A Proposal for the Sciences, Rediscover Bacon's Idols of the Mind

Why is science so stubbornly politicized?  Perhaps we have just been teaching it wrong.

Francis Bacon benefited from his Queen's loyalty to the split with the Catholic church. Being entirely separate had its advantages, and Bacon's firm adherence to Aristotle while despising the state of received Aristotelian philosophy materialized in his bold new vision for the scientific approach.

I am happy to discuss in comments the details of this matter, which I am still working through, but let's make a long story short. Science before Bacon had been captured by the idea of the deductive method. This means that first principles were hypothesized which, when logically applied, would sort out almost any contradiction between competing claims. What if these didn't work because of some new discovery? Simply, revise the first principles. This process would give us insight into the true nature of the world.

Bacon offered an alternative. His method looked towards the inductive method. This takes a radical approach to science that we are all taught in our first laboratory class, the scientific method. Simply put, the scientific method asks us which phenomenon we are interested in and then accumulates related observations. We sort these observations by their perceived priority in association with the main phenomenon of interest.

In this approach, Bacon discovered what he called the Idols of the Mind. He gave them names:

• idola tribus: The idol of the "tribe" deals with coherence of ideas into neat packages. I take this to be related to much of the moral foundations literature Jonathan Haidt is working with. 
• idola spectus: The idol of the "cave" deals with cognitive bias. For example, our minds interpret our enemies best argument as evidence that they have bad intentions. Liberals who watch Fox News confirm their prior that conservatives are crazy. 
• idola fori: The idol of the "marketplace"  deals with language. Often language assumes a meaning quite different the way specialist use it, this helps distort careful logic when applied to the public debate.
• idola theatri: The idol of the "theatre" is the closes to sophistry. The tendency to over-sell academic expertise. 
• idola schola: The idol of the "school" is the pedantic reasoning of textbooks. It is a oversimplification useful only for the teaching of material to neophytes. 

The idols were categories of errors. Science according to Bacon was understanding error, not finding truth.  The most important lesson that Bacon teaches us is that all answers are errors and that these are more or less affected by these idols. To begin the process of cleansing the mind from these idols, there are many approaches. None are going to work. We can only progress by taking the task seriously. 

I find it discouraging sometimes that so many students think that they can posses "the answer" and have simply not been taught the idols of the mind, specifically idola schola. I can't read a periodical without thinking of the idola fori. I have so much contempt for my peers who dismiss the idola theatri and attempt to establish their reputation by sophism. 

The only hope science has is to proceed with a more ready understanding of Bacon's idols. It strikes me that much of what we see as progress in the last 300 years depends on the implicit expectation of this task. If anything explains why modern science is so politicized, it is the fact that we have lost our understanding of Bacon's method. I aim to do better.    

Irrelevance of Statistical Averages to Perceived Bias

Helen Thomas recently died and she is rightly remembered as a "pioneer." What Helen Thomas did was truly amazing as she not only put together a career as the first woman to do what she did, but she also raised the bar in her profession and blew past the bar of simply proving that women can do the same job as men. She proved they she could do it better than most.

It would be tempting to compare her to Jackie Robinson, another trailblazer who was memorialized in film this year. However, not all bias is created equal, so I want to push away from false equivalence. Too quickly latching onto a narrative of the pioneer seems to do a subtle and mischievous disservice.

We can look at statistical averages to measure discrimination in our world, today, which remains despite the efforts of people who have "broken through the X barrier." The world is a vastly unequal place, even today. However, one simple point must be emphasized. That as much as the statistical averages differ, they tell us nothing about the capabilities of each demographic category. Statistical averages are silent on the vast array of things that we all want to talk about.

President Obama for the first time as a sitting president explained what it felt like to be subjected to discrimination. But, his last word on the subject is that his daughters are just different. He says that the younger generation is just better than us. This is likely true. In the last 50 years, a whole career for people like Helen Thomas, the world has changed. No one takes it for granted that race, creed, or sex will prohibit you from doing things that you want to do. Despite this fact, however, the legacy is an inescapable feature of the debate.

