Help me form the new 'Progressive Market' party.

Great Debates
1

This is going to be a long series of posts, capturing some thoughts I’ve been percolating about what a modern political party might look like - one that appeals to a wide spectrum of people, yet incorporates our ever-increasing understanding of economy and technology into the core of its philosophy. I’d like to start a debate about this and examine whether or not this would work.

It will appeal to Libertarians because it embraces the market at the fundamental mechanism through which the economy should operate.

It will appeal to progressives because it addresses numerous issues they care about, which are under-served today.

It appeals to conservatives because it necessarily eschews regulation as much as possible, calls for small government, and embraces individual decision-making.

I’ll start by layout some fundamental axioms that I believe are true, and which should be used as the guideposts for implementing rational policy. Then we’ll take those and talk about some actual, real-world policy platforms that could work, that could gain popular support, and which would make the world a better place.

First, the axioms:

  1. A ‘perfect’ market is the most efficient mechanism possible for allocating resources and for ensuring that all transactions are made in the most rational way possible. A perfect market is described as one in which all the information about the cost of a transaction is known, and all the people affected by the transaction are compensated for their costs. It also requires that there be plenty of alternative choices, and no shortage of supply or demand.

  2. Very few markets are ‘perfect’, and a legitimate role for the government is to recognize real market failures and address them. Special care must be taken, however, to distinguish a real market failure from a market that works but simply doesn’t provide what a special interest group wants.

  3. The most effective social policy will be that which recognizes the efficiency of markets and freedom, and seeks to leverage it as much as possible.

  4. Markets do not necessarily address national security concerns. Therefore, the government has a role in regulating markets for national security reasons. For example, by preventing the sale of certain technologies to unfriendly countries, or by ensuring that certain critical-to-defence industries stay within a country.

  5. Free trade is always preferable to regulated trade, subject to the conditions above.

  6. Technology must be embraced and leveraged. We recognize that societies evolve; that technology changes the way we relate to each other, and that it’s wrong to attempt to stifle it to maintain a nostalgic status quo.

  7. Liberty. This party recognizes the constitution of the U.S. as being a good social contract between a government and its citizens, and would advocate such freedoms in any country in which it forms.

  8. Secularism. This party is simply not interested in religion at all, and sees it as a purely private matter.
    Now, on to some specific policy platforms:

First, this party is not a radical, “we must eliminate government” Libertarian party. It’s clear that the public is not interested, and there’s no sense tilting at windmills. Instead, this party will recognize that society has been organized in a fashion that’s largely acceptable to the majority, and will seek changes only on the margins, and in areas where there are clear failures and room for major improvement.

The primary goals of this party will be to discover areas where government has intruded into the marketplace and made things worse, and to reverse them. However, it will also seek to discover areas where markets don’t function because of real market failures, and address those. It will look at government programs that don’t work, and seek market-based reforms without losing sight of the social goal that was aimed for in the first place.

That said, let’s break this down into some concrete areas and look at some policies such a party might advocate in these areas. Let’s have a separate subject heading for each of them. First, the environment. More later.

2

Environment

Let’s start by looking at an area of conflict today between conservatives and liberals - the environment, and see how this party can devise rational policies that satisfy both.

The split between us has to do with one major fact – there is a huge market failure here. The market failure is that everything we do that affects the environment creates externalities that affect other people, yet we don’t really have good ways to compensate those people and pass the costs on to the polluters. So we’ve ‘solved’ the problem with government regulation. This has had decidedly mixed results.

Since the main market failure here is lack of accounting for externalities, we’re going to try to fix that with government policy that seeks to bridge that gap, without destroying the functioning of the market.

For example, let’s take the issue of car pollution. Environmentalists want to limit things like SO2 emissions because of problems of smog and health concerns in the inner city. So they advocate regulations that seek to set maximum allowable exhaust emissions on car manufacturers. This is at best a blunt instrument, and at worst it’s completely wrong in this sense: What the real problem here is that the people who are damaged by vehicle exhaust are not compensated for it, and therefore the people who drive cars are essentially being subsidized.

If the true cost of driving a car could be known, and the people damaged by it could be identified and compensated, then people would only drive when there was an agreement between them and the people who pay the costs, and everyone would be happy. Of course, the people who are damaged are the only ones who really know how much money they would be willing to accept as compensation for their damages. So in the ideal world, car drivers would have to come to a negated agreement with everyone they affect, and once everyone was happy, we’d be okay.

