Parasitic Liberalism

This hot-off-the-press paper by Samuel Bowles investigates the "parasitic liberalism" thesis, which is roughly the idea that liberal societies do not produce enough civic virtue to maintain themselves, and instead are parasitic on the older inherited forms of social organization (clans, eg) that they displace. If the thesis is true, then liberalism is doomed, because it will ultimately cannibalize the source of its own success.

For example, in the absence of a strong work ethic and feelings of reciprocity among employers and employees, an adequately functioning labor market would be impossible. If trust, truth-telling and other ethical behaviors were absent among borrowers and lenders, credit markets, likewise would collapse. The same is true with even greater force of other institutions, so that: "...no social system can work ...in which everyone is ...guided by nothing except his own ...utilitarian ends.." (Schumpeter).

I know academic papers are supposed to speak with an air of timelessness and not riff on current events like blogs, but it must have taken effort to write the highlighted sentence in 2010 without making explicit reference to the actual state of our society.

... the following are commonly held to be among the cultural foundations of a well functioning liberal order: willingness to help others at a cost to oneself (voluntarily paying taxes and contributing to public goods for example) and upholding social norms such as respect for private property, honesty, fair treatment, and political participation even when these do not enhance one's material benefits...

By liberal society I mean one characterized by extensive reliance on markets to allocate economic goods and services, formal equality of political rights, the rule of law, public tolerance, and attenuated ascriptive barriers to mobility... examples of liberal societies are Switzerland, Denmark, Australia, the U.S. and the U.K., while examples of non-liberal societies... are Saudi Arabia, Russia, Ukraine, and Oman as well as the small scale societies of hunter-gatherers, herders and low technology farmers...

So, to restate the idea, traditional human society develops a rich texture of human relationships, based on kinship, professional guilds, personal loyalty, etc. Liberalism (aka modernism, aka the market) comes along and sweeps most of the relational structure away and replaces it with individualised, atomistic economic transactions. But the market depends on a certain level of trust and good faith. All that stuff comes from an earlier time, and the grinding gears of the market will eventually use up the store of it that was generated from earlier times, and we're left with a harsh landscape of pure self-interest and low trust, which just won't work that well.

This is apparently an old idea but it's somewhat new to me, at least crystallized in this form. Bowles cites classic authors like Burke, Tocqueville, Hayek, Polanyi, Habermas, Rawls, Mill, and others who have touched upon it before. And there's a wide range of cited literature from behavioral economics that I'm not going to have time to read, but looks fascinating.

So then the paper presents a mathematical model for thinking about virtue and liberalism. There's a lot about this kind of thing that raises my hackles. For instance, it's not really clear that you can tell much from ultra-simplistic models in which "virtue" is represented by a single numerical variable. But it may that an ultra-simplified model is better than no model at all. Certainly much has been made before of game-theoretic models like the Prisoner's Dilemma, and this is just a slightly more complexified version of that.

This topic is related in various ways to an earlier paper by Bowles and Jayadev on guard labor.

Indirect evidence consistent with the predicted inverse relationship between virtue and the extent of markets is found in the fact that the U.S., perhaps the most market-based of the advanced economies, also excels in the fraction of its labor force devoted to what Jayadev and I call guard labor, namely, that devoted to (or the consequence of) maintaining order.

Bowles' conclusion is that while there is some general truth to the parasitic liberalism thesis, it paints too simplistic a picture:

...the parasitic liberalism thesis fails not because it misunderstands the cultural consequences of markets or the tendency of liberal institutions to erode traditional institutions and cultures, but rather because it overrates the benign contribution of tradition to the moral underpinnings of liberal institutions, and underrates the contribution of the liberal state and other non-market aspects of liberal societies to the flourishing of these values.

My own take: The US certainly seems to have consumed a large stock of its virtue, while cultures with deeper roots in tradition seem to have deeper wells of virtue to draw on (for "virtue", read "willingness to cooperate with others" or simply "fraternitié", the third and often neglected leg of the French version of liberalism). That may be why the US seems to be heading into banana republic territory while European states actually seem to use there powers to take care of their citizens. The people who do really well at small-scale, ground-level capitalism in the US are those with large family/ethnic networks to draw on.

More generally, it's just too soon to tell. Liberalism, modernism and capitalism constitute a major change to human society, and we are only part-way through the transition. Technology continues to evolve and it drives new variants of political structures (ie, print supported the rise of nationalism, radio supported the rise of fascism, and we don't really know what the Internet will do yet). Liberalism is only a few hundred years old and given its self-mutating nature it is impossible to say what its long-term prospects are.

Guard labor and open source

According to this paper by Samuel Bowles and Arjun Jayadev, an astonishing 26% of the US workforce in 2002 was engaged in non-productive "guard labor", meaning their work was not directed towards producing goods or services but was instead aimed at making sure that the wrong people did not help themselves to slices of economic pie that they were not supposed to have.