There should be no journalist that doesn't know who Helen Thomas was. There should be no diminishing of the achievements of folks who overcame similar obstacles, but the fight for equality does not end with women both being equal and women continuing to feel the lingering victimization. When Obama talks about what he has seen, personally, as discrimination he must walk away from this experience and retire to a private place in the White House to consider the precedent that he is setting. In a world where young black men feel completely alienated, the White House can no longer be a joke as an aspiration.

This brings us back to stats 101. The statistical difference between races is dwarfed by magnitude of difference within one race. We are different on average, but this no longer correlates with a glass ceiling for achievement within any one category. While history cannot be forgotten, those that have succeeded and become path-breakers have rejected the notion that the statistical differences between categories must matter for their potential. Perhaps one might take heart in breaking down a barrier that still remains. Perhaps a person will remember to help others who follow behind themselves because of the recognition of the achievement. The true measure, however, of progress is simply getting beyond the narrative of statistical averages and work on making that data irrelevant by setting a new example.

Cosmo-Parochialism

I hate when people say they like to travel, for most people mean that they like consuming museums after taking a long plane flight.

As a professor, I have been to my share of museums during my opportunities to travel. I recall taking a group of students to Manchu Picchu. They couldn't really care less. Sure, there is a part of them which will look back on the group pictures that we made, or remember what it was like to stare down from the sides of the mountain to the river vanishing in the valley below, but really what they wanted were the props for visiting. The gift shop at Manchu Picchu gives a stamp for your passport, which is symbolic. It is just another item on the list.

Real travelling requires learning a language and staying in the homes of the people who are native to the country. Far fewer people do this. I wouldn't even know about this if I didn't do a study abroad where I lived in someone's house or if my wife's family were not so generous as to put us up when we visit Germany. I can't help but fret when I think of  too many of today's students that can't tell the difference between 1) wandering the streets of a foreign city and 2) actually becoming acquainted with a foreign culture. 

I find this to also be the case among so many people's political preferences as well. The cosmo-parochialists have a list of things that they have to have to consider themselves cosmopolitan. This list includes having a gay friend, traveling abroad, volunteering for a political campaign, and various other things. We all know the list of things we are "supposed to" do before we get old and set in our ways. But none of this is real because it lacks a fundamental element of reciprocity. This reciprocity requires submitting one's self to challenges to one's beliefs. 

The cosmo-parohialist consumes culture, s/he does not experience it. Living life with a check list of politically correct experiences does not get you down and dirty in another culture. It doesn't let you experience things that repulse you about other cultures that you learn to appreciate when you see it with a new set of eyes. One can have these experiences without leaving home. All that is needed is someone who is unrepentantly different than you. This comes from an openness of mind that demands engagement with others. Few have this trait, rather they quickly converge on the "right" answer. True cosmopolitans, rather, are stuck not knowing which hand to hold a fork or whether to use chop-sticks because they love both traditions so much it is hard to chose one. 

A cosmopolitan wants everyone else to remain different so that they can benefit from different customs and traditions, so that they can experience cultural exchange and learn new things. A cosmopolitan fears the convergence of cultures brought about by globalization because they will lose the very thing that defines them as cosmopolitans, a challenge to their own sacred beliefs. 

A cosmo-parochialist cannot get this while listening to an English language translation of a museum tour.  

Spontaneous Order vs. Dionysus vs. Rousseau

Ok, that is a strange combination. But I was thinking about different theories of the group. I have been obsessed with thinking about collective action since I first read Hayek who articulated the idea in a way I had not found in other places. Now I know that collective action problems are everywhere, but it really depends on how you look at them. So I want to break these down into categories:

The ancient Greek idea of Dionysus was of a harvest god, a god of excess. So what do you do when you have a harvest and much of it will cannot be stored for the long term? Well, you feast. The feast celebrating Dionysus must have been quite a few people's favorites, but over time the creation of myth about the god suggested something very interesting. Dionysus as a fetus was ripped apart on the order of a jealous goddess Hera because, as usual, Zeus had been fooling around and fathered Dionysus from a mortal woman. One way that the dismembered god could be re-united is when his worshipers all worked themselves up into a drunken frenzy. Dionysus here stands for the transcendental union of the mob in its most animal form. The individuals have to be reduced to a totally unconstrained state, like an orgy.