Also note that vehicle emissions don’t affect everyone equally, or affect every region equally. SO2 is a much bigger problem in Los Angeles than it is in rural Illinois. In a real market situation, residents of Illinois would be willing to negotiate a much smaller fee for their damages than the people of Los Angeles would.

Another problem with current regulation is that it generally affects only newer cars (aside from some places that test older ones and force them to upgrade). Having higher standards on newer cars effectively subsidizes those who choose to drive older, dirtier vehicles.

So here’s a concrete policy suggestion for this problem: Rather than set emission standards on cars, we allow manufacturers to emit whatever they want. However, we measure all cars for pollutants – new cars as they come off the line, all other cars through a mandatory test every year. Vehicles are then issued a sticker that says how much pollution they emit. Then we encourage municipalities and states to implement emissions taxes and pollution credits. The two together must be revenue neutral by law so it doesn’t become a tax grab and further distort the market.

The pollution credits are tax credits issued to the residents of the taxed area (whether it be at the municipal, state, or federal level). The tax is levied on drivers by mileage and their pollution rating. The mileage can be read at the same time the pollutant level is, and a tax receipt issued at that time. (This doesn’t solve the problem of people who drive the vehicle outside of their taxed area, which we’ll get to later). The amount of subsidy/tax will have to be determined on a regional basis. An area of high pollution will have high subsidies and high taxes, so the signal of the cost of pollution will be stronger.

There. Now think what we have accomplished – in dirty cities, people get larger credits from the government to compensate them for the pollution. But the people who pollute pay higher taxes. Now the market has the ability to transmit the information between all parties and allow them to make rational choices.

If you live in LA and ride a bicycle or take mass transit, you’ll actually earn money from this system. If you insist on driving your ’74 Pinto, you’re going to pay a hefty pollution tax for the privilege. So people in the most polluted cities will gravitate towards cleaner vehicles, and the market signals around pollution will be particularly strong and drive behaviour.

Also, for those of you who advocate denser city living, consider that now inner-city apartments will essentially be subsidized because the people who live there don’t drive much, but have higher pollution costs. So living there gets you a cheque every month that you don’t get today.

This will encourage people to buy or build residences in the inner city. The suburbs will be punished currently, because the people who live there will no longer get the free subsidy of no-cost pollution. In the short term, the effect might be to push them into cleaner vehicles, which means the clean vehicles are going where they do the most good, and the dirtier ones remain in areas where it matters least. This is much more efficient than just mandating that all vehicles in the country can only emit X

On the other hand, people in Illinois may not make much in credits or pay much in taxes. So the cost of regulation to them is minimal, as is the effect on their decision-making. So we maximize efficiency everywhere.

And think of what it does for the manufacturer. Now, instead of having to figure out a way to make their ¾ ton trucks zero-emission (which may cost a lot of money), they can focus their R&D on cleaning up vehicles used in cities. Or, a company that has a vehicle that’s especially hard to clean up (Say, a Mazda RX-8 with a rotary engine, or a diesel engine) will be at a competitive disadvantage against companies that have cleaner technologies, and seek to regain it in other ways (or drop the dirtier engine technology).

In any event, now that the market is sending signals to everyone involved in the transaction, the market will adapt in the most efficient way. It will push people harder into mass transit in areas of high pollution, and leave people alone in areas without the problem. People who choose to drive older, dirtier cars will pay a premium for doing so, which will drive them to retire those cars sooner. On the other hand, you might see the market adapt such that new cars are driven in the city, and used vehicles tend to migrate out to the country where the tax disadvantage is lower.

The beauty of the market is that we don’t care or know what the solutions will be. All we know is that if the informational signal of cost and benefits is transmitted to everyone affected by the transaction of buying and driving cars, the market will adapt to the new reality.

For example, another adaptation that could happen is that poor people will be attracted to more polluted cities. They don’t drive cars, so they’d get a tax break for living in those areas and come out net beneficiaries. Of course, lots of poor people live in the inner city today, and they’re paying a pollution cost they aren’t compensated for. So a real-world effect of this would probably be a subsidy for the poor. Especially if they use mass transit instead of driving old beaters.

For environmental issues that have national or global scope (global warming, etc), there may be federal taxes and credits as well, and international agreements between countries that set up an international market in pollution credits that countries can trade.

For example, we could have a national greenhouse gas tax levied the same way we do with the SO2 emissions tax, and a national greenhouse tax credit. The tax credit goes to everyone equally, and the tax is taken from those who emit greenhouse gases. Tax credits could also be given to those who have property that absorbs greenhouse gases.

