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Glenn Weyl Book Lecture: Radical Markets Uprooting Capitalism and Democracy for a Just Society

Glenn Weyl Book Lecture: Radical Markets Uprooting Capitalism and Democracy for a Just Society


DAN D’AMICO: Hello. Welcome. Thank you all for
braving the weather. My name Dan D’Amico. I’m the associate director of
the Political Theory Project. We’re the hosts
for this evening. We’re joined by
Professor Glen Weyl. He is a principal researcher at
Microsoft Research New England, where he works on political
economy in the 19th century from an interdisciplinary
perspective. His most recent book– not yet out until the 15th,
but you can buy it in the lobby right now– entitled Radical
Markets– Uprooting Capitalism and Democracy
for a Just Society. The substance of this
work fits perfectly within the mission of the
Political Theory Project, which is to pursue and invigorate the
study of ideas and institutions that make societies free,
prosperous, and fair. So please join me in
welcoming Professor Glen Weyl. [APPLAUSE] GLEN WEYL: Thanks so much,
Dan, and to everybody else who helped organize
this, and to everyone who came, in spite of,
I guess, both Jeb Bush being here and the rain. So this book is the
outgrowth of many years of work with Eric
Posner, who’s my most common co-author at this point. And if you do buy a copy
of the book afterwards, make sure that they
scan it on the front, because that actually is
the bar code for the book. So the book, because so
many years went into it, is full of quite detailed,
technical, specific policy proposals. But I think that, before
diving into those, which I will do a little bit
during the presentation, I want to orient you to the
broad perspective of the book, which I think is most easily
done by, for a moment, suspending your
practical concerns and coming with me on a
journey of imagination to a fictitious city that
I’m going to call Marketopia. So Marketopia is a
little bit like Zootopia, except rather than being
defined by being inhabited by a variety of mammals,
its defining characteristic is that all private property– let’s put aside
personal effects, like cats, and dogs, and
jewelry, and so forth– but all major private property–
houses, land, airplanes, et cetera– is continually up for auction
to the highest bidder, with the current
highest bidder– the current possessor
of those assets– paying that bid as a rental
payment into a common pool. But anyone else can
come along at any time and beat that highest price
and come to possess that asset. Now, in Marketopia,
this principle applies not only to
private property, it also applies to many
things that we would usually think of as public
goods, like the nature of the bus system,
which politicians administer various things in
Marketopia, how the schools are run, except that rather than
using a standard auction, where the highest bidder
wins exclusively, we add up the willingness
of everyone to pay out and make the decision, which has
the greatest total willingness to pay for it. And all the proceeds
of this auction are continually returned to the
general public in equal shares as a social dividend– or some people might call it
a universal basic income– much the way that, in
countries like Norway or in, even, Alaska, the
proceeds of oil sales are continually returned to
the public as a dividend. Now, when you think
of Marketopia, your first reaction
is probably that this is the most extreme version of
a free market you can possibly imagine. And in fact, it
makes you realize that most of our society, which
we think of as a free market society, is not, in fact,
a free market society. In fact, most assets
are not liquidly available for new uses. Most of the grounds
of Brown University, for example, if you wanted
to repurpose it in some way, you’d have to enter into
an endless, probably impossible, negotiation
with Brown University. And at best, you
would have to pay them many multiples of what
they’d be willing to accept for that piece of land,
because they would try to take advantage of the market
power that they have over you– that they’re the only people
that you could bargain with for access that asset. Whereas in Marketopia, because
everything is continually up for a competitive
bidding process, every asset is truly
competitive and contestable at every moment. Yet, while that sounds
intriguing on the one hand, it probably also
sounds problematic, because you might think
to yourself, well, if everything is
continually up for auction, won’t the rich
dominate everything? Won’t they just
outbid everybody else for control of those assets? But then you have
to ask yourself, what do you mean by the rich? What do you mean by the wealthy? Well, literally, wealthy
means those who have wealth. And in Marketopia, there’s no
such thing as private wealth. In fact, all assets
are commonly owned, both in the sense that anyone
can equally contest for control of those assets,
and in the sense that all the benefits
of the assets equally flow to all
members of society. In fact, Marketopia
is, in some sense, a far more thoroughgoing and
consistent implementation of the principle of
common ownership, advocated by people
like Karl Marx, than real-world forms of
socialism, which ultimately degenerated into the control
of a bureaucratic elite that turned out to be,
in many ways, as oppressive as the capitalists
that they claimed to replace. So that’s a paradox– or it might appear– the most extreme
form of free market is somehow the most
thoroughgoing implementation of the principle of common
ownership of capital. Well, that might
seem a paradox today, for those of us who live
after the Cold War and the way that it shaped our
political thought. But it would not be a paradox– or, in fact, it would be an
obvious, perhaps even dogmatic tenet, for many of the
leaders of the field of political economy in
the late 19th century and early 20th century,
especially epitomized by this gentleman here. So does anyone know
who this gentleman is? I’ll put aside Dan and
John, who’ve read the book. But people who have not
just been reading the book, does anyone know who
this gentleman is? Yeah, go ahead. AUDIENCE: Is that Walras? GLEN WEYL: Oh,
that’s a good try, and he was very good
friends with Walras, but this is not Walras, no. So this guy was the best-selling
author in the English language, other than the
Bible, for 30 years. He helped inspire the Chinese
nationalist revolution. He was one of the greatest
influences on the leading politicians in Western
Europe in the early part of the 20th century. His name is Henry George. And despite his
enormous influence, despite his book
being the namesake of US progressive movement,
Henry George’s ideas were largely forgotten, and
his face, apparently, also was largely forgotten in the
debates between capitalism, and socialism, and communism
during the 20th century after the Cold War,
which left little room for his perspective. The goal of this talk– the goal of this book– is to dig back and
revive those ideas, argue that, in fact, the
field of mechanism design, for which several Nobel
Prizes have been given, is actually the continuation
of Henry George’s ideas, and to argue that,
together, this vision offers an alternative to
the reactionary populism of both the right
and the left that seems to be the answer to the
rising crisis of confidence in liberal institutions today. So what is that
crisis of confidence? Well, we see it as having
really three components. So first of all, there’s
been a dramatic increase in inequality within
wealthy countries, especially
Anglo-Saxon countries, over the last several decades. So on the left here,
you’ll see that– this comes from
Piketty and Saez– the share of income accruing
to the top 1% and top 0.1% of the income distribution
in the United States has nearly doubled from
the mid-1970s until today. And at the same time, as we
see on the right in the orange, the share of income
accruing to all– sorry, in the purple– the share of income
accruing to all workers, as opposed to the owners of
wealth, has fallen by about 10% over that period. Now, that might not
worry you if you thought, as Ronald Reagan or
Margaret Thatcher argued, that that sort of
inequality is just the cost of a more dynamic,
more quickly growing, more competitive economy. And we just have to accept that
sort of increasing channeling of returns to wealth,
rather than to labor, in order to have
that sort of growth and technological progress. But at the same time that we’ve
seen this declining return to work, we’ve also
seen a dramatic increase in market power among firms. So the way that I’ve
plotted that here is that this orange line is the
inverse of the average markup of firms in the economy,
according to a recent analysis by Eeckhout and De Loecker. And what you see is, just as
labor income has been falling, the share of markups has almost
tripled during the same period. And if, as this suggests, a lot
of this increasing inequality is not due to dynamism, is not
due to greater competition– in fact, to precisely
the opposite– to an increase in rents and
an increase in market power in the economy– you would expect to see
the economy slowing down at precisely the same time
that this inequality has been growing. And that, in fact, is
exactly what you see. So throughout the
wealthy world, you’ve seen growth rates fall
from the rates that prevailed in the post-war
period to the last 30 years in half in the United States,
but even more dramatically, in Europe. In the United Kingdom, for
example, rates of growth are about one tenth what they
were in that previous period. And in France, the fall has
been even more dramatic. So this combination of
stagnation and inequality– what we call “stagnaquality”– is, I think, discrediting
existing economic wisdom in this era, in the same way
that stagflation in the 1970s– the combination of
stagnation and inflation– discredited the standard
Keynesian worldview in the 1970s. And this undermining
of belief in the standard economic
paradigm in neoliberal ideas, in particular, has
been fueling a backlash that’s seeking alternative
approaches to the economy. And it’s not only a purely
economic concern, however, because the dissatisfaction
with existing paradigms, I don’t think, is purely economic. There’s also an
increasing concern about the ability of
democratic governance to legitimately resolve the
tensions between minorities and majorities within
wealthy countries. And that’s on both sides
