December 19, 2018 | ° F

O'BRIEN: Moralizing markets will worsen gridlock


Opinions Column: Taming Tribalism


connorobrien

As far as economic policy is concerned, the American ideological compass has become frustratingly one-dimensional and inflexible. As income and wealth inequality have risen to levels not seen in nearly a century, the Left has cried foul, proposing numerous solutions to reduce inequality, typically through income transfers to those at the bottom or various regulations. Simultaneously, while conservative elites have rallied against what they perceive as burdensome economic regulations, they have also sought to justify any market outcomes and portray attempts to question or alter them as immoral and greedy. 

But to what degree does this dynamic make sense? The Left remains focused on improving outcomes for the poor and middle class above all else. Progressive and liberal leaders would like to see incomes, health benefits and working conditions improve for those in the middle class and below. 

Intuitively, they tend to view markets, by their very nature, as imperfect systems whose apparent excesses need to be trimmed. Hence, when attempting progressive reform aimed to disproportionately help those at the bottom, they often resort to “anti-market” strategies, such as command-and-control regulations or mandates. 

In contrast, conservatives have far more faith in markets, but also fall into the trap of asserting that their outcomes are inherently just, rather than viewing markets as a means to an end. Conservative writer Ben Shapiro, for example, argues inequality is both moral and necessary for growth. 

While this is true in a very broad sense, it is an uninsightful platitude for those seeking policy answers as it fails to defend our specific levels of inequality here and now. This line of thinking is not a defense of the current American distribution of income or wealth, but rather it is a defense of market outcomes anywhere and everywhere. 

In fact, this artificial barrier to questioning the fairness of our market outcomes deeply undermines American conservatives’ goal of economic deregulation. Property rights, rule of law and regulations create for markets the “rules of the game,” or structure by which participants must abide. While conservatives want to change these rules in pursuit of more economic freedom, rethinking them with an eye toward economic inequality leaves them blindly defending the morality of current economic outcomes. 

Of course, if outcomes from the economy as it is constituted are just, conservatives in pursuit of deregulation do the same thing for which they criticize the Left: alter the market to reflect their own moral vision. 

Maybe this paradigm need not exist at all. Progressives can go on seeking to better the financial standing of those at the bottom and middle, but there is no reason why this pursuit must always require a uniform hostility toward markets. In truth, liberalizing developing economies has proven immensely fruitful to the global poor. 

Expanding markets can and very often does produce progressive outcomes. At the same time, there would be no ideological contradiction in conservatives touting the distribution of benefits from their deregulatory efforts. But, conservatives are held back by a need to equate a defense of markets’ existence with a defense of our present market outcomes. 

There is a plethora of concrete policy examples in which progressivity and economic liberalization are complementary rather than mutually exclusive. Economists have long been interested in the phenomenon of “rent-seeking,” which consists of the manipulations of the “rules of the game” by interest groups to artificially boost profits above their natural levels. Rent-seekers use the political system, often through unelected agencies, to erect barriers to competition that slow overall growth and implicitly redistribute income and wealth to those at the top. 

For example, while copyright law is a cornerstone of any capitalist economy, drug manufacturers have strengthened it far beyond what is necessary to promote innovation, resulting in skyrocketing prices and profits for firms. Deregulatory steps — such as shortening the length of time a drug patent is protected — would be a form of indirect redistribution down the income scale. 

Similarly, homeowners have made it nearly impossible to build new housing in many of America’s growing cities through restrictive zoning and permitting laws. Reducing the scope and strength of these regulations to allow the supply of housing to expand when demand rises, while potentially damaging to the net worth of those near the top, would be a huge help to working-class families trying to pay rent. 

Nobody is expecting an economic consensus, but conservatives and progressives are preventing themselves from accomplishing mutual goals by stubbornly refusing to speak a common language. We are instead left with gridlock and ideologies ridden with internal inconsistencies and contradictions. If leaders spent less time moralizing markets and more time individually weighing the nuances of each issue, perhaps we would have an economy that is both more progressive and less constrictive.  

Connor O'Brien is a School of Arts and Sciences senior majoring in economics. His column, "Taming Tribalism," runs on alternate Thursdays. 

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Connor O'Brien

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