If every country agrees to this, we set up a market in greenhouse credits. Countries that begin emitting more have to buy more, and raise their greenhouse tax on their citizens to cover the cost. The price of the credits will be set by supply and demand. Countries that pollute relatively little will have excess credits, and countries who have more pollution will have to buy them. They will bid for those credits, and the price that comes out will represent the true cost of producing greenhouse gases, given a politically-set maximum tolerable global amount.

A country that emits more per capita than the world average pays a net tax, and a country that emits less than the world per-capita average gets a greenhouse credit. All monies must flow from and back to citizens in the form of taxes and credits. If the world decides that greenhouse gases must be further reduced, the simple solution becomes to auction off fewer credits in the next year. This drives up the price, which drives up the size of the tax and the credit in each country, which causes citizens to change their behaviour accordingly.

Now think about what happens here. Greenhouse emitters start paying a tax. They now have an incentive to cut back. People who have tree farms, on the other hand, get a greenhouse credit. Now, some greenhouse gases are very expensive to eliminate, and some are relatively cheap. Now that those who emit them are paying a cost, they’ll eliminate the greenhouse gases that are cost-effective to do so. We don’t care how. Hell, if they want to make a tree farm to compensate for their emissions, that’s fine. Or perhaps they’ll invest in carbon sequestering. Or maybe some products or energy sources will become cost-prohibitive and be eliminated from the market. But now we have market signals that reward good behaviour and bad, and then we step out of the way and let society adjust itself and let the market work to solve the problem in the most efficient way.

If we decide to auction off fewer credits on a global basis, this basically makes all the signals stronger. It rewards low polluters even more, and punishers high polluters more. That’s all we need to do. The market will take care of the actual solutions.
Other areas of discussion if this isn’t boring people to death:

Education
Urban Planning
Welfare
Trade
Defence
Science and Technology

3

Might as well add Healthcare, and also tell us your party’s position on abortion. That’s a make or break issue for a lot of people.

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Sure. Abortion’s easy - we have no position. It’s a social matter, and the party should have an agnostic position towards it, which means maintaining the status quo, or perhaps allowing the states to make individual decisions. Individual politicians might have a pro or anti abortion stance, and would have to be elected by their constituents based on it. The party ‘machine’ would not influence these decisions in any way. In other words, a big tent.

5

How exactly does this differ from the ideology and policies of the existing Libertarian Party?

6

One thing I left out of the environment example: How would the level of tax and subsidy be set?

One answer would be an auction. This has already been tried, to great success. This brings up one of the things the market is especially good at - uncovering hidden information about the true cost of things.

If you asked someone today what they think the cost of environmental damage is to them, youre likely to get a wildly inflated number. On the other hand, if you ask a business how much it would cost to eliminate their pollution, you’ll also get a wildly inflated number. But are these numbers real? Both sides may think their own number is right, but until they are forced to examine it in light of tradeoffs they have to make, they themselves may not even know.

For example, there was a project that was set up to test this. When regulators asked companies how much it would cost to lower their emissions, they got some very big numbers. But then a program was set up to auction off emissions credits - and it turned out that those companies were only willing to pay a fraction of the amount for those credits that they original said the emissions reductions would cost them. In other words, they wildly inflated the cost of reducing emissions. It wasn’t until it became ‘put up or shut up’ time that they really knuckled down, talked to their engineers, examined alternatives, and came up with an amount they were willing to pay to void lowering emissions. And whne they did, it turned out to be a lot lower. Hidden information was uncovered.

Likewise, someone may say it costs X amount in damages to them, but until someone actually makes the offer to pay them X to allow them to pollute near them, we have no way of knowing if that’s the real number they’d accept. In other words, someone might say, “It costs me $1000 a year in health damages for that coal plant 20 miles from here!”. But if the coal plant says, “Fine. We’ll move away - or we’ll pay you $500 for the privilege of staying”, will the damaged party accept the $500? if so, then the real cost wasn’t $1000 at all.

There’s another role the government can play here to make the transaction fair - uncovering aysmmetrical information. In other words, the company knows how much pollution they create, but the other party may not. That gives the company a transactional advantage. So our party would advocate govenrment policy which demands full disclosure of such information, backed by government audit when nevcesary.