of the political spectrum. So it’s both concerns among
gun owners about their status as a minority and them
calling upon courts to protect their
interests, and the ways in which a variety of
ethno-racial and immigrant minorities within both the
United States and Europe have increasingly looked
to both the judicial system and, in the case of Europe,
to transnational institutions with less democratic
accountability to protect them against the
oppression of majorities. So increasingly, both
the economic wisdom– the economic technocrats that we
rely on to steer the economy– and the political
technocrats– the judges and the supranational
institutions– that resolve the tensions
between tyranny of the majority and the rights of
minorities seem to be becoming
increasingly illegitimate. And in reaction to this,
we see an increasing turn to reactionary,
populist ideologies, both of the right, as shown
here by Brexit and Donald Trump, and of the left, as we see
with the rise of Jeremy Corbyn and old-guard state socialism
in the United Kingdom. So our view is that,
in this time of crisis, we need to open our minds
to alternative political conceptions that have
sufficient boldness and promise to
offer an alternative to these reactionary ideologies,
which we do not believe can actually address
the underlying issues of inequality, slow
growth, and political conflict. And so what I’m
going to do today is start by laying out
the proposal, which is in chapter one of our
book, which is not necessarily the most important
one in the book, but the one that I
think most clearly breaks apart our standard
left-right political discourse and most clearly offers
us an alternative basis for a political vision. And then I’ll briefly talk
about the other proposals, try to tie those together
into something of a broader social vision, and
briefly talk about what we might do to move
forward from these ideas. OK. So the standard discourse
that the 20th century has led us to think about is
the conflict between capitalism on the one hand– often dominated by corporations,
and private property, and so forth– and on the other hand,
centralized planning, or state socialism, on the other hand. But in the late 19th century,
there was a very important movement in economics,
which viewed both of these as unacceptably centralized
systems of power, because, as many of
these thinkers argued, capitalism tended
towards monopoly– both in the ownership of land
and the ownership of property that kept land from being
used in its best uses, and in the concentrated control
of business enterprises, which were bureaucratic
and stopped the free flow of markets– and on the other
hand, state socialism, which actually just
embraced precisely that monopolistic
tendency of markets and made it central to the
organization of society. Instead, these
thinkers argued that, to have truly
competitive markets, we had to move beyond private
property and its tendency towards monopoly. And the central
thinker in this– or the most famous
thinker in this movement– was Henry George. So Henry George
argued that land– the land on which all of
civilization is built– is created by God. It’s not created by any person. And so it can’t
belong to any person. And in fact, all of
the value of the land comes from the general
progress of civilization around the land. He has a story of someone who
arrives in an infinite Savannah with beautiful
natural endowments everywhere and settles
down in one spot, taking 1,000 acres for himself. But while he has all the
affordances of nature, he has no one to trade with. He has no one to help
him in his tasks. And so the next
person who comes along settles on a less-nice
piece of land next to him. And pretty soon,
a city grows up. And after a few years, he’s
the richest man in the society, for having done nothing,
except having arrived and taken a bunch of land
and appropriated it from the public for
his private use. And so George advocated
for solving this problem by having a 100% tax
on the value of land– on the rents from land– and no tax at all
on anything else. So no tax on labor. No tax on capital. So he made a very sharp
distinction between the natural endowments of the earth on the
one hand and human creations– labor and capital– on the other hand. So George was
enormously influential. Albert Einstein referred to
him as the greatest thinker of the 19th century,
greater than Maxwell, who was his favorite physicist. John Dewey said that he was
the most important influence on the progressive movement. And he also is reflected
in popular culture in some very interesting ways. So this shows a billboard
that someone put up on a vacant lot
in New York City. It reads, “Everybody
works but the vacant lot. I paid $3,600 for this lot, and
will hold it till I get $6,000. The profit is an unearned
increment made possible by the presence
of this community and the enterprise
of its people. I take the profit
without earning it. For the remedy,
read Henry George.” Henry George also inspired
one of the most important pop-cultural artifacts of the
20th century, which is this. Does anyone recognize
what this is? Yeah, this became Monopoly. But it actually was called The
Landlord’s Game, originally. It was invented by
Elizabeth Magie, and it had two sets of rules. One set of rules were
the monopoly rules, and the other set of rules were
the progressive or Georgist rules. So under the monopoly
rules, the game plays roughly like
what you’re used to. But under the
Georgist set of rules, the land rents on
each of these areas, though not the
house rents, accrue to the public treasury, which
then uses them first to buy out the utilities, so that
they’re available for free, then to buy out the railroads. So they’re available for free. And then, eventually,
the money is used to pay a social
dividend that you receive when you pass this
spot, which is now known as Go. So the point of the
game was originally to teach people that, under
capitalism, everything tends towards monopoly
and the one person dominating everything and
driving everyone else out, whereas, under a just
set of property rules and so forth, instead,
you would have the impossibility of
anyone dominating it, and everybody prospering
together, as each did better. So Henry George was
enormously influential, but there were some, I
think, important weaknesses in his ideas, that, while
his vision inspired so many, led his actual proposals
not to be widely adopted. So probably the most
important of these is that George made this very
sharp distinction between land and labor. But if you think about
it, almost everything that is useful that
we have is actually some combination of these. Consider a gold mine. Imagine you had a 100% tax on
the value of the gold mine, but anything that was
taken out of the gold mine would become capital and
would be taxed at a 0% rate. Now imagine you got
possession of that gold mine. What would you do? Well, obviously, the
first thing you would do is immediately grab all the gold
out of it as quickly as you can and put it in your house,
and then say, OK, now this is my capital. All of it completely
belongs to me. And this thing that
gets taxed at 100% is this useless,
hollowed-out gold mine. And of course, that
would happen for all other natural resources. And in fact, Georgism
would have been literally an environmental disaster,
because people would have had an incentive to strip
all assets out from nature as quickly as possible. And conversely, even
trying to figure out precisely what the contributions
were of the structures on top of land versus the
land underneath it is a fiendishly
difficult problem to actually try to undertake. Now, that didn’t
mean that people didn’t try to apply
Georgist ideas, and they came up with
very creative ways of trying to think about this. So one of the people
most inspired by George was this gentleman. Does anyone recognize him? AUDIENCE: Sun Yat-sen. GLEN WEYL: Sun Yat-sen, exactly. So this was Sun Yat-sen,
who was the leader of the nationalist
revolution against the Qing dynasty in China. And he described
his relationship to George as analogous to
that that Lenin had to Marx. And he said that
George’s ideas would be the basis of his revolution. Now, unfortunately, I
think, for the history of the 20th century, Sun didn’t
manage to keep control of China once he freed it of
the Qing dynasty, unlike the Bolsheviks in Russia. And so, eventually,
his ideas were buried in the arrival
of communism to China. But he came up with an
extremely creative way of implementing
George’s ideas, which is that everyone
would assess the value of their own property. They would pay a tax on
that self-assessed value, but then the government
could always come and buy the property from
you at that value, if it thought that you
were undervaluing it. So that was a very
creative way to get people to reveal the value of the
land, but unfortunately, when this was
eventually implemented, in Chiang Kai-shek, who was the
nationalist successor to Sun’s government in Taiwan, where the
nationalist forces retreated to escape the communists,
the government officials were often quite corrupt
and would not actually take the land, even if it
was dramatically undervalued. So the system didn’t work. Now, I think, unaware of this,
Arnold Harberger, a University of Chicago economist
and the founder of the so-called Chicago
Boys, who famously advised the dictator of Chile,
Augusto Pinochet, when he was first doing work
in Chile in the early 1960s, he proposed a system
of property taxes that he thought would be
much easier to enforce, given the conditions
of corruption there, than the assessment system
that they were using. And it was very
related to this idea. So I’ll let Harberger
describe directly to you the ideas,
which we revived, along with Anthony Zhang, who is
a graduate student at Stanford GSB, as the Common
Ownership Self-Assessed Tax. So he says, “If you have
to make a base for taxes, adopt criteria to determine
the true economic value. The solution that the economist
offers is simple and direct– allow the owner to
declare the value himself, make the values public,
and oblige the owner to sell his property to
any person willing to pay the declared value. The system is simple
and creates incentives, even beyond those
existing in the market, for assets to be
employed in their most productive economic use.” OK. So what would this
actually mean in practice, if we were to
implement this system? So first of all, we would
allow every possessor of assets who pays