The French author Rousseau also talked about where political authority comes from. By trying to imagine a sovereign who most perfectly captured the majority of political will, Rousseau posited that the general will could be achieved in society in at least a relative degree. Rousseau did not have the benefit of social choice theory, nor the intervening scholars that have studied the issue, but he becomes an early expression of approximating a social choice solution at an aggregated level. Arrow would later call this solution a dictator.

Finally there is Hayek. The theory of spontaneous order deliberately rejects the solution of collective action through one mind (be that god or sovereign). In its place Hayek finds that the price mechanism help to communicate information so that totally isolated individuals could get what information they need to move resources in the right direction to everyone in society's benefit. Typhoons cause damage to catfish farms in Vietnam, no need to read the paper, the price rises and people start conserving catfish by eating other foods at the margin.

What is explicitly rejected in Hayek's theory then is that the aim of this process is deliberate. There is no god, no sovereign whose purpose this whole process serves. Looking at the three different cases we note the similarities. All have two levels: social order and individual action. The Dionysians debase the individual in order to celebrate their god, whatever happens happens. Rousseau ignores the minority, which causes some problems that even he would have to admit. Ultimately Rousseau's system is unstable because it is too bold with majority will. Hayek rejects the teleos, the goal of society that Rousseau would want, and the thing Dionysians couldn't care less about.

Hayek, to my mind is the one that cares the most about the individual. Some say to a fault. Perhaps Hayek's biggest challenge is to deal with a world where the minority gets some power or privilege by historical accident or evolutionary failure. Rousseau's majority would take care of this problem, but it would soon start looking like a Dionysian mob because, as far as I understand, Rousseau didn't have a solution for run away majority will (French Revolution). So the biggest question is, in avoiding the mob, are we doomed to have entrenched interests?

Deficits, Cognitive Bias, and Thinking Critically about Thinking

In a great book, Democracy in Deficit: The Fiscal Legacy of Lord Keynes, James Buchanan (1986 Nobel prize winner) and his student Richard Wagner (one of my professors) argued that spending is very closely related to reelection and that taxing works against reelection. The argument that we could spend when we were in bad economic times and save when we returned to prosperity (Keynes's countercyclical argument) gave rise to one of the enduring problems with the modern state -- fiscal opportunism. They called the balanced budget idea of government, "that old-time fiscal religion," and argued that only a balanced budget amendment could help save congress from the incentive to shy away from taxes and always increase spending.

California passed measures that has made it in effect a public referendum on every tax cut and every spending increase. This has led to California becoming completely bankrupt with no good way to get out of the fiscal mess. Voters easily vote for more programs and for tax cuts in the same ballot. In fact, people are watching California from China and arguing that democratic reforms could destroy the economy. There is a new assumption is that economic growth and democracy might work against one another.

The very essence of the argument of the republican idea of government was that representatives would have to be held to account for their stewardship of the resources that they are entrusted. I think one way to solve this issue of mis-allocation of resources is to trust them with fewer resources. I have little faith in the idea that we just need to elect better stewards.

Think about this example: In a business, no one cares how many times you failed before you succeeded. In politics, no one admits fault or past mistakes for fear that it will be used against them. This incentive means that dishonesty creeps into the system, little learning takes place and information is sharply limited. The only profit and loss signal is reelection (which is infrequent and clumsy, because it is not broken down to specific issues). Politicians go on TV regularly and refuse to comment on the substance of the issues for fear it will affect their ability to negotiate and vote trade later. It says something about our public discourse in this country that John Kerry's worst mistake was to change his mind in light of new evidence. George Bush's major selling point was that he was above changing his mind. This virtue would ensure a businessman failure, but a politician ought to have this to succeed.

