February 2008

One of my favorite things about Matt Yglesias’s blog is that he’s considerably better-informed than his commenters, and is willing to say things that he knows perfectly well will piss them off. The latest example is a post where Matt opines that “the movement, started under Jimmy Carter then of course continued by Ronald Reagan and Bill Clinton, to deregulate important aspects of the American economy was basically a good thing.” This provokes almost unanimous condemnation from Matt’s readers. But Matt’s right.

I think it’s amazing how many commenters here appear to have absolutely no knowledge of the nature of a lot of regulations in the 1970s and before. I’m not talking about meat inspections or environmental laws here, but the regulation of trucking, airlines, telecommunications, securities, and a number of other industries were thinly veiled attempts to create government-supported monopolies for the benefit of incumbent businesses. The ICC, for example, which regulated surface transportation, carefully controlled which trucking companies could drive which routes. They routinely denied applications to provide new service on the grounds that the route in question already had “enough” competition. The result, not surprisingly, was that prices were significantly higher than they would be in a competitive market. Airlines were the same way. The CAB actively prevented the airlines from cutting prices or expanding service. And until the early 1970s, the FCC actively worked to prevent competition in the long-distance market to keep AT&T’s profits up.

Not only did consumers get screwed from higher prices, but this created a lot of waste too. Trucks would commonly drive from one city to another, and then drive back empty because they couldn’t get permission to carry cargo on the return trip. In the 1960s, airplanes were almost half empty, on average, because they weren’t allowed to cut prices in order to attract more passengers.

Airline, trucking, and long distance deregulation were a win from just about every ideological perspective. It was good for consumers (especially low-income consumers), free markets, and economic efficiency. The major losers were incumbent businesses who no longer enjoyed monopoly profits. It’s a rare example in which elite opinion across the political spectrum converged on a set of changes that benefitted almost everyone in society.

A final thing to note is that these policies were championed by liberal Democrats. The key players were Jimmy Carter, Ted Kennedy, and Stephen Breyer, who worked for Kennedy in the 70s. This was a great triumph of liberal intellectuals over corporate interests. Yet a generation later, the smart lefties who read Matt’s blog seem to be completely oblivious to what was probably Jimmy Carter’s most important domestic policy accomplishment.

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Julian interviews Larry Lessig on his prospective congressional campaign. Awesome.

Julian sticks with a straight news story, but I find Lessig’s latest crusade almost painfully naive. Lessig’s work on copyright law and free culture was brilliant and nuanced. I don’t think it’s an exaggeration to say that he got people thinking about copyright issues in a new way. But having turned his attention to the problem of political corruption, he comes up with “solutions” that have not only been widely discussed for decades, but have actually been tried and found wanting. The Watergate-era campaign finance reforms, let’s remember, attempted to create a system of public financing for presidential campaigns. It failed at least in part due to the Supreme Court, which found that restricting people from spending their own money on political speech violated the First Amendment.

The problem of political corruption is fundamental to politics. When governments have the ability to take from some and give to others, people will expend resources to ensure they’re on the winning side. Lobbyists and PACs are symptoms of this underlying process, but banning them isn’t going to eliminate the incentive to influence the political process, it will just lead special interests to find new ways to do so.

In the writings I’ve seen on this subject thus far, Lessig doesn’t appear to seriously grapple with these difficulties. As he put it in his original post on this subject:

In one of the handful of opportunities I had to watch Gore deliver his global warming Keynote, I recognized a link in the problem that he was describing and the work that I have been doing during this past decade. After talking about the basic inability of our political system to reckon the truth about global warming, Gore observed that this was really just part of a much bigger problem. That the real problem here was (what I will call a “corruption” of) the political process. That our government can’t understand basic facts when strong interests have an interest in its misunderstanding.

I think that parenthetical comment is crucial. What Lessig is grappling with isn’t a corruption of the political process. Rather, it’s a reflection of systematic problems with political decision-making. Procedural changes, like banning PAC contributions, earmarks, or third-party campaign expenditures, may shift power away from the current crop of special interests towards new ones. But politics just is the clash of special interests. Sometimes, one of the special interests with a seat at the table will be a public-spirited, grassroots organization like the ACLU, Creative Commons, or the National Rifle Association. But the self-interested factions devote vast resources to ensuring they maintain their seat at the table. PACs and lobbyists are symptoms. The underlying problem are the inherent incentives of the political process.

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