this tax to choose how to bundle their assets. So if you, say, bought up
a whole bunch of houses and wanted to make it
into a condominium, you could immediately bundle
those together and say, no, this is a condominium,
not a series of houses, and so you have to
buy the whole thing, rather than buying
them separate. People would have a
specified period in which they could vacate their homes. So just like there’s eviction
proceedings, just like there are foreclosure
proceedings, there would be some
process for leaving a house if it got purchased. Third, if someone wanted
to inspect a property to figure out its value,
they could freeze the price, pay some fee for
inspection, and look at it before deciding to buy it. The optimal rate of
this tax is ideally not uniform across different assets. It should actually be calibrated
to a couple of things, the most important of which is
the turnover rate of assets. So assets like
personal effects– which maybe you would even
exempt entirely from this– that very rarely
turn over and that are held onto someone
for their whole lifetime, this should be taxed at
an incredibly low rate. On the other hand, assets that
turn over much more frequently, like spectrum, or like, maybe, a
car that gets sold as used cars with reasonable frequency,
business assets– these things should be
taxed at a higher rate. The rate should roughly be
proportioned to the turnover rate of that asset. That’s what offsets
the incentive to set an exaggerated price. But also, assets that require
a lot of care and investment should be taxed at a lower
rate than assets that are more, like George’s land,
invariant to the investment that people make in that. Liabilities and mortgages would
be deductible from the asset. So the tax would be paid on
the net amount of ownership. Technology would play a
really important role, both in helping you browse
the set of assets that are available and decide what
it is that you would want to buy, for example, but
also in helping people assess what value they might
want to set for the asset, and taking into account all
the relevant contingencies. Overall, in the
economy, though, we think that something
like a 7% rate, on average, is likely to
be close to optimal, which would expropriate roughly
2/3 of private wealth, once you take into account the
full discounted value of all those payments that
you’d have to make. Now, what are the
benefits of this? Well, as I mentioned, there is
this view in the 19th century– sorry, do you want
to ask a question? Yeah. AUDIENCE: What is to
prevent you from setting a really low price, hoping
that no one bids against you? If everyone bids against you,
you’d then say, OK, well, I’ll buy it off
them, and [INAUDIBLE] afterwards, and then
pay the high price when they’re [INAUDIBLE]. How is this incentive
[INAUDIBLE]?? GLEN WEYL: So someone
could buy it off of you. AUDIENCE: And then you
buy it straight back, but now I’m willing to
pay the market price. GLEN WEYL: Well, they have to
choose what they assess it at. So you’d be hoping that
they don’t assess it at– AUDIENCE: No, but then
I’m only willing to pay the market price, when
someone’s bidding against it. GLEN WEYL: Well, first of
all, the main goal of this is to achieve
efficiency, and so if– there might be exceptional
case where something like that might occur, but the
primary goal of this is not to raise revenue. The primary goal of this
is to achieve efficiency. But second of all,
what you’re describing is not the optimal strategy,
because if the tax rate is set near the turnover
rate, then the chance that the asset’s going to
be taken from you exactly offsets the marginal
additional tax that you pay. So unless the tax rate is set
well above the turnover rate, you’d never have an incentive
to do what you’re describing. AUDIENCE: But it depends on
the costs of turnover, I guess. If I have to sell [INAUDIBLE]
and buy it back again, if that imposes– GLEN WEYL: No, no, even if
there’s no cost associated with that, still,
if the tax rate is set equal to the turnover
rate for the asset– now, whether you can achieve
that exactly for everything is another question– but
supposing that it’s actually set that way, then
any benefit you get from reducing the price
is exactly compensated by a reduction in
the amount that you get at the moment of purchase. AUDIENCE: OK. So what I’m thinking about is in
terms of [INAUDIBLE] like that. OK. When you’re dealing with
continuous quantities, I can see that that’s true. GLEN WEYL: No, no, no. I’m talking about
discrete goods. Turnover rate– I mean the
probability of turnover, the percent chance of turnover. AUDIENCE: So how often do we
have to be at the auction? GLEN WEYL: And any time,
anyone can come and buy it. And the tax rate is set at
the percent chance per year that it turns over. AUDIENCE: But I don’t see
why another company could instantaneously change
up my evaluation. So you buy it from me, and I
instantly come back, and say– GLEN WEYL: I can come back,
but I would lose money in the process. I would receive for
it less than I would have to buy it back from you. AUDIENCE: [INAUDIBLE]. OK. GLEN WEYL: So what are
the benefits of this? What does it improve? Well, I referred to
this general notion that private property is this
monopolistic quality, where things don’t get turned
over to their best uses, but someone holds onto it. Now, that was a very broad,
vague idea in the 19th century. Leon Walras, the gentleman
here, mentioned– talked a lot about this
idea, but he didn’t specify exactly why that would happen. Let me describe some
reasons that economists during the 20th century have
figured out that happened. So one reason is what’s called
the Myerson-Sattherthwaite Theorem. So this is the notion
that, if I have an asset, and Dan might be the
better owner of that asset, if he comes and tries
to make me an offer to purchase this asset,
he’s probably not going to offer me the
full amount that he’d be willing to pay,
because he wants to try to make some profit. On the other hand,
I’m not going to be willing to sell it at exactly
what I’d be willing to accept, because I’m going to try
to get him to pay a higher price for it. Unless we have full
knowledge for certain that he values it more
than I do, and we both are 100% sure of that,
there is a theorem which says that there’s no way
for us to consistently transfer the asset from me to him. But that’s not the only
reason that private property tends to inhibit trade. There’s a whole bunch
of other reasons that we’ve also learned. So for example, I might
exaggerate the value of the asset, not just in order
to try to get more off Dan, but to try to convince him
that he should value it more, because he might
look to the price that I charge as an indication
of how much it’s really worth. And so I have an incentive
to exaggerate upward the price to persuade him
that it’s really a good asset. Both of these effects, I think,
are reflected in a heuristic that a lot of people use,
which is called the endowment effect, which is,
if I own something, I’m always going to be
asking more for it than I’d be willing to pay
in order to get it. And I think that’s a
psychological trick that many of us use to deal
with both of these bargaining problems. And in fact, there’s increasing
evidence that that’s the case. And when people
are renters, they don’t have that attachment. They don’t have this irrational
psychological reaction that they should be
willing to pay more to keep things than
they are willing to pay to get them in the first place. So if we had a system
where people weren’t fully owners, where they
were paying this tax, I think that would erode this
sense of irrational attachment embodying the endowment effect. Third, and I think
equally importantly, a huge source of the monopoly
problem in capitalism is that new entrants– new firms–
find it very hard to raise the credit– raise the money– that they need in
order to potentially compete and to buy the
assets necessary to compete. In this economy,
all assets would fall immediately– their value
would fall by 2/3, because you would be taking into
account all the taxes that you have to
pay in the future. So it would become far easier to
buy assets in the first place. Effectively, the down
payment on an asset would be like the
full value of it, because it would take into
account all those taxes that you would eventually pay. And fourth, this would
raise a huge amount of money that could be used to equalize
society, and therefore, give many more people the
access to competing for assets. So let me give you an
illustrative calculation of this. So a US median household
has roughly $60,000 of equity in their house
and $25,000 of other assets. On the other hand,
the average amount of capital in the economy
per four people is $960,000. So if these both fell in to one
third of their current value, because of the tax, the
equity of a typical household would fall to $20,000,
whereas the average equity in the economy would
fall to $320,000. A 7% tax on that would be
that a typical family of four would have to pay about $1,500
a year to maintain their assets and not have them
be taken, but they would receive a social
dividend from this money of about $22,500. And that would lead to a
net gain of roughly $21,000 for every family of four. Now, those families of
four, you might say, look, they don’t want
to lose their house. They love living in their house. They want some more
stability in their life. Let’s imagine that they
overvalued their house by a factor of five. So nobody would want
to take their house. Still, they would, on
net, in this system, be gaining about
$14,000 for the family. And if everyone else was
overvaluing their assets, they would be getting
even more of a dividend back in exchange for that. So under this system,
just like at present, stability is costly. The rich in our
society, they don’t get evicted from their houses. They don’t get foreclosed upon. They don’t live in dangerous
places, where their house is likely to get destroyed. The poor do in our society. They have instability. They have to deal with
all of those problems. In this society, too, you
can pay for stability. However, in this society, the
means to pay for stability are far more equally
distributed among people. And if you impose costs by
insisting on stability– by insisting on a monopoly
price for your house– you have to pay for
that in society, so that everyone would
have more opportunities, because so many more
