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美国本特利大学经济学教授斯科特·萨姆纳(Scott Sumner)

 
 
 

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Why are the Swiss so happy?  

2009-09-28 21:33:54|  分类: 默认分类 |  标签: |举报 |字号 订阅

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Because I head to George Mason University tomorrow, this will be my last post for a while.  You might want to follow the discussion on Cato Unbound, where I will be posting replies to Hamilton, Selgin and Hummel.

Right after my last post extolling the virtues of Swiss-style democracy I read Bryan Caplan’s persuasive attack in The Myth of the Rational Voter.  He argues that voters aren’t just misinformed; rather they hold deeply ingrained biases that lead them to make poor public policy decisions.  Naturally I wondered if this refuted my argument.  I don’t think it does, but it weakens it a bit.

Bryan’s book is not an empirical study of various forms of democracy; it is an attack on the theoretical underpinnings of the argument for democracy, especially unconstrained democracy.  Switzerland is not even mentioned.  On the other hand the theoretical arguments are impressive, and supported by survey findings.  For instance, he shows how the “wisdom of the crowd” argument breaks down if voters have systematic biases, and then he presents a lot of evidence that they do have such biases in areas like free markets, free trade, etc.   He concludes the book with an outstanding chapter on “market fundamentalism” and “democratic fundamentalism,” which shows that there is no merit to the frequent accusations that free market economists are market fundamentalists, but that there are lots of democratic fundamentalists.  Caplan basically defines a ‘fundamentalist’ as someone who supports a societal institution regardless of whether it works better than alternative institutions.  If we adopted the terminology that I use, most free market economists are pragmatic libertarians, not dogmatic libertarians, as they favor a role for government in certain areas.  Hence they are not market fundamentalists.  (I use the term ‘pragmatist’ as a philosopher would use ‘consequentialist.’)  In contrast, he finds numerous examples of political scientists who say they support democracy even if it doesn’t work as well as other systems.

One commenter argued that my full-throated defense of the Swiss system of direct democracy made me a democratic fundamentalist.  But this can’t be true, as I support democracy entirely on consequentialist grounds.  I was first attracted to Switzerland by its economic success, not by its democratic system.  Indeed, I was initially skeptical about the “wisdom of crowds” argument.  Only much later did I take a fresh look at their political system, and start to entertain the possibility that it might play a role.

Although I accept Caplan’s theoretical arguments against direct democracy, these arguments don’t sway my belief in Swiss-style democracy, which combines decentralization and referenda.  Here are a few reasons:

1.  Caplan focuses on a few areas where voters have strong cognitive biases, such as trade.  But there are many examples of public policy decisions where voters would probably make better decisions.  Consider pork barrel spending.  Would American voters have voted for a “bridge to nowhere” that served a few dozen people at the cost of over $100 million?  Would Alaska voters have supported the plan if they had to pay for it?  How about the voters of Ketchikan?

2.  Caplan argues that voters are not just misinformed on trade, but hold cognitive biases that are not even shaken by college economics courses that extol the virtues of free trade.  I agree, indeed I’m just as frustrated as Bryan.  But I also think there are many false beliefs that can be easily shaken.  If I talk to an average person about deregulating taxis, I find they are initially skeptical.  “Wouldn’t a lot of unlicensed taxis be dangerous?  What if the drivers are not well trained?  Or if the cars are not well-maintained?”  When I explain that the debate is about market access, not safety, and that it is about whether a cartel should be able to artificially prop up prices by making taxis much harder to find, there is an almost universal change in mind.  Thus in the area of occupational licensing, the problem really is ignorance, not simply biases.  Peoples’ instincts favor free entry into an occupation, at least if minimum quality standard are met (I admit, that’s a tougher problem.)