Compare this to 11% in contemporaneous Sweden, or 7% in the US in 1929.

I'd argue with some of the definitions and methodology in the paper, in both directions. For instance, supervisors are the largest category of guard labor, but it's hard to say that all of management is non-productive -- they aren't all PHBs, many make creating contributions other than merely riding herd on their employees (ie, they are thinking of someone like a low-level manager in a call center whose only job is to make sure employees don't stay too long on their bathroom breaks -- but there is also, say, Steve Jobs). On the other hand, there are entire industries that are effectively engaged in guard labor that are not counted in Bowles and Jayadev's measure, such as health insurance. And the finance industry is neither productive nor guard labor (I wonder what percentage of the economy is skimmers and con artists?).

Prisoners and the unemployed are also counted in the numbers for guard labor, because the concept depends on the idea of power and sanction, and prisoners and the unemployed are considered "necessary concomitants of the public and private sanctioning systems, respectively". This struck me as odd, but makes some sense when taking a macroeconomic point of view -- both the guards and the prisoners are people who are not doing actual economically productive work -- their labor is wasted as a direct result of the fact that the social system of power and property needs to be upheld.

Ideally we would also include those producing guns for private use, locks, security systems and the like, but we are not able to do so because of the lack of data.

The need for guard labor is related to the broader goal of understanding the role of institutions in the role of managing and reproducing the economic activity of society:

The insight we wish to develop is that securing conformity to institutions can be quite costly, and the cost differs among institutions and across time and space. Conformity achieved through the coordination of expectations or the internalization of norms, for example, may not be very costly, as in the case of driving on one side of the road or the other, or the voluntary compliance with tax laws in some countries. However, where conformity to a society'™s institutions is secured primarily through governmental coercion or privately deployed sanctions,the resource costs may be substantial. Examples include some authoritarian political systems, colonial regimes, and as we will see, highly unequal capitalist economies.

Intuitively, the more inequality in a society, the more guard labor it requires. There's a convincing scatterplot of GINI vs. guard labor fraction by US state included in this quite good profile of Bowles in a Santa Fe paper.

Prior to about 20 years ago, most economists thought that inequality just greased the wheels of progress. Overwhelmingly now, people who study it empirically think that it's sand in the wheels.

Here's the last paragraph of the paper:

Fourth, illegitimate inequalities are costly to sustain. While cultures often justify vast differences in power and access to valued resources, the mind is not a blank slate on which such ideas as the divine right of kings or the superiority of the "˜white race" can be etched at will. Two decades of behavioral experiments have provided convincing evidence that humans in dozens of cultures are inequality averse, and that violations of norms or reciprocity often lead to costly confl‚icts.

Of course the counterargument to the view that guard labor is mere friction is pretty easy to make -- that all this guarding is actually necessary to make producers productive, via incentives and structuring. The ticket-taker at the movie theater produces nothing, but without the efforts of him and others, the actual movie-makers could not get paid and could not raise capital to produce anything. It might be more efficient to have a different scheme, for instance having entrance to the movies be free and producers supported by the government via taxation. That may sound absurd or totalitarian but just such a change is happening in academic publishing via the Open Access movement and free-access journals like PLoS. Institutions that did nothing but provide proprietary guards over content (like my former employer Elsevier) are on their way out.

In fact, the whole free/open source movement in software and elsewhere may be seen as a response to the unpleasantness of guard labor. Proprietary software requires licensing schemes (ticket-takers) that cause new bugs, interfere with legitimate uses, and more generally cause friction. More broadly, locking software behind a pay wall reduces the amount of sharing and requires frequent reinvention of the wheel. It's inefficient, and this drives engineers crazy. Most of the time they don't get to vote, but the FOSS movement arose as a direct response to some of the unpleasantness surrounding proprietary software and has in its way been amazingly successful.

Guard labor is in its most purest and most apparently wasteful form when it is guarding digital content. The question is why then, if our economy is more involved in producing content than ever before, is the fraction of guard labor so high? I suppose it is also true that guarding digital content takes more effort than guarding physical objects -- how much of the fraction is RIAA lawyers, or the army of private detectives employed by Monsanto to sue small farmers who allegedly use their genetically modified seed without paying (genes are basically digital content -- and I just watched Food, Inc. which goes into this story). Monsanto, like DRM, is friction, but capitalists would argue that it such friction is necessary to spur production. But there can't be all that many people employed doing this kind of work.

I was around for the birth of the open source movement and efficiency really had nothing to do with it -- it was a moral struggle, based on the anguish of the excluded when a once open resource suddenly being subject to enclosure and guarding. But its ongoing success happened because of efficiency and the self-interest of software producers and companies. It is interesting to hear arguments for more general economic equality and openness, usually derived from a moral or emotional basis, being made on the basis of macro-scale efficiency.

[[edit: I was constructivly flaming Bowles' frequent collaborator Herbert Gintis on open-source here]]