assets would be contested. Overall, this would reduce
inequality back to the levels that it reached
in the mid-1970s– sorry, half of the way to
the levels that it reached at the trough of inequality
in the mid 1970s, quite close to the levels
of inequality to prevail in Sweden at present. And at the same time, it
would generate enough revenue to eliminate all
other taxes on capital and pay down most of the
national debt, while still providing this income. OK. Now that may sound like a
crazy, total upending of society that never has any
chance of happening. And I would disagree
that it never has any chance of happening, but
it certainly is quite radical. But in the near term, we can
make some significant steps in this direction that are not
particularly controversial, that will allow us to experiment
with these mechanisms, and that will bring
tangible gains immediately. And one of these we
proposed with Paul Milgrom, who’s a Stanford
professor who was central to the design of
the spectrum auctions. And he recently designed
a set of auctions that were meant to reallocate
spectrum from old uses, like television broadcast, to
newer uses, like 5G and Wi-Fi. And that took the
government seven years and an incredibly costly,
complex, bureaucratic auction to make that happen. But Milgrom, in
this piece with us, argued, if instead
the government, rather than having these
perpetual licenses, had a license where
you continually had to assess a price and be
ready to sell at that price, then you would constantly
have the ability to reallocate that
spectrum to its most efficient economic use. And so we proposed
that to the FCC in a journal called
Regulation, and there has been significant
discussion at the FCC. And we’re also talking
in the United Kingdom to the authority that
manages oil drilling rights about a similar system. And I think actually the
nearest-term thing that’s likely to happen is that,
within the blockchain community, there’s an increasing
interest in ideas like this. And I was just talking
to Vitalik Buterin, who is the, basically, leader
of the Ethereum community, about using this for
internet addresses within blockchain, within
the Ethereum community. That may actually well
happen within the next couple of months. So those are three somewhat
scattered examples. But if you think about all
the examples like this– things like
intellectual property, all the administrative
leases, and so forth, that the federal government
does, et cetera– that accounts for
something like 15% to 20% of the total capital
in the economy. So already, you could make
some non-trivial progress towards this world,
and certainly learn a tremendous amount
about how this all works, with these relatively
uncontroversial applications. But in the long term,
I do think that it should be applied very broadly. And that might
sound challenging. It might sound crazy that– maybe even my personal problem. My car would be up
for auction like this. But I actually think that
the social effects of this are actually quite desirable,
because if you think about the longest, sharpest
critiques of capitalism, some of the most important
ones are precisely its tendency to foster an excessive
attachment to material possessions. And that attachment to
material possessions– rather than to the
people around us, rather than to our communities– would be eroded if we came
to view many of the things that we own as a little bit more
like a spot on the beach, which we inhabit at the moment, but
which will pass on to someone else at some other moment– and on the other hand, view
other people’s property as, rather than something
totally divorced from us that we
could never have, instead as something that
we might take advantage of at some other
point in the future, if that’s advantageous to us. If we come to have a
society, which I think we’re already coming to have,
to some extent, where uses, and opportunities,
and experiences are valued more than
permanent possessions that we hold onto forever– not that there isn’t some
value to attachment to things, but here we would have an
optimal degree of attachment to things, which balances
the ability of others to potentially use those better
in the future with our ability to form attachments and
get value out of them. And at the same
time, I think, even beyond its effects on our
attachment to possessions versus to our communities, I
also think that in many ways this world would create
a much more just society and would ameliorate
many of the complaints that people have made about
the sort of moral culture that’s engendered by capitalism. So the defenders of
capitalism have long claimed that a competitive
market creates a scenario where we all mutually benefit from
each other’s prosperity, and therefore, tends
to create camaraderie and to break down the
sense of violence that exists within feudalism. But of course, that’s
true of competition– perfect competition. It’s not true of monopoly. A monopolist is
precisely the opposite. A monopolist takes
advantage of everyone that they interact with
and views every interaction as a chance to
exploit and to extract as much rent as possible from
the person that they’re facing. And the problem is,
in capitalism, we only get competition in
impersonal markets with very large
numbers of actors. So our personal lives
and our interaction with the market in our personal
lives all feel much more like monopoly and exploitation. That’s why we dread
interacting commercially with people who might be
our friends, because we’re so worried about
having to be placed in this position of trying to
take advantage of each other. But in this society, that’s
not how things would work, because the mechanism
itself would create a sense of perfect competition. We would effectively
act as price takers. We would not worry about a
negotiation with someone. We would set a price,
and, for the reasons I was describing
before, that price would always be
something that we would be willing to
accept for the asset. So we would benefit
any time someone came along and took something. But rather than having a long,
drawn-out negotiation that was a headache for
everyone, instead, it would just be a natural,
beneficial transaction, the same way that our
anonymous transactions in large-scale
markets are mutually beneficial transactions. And at the same time, because
our social dividend would be a share of all
the value created within the communities in which
we live, because we would have that value constantly
returned to us, the same way that
within, say, Microsoft, the corporation I work for– I have a share of the profits
of Microsoft Corporation, because I’m required
to hold stock. I think that it would foster
a sense of everyone diffusely benefiting from the value
created by the community, fostering trust, and
solidarity, and so forth. OK. So that’s the first
idea in the book. Let me tell you about the
other four, very quickly. Yeah, go ahead. AUDIENCE: Just a quick question. So how do taxes– how do companies
work [INAUDIBLE]?? So [INAUDIBLE]
companies [INAUDIBLE].. GLEN WEYL: So companies are
possessors in this world. So just like in
our present world, they’re people, effectively. But they have
liabilities as well, which is the shares
in those companies. And those liabilities
would be self-assessed, in the same way that the
assets are self-assessed. So effectively, the possessors
of the shares in the companies would assess the
value of those shares. Those would be a
liability that would be written down against the
assets that the company holds. And the company could choose
how it wants to package those. So if I thought, say,
that the company is just going to sell it as a whole
or not sell it at all– it doesn’t want anything
else to be for sale– it could package everything
for the company together. That would be very
expensive for it to do, because it would just
pay taxes on everything. But to the extent
that it thought that it could get a
lower tax liability or was willing to
sell those assets, it could de-bundle them, and
therefore reduce the amount that it has to pay in taxes. OK. So the second idea is to
have a system of collective decision-making, which truly
achieves the greatest good for the greatest number,
rather than the tyranny of the majority, by allowing
people to choose how much influence they want to exert on
different issues and different elections, based on
allocating some budget that they’re given– except there’s a specific
rule in this world, namely that you pay the square
of the amount of influence you have on any given
issue out of your budget of voice credits. So this is called
quadratic voting, and it’s the unique system of
vote pricing in this way that gives an incentive
for everyone to vote in proportion to how important
the issues are to them. And if it sounds a little
bit mathematically abstruse, you can make it very easy
and concrete for people to interact with using a
little bit of software. So here is a survey
that we ran nationally on a variety of
hot-button issues. And if you get one vote
on any of these issues, it just costs you one credit. But as you have more
votes on an issue, you see that the cost
becomes increasingly large for an additional vote. So using that technology, we’ve
gotten people who haven’t even completed college or even
high school to pretty reliably report
intensities of preferences to us, using this system. And we think, more broadly, that
it could create a true market system for collective
decision-making in a wide range of
areas and address many of the crises of
majority-minority conflict. Third, we propose a system
that we call the Visa Between Individuals Program, where,
rather than large corporations or governments being
those who decide who is able to migrate
to the country, every citizen would have a
right to sponsor migrants and to negotiate with
them, subject to some labor protections, for a
share of the surplus that the migrant gets from
coming to the country, so that every citizen would
benefit from migration. And therefore, there
would be an interest among the general
public strongly– for their own economic benefit– in supporting
migration, rather than just among capitalists and those
living in cosmopolitan cities, allowing for a much greater
degree of migration. Fourth, we argue that antitrust
laws have a tremendous amount of potential that
has not been tapped, because the overwhelming sources
of market power in our society are not even investigated by
existing antitrust authorities. Those are, first, that