Anyway, the answer to the question of how we set the tax and subsidy rates is by auction. We take a region, and calculate how much pollution is generated. We create pollution credits for each citizen equal to one share of that pollution. Then we demand tht polluters buy enough credits on the ‘pollution exchange’ to match how much they personally emit. People will sell their credits when someone bids a price high enough to entice them to do so. Eventually, the price will stabilize at the ‘real’ cost of pollution.

We can set up intermediaries to avoid citizens having to deal with the nuts and bolts of the auction, but this is the general concept.

7

On the environmental issue - I take it there would be no restrictions on pollution that doesn’t cause immediate economic damage? For example, you’d allow unrestricted exploitation of the Alaskan oil reserves, because it wouldn’t affect any inhabited areas?

More generally, your manifesto will have to address the controversial social issues - abortion (as already mentioned), gay marriage, civil rights and affirmative action, parental rights and responsibilites, control of drugs (including alcohol and tobacco), separation of church and state (school prayer, “In God We Trust”, evolution/creation), etc. Economic policies are an essential component of a manifesto, but many voters regard other issues as more important.

8

to be quite honest, some of these ideas don’t sound too bad, but i’m a mish-mash of political ideas to begin with. i think part of the wording might want to be refined…the “choosing to drive the '72 pinto”. some don’t have a choice in what car they drive. the ones that do will have wiggle room. mass transit, or at least a city that has a system, will be rewarded. what about a city like detroit? it’s been said that detroit has no mass transit because the auto companies won’t let it exist. i’d assume that because of how everything is laid out, the car companies would push for mass transit?

yeah, that’s a touch of the tongue-in-cheek humor.

email me. it sounds interesting, and i’d like a more direct line with you to banter on about this. i have interest in such things, you know.

9

additionally, it seems that big issues today are social issues. this is not to say the environment is not important. i think it’s very important, but it’d be hard to get someone coming over to your new shores based on the environment. i suspect this is because this is the first part you’ve sat down and ruminated about (outside of the agnosticism on abortion, that is)
a problem with the “every state decides if aboriton is right or wrong” issue is that if it ends up that way, you’ll have abortion states by non-abortion states. you’d be creating an interstate market for abortion for border cities, at least. federal regulations would STILL govern it and have dominion.

what’s so wrong with “abortion is legal, but i don’t condone it. do what you want with your body as long as you don’t harm another”?

…of course, anti-abortionites might say that “another” is an unborn child…then you fall into a debate about what is or isn’t “another”. we stay where we are, for the most part.

the problem with abortion is that both sides are unwilling to compromise. the pro lifers, for the most part, say that life begins at conception and that killing a “child” from that second on is murder. that’s good for you, if that’s what you believe. then don’t get an abortion and you won’t have to worry about it, correct?
yet, it’s this “i don’t believe in it, so you shouldn’t be allowed to do it” that makes this tough. of course, murder fits this, so the debate keeps on a-raging.

10

It differs tremendously. Libertarians basically have a zero tolerance for government. I’m saying government has a role in many areas, but it should try to achieve its goals using market mechanisms which have been proven to work. Take the environmental issues above - the government is strongly involved here, in mandating car inspections, setting up emissions markets, issuing credits and levying taxes, and in determining the amount of desirable pollution in the first place.

For instance, an environmentalist could still lobby the government to improve the environment. But the mechanism the government would use would be to determine how many pollution credits are allowed to be in the marketplace. If you decide SO2 emissions must be cut nationwide by 10%, you simply cut the number of credits by 10%. That will cause the price fo the credits to float upwards.

The thing about this is that the costs of such a move will be immediately obvious. The initial cuts might not move the price much, because of the relative ease with which we can improve emissions or cut consumption. But at smoe point, small cuts in emissions credits will start to cause dramatic swings in the price of credits in the market. Once the low-hanging fruit is eliminated, it will become more and more expensive to reduce emissions, and companies would rather buy credits at a higher price than cut emissions. This pushes the price high, and gives us important information about the real cost of pollution reduction.

THen we as a society can make better-informed political choices, because we’ll know exactly how much we’re paying to reduce pollution. Maybe it will be a lot cheaper than we think, and folks like Jshore, who think that industry has successfully scared us into thinking pollution reduction is much harder than it really is will be correct. Or perhaps we’ll find that that economic cost is a lot higher than we believed. But etiher way, we’ll be able to make smarter choices, becaue we’ll have better information.

But the government is still ultimately responsible for setting the aggregate limits.