On the other side of the debate are people who want the government to have more power. Obama goes to sleep every night thinking that no one could do a more honest and better job than he is doing. Strictly speaking, he might be right - given that anyone is making decisions for the 300 million people in this country. What these people seem to want is for politicians to make decisions for them. These individuals prefer the myth that there are guards on a wall ensuring that we won't have to tackle the difficult issues. After-all, they are elected to decided for us. This view assumes that only Obama has access to the information about the banks, about the war, about the economy. More trust is needed in his secret files that make it clear which decisions to make. People who have run a business of any size understand the importance of managers seeming to have a clear plan. However, asserting confidence doesn't save the manager when errors are discovered. The plan has to adapt. I am not sure that politics contains the necessary incentives for this to occur no matter who is wearing the hat.

At the end of the day, I have become convinced with the evidence arguing that the majority of how we view the world politically is derived neurologically (Jon Haidt, U Virginia). We can do brain scans and determine the more active centers of people's brains. To break it down to the most important dichotomy, we can look at the left-right political space in this country. Those with a greater portion of activity in the higher-order cognitive thinking areas tend to believe that we can reason our way out of every problem. They don't see natural connections between family members or small group affiliations, they see larger pictures, ethnic groups, political groups, and nations. They then "know" in some sense that greater data collection and more central control will help eliminate "errors" that others are making. Those that have less of this frontal lobe bias, when shown a picture made of dots, see the individual dots and have to have the picture pointed out to them to see it. They are more likely to be religious or traditional in other ways. They see the world made up of very strong social ties. These individuals are the ones that donate to charity, preferring help to come from knows how the one receiving the aid will use it to make themselves better off. Groups are smaller in this perspective and individuals are very meaningful pieces of the whole. These brain types fear outsiders and tend to see reasoning about issues as propaganda meant to ensure compliance rather than agreement.

Of course the frontal lobe types dismiss the others as less evolved. Actually, more research is being done to see if frontal lobe injury makes one more conservative. The implication here is that those that are conservative are brain damaged in some way. Actually, I don't know that this implication holds logically. Any good economist knows that there is a division of labor. The frontal lobe functions are necessary to making well-rounded decisions, but not enough to guarantee that well-rounded decisions are made. Too much focus on high-cognitive reasoning is like Spock from Star Trek. I think that there are good reasons that local knowledge and knowledge of meaningful social connections are important. What we tend to think, at least in academia, is that frontal-lobe activity takes the place of all of the other things that are important to being a well-rounded individual. We have spent so much time defending our nerdy habits that we don't realize the limitations of being nerdy. No one that I know of is doing good research on the impacts of this hypothesis on the political economy. I think it shows that the founders of this nation knew something about people when they wrote the constitution that we have forgotten over time. The reason we need competition between the federal and state levels is to help us balance between high-ideals and the way those ideals come into practice. I just hope that we can account for the goodwill of both sides amid a very frustrating political conversation and economic environment.

Nuclear Reactors and Seismic Activity

I hate pain and suffering. Even when it happens to other people.

The events surrounding the disruption of a nuclear reactor, its backup, and its secondary backup were catastrophic. The reaction to these events seems to be more emotional than sensible. I have been debating with my more worried friends about the policy implications of these events. They seem to think that we should ban nuclear reactors from any area with seismic activity.

Before we consider this, maybe we should make a comparison to an event that is older and look at it with the benefit of hindsight. The Gulf spill last year was horrible. As I understand it this was again the case of a freak event causing a problem sufficient to overcome the connection to the drilling pipe and at least two redundant countermeasures set up to keep the pipe closed in case of such an event. My claim in that case was that the level of redundancy in safety measures was clearly too low relative to the cost of the broken pipe.