there’s far greater market power over workers than
there is over consumers. And the way to think
about that intuitively is think about a typical
product that you buy, like a water bottle. How many reasonable
options do you have that you would be
pretty close to indifferent between for buying reasonably
good water bottles? Probably five, 10, et cetera. How many options do
you have for your job that you would be
reasonably indifferent, and that, if, say, your
wages went down by 5%, you would quit and
move to the other job? I think there’s basically
one, maybe, for some of us. Maybe, for some of us, none. So there’s far greater
market power in labor markets than in product
markets, and yet there’s never been a single
antitrust case that blocked a merger
because of the effects that it has on labor markets,
even though all the time mergers affect the structure
of labor market competition. So there, I would say, that’s
2/3 of all market power completely been
exempted, effectively, from antitrust analysis. At the same time, probably
the most important source of that market power has
been completely ignored by antitrust officials, which
is the power of large investors, like State Street,
BlackRock, Vanguard. They own roughly a third
of the corporate economy, and they’re the largest
shareholders– the five largest shareholders– of the
vast majority of companies in the corporate economy. And so they have no
interest in seeing United compete with
American or Delta, or CVS to compete
with Walgreens. There’s no benefit to
them of such competition. And there’s increasing
evidence showing that that lack of
competition is raising prices and reducing investment. And yet there’s been no
attempt, even though there are very simple ways that
you could address that, to reduce the power
of those investors to eliminate competition
in our economy. And finally, we argue that all
of the contributions that each of us makes through the
data that we provide to digital services is
the fuel that allows AI services to eventually– supposedly– displace our jobs. And yet, we’re not paid for any
of that work that we’re doing. Effectively, AI systems that
are going to eliminate our jobs are just broadcasting
all of the information that we have fed into
them, and yet we’re not compensated
for that, because of the monopsony power of
the largest data platforms. And we argue for a modern
data labor movement which would create power
among those supplying data to demand treatment for
their labor as workers. OK. Altogether, we argue that these
ideas would grow the economy by roughly a third, while
reducing, near permanently– as long as you think that
capital is the leading source of inequality– near permanently
reducing inequality to levels mid-century or below. They would therefore double
the median income, while only reducing the income of the
top 1% by about a quarter, or the effective
income equivalence. And at the same time, beyond
their purely economic effects, I think, at a societal level,
they would increasingly reconcile people
who feel left behind by markets and technological
change to that change, and in fact, show them
the benefits of it. It would show them the
opportunity created by digital technology,
the opportunity created by immigration, the opportunity
created by markets in assets, rather than reserving that
for the wealthy and elites in big cities. And at the same time, it
would heal the divides between the rich
and the poor world and between minorities
and majorities within wealthy countries,
rather than continuing to fissure those
divides, as so many of the reactionary policies that
are prescribed as alternatives can. So these are
radical ideas, but I do believe that they
are feasible ideas. I believe they’re ideas like
the neoliberal ideas of Milton Friedman in the early 1960s– whatever you think of those– which might seem crazy at
first, but are such a clear path of potential solutions to
the problems that we’re facing that they’ll
eventually, in some form, have to be a part
of our discourse. And maybe eventually, they’ll
become inevitable in the way that his ideas did. And yet, the things
I’ve described are not really the endpoint. In fact, I set up my ideas
in a very specific way. I wanted them each
to individually be attractive and
feasible proposals. But if you put
them all together, there’s all sorts of additional
possibilities that emerge. And I won’t go into that
too much, but for example, quadratic voting, I
described as a system based on this
artificial currency that everyone would get. But if we had a much
more equal society, we could actually base
it directly on money, in a way that would be
much less problematic and that would bring
additional gains, because people who,
overall, care more about the public sphere would be
able to express themselves more and probably represent the
interests of their compatriots better. OK. So I am under no
illusions that these ideas are going to be easily
intelligible or communicable to a very, very broad audience. I’m trying to put something
out there that can inspire– especially young
people I’ve seen have reacted in a very
engaged way to this– to build upon them and help
communicate and inspire more people to be able
to interact with these. And so I hope that scholars,
and entrepreneurs, and artists, and leaders, and activists,
and all sorts of people will take something away
from this, build upon it, and help bring, I think,
ideas that we desperately need to a broader audience. So thanks so much, and I’m
excited to take your questions. [APPLAUSE] STEVE CALABRESI:
That was fascinating. And I’m Steve
Calabresi, for those in the room who haven’t met me. I teach at Northwestern
Law School in Chicago, but happen to be in
Providence most of the year. I would yield to no one
in my libertarianism or in my willingness
to redistribute wealth beyond the point that it has
been redistributed up to now. I think, for example, that
eliminating zoning laws and allowing the building of
apartment buildings and suburbs would desegregate our
neighborhoods and schools very quickly, by eliminating
government interference. I think that one of
the key problems we face with the health
care situation is that health insurance is
regulated at the state level, and there is an
inter-state competition among health insurers. So I yield to no one
in my libertarianism. As to redistribution, I
would support a 2% tax on assets or capital per year. But I have at least
three major problems with the proposal
you’ve put forward. The first problem
is that I’ve always believed that stability
in our Constitution, which has lasted 225 years,
and stability, generally, reduces the risk
factor in investment. And investors who are
making investments– making to the long-term, like
paying out 20 years from now, want to be sure
that they’re going to be able to realize the
benefit on those investments, or they simply won’t make them. And by eliminating the
stability of property rights, you make everything
completely transferable. And I wonder whether the
risk factor to investment doesn’t become very high. And one way I would
illustrate this is by immediately
asking you, after I’m done with my question, how much
you value your co-authorship of this book, and
what you would be willing to sell it to me for
if I decided I was enamored with these ideas and wanted
to be associated with the fame and glory that you’ve
created by writing the book. So the first thing is the
risk factor in investment. The second thing,
which you talked about, is that you said– GLEN WEYL: Can I answer
them sequentially, so I don’t forget them, because
I don’t actually have something to write down on? STEVE CALABRESI: Sure. GLEN WEYL: So you’re absolutely
right about the investment thing. And in fact, the
book goes in detail into the trade-off between
investment efficiency and allocative efficiency. And there is 100% a trade-off
between those two things. However, first of all, we
would use half of the income that we raise off this to
eliminate other capital taxes. Other capital taxes–
and some income taxes, and pay down debt– all of those things weigh
in precisely the same way on investment, but they don’t
have the efficiency benefits of this house. So eliminating those is
just pure efficiency gain. And then we would,
in addition to that, raise a bit more revenue. Now, 7% sounds a
lot more than 2%, but it’s not as much
more as it sounds, and the reason is that once you
eliminate all that other stuff and you think about the
compounding of that, the marginal tax of
that additional tax rate is much less, because it’s
falling on a reduced base than the initial part of it is. So effectively, my
7% tax is really your 2% tax on the
margin, because you go in and eliminate all those
other taxes at the same time. So I think it’s very
consistent with that, and it has the
efficiency benefit– but overall, that 7%
rate is a trade-off between the investment and
the allocative efficiency. Absolutely, you’re right that
the investment efficiency is a cost of this
proposal, and you have to trade that off against the– STEVE CALABRESI: And
what is the price at which you would sell your
co-authorship of the book to me right now? GLEN WEYL: Well, currently,
we don’t have a tax on that. So I would have an incentive to
set a very high value for that. So if I’m optimizing– STEVE CALABRESI: I’m
just playing the game. GLEN WEYL: –in my world,
I would set a price of, I don’t know– let’s say $30
million, $40 million. But if you taxed me on it
at the optimal turnover rate of intellectual
property assets, which might well be 6% or 7%, I might
give you a different reaction. STEVE CALABRESI:
So that leads me to my second question, which
is the endowment effect, which you talked about. And the endowment
effect is real. It’s been shown in experiments
with college and law students that, if you give them a free
mug and tell them it’s theirs, and the mug is worth $5, when
you go to buy it from them, they’ll want $10 or $15– GLEN WEYL: Right. Absolutely. STEVE CALABRESI: –for the
mug, rather than the $5 it was worth. The endowment effect is real. And I have to mention
to you, I recently celebrated my 60th birthday. And at the age of 60,
I have many more things I’m sentimentally attached
to than you probably have at the age that
you’re currently at, which I will be polite enough
not to ask you to disclose. But sentimental
attachments to things are a real aspect of human
behavior and a real phenomenon, and it seems to me
that some of that is attached to a piece