11

This is true. And my personal preference would be to have very moderate social policy - about where the mainstream of the Democratic party is. Personally, I’m a Libertarian on these matters. I’d prefer to see drugs legalized, and government kept completely out of the affairs of consenting adults. But I realize this isn’t a ‘winning’ position, so I’d probably advocate policies similar to what Bill Clinton did - straddle the line between both sides. Find compromises. Try to put a working coalition together that could govern from the middle.

That’s the whole point of this party - it isn’t ‘liberal’ or ‘conservative’. It’s more pragmatic. It says that if you want to change X, at least be smart about it and do it in ways that have been shown to work much better than the blunt hammer of government regulation of the minutae of the marketplace. Government doesn’t need to tell factories which brand of scrubber they must install, or tell auto workers how much mileage their cars must get and how much crap their engines spew. The govenrment just has to make sure that the market functions properly in areas where it doesn’t, and these problems will be solved, or at least we’ll know that they are too expensive to easily solve.

12

The thing is, special interests like big corporations have a vested interest in making sure the market doesn’t work. A used car salesman doesn’t want you know know everything about his used car. Ford has a vested interest in seeing to it that the roads are subsidized, because they sell more cars that way.

So this party would by no means be a ‘big business’ party. In fact, most of the big market failures we see today benefit big business. But regulations also hurts big business. By making regulatory power more efficient by using markets, we’ll help them. But by taking away the market failures that benefit them, we’ll hurt them. Where it comes out in the wash, I have no idea. But whatever it is, it will be a reflection of reality, and not the power of a Washington lobbyist.

Not that I’m trying to avoid E-mail, but I’d rather expend my effort in a public forum rather than get sidetracked in private. Let’s try to keep the conversation going here first.

13

I don’t have anything to add to “Environment,” but I’m interested in watching this as the other stuff comes up. I might join this party.

14

There is an existing problem when it comes to things like damage to public lands, and of course it’s still difficult to determine who all the damaged parties are. Therefore, we would still resolve some issues like this the way we do now - by people electing governments who promise to protect them, or through international agreements (for instance, acid rain falling on neighboring countries). I’m not talking about a panacea that will cure everything, or even a radical restructuring of the way we do things. Again, change would be on the margins, limited to areas in which the current system is most broken or most in need of improvement.

Some of these innovations have already been started. There are been pollution credits and auctions, and my understanding is that these programs have worked very well. School vouchers are an attempt to do the same kind of reform in education. So this is nothing new. It’s more a matter of emphasis. This is a mainstream party like the Republicans and Democrats - just one that’s more dedicated to ensuring that the market functions correctly, and that when change is mandated, we should first determine if the market in that area is fundamentally flawed and seek to fix it before instituting more heavy-handed regulation.

15

What’s your party’s take on the Iraq War? Did it support the war when it was first started, and what does it recommend we do now?

16

I’m sorry, Sam, especially after all the work you’ve put into this, but that’s just utter hogwash. So was your identification of libertarianism with marketeerism. I really like and respect you, so I won’t brow beat you over this, but I feel like I must comment on both these items. Libertarians are not anti-government. If we were, we would be anarchists instead of libertarians. We advocate a very strong government that should have at its disposal everything necessary to suppress initial force and deception among its citizenry. We also advocate volunteerism in markets. They need not be capitalist. The market can be communist so long as all are volunteers. Libertarianism and volunteerism are synonyms.

17

"The Party’ doesn’t have a take on it. Let’s assume it’s a mainstream party, with some members for the war, and some against it.

The main recommendation I’d make in terms of the ‘principles’ of the party is to be extra vigilant in understand all of the costs and benefits. But by necessity, areas of military force are outside the scope of the market, so the fundamental economic principles of the party are irrelevant.

Let’s just assume for argument that in areas outside of economic/regulatory policy, the party is centrist. Social issues, defense, etc. Otherwise we could sidetrack this discussion all day with issues like this.

18

expand upon the concept of “vouchers”.

educational vouchers exist, to an extent. give an explanation of exactly what vouchers are as they are, and how they’d be the same/different under your system. i’m not as versed in that as i’d like to be.

19

I’m going to start a thread for each of the major areas of discussion, or else this will get too confusing.

Let’s call this the ‘environment’ thread, and discuss how this new party might address environmental concerns.

In particular, I’d be interested in hearing from people who consider themselves environmentalists, to see if they are at all receptive to this approach of managing the environment.

20

I understand. Sounds a great deal more practical than some of the more Utopian political schemes proposed here. :wink:

Incidentally, your proposal of varying car tax based on the amount of pollution a car produces has actually been adopted by the UK government, if that gives you any encouragement.