I don't know how we settle on two backups as the optimal number of back-ups. Both in the oil spill case and in the nuclear reactor it seems that the risk justified a bit more redundancy. My friends who want to ban nuclear power outright for Japan seem to be missing the economic argument that there is always a price that justifies doing less of something. If the correct number of redundant measures is high enough we will have the same think happen if we ban nuclear power or if we require safety measures sufficient to have the same effect.

This was all I was debating, but somehow I got public choice thrown back in my face. The claim was that banning was a better commitment than regulations because regulations would be shaped by greedy politicians and lobbyists. I like that my progressive friends are learning public choice, but it bothers me that they are applying it inconsistently.

I am making a simple Pigouvian point, that we can internalize the social costs by increasing regulation. I am not entirely in support of this position, but I didn't think that it would be subverted so easily by the claim that it was not draconian enough. Who knew?

The Stagnation?

Perhaps there is someone who would both read this blog and not know of the book:

The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better by T. Cowen

However, I will only point out two reasons it is thought notable. 1) because it is a e-book only release which is relatively short. For an academic book this is great because it eliminates the filler most academics seem compelled to include in their books. 2) It has been widely talked about by people both pro and anti-market.

Cowen seems startled somewhat by its reception among self-titled libertarians. Afterall, he claims that there is a stagnation. If fans of small government thought that they have a case against big government at all, surely the growth in government over the past 50 years would have caused stagnation?

This strikes me as noteworthy, especially since Cowen, when I was in school at GMU, was a fan of staying that government is a luxury good. When income rises you want more of it (generally speaking).

This is particularly interesting considering a hot debate in the regulation literature. A 2001 working paper by Edward L. Glaeser and Andrei Shleifer, The rise of the regulatory state, is a good example of the basic hypothesis. The modern regulatory state rose because of legal failure, that is, legal decisions failed to reach an efficient, stable, or lasting consensus for future activity among the group they were intended to regulate. Basically, this is a critique of constitutional political economy from the Chicago-Virginia (Coase-Buchanan) perspective.

Diana and I are very interested in developing this line of inquiry. If it is true that legal precedent does a poor job of establishing a clear and permanent legal consensus, then regulation has to be at least considered. In a working paper, which we have presented at conferences in the past, we argue that the regulation of medicine, specifically blood donation, was controlled by a regulatory action motivated by pure public choice concerns. We argue that the outcome was worse than what had already been established in legal opinion but not yet taken place. We think that regulation is just as suspect if not worse than the process of the courts.

Since I believe that Shliefer's work (this paper with Glaeser and others of his) points to the best arguments against the idea of a constitutionally limited government with democracy; I also am willing to view Cowen's argument as a cleverly updated version of Schumpeter's thesis about the demise of capitalism in Capitalism, Socialism, and Democracy. Cowen makes a bold assertion and dares us to prove him wrong. If there is no stagnation (as I assumed in my knee jerk reaction ) despite increases in the scope of government over the last 50 years, then we have no reason to lament this change in government. I know that we could have higher growth -- but at some level I am willing to appreciate that the unseen benefits of growth will always fail to win minds compared to the visible poverty that persists even with the intervention.

Cowen shows us that stagnation is normal in a process of growth. Russ Robert's this week mentioned Kuznets Curves which predict that income inequality increases during periods of growth but converges later. These theories show us that there is some regularity in the world driven by a more complex process. We shouldn't expect high growth all the time, sometimes we prioritize fairness over growth.

I tend to be on the side of the heroic vision of capitalism which I believe is best illustrated by Hernado De Soto's claim in his book, The Mystery of Capital, that allowing people access to capital is the economic equivalent to nuclear fission. But, I am willing to look out the window and see people being prevented from having access to this by the banality of "frictions" in the developing world. [This is putting it nicely, but these frictions should occupy another blog post in the future] At the end of the day, we have to come to terms with the fact that people want intervention in order to grow at moderate rates in order to signal social justice. Growth that occurs too quickly might be on net positive for the society, but there is something psychological about high growth rates that cause moralizing among voters (or the mob in general). I have called this repugnance in other places. I will talk more about this in the future, but for now, I think it is sufficient to link this stagnation idea to the moderation of growth rates implied by Schumpeter and Kuznets in rapidly growing (or recently rapidly growing) economies. Linking this to the regulation theory of Shliefer means that we have a causal process for the growth in regulation partially identified.