of land or a house, even if it’s not a
particularly remarkable one. GLEN WEYL: So you’re absolutely
right that the endowment effect occurs, but it’s also true that
it occurs far less to things that we rent than that we own. And there is evidence
about that as well. And there’s also evidence
that it happens far more in societies where
bargaining is an issue and something people
anticipate than in societies where that’s not the case. And in fact, there’s a
really beautiful paper in the American Economic Review
that shows that that happens. So there’s tribes in east
Africa called the Hadza. And some of them
have more exposure to trading in marketplaces
than others do. And there’s basically
no endowment effect among people who don’t have
exposures to market bargaining, and there is an endowment
effect among those who do have exposures
to market bargaining. So I think the
endowment effect is an outgrowth of
private property, but I’m not sure it’s
a desirable outgrowth of private property–
or at least, not in the extreme form that
it manifests at present. So I’m not saying
that there shouldn’t be some attachments
that develop, and so forth, but maybe they
shouldn’t be as strong as they are, and that we
have super-optimally, monopolistically strong
attachments to objects. STEVE CALABRESI:
So my final comment was with respect to
the voting proposals and all the public
choice problems that would be entailed in setting up
a government that would manage this system without veering
over into something more like crony capitalism. One of the huge problems that
consumers and voters face is rational ignorance. And one of the reasons why
democracy doesn’t always function perfectly is that
voters don’t have an incentive to know as much
about the candidates as we might like them to have,
because your vote, in practice, doesn’t make much difference. So for example, in
Illinois, I was regularly asked to vote on
dozens of state judges. I’m a law professor in Chicago. I knew nothing about
these state judges. I couldn’t vote in
those elections. I was rationally ignorant,
so I didn’t vote. Most of the public is
probably rationally ignorant, according to opinion polls,
about various things. How could you possibly
make something like quadratic voting
work in a world where people are rationally
ignorant about scores and scores of different things? GLEN WEYL: So I
don’t think we can make any system work perfectly
in a world where that’s true. But I don’t think that’s any
less true of quadratic voting than of anything else. But I do think quadratic
voting, precisely for the reasons that
you’re describing, would work far better
than our present system, and let me describe why. I can be perfectly arrogant,
like I’m sure all of us can, about how ignorant many people
are about national politics, and how I should have much
more votes than other people do on that. However, with regard to things
like you’re describing– but even more– local politics–
who’s running for school board, or whatever– I am the worst
curse on democracy, because I’m a total transient. I have no idea. I don’t even know
what offices are available in the
south end of Boston. But there’s many people
who’ve lived there for years, and who know all
about that, and who know that that guy is
the one who was molesting the little children,
or this other one was stealing from the public
trough, and that’s just not– there’s all sorts of local
knowledge that people have. And what would be far better for
everyone is if we could trade– is if they could vote on the
things that they know about. I could vote on the
things that I know about. That’s how the
marketplace works. But we don’t apply
that principle in our collective decisions,
and quadratic coding precisely allows us to apply
that principle. And in fact, there’s
a wonderful literature on what’s called
issue publics, where, within almost every social class
and every demographic group, you can find people
who are incredibly knowledgeable about
all the issues that we decry that social
class or group not being knowledgeable about. It’s just that there are always
a minority of those people. But if that class
was effectively represented by the knowledgeable
members of the class, rather than by the ignorant
members of the class– and probably, those people
who are ignorant on one issue, they’re knowledgeable
about another. If we allowed for that fluidity,
if we allowed for that trade, we would have a political
system that came far closer to approximating the local
expertise that we rely upon in the marketplace
than the ignorance that we institute as a rule
through the one person, one vote system in our
collective decisions. STEVE CALABRESI: Thank you. GLEN WEYL: Yeah. AUDIENCE: Thank you so much for
a provocative and fascinating talk. I have two questions. The first is that
you didn’t say much about how you model
one of the most important actors in
your story, which is, who’s setting the tax? And the optimal tax is crucial
to this system of generating the benefits that
you identified, but when we look
around the world today, it doesn’t look like
optimal taxes across assets are in practice. So what do you have to model
about the sort of political and bureaucratic
decision-making process– the information that they
need and their incentives to use that information– to avoid capture and to
set the right tax rates? GLEN WEYL: Yeah. So I think one really desirable
feature of this system is what I sometimes refer
to as proof by blockchain. So I’m actually not necessarily
the hugest fan of blockchain technology, but I think that
you can investigate a system in whether it really
involves discretionary, potentially arbitrary authority,
based on whether or not you could basically implement it in
a decentralized blockchain-type system or whether you can’t. In this system, I
really think you can, and the reason is that, at least
an approximately optimal tax rate, in almost all of
these cases, can be set, purely on the basis of
the turnover of assets. So then the only
question is, which asset classes do you allow? Because then, once you
have an asset class, you can just say, what’s
an average turnover rate of that asset
within the economy? And it’s not just that
that can be implemented in a mechanical way. It’s that it’s transparent,
and people in the public can say, no, no, no, the asset
doesn’t turn over that much. That’s too high of a
tax rate for this asset. And so because there is
an empirical, approximate, sufficient statistic
for this that is easily observable
and not subject to a lot of technocratic dispute,
I think that you can do pretty close
to making this almost literally automatic,
as a way of operating it. Yeah, Dan. DAN D’AMICO: Glen, I’ll add
on to the show of thanks and mention how intriguing
some of these ideas are. I really like the
historical lesson on the prototype of Monopoly. I really like
playing games myself. So I’m going to frame two
questions around that metaphor. The Georgist model
of playing the game, to me as an avid game-player,
sounds boring and monotonous and not very fun or enjoyable. And I think that that
visceral reaction speaks to a potential
challenge to the presumed model of justice and the role of
income and wealth equality that you imply. So how would you justify
this sort of system to individuals who don’t
view a conception of justice to be as imbued with mandates
regarding wealth or income equality? The second part
of my question is about my favorite aspect
of playing games, which is cheating. And if I understood correctly,
this artificial high reserve prices are deterred
through taxation. Both that and the
transfer of ownership would seem to rely upon some
mechanism of enforcement. So if the auctioning
system of capital assets is leveraging wealth, it would
seem to give a lot of authority to the contemporary unequal
distribution capital holders, in contrast to the voice sharers
that you’re talking about. So if I had sufficient wealth
and valued my current stock of assets, I would just buy all
of the enforcement resources– the jails and the
police squad cars– as a means of avoiding
the tax liability or granting myself the potential
to raise artificial reserve prices. How would your system
cope with that issue? GLEN WEYL: Great question. So first of all, I actually
find the game really fun, mostly because of
the novelty value when you play it with
the Georgist rules. But I agree that if
the game was always played by those
rules alone, perhaps it wouldn’t be quite
as entertaining. But I think my feeling is
that people will always find interesting
ways to be diverse and to differentiate themselves. And that inequality of
resources ties that up in a way that actually makes
it harder and more contentious than is necessary. So the reason I think that our
society is so beset by many of the ways that
we have conflicts over identity politics is– and many other
societies as well– is not fundamentally
because we can’t come to terms with difference. It’s fundamentally because we’ve
tied difference to capital, and we’ve tied stories
about history and disputes about history to capital. Because the system
of private property is so tied up with history
and it puts such a weight on history that if we took
a step back from that, we could have actually more
opportunity to have difference if we took away the strong
ties between difference and entitlements to capital. I actually think
this is even more stark in countries that are
even more sharply divided than we are. If you think about
Israel and how much tying there is between
the story that we tell about the
history of that land and the ownership of wealth– if you can pull
those things apart, I think we could have many
more interesting conversations about the differences and
the differences in people’s historical narratives
if we didn’t have to dismiss each other’s
historical narratives in order to maintain our
control over capital. So I actually find that
an enticing opening to new forms of difference and
to conversations about ways in which we are
not the same, even if we are more equal in
our capital endowments. The second point is
about gaming the system. And look– I don’t think you
need to change any enforcement institutions relative
to the present, except letting some of them go,
in order to implement the world that I’m describing. You just need to change
the definition of stealing. What it would mean to
steal in this world is to fail to evacuate a
asset that you no longer are the possessor of. We have lots of institutions
