30 November 2009

"Anti-Big Business Millionaires"

Porch Dog | Those Anti-Big Business Millionaires:

SB7 quotes the following to make his point (or more precisely, let’s the point make itself since it’s a recurring theme on his blog)
Factoids of the day:

1. 54% of Congressmen are millionaires.

2. Consistent with the ‘limosine liberals’ stereotype, eight out of the ten richest are Democrats.
I would like to add my own, lesser point: Can we please recognize that the financial make-up of Congress virtually guarantees that nobody is out to pass “anti-business laws?” I mean, sure, it’s possible that these guys who’ve found a way to earn/inherit millions of dollars are actively working against their own self-interests, but isn’t that just a bit naive? The truth is that Republicans and Democrats are each beholden to their own set of business interests. Legislation that appears anti-business on the surface really just helps out some other group.

And since I’ve linked to SB7 I would like to quickly add, I’m not saying that laws don’t end up having anti-business consequences, just that that is not the point.
I'm not sure if this would surprise Porch Dog, but I more or less agree.

There isn't really a unified point to the following, but here are some discussion points to consider on these themes:

1. This gets at the distinction between "pro-business" and "pro-free market." I think almost all congressmen are pro-business, while few, left or right, are truly pro-market. Ongoing confusion between the two serves both the left and right for different reasons, and hurts the public. This is a distinction that deserves much, much more attention. The fact that "good for businesses" is not congruent with "good for markets" and the latter is by far the more important is hereby declared to be a SB7 Bottom Elephant.

2. Bryan Caplan, who brought these statistics to my attention, wonders how much of this is due to over-representation of lawyers in politics. (More congressmen list their occupation as law than business). While law firms are business, they are not run like businesses in general, nor do they face the same incentives. We've been treating financial firms as sui generis over the last couple of years. I believe law firms are even more unlike businesses generally.

(A bit of explanation: most law firms' revenue is dependent on the number of hours billed, so their incentive is to use up as many hours as possible, that is, to consume inputs rather than to produce outputs.)

3. The source of voters' wealth tells you more about their political alignment than the level of their wealth. That is, business ownership even of very small firms generating modest personal income, is more positively correlated with republicanness than is high income in general. I assume the same is true of politicians. I think the source of the wealth of that 54% would shed more light on this discussion.

4. A higher proportion of bills introduced than passed can probably be viewed as being anti-market or anti-business. That's just a hunch, but I think that there is a vocal minority of legislators who are truly anti-business and anti-market, either because they are not rich and have no ties to business, they are rich enough that they will remain rich no matter what legislation they champion, they are willing to trade future revenue for popularity today, or they don't understand the consequences of their proposals well enough. If true, this makes anti-market legislation a consistently looming possibility even if you are unconvinced it is the current state of affairs.

5. Consider the CPSIA and Mattel. The CPSIA was enacted in the wake of Mattel importing some potentially dangerous toys, and requires preposterously extensive (and expensive) inventory tracking and testing requirements on anyone making products for children. The kicker is that Mattel arranged to get itself certified as the only toymaker allowed to test it's products in-house, so their punishment for their iresponsibility in the first place is to be given a cost-advantage over their competitors.

The CPSIA passed 407-0 in the House and 79-13 in the Senate. Discussion question: Are those 486 congressmen who voted in favor of the CPSIA pro- or anti-business? Pro- or anti-market? Surely few if any of them owed their fortune to Mattel, or received significant political backing from them, or the toy & childrens garment industries in general. What does this case tell us about the attitudes in congress to businesses or markets?

6. Obama, who many people voted for because he was going to "make big business accountable," etc., has been very anti-market so far. Yet his policies have been very good for certain businesses: Chrysler & GM obviously, some financial firms also obviously, Fannie & Freddie if you treat them as businesses and not thinly veiled government agencies, pharmaceutical companies (but not medical device manufacturers). There have also been many firms benefiting less explicitly: the GEs and Mesa Powers and GIMs, and the multitudes of car dealerships and real estate companies and brokers and home builders, and many others.

So: Obama -- millionaire, no history in business or family history of same. Policies which are anti-market, but can be interpreted as pro-business. I guess what I'm getting at is "what is Corporatism?" I would say anti-market and pro-business, which is a very dangerous combination. The anti-business alignment as Porchy defines it may be rare, but I think the corporatist alignment as I define it is rampant.

7. One comment on the following: "I’m not saying that laws don’t end up having anti-business consequences, just that that is not the point." Where do you draw the line between the point of legislation and the "unintended" consequences of the same? I agree that anti-business consequences are not often the goal, and rarely ever the publicly stated goal, but many of the unintended consequences of such legislation is often so predictable that I have a hard time describing them as "unintended." To take it back to the CPSIA, is the point of it to put all-natural, mom-and-pop, Etsy-based toy-makers out of business? No, of course not. The point is to "protect our children." But that's putting those shops out of business is so obviously going to be the effect of the CPSIA that I have a hard time considering it to be anything but explicitly anti-business.

Or consider the "job creation plan" from Michigan a month back, which is ostensibly pro-business (or "pro-employer" or whatever) but in reality would be terrible for businesses. Do the results of that plan count as "unintended consequences" when they're so easy to predict? Is that "point" of such plans pro-business because they're described as being good for business, or are they anti-business because they would actually be bad for businesses?


PS As usual when I reply to Porch Dog, I feel like I am giving the impression that I disagree with him more than I really do. Don't read the above points as counter-arguments to his post, merely as thoughts inspired by them.

2 comments:

  1. Oh, I'm not surprised at all, and , as I said in my post, I was merely adding a point, and one I see as the lesser of our two points. And I really enjoyed this list of potential departure points for different discussions. Consider this post Google Starred.

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  2. I like that we see things similarly enough to agree, but also just differently enough that we can have some fruitful discussions.

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