçe with the experience of all the eccentricities that a lunatic Bavarian could pack into a mountainside dreamscape: we were ready. We donned plastic bags over our shoes and entered the castle on our mandatory group tour.

The palace was dark. The tour guide elicited snickers from the tour for her mundane, disinterested commentary.

– This is the sultan’s hallway. The sultan would have walked down it. Sometimes, other personnel may have walked down it as well.

We shook our heads and kept our eyes out for crystal, which wasn’t too hard to find. Crystal chandeliers were all over, and then there were the staircases.

I’m not sure who thought that crystal staircases would look prestigious, but they certainly didn’t take into account the aesthetic of dark wood and crystal.

We weren’t wowed by Topkaki Palace, the forerunner of Dolmabahçe, but the upgrade didn’t seem worth 35 tons of gold, 14 tons of which were used to guild the ceilings alone.

The shabby knockoff of a European palace bankrupted the Ottoman Empire, setting the stage for its collapse and the consequent rise of the Turkish Republic, thereby guaranteeing Pamuk would not live in the ages of the Haghia Sophia and the Blue Mosque, but in the wake of the Dolmabahçe: he would not know Istanbul as ” a great world capital but rather … [as] a poor provincial city.”

Turkey built its tacky palace, secularized its state, and stripped its culture of the oddities that bemused Western tourists all in the name of establishing Turkey as modern and relevant. Yet at the end of the day, when we tried to lookup a comedy clip on youtube.com, we were greeted with a message from the government stating that the online video website had been banned.

It turns out Turkey is the only country in the world that currently bans Youtube. Apparently, some Greeks and Turks were trading online video swipes when a Greek video claimed that Ataturk was gay and said he looked like a monkey. As Costanzo put it, “Game over.”

I was going to write a post on the current health care reform debate, but at this point the proposals are too amorphous and the debate too inane. That said, there are numerous problems with the American health care system, and today I’ll share an idea I have for tackling the problem of non-existent or inadequate health care coverage. Perhaps in another post I’ll tackle cost control, but now I just want to drill down on this actuarial auction idea.

For all its misgivings, the insurance market can effectively provide coverage for basic and catastrophic care for non-pre-existing conditions and risk factors. Insurers are not paid enough, however, to make it profitable to pay for long-term care and potential side-effects of pre-existing conditions.  Insurers are currently asked to be part-insurance company and part-social service.
Both insurance and social service delivery would be more effective if these responsibilities were separated and assigned to their rightful owners. Insurance is the province of the private sector, while social service is best channeled through the government. This does not mean that the government has to provide the charitable care itself, it simply means that by the time the private sector is asked to interdict, the proper provision of the care must be profitable (>0) to the provider.

If the private sector is indeed perfectly capable of selling basic and catastrophic care for non-pre-existing conditions and risk factors, the question becomes how the government should augment this market? For one, it could choose to provide a voucher for the poor to purchase health care insurance, as the government provides vouchers for food. It could also choose to mandate insurance, as the government does for auto insurance, due to negative externalities.

Third, the government could provide a voucher conditional on the likely-cost-of-coverage for a patient’s pre-existing conditions and risk factors. This voucher could be combined with the basic/catastrophic voucher to purchase insurance at the elevated payment rate necessary to make high-risk patients actually attractive customers to insurers. That is to say, insurers seek out healthy patients not because they are healthy, but because the healthy patients are willing and able to pay slightly more for coverage than the insurer anticipates paying out: the premium of security for the patient. If you paid insurance companies at a level commensurate with the likely payout of high-risk patients, they would also try to make their plan more, rather than less, attractive to those patients.

Does such a conditional voucher sound outlandish? Remember that insurance companies are performing just these sorts of calculations when they set their rates for different risk groups. In fact, the best way for determining the optimal level for the conditional vouchers would utilize the knowledge of those very insurers. For example, an auction system where each insurer makes the lowest bid they would accept in payment to provide a specified minimum amount of coverage to an individual: this amount could be taken as the minimum amount necessary to pay for a given type of patient.

The lowest bidder not only sets the voucher value with his low bid, but also could receive a percentage bonus payment (e.g., 5% of low bid) from the government on each individual who spends his voucher at that plan. This type of incentive is common: we currently provide similar bonus payments to providers that comply with government data and quality standards. Reckless low bids could be dissuaded by a mandate that the low bidder *MUST* accept any individual with that health profile who wishes to redeem his voucher with the low bidder’s plan. In essense, we hire Al Roth and tell him, ‘Make me an auction system.’

In sum, here I am arguing that there exists a market design solution that could effectively price vouchers, which would make it profitable to take care of the sick. It’s important to make it profitable to take care of the sick, as otherwise health care plans and providers will simply try to drive down the cost of their care to minimize the loss, which is when you run into problems like patient dumping. I am also implying that the insurance market is capable of administrating care and insurance to both healthy and sick patients, and that they simply need to be paid more for those high-cost, sick patients. Finally, I am implying that the government should mitigate this high-cost of insurance for poor and sick patients. Thoughts?