Now off to think more about Mises's work, Interventionism.

Why Don't We Update?

I have been working on a project that investigates the institutional constraints on expert advice in development economics. Specifically, I have been using PT Bauer’s work from the 1950s on Indian Economic Policy and West African Trade as an example to argue that the quality of expert advice is constrained by how experts relate to their subjects. The idea is that when experts and their subjects operate within the same network of reward and feedback mechanisms, experts will be more likely to internalize negative feedback and update. When experts operate in a network of rewards and feedback that is separate from the network of their subjects, on the other hand, they are further removed from potential negative feedback and therefore much less likely to learn and update their theories to comport with real world evidence (see aidwatchers.com from more recent evidence of this problem in development economics).

Ever since I started working on this project, I have been subject to confirmation bias, i.e. everywhere I look, I see my theory in action. The same thing happened as I was reading Barry Eichengreen’s most recent book, Exorbitant Privilege. Eichengreen argues in this book that the Fed bares at least partial responsibility for the 2008 financial crisis because its monetary policy was too loose. According to Eichengreen, the FED had followed the Taylor rule in setting interest rates throughout most of the nineties and early 2000s. The Taylor rule derives the target short-term interest rate from the divergence between actual inflation and the desired level of inflation, as well as between actual GDP and potential GDP. Eichengreen suggests that fears of deflation led the Fed to diverge from the rule in 2002 when instead of raising rates, as the rule would have prescribed, it chose to keep them at low levels to prevent a Japanese style deflationary crisis.

I am as far away as any academic economist could be from being an expert on monetary policy, but as I am reading Eichengreen’s description of Fed policy in 2002, I cannot help but being reminded of current FED policy. Fears of deflation have been cited for almost 2 years now as a reason for historically low rates. And, the FEDs most recent increase of the Fed Funds Rate by 25 basis points seems timid given the recent good news about a recovering US economy and what the Taylor rule would prescribe. I might be wrong about the connection between 2002 and today, but if there is any resemblance between economic conditions then and now I cannot help but wonder what it is that keeps the experts at the Fed from updating and learning?

Eichengreen also cites the ‘pseudoscientific nature’ of an increased mathematization of the financial industry as one of the reasons for the excessive risk taking that lead up to the crisis. Yet, everywhere I look, I see academic economists advocating the use of ‘quantitatively rigorous techniques’ without ever indicating what the limits of quantitative analysis might be (Nassim Taleb being the exception). Again, I cannot help but wonder why we do not update? What is it that keeps the economics discipline from learning? Why do we not change our strategy in the face of disconfirming evidence? Every fool will learn not to make the same mistake twice, but as academics (the same is true for economic policy makers) we seem to be blind to real world evidence.

Given the implications of my theory about why it is that economists are so bad at predicting policy, it is not hard to see why we keep making the same mistakes over and over again. Just like development economists, academic economists in general are removed from their subjects. Ben Bernanke will eventually return to his job at Princeton University where he already has tenure. Why should he be worried about the consequences of his bad theories in action? Similarly, most academic economists around the country, who continue to preach the need for quantitative rigor already have jobs with tenure and will keep those jobs whether or not their theories have any practical relevance. Maybe the recent proposal by the Utah legislature to get rid of tenure is not such a bad idea after all. However, I am doubtful whether that would suffice to bring the theory underlying policy prescriptions into closer alignment with reality. What are some good proposals for reform of academia that might make us as a discipline more realistic?