that enforce things like that at present. We have institutions
that enforce that, if you get evicted
from your property, that you have to leave it, that,
if you get foreclosed upon, you have to leave your property. Now, yes, in this
system, there would be more reliance on enforcing
that against currently wealthy people and less
reliance in enforcing that against currently poor people. And there might be some
political economy problems around that. But hand-in-hand with
the greater distribution of the rents from capital
to a broader population would go a change in the
political economy around that. And how we bring that about– ultimately, I haven’t given
up faith in democracy. I believe that there are
ways, short of revolution, to change simultaneously the
rents and the enforcement of capital. But the new equilibrium
would be very consistent, because rents would be
reallocated in the same way that entitlements to exclude
would be reallocated. So internally, it
would be consistent. The transition is
more challenging, but I think it can occur
through public mobilization. It can occur through some of
these other proposals, which are already in law, that would
start to equalize capital endowments, and therefore, make
the political economy easier to deal with, et cetera. Yeah, go ahead. AUDIENCE: What
potential do you see for quadratic voting with
relation to campaign finance? As I see it, even with the
current status quo of Citizens United, it could offer a
potential greater improvement for people, because it’ll
just be more transparent in the system, instead of– GLEN WEYL: Yeah. Yeah, absolutely. Absolutely. So let me describe
how it would work. And I think there are
some constitutional issues with this, though. At least under the current
Citizens United ruling, I don’t think it would fly. That’s Eric’s conclusion. So imagine that we had
the following system– so what are the main goals of
campaign finance regulation? There are usually two, which
are viewed as separate, but under quadratic
voting would be the same. One is public finance. The second is limitations
on the contributions of the very wealthy. Imagine that we a more
continuous system for both of these, where if
you contributed money to a candidate, the amount that
the candidate would receive would be the square
root of the money that you contributed multiplied
by some constant that clears the market. So there would be taxes
on the contributions that are very large and subsidies
on the contributions that are very small. So effectively, it would
be like public finance based on poll figures, which
is how it’s done in Europe– sort of– continuously
combined with taxes on the contributions
of the very wealthy. And you can show that, if
you set that constant right by putting it in an
appropriate public subsidy, you can achieve optimal
public goods provision. So I think that’s a very
appealing mechanism, not just for campaign finance,
but for more general funding of the media in an age
where it’s increasingly hard for journalists to
get access to the resources that they need, in order
to provide the public goods that they offer. AUDIENCE: I have just
a small point on that. So if you happen to have
the quadratic voting, it might also
encourage the wealthy to use the resources to
try to convince people to use their quadratic voting. GLEN WEYL: Absolutely. AUDIENCE: So it might
encourage [INAUDIBLE] not just the funneling of the
wealthy [INAUDIBLE],, paying $20 to get the votes,
but more officially, it might encourage
the fellow citizens by changing their minds. GLEN WEYL: Yeah. Absolutely. So I think one real– AUDIENCE: It’s the
increase in speech. GLEN WEYL: So I think one real
problem with our current system is, because there’s so much
focus on getting those just indifferent people
over the hump, that creates a very particular
sort of sound-bite culture, whereas if you care about those
people who are deep in one camp, but exactly
how much they feel– then you would have a much
more rounded public discourse. AUDIENCE: I was
[INAUDIBLE] a deeper one. GLEN WEYL: Yeah, a deeper one. A deeper one. Yeah. Absolutely. Yeah, go ahead. AUDIENCE: Thanks so
much for the talk. This is really
really stimulating. So I have a question that
builds on something professor D’Amico raised in his
question, which is about– so I will take your word
on the technical side of this presentation. But my question is
about the– what’s the justificatory structure of
the argument supposed to be, fundamentally? So one objection I see is
that your proposal, perhaps, embodies a particular
kind of attitude toward either physical
space, or land, or resources. And many citizens in
liberal democracies might reasonably
reject that view. So think about a
religious group that has a particular
attachment to this place, because they believe
that some important event in their religious
tradition happened here. As I understand,
under your scheme, they could maintain
that monopoly by setting an extraordinarily– a monopoly price. They might object that
that’s an unreasonable burden on their form of
religious expression. So the question is, how do you
justify this regime of property rights to people like that,
or for that matter, people who have more communitarian
outlooks, people who identify strongly as members of– people who strongly identify
with either some kind of spatial or
collective identity? GLEN WEYL: So I think I have
to take all three of those separately, because the
project is genuinely quite morally pluralistic,
and so I think you have to take each
question on its own terms. So regarding the first, I
think that the answers depend, even there, a little bit upon
context, because if you’re talking about the context
of, say, the United States, and, say, the Branch
Davidians or some group which maybe is
attached to a place, but it’s a place that
is really not contested, or there’s not interest in
contesting it among others, I think you would simply
say, on pragmatic grounds, that’s simply not going
to pose much of a concern for you, because
at a very low cost, you can preserve exclusive
control over that resource. However, if you think
about a place like Israel, where things are
fiercely contested by multiple groups that
have claims like that, I think that the answer is
actually quite powerful, which is, it is simply
impossible for the state to simultaneously
fully represent all of those interests. And in a politically liberal
society of any sort at all, we are going to have
to find some way for it to adjudicate
those disputes that takes into account both the
sense of equality across groups and a sense of the importance
to those groups of that in a relatively neutral way. And I think that, actually,
as coarse as it may sound, the price mechanism is quite
a powerful way of potentially doing that, because rather
than allowing groups to use their historical
claim to an asset as a justificatory basis for a
monopoly right over that asset, instead asking
them to pay for it and to compensate
others for that access, I actually think, to me, that’s
a compelling, liberal way to try to adjudicate
those disputes. Now, that doesn’t mean each
group will view that as fully legitimate, but
we can’t simultaneously acknowledge the full
narrative of all those groups in a liberal society. It’s just not possible. So I think, as a
means of adjudicating, to the best of our ability
within a liberal society, those claims, I actually think
the price mechanism is quite a compelling way to do that. In terms of
communitarianism, I actually think that we didn’t have
as much time to go into it. But I think quadratic
voting is actually quite compelling
for a communitarian, because quadratic
voting fundamentally rejects the Dworkinian,
in Rawlsian perspective that private goods are
the domain of the market. It says, no, we can be as
committed, and serious, and focused on collective goods
as we are on private goods. And we can put just
as much emphasis behind the veil of ignorance
in the regional position auction on access
to collective goods as we do to private goods. So I actually think it
goes a significant way towards bridging the gap
between a communitarian and a liberal perspective
along that dimension. And you had a third question– a third group. AUDIENCE: That’s fine. GLEN WEYL: Yeah. OK. Yeah. AUDIENCE: So I had a question
about information and privacy. And so I think, in a
complete information world, everything seems
to work very well. It’s a very intriguing idea. But I was coming back to your
example from the very start, thinking about this gold
mine that somebody discovers. And they’ve got some
gold in the mine, and I’ve got this acre of land
in the middle of, I don’t know, California. And it seems like– so I discovered that
there’s gold there. And it seems that I have
a strong incentive not to raise my price
of how much I’m willing to pay for this land,
because then everyone suddenly realizes there
must be gold there. And there’s still
asymmetric information, so– I’m thinking about a
very simple model here– but in some sense, it seems
like I have to pool on the– I still value this
land at zero, but now everyone realizes that, in
some sense, some of this land occasionally does– one of these land parcels does,
probably, have gold on it, so we get this inefficient
transaction, where everybody’s buying all of these
parcels of land, just to find out information
about whether there is gold under this guy’s parcel
of land, to find out his asymmetric information. So I was thinking about this
in the case of just the houses as well. You have this
incentive to invest in ways that is hidden
from view, and again, within your company, to try and
keep your informational rent, in some sense, hidden. And I was just thinking
about this creating large additional inefficiencies
of allocations of investments, and I wondered what you thought. GLEN WEYL: Yeah. So that’s a great point. So what you’re
describing is what I would call investments in
common values information acquisition. And there’s actually
a sense in which those are equivalent to
common values investments in proving the value. In fact, you can view their– you can think of there as
being a more general thing than either information
acquisition or investment, where you’re doing
some combination of– you’re affecting an information
process that is not necessarily a Martingale. And that is always going
to be distorted by the tax that I’m describing. So both common
values investments, common values
information investments– anything that is affecting