3.  And I also think that ignorance plays bigger role in even trade than Bryan suggests.  I seem to recall that NAFTA was trailing in the polls until Gore debated Perot in 1993.  Gore bought out slides showing how Smoot-Hawley was enacted at the beginning of the Great Depression, and dramatically contracted world trade.  The poll numbers swung in favor of NAFTA (and stock prices rose after the debate— something investors pay attention to.)  When people focus on issues in a serious way they become more rational.  An important part of this argument is the way people defer to authority when the stakes are high.  Sometimes they do this too much as when they (and I) assumed Bush must have had good intelligence on Iraq.)  But many middle-brow voters (who are much more likely to vote than the totally uninformed) listen to “experts” for advice.  Don’t laugh, but Rush Limbaugh is a sort of expert—and I believe he subtly pushes conservative voters toward the more free market Republicans, and away from the high-tax, protectionist Republicans.  Or take the Sunday news shows.  Even if voters have protectionist instincts, when they hear both liberal and conservative pundits agreeing that a xenophobe like Pat Buchanan would be dangerous for the country, it has an impact.  In France someone like Le Pen can get a lot of protest votes, but in an election where he made it to the final round he was absolutely destroyed (by a Turkmenistan-like margin of 82.2% to 17.8%.)

4.  It is true that most voters oppose a unilateral move toward free trade, but the same could be said for non-economist elites.  And if we are to have rule by elites, it won’t be by economists, it will be by lawyers (economists are mostly too idealistic and naive for the rough and tumble world of politics.)  But there is also good news in Bryan’s book; a graph on page 69 shows that most American voters support free trade agreements with other countries.  If this is to be believed, then the reason we don’t yet have a free trade agreement with the EU is not the voters, rather it is opposition by powerful special interest groups such as farmers.

5.  I also think that poll results must be interpreted with extreme caution.  Bryan criticizes the public’s responses to 11 survey questions about whether this or that factor plays a “major” role in hurting the economy.  In 10 of 11 cases the public leans more toward the “major” end of the spectrum than economists.  And indeed their answers do seem silly if you think of “major” in a relative sense.  Economists are used to minimizing big things–i.e. defense spending is “only” 4% of GDP.  But average people don’t think that way.  Obviously if they named 10 of 11 factors as having major roles, they meant something more like “important in an absolute sense”, or “has a multi-billion dollar impact on GDP.”  Indeed, how could it logically have been otherwise?  Another example occurred on page 51 where Bryan argued that a poll (conducted in the late 1970s) found majority support for the proposition that the government had a responsibility to “keep prices under control.”  Given that inflation was very high at that time, and given that most voters don’t understand the difference between relative and absolute prices, it is not at all clear that this was a call for Soviet-style price fixing.  It might have merely reflected frustration that the government wasn’t controlling inflation.  Bryan also mentioned a poll showing most drivers consider themselves “above average.”  Isn’t it likely that people differ in their view of what constitutes “good driving?”  I think most drivers are above average–by their own criteria.  Most young men are above average at aggressive driving, and most 55 year old women are above average in terms of safety.

Bryan mentioned four major cognitive biases, but left out the one I view as most important, elasticity pessimism.  I find almost all students think demand curves, and the supply of labor, are very inelastic.  If so then there is no good argument against the welfare state on supply-side grounds, which are the only valid grounds of opposition for a pragmatic libertarian.  But this bias toward the welfare state is (very fortunately) partially offset by conservative values, especially values like hard work and “just deserts.”  Pragmatic libertarians like me may not put much weight on these values, but without them there would be little opposition to massive tax increases.  The supply-side argument is just too counterintuitive.  Of course this is the pragmatic libertarian/social conservative coalition that the Republican Party struggles to hold under one big tent.)

Even with all these caveats, Bryan’s book is fairly persuasive at a theoretical level.  So then why do I still cling to my support for direct democracy despite Bryan’s claim (p. 195) that the combination of cognitive biases are “as bad as it gets” in terms of making sound public policy decisions?  Perhaps because I am not a democratic fundamentalist.  I don’t support democracy because it is “fair” but rather because it seems to work well.

This led me to rethink the Swiss model.  Maybe Switzerland’s success has more to do with decentralization than with direct democracy.  Or maybe decentralization and direct democracy fit together like a hand and glove.  Maybe you need a decentralized political structure, where 95% of goods are imported, for voters to see the merits of free trade.  As we will see, both factors seem to play a role in Switzerland’s success

Part 2:  The Swiss Experience.

There are no perfect examples of direct democracy in the modern world, but one country comes far closer than any other, Switzerland.  During the 20th century, almost one half of all national referenda in the entire world occurred in Switzerland.  And there are two other factors that further contribute to Swiss democracy, it is a relatively small country and it is highly decentralized.  Aristotle said that no country could remain well-governed if its population exceeded 100,000.  As we will see, recent European history provides some support for Aristotle’s hypothesis.