Government Revenue

Government revenue, in the aggregate sense, comes from three sources: inflation, taxes, and the issuing of debt (treasury securities).

However, I do not think it is common to sum these sources of revenue and track the total share of GDP which is attributable to these sources of revenue. While inflation and taxes are unambiguously helpful for the government's position, the servicing of the debt is a budget item itself. Inflation does its part to eat away at this balance, but it is none-the-less a liability.

In the recent discussion of the budget what seems to be playing in the center of the spotlight is the issue of raising taxes. However, it is one very small semantic step to view inflation as a flat tax. Ricardo argued that bonds were taxes, but just delayed. So why are these other measures of taxes not more obvious to people? When we raise the level of borrowing, we are committing to future taxes. In short, we may see a growing government, but we are going to wrongly attribute the growth to the current period -- we have been growing all along, so says the spending.

Like a corporation, the issuing of debt is an important part of doing business. Everyone who owns a home understands this lesson. When you qualified for your mortgage, the high number that you were given for the amount you could afford was calculated on the principle that your payment could be as high as 55% of your monthly income (assuming you had no other monthly liabilities). The only question that I have is why we don't think about government the same way we think corporate or individual finances.

Recent reports suggest that government spending is likely to grow to 30% of GDP. This is a huge growth from the historical average which trended in the last half of the century just under 25% of GDP. Basically we will see a growth in government by 20% if these forecasts are correct. That is a large number, but it is nowhere near the debt ratio that businesses and individuals carry. If we view our government as a corporation, then we are OK.

Of course, being an economist, I have an "on-the-other-hand" qualification. Government sits astride a society consisting of individuals and corporations. In welfare theory we assume that government exploits rates of return which are higher than market rates. The issues an omniscient and benevolent governor chooses is one burdened with incentive problems sufficient to make it difficult or impossible to solve in the absence of government intervention. One example of this is the interstate highway system. Investment in infrastructure has been calculated to outperform market returns consistently, yet was not something historically provided at the scale that the Eisenhower system provided. This proved necessary for much of the economic growth that surrounds our cities and higher population density areas. This is strong argument in support for infrastructure. [I ignore the opportunity cost argument for this money]

I do think we should invest in infrastructure; but is it necessarily something we should do as a government? New technology is allowing private capital to be available at precisely the same time that the federal government is hitting a wall with their ability to raise revenue. Bonds are constrained by threats of sovereign debt crises in Europe and inflation is widely understood to cause pervasive damage. This means that any increase in taxes possible is already spoken for. It has to fund existing social security obligations. It is fortunate for us that we can turn to private capital to fund some of the public goods that we have traditionally thought of as public works projects.

Take toll roads for example. Tolling used to be something that we thought was prohibitively costly. We hate toll booths and paying people to sit there all day and collect money faces rising wages and collective bargaining. Now we have E-Z pass and various new GPS technologies private firms (just like Facebook, credit card companies, and others) can manage the pricing of our activities based on our use of the services. The path is open for taking things off of the government budget. I am convinced that technology has solved many of the problems we used to rely on government to solve.

The role of government is open for debate, but I suggest that we can be much more clear about what role that that government should play. If we want to fund programs that provide social justice, that is great. However, let us be clear now about evaluating the impact of health care, education, social security. Are we getting what was promised? These central issues for government are possible to disentangle from the role government plays in managing business. For the role that government plays in regulating industry, I am less convinced after the banking bail-outs that government can do this well at all. It becomes hard to have lawmakers write good laws when all of the information they get about the industry comes from those standing to benefit from the legal changes.

I am hoping that technology is a solution to these problems. Technology helps to eliminate many of the market failures that cause the need for intervention. Technology may decrease monitoring costs for abuses of the system. In short, I am hoping for an increase in transparency. Maybe technology will even help to means-test the provision of social security so that we can help those that need it and avoid the bloodletting predicted in most deficit forecasts. If we want to help the least-well-off, why do people with very high salaries qualify for social security? This might be a first step in decreasing spending.