some common value thing that’s exposed to you is going
to be distorted away from the first best by this tax– and by any tax on
capital, by the way. All taxes on capital
have that property. So for example, imperfect
intellectual property rights encourage people to
hold trade secrets. It’s exactly the same logic. So I 100% agree that there are
going to be losses to welfare by what you’re describing. However, those losses
are second-order, starting at this tax
rate being equal to zero, and they get more and more
severe as you go onward. And there’s something
that has to be quantified, along with the investment
losses that come from this tax, and traded off against the
allocative efficiency gains. So absolutely, they should
tend to moderate the taxes. Depending on how
large those are, you might want to set the
taxes at, I don’t know, half the allocatively
efficient rates– which are the turnover rates– or
3/4, or somewhere in between. Of course, you need to trade
that off against the fact that you don’t want
the system to be too cumbersome and complicated
and fine-tune it, and so forth. So I think that’s an
extremely valid point. It’s not ever a case
for a zero-tax rate. It’s a case for moderating
the tax rate somewhat, but it is an important
thing to be measured. Yeah, go ahead. AUDIENCE: Yeah. Very interesting talk. I’m worrying about bullying– GLEN WEYL: Bullying? Yeah. AUDIENCE: –in
the private sense, but also bullying in
an economic sense, and maybe also bullying
against minorities writ large. So if I’m a little bit
richer than you are or you’re a little bit richer
than I, I can create lots of problems for
you in your world, right? So let’s assume you’re a cop– GLEN WEYL: So no, I
disagree with that, but I’ll explain why. AUDIENCE: OK. Great. So– GLEN WEYL: I understand the
idea of why you think so, but you can go ahead
and explain it. Yeah. AUDIENCE: So then, I can
be rather quick, right? So let’s assume that
you have a nice car, and you really like the car,
because it’s your grandfather’s car, or whatever. And for some reason,
I don’t like you, so I threaten to
buy your car, so you will increase the
price for which you would be willing to sell the
car, which effectively would increase your tax rate, right? GLEN WEYL: Yeah. AUDIENCE: Same goes for
the economic example. So if I’m a big company,
and you’re an entrepreneur, I might try to increase
your taxes, basically, by threatening to
buy your assets. Same goes– just
the third point– so third point was all
kinds of minorities, religious minorities. GLEN WEYL: I
understand the point. Let me try to explain why
I don’t think that’s true. So if you are setting your
price at your willingness to accept for that asset,
which you should always set it there or above that, then
that bullying is about as effective as Donald Trump coming
along to someone that he wants to bully and saying, I’m
going to really bully you. Let me offer you 10
times what you’re willing to accept
for your house. That’s not a very effective
way to bully someone. And you’d actually
be pretty happy if someone decided to bully
you in that way, right? Now, if someone is setting
their price dramatically below their willingness
to accept for an asset and hoping that no
one discovers it, I’m perfectly happy
for that person to be bullied, because
they’re basically trying to undermine the
operation of the whole system. The only people who are
exposing themselves to bullying are people who are deliberately
violating social norms. And by the way,
people like that are exposed to bullying at present. If you are doing all
sorts of illegal things– if you’re doing corrupt,
fraudulent things– of course someone can
blackmail you, right? So the only people
who, in this system, would be exposed to bullying
are people who were deliberately not playing by the rules. Everybody else would actually
benefit from that sort of, quote, “predatory,”
unquote, behavior, because they’d actually be
happy for someone to take the asset from them for more
than they’re willing to accept. AUDIENCE: I’m not
agreeing to that. I can see some of your points. So for instance, if
we are interested in, from a moral point
of view about having some diversity in the city
or [INAUDIBLE] area, right? And then people think about
white supremacists coming, and they try to bully
out black families, certain religious minorities
to create some homogeneity. GLEN WEYL: Well, look,
this is a market system. And to the extent
that people are willing to pay for
discriminatory preferences and pay a premium
for them, this system is not going to prevent
that from happening. If you want to have regulations
to stop that from happening, you’d have to do other things. But I think that– AUDIENCE: You promised that
this system enables that kind of discriminatory moves. GLEN WEYL: Like
any market system does, because, if people
are willing to pay– but I think, on average,
it has to undermine those, unless you think that, on
average, white supremacists are poorer than the people that
they’re bullying, because this, on average, redistributes
wealth dramatically from the wealthy to the poor. And so it gives people all
sorts of new opportunities to do that. So if, on average,
you think the people who are victims of
bullying are wealthy people and that the bullies
are poor people, then you might be worried that
this system would, on average, go in that direction. AUDIENCE: I think I may
have a last question. GLEN WEYL: OK. Sounds good. AUDIENCE: So I’ll
ask in a general way. You know I love the project,
not only because it’s hard to track ideologically– I love it for that reason– but I love it in
the content too. But I just want to invite you
to say a little bit more about incentives– how you understand
the incentives to work– the nature of the incentives
to work– and to labor, to be an entrepreneur– all
the different kinds of work in this society
you’re describing. So you say that hyper-populists
can inhibit trading. I get that. And you’re motivated
by this idea to try to make assets liquidly
available for new uses, including entrepreneurial
uses, and so on. I want to invite you to
say a little bit more about how you see people
being motivated to work. So under state socialism, which
your system is obviously not, I would say, infamously, they
invoke the idea of the new man. They create a new
person who going to be motivated to work
altruistically or selflessly, and so on. Your system has some
of those components. It’s going to have a
transformation in the way we think about poverty, the way
we relate to physical things in the world, and
therefore, I think, a transformation in the way
we relate to one another. But it also has some
other elements involved. Could you just say something,
if you’d like to, just more generally about– what are the incentives to work? Is there a new man? It’s not a new socialist man. What kind of a
person or man is it? GLEN WEYL: So there may be
a new man under our system, but it certainly doesn’t
rely on or even hope for that sort of
a transformation. It relies very much on
self-interest as the engine, though it hopes that,
gradually, self-interest comes to be aligned with
some more diffuse interests as well within the system. So in terms of
capital accumulation, or what you might
call entrepreneurship, the incentive for
that is clearly diminished in this system. There’s a reduction in
investment incentives. But it is not anywhere
near eliminated. It’s reduced to one third
of what it currently is, but that’s far from elimination. And the new capacities
and opportunities that people are able to
draw upon, we believe, would more than
fully offset that, in terms of the average
level of entrepreneurship that becomes feasible. In terms of true labor income,
not capital accumulation, we believe our system would
be a dramatic increase in the incentive to labor,
for several reasons. First of all, by eliminating
the monopsony tax on labor or significantly reducing
the monopsony tax on labor, I think you would eliminate by
far the largest tax on labor– much larger than the other
taxes that we impose on labor in our society at present. Second, by providing a new base
for income to be generated, you would be able to
directly significantly reduce taxes on labor. Third, by compensating
people for the data that they create,
rather than, basically, having a 100% tax on
that form of labor, you would be spurring one of the
most important forms of labor in our emerging world. And finally, by offering
people who currently have no chance to labor at
reasonable rates– people who are living
in poor countries– the opportunity to offer
their labor to its most valuable uses, you
would, right there, dramatically increase the base
of labor in society in general. So I think, overall,
this would be one of the most dramatic
reductions in the taxation of labor income– effective taxation
of labor income– that you could imagine. But it would somewhat
reduce the incentives for capital accumulation. AUDIENCE: [INAUDIBLE]. You didn’t– or
maybe it [INAUDIBLE].. I thought part of the
egalitarian background [INAUDIBLE] there are so
many– part of the [INAUDIBLE] unequal society [INAUDIBLE]. So there’s so much creative
potential [INAUDIBLE] unleashed into our
world, into our economy, and this system would unleash,
perhaps, that creativity. GLEN WEYL: Well,
I agree with that, but I think, very directly,
just in the most standard way, this would just
dramatically increase the incentive to labor. Yeah. Yeah. DAN D’AMICO: Glen, thanks again. GLEN WEYL: Yeah. Wonderful. DAN D’AMICO: We’re
about out of time. There are refreshments
in the lobby, and– GLEN WEYL: And I’m
happy to sign books if anyone wants to get one. DAN D’AMICO: And as a
not-so radial market, there are books
for sale as well.

Author Since: Mar 11, 2019

  1. This guy said every single adult in Belgium should be forced to house a migrant basically doubling the population of an already too densely populated country.
    If the Belgian fails to integrate the migrant because the migrant commits a crime, the Belgian will get fined.
    This means that a Belgian couple would be forced to house 2 migrants, if 1 of the migrants steals from you, you would be fined.
    If 1 of the migrants does something like rape your child or wife, the victims would be fined for it!
    This guy is a charlatan and should be discredited for everything he does coming up with such INSANE authoritarian murderous propositions.

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