Switzerland is still a fairly neoliberal economy, but no longer exceptionally so.  Swiss voters never moved as far toward socialism as most other countries, but have also been less aggressive with neoliberal reforms since 1980. In addition, Switzerland has long had much lower tax and spending levels than its immediate neighbors, which suggests that under direct democracy voters may prefer less egalitarian policies than those prevalent in Western Europe.  And surveys suggest that Switzerland is the second happiest country on earth.  Are these facts related?  A recent study by Inglehart (1990) found a strong correlation between happiness and democracy, and later studies suggested that the causation ran in both directions.

Until recently, happiness researchers assumed that aggregate happiness in most countries remained stable over time.  An important recent study by Inglehart, et al (2008, p. 266), however, reports strong evidence that happiness has been rising throughout much of the world between 1981 and 2007, and also suggests some reasons why:

Like democratization, social tolerance broadens the range of choices available to people, thus enhancing happiness.  Accordingly, Inglehart and Wetzel (2005) found that support for gender equality and tolerance of outgroups were strongly linked with happiness—not just because tolerant people are happier, but because living in a tolerant society enhances everyone’s freedom of choice.  Similarly, Schyns (1998) argued that gender equality is linked with happiness.

During the late 1980s and early 1990s, dozens of societies experienced transitions to democracy that enhanced freedom of expression, freedom to travel, and free choice in politics.  Moreover, from 1981 to 2007, support for both gender equality and tolerance of outgroups increased substantially in most of the countries monitored by the [World] Values Surveys (Inglehart & Welzel, 2005).  Furthermore, during the past two decades, low-income countries containing fully half the world’s population have experienced one of the highest rates of economic growth in history, allowing them to emerge from subsistence-level poverty.  By a favorable combination of circumstances, societal changes of the past two decades have increased both the prosperity of people in less-prosperous societies and the political and social freedom of people in middle-income and high-income societies, enhancing the extent to which people in both types of societies have free choice in how to live their lives.  We hypothesize that these changes have been conducive to rising levels of happiness within entire societies.

Thus it is no surprise that I found happiness to be much more highly correlated with liberal values than with economic variables, others have found the same.  One potential problem with their findings is that the causation between democracy and happiness could run in either direction.  Frey and Stutzer (2002, p. 424) noted that:

“For Latin America and Russia, one study (Graham and Pettinato 2001b) indeed identified a mutual dependence of pro-democracy and pro-market attitudes with well-being: both raise happiness, but happier people are also more likely to have pro-democratic and pro-market attitudes.  With due caution, it may be hypothesized that, for the respective respondents, there is a virtuous circle in which attitudes favorable to democracy, to the market, and to life satisfaction, reinforce each other.”

Let’s assume that there is at least some causation running from democracy to happiness, which seems plausible given that much of the huge wave of democratization in the late 1980s and early 1990s was exogenous, as events in one country quickly impacted its neighbors.  This still wouldn’t tell us whether or not moving from representative democracy to direct democracy further boosts happiness.  Fortunately, the extent of direct democracy varies considerably across the 26 Swiss cantons.  Frey and Stutzer (2002, p. 425) report that:

“the extent of direct democratic participation possibilities exerts a statistically significant, robust, and sizable effect on happiness over and above the demographic and economic determinants normally taken into account.  When the full variation in the institutional variable is considered, i.e. when individuals in the canton with the highest democracy index (Basel Land) are compared to citizens in the canton with the lowest direct-participation rights (Geneva), the former state with [has?] an 11-percentage-points higher probability that they are completely satisfied.  This effect is larger than living in the top rather than in the bottom income category.”

If the result in the last sentence is valid, it would suggest a very powerful relationship between direct democracy and happiness.  And they also report (p. 425) results from a number of other interesting studies of both the U.S. and Switzerland showing, among other things:

1.    Direct democracy leads to greater responsiveness to voter preferences.
2.    Direct democracy leads to lower levels of government expenditure, except perhaps on education.
3.    Direct democracy results in public services being provided at lower costs.
4.    Direct democracy leads to higher per capita incomes.

I have noticed that intellectuals are fond of the maxim that “democracy is the worst system, except for all the others.”  I gather that intellectuals who say this mean that we would be better off being ruled by a “philosopher king” rather than a bunch of mostly ignorant voters, but alas “power corrupts” (another overused cliché) and thus we need democracy to insure that the government is responsive to the wishes of the voters, and doesn’t become highly repressive.  I think this view is wrong.  Democracy is the best system, period.  It is the best way of deciding what to do, and it is the best way of insuring that the government actually does those things.  This seems to defy common sense, which is why I included it in my list of economistic views.  Indeed it is so difficult for intellectuals to forgo their strong prior belief that they know best, that even economists who believe that financial markets aggregate economic data efficiently, and can forecast better than experts, are often reluctant to extend that hypothesis to political markets.  In the US economists vote 3 to 1 for Democrats.  Rule by economists would push us toward the high-tax European model.  Fortunately, voters don’t allow this to happen.

Yes, there are many examples of where democracy failed to produce the optimal result, but these failures are anecdotal.  I know of no systematic study that shows experts make, on average, better public policy decisions than voters.  In the one example of somewhat direct democracy during the 20th century, we see voters who remained skeptical of highly statist economic policies, even when they were in vogue among policy experts and intellectuals.  Of course Switzerland has many flaws.  Its behavior toward Jews  during WWII was in some respects disgraceful, as was true of virtually all European countries, and the US.   But consider one other huge success—Switzerland remained neutral in 1914.  In contrast, many other European armies were marching off to senseless slaughter with the enthusiastic support of the overwhelming majority of their public intellectuals.  It also has lenient drug laws, which casts doubt on the view that direct democracy would lead to a nightmarish regime of socially repressive polices.

The concept of democratic accountability goes beyond voting.  It is almost impossible for governments ruling over a very large population to be responsive to voters’ needs in any sort of efficient way.  This problem of “diseconomies of scale” in governance has been well hidden because of two historical facts.  First, prior to WWII larger countries did have two important advantages, a large domestic market, and a greater ability to deter invaders.  Neither advantage is important for modern day members of the EU and NATO (or other developed country treaty organizations.)  Second, the extraordinary success of the U.S. has led to complacency about the ability of large countries to be successful.  (I say “extraordinary” because one would expect a large, ethnically diverse country to be closer to the middle of the pack in per capita GDP.  Also note that the U.S is a very happy country, despite press reports to the contrary.)  In recent years, however, there has been a little-noticed trend for the smaller countries in Europe and Asia to rise up the charts and surpass the bigger countries like Japan, Germany, France, Britain and Italy in per capita GDP.  As for why the U.S. has been so successful thus far, it first achieved its great success with a more decentralized framework of federalism, has been relatively open to referenda, and had a large economy when large domestic markets were still very advantageous.  We may now be coasting on our past success, and may have missed out on important parts of the neoliberal revolution.   Earlier I argued that the U.S. will eventually need to break up into an EU-type arrangement.  Once again, Frey and Stutzer (2002, p. 426) have something interesting to say about decentralization:

“The study on Switzerland (Frey and Stutzer 2000) measured the extent of local autonomy by an index based on survey results.  Chief local administrators in 1,856 Swiss municipalities reported on how they perceived their local autonomy using a 10 point scale.  The estimate reveals a statistically significant positive effect of decentralization on subjective well-being.  For local autonomy, the proportion of people who indicate being completely satisfied with life increases by 2.6 percentage points, compared to a situation in which the communes are one standard deviation less autonomous vis-à-vis their canton.”

It sounds good, although the thought of living with a bunch of Swiss who are “completely satisfied with life” makes me very depressed for some reason.

I am not saying that direct democracy is perfect.  I recall reading that Switzerland has a lot of petty paternalistic regulations.  Perhaps this is why it looks so pretty.  But this should come as no surprise as we observe the same thing in American gated communities—perhaps the closest American analog to direct democracy.  I find towns that ban purple houses and pick-up trucks in the front yard to be boring and sterile.  But I suppose people would tend to sort into the types of communities they liked best.  In any case there are worse things in the world than gated communities, much worse.

One final comment.  Although we disagree about democracy, I actually agree with 90% of Caplan’s book.  I just interpret some of the evidence differently.  One area I didn’t discuss was the trendy “self-interested voter hypothesis.”  We both agree it is nonsense.

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