Peter L. Berger's Blog, page 206

Gloomy and Cheerful Evangelicals

Anyone seeking to compare religion in the United States and Western Europe begins with the alleged contrast between the most religious democratic country and the more secular countries on the other side of the Atlantic. Of course things turn out to be more complicated the closer one looks—America is less religious than it first seems, Europe less secular. Yet, roughly speaking, the contrast holds up. Perhaps the easiest way to get at this is to observe that America has something that Europe significantly has not—a wide swath of territory known as the Bible Belt, with a socially and politically important subculture, the Evangelical community. That community includes over 26 percent of the American population, ahead of mainline Protestants and Roman Catholics—and significantly more than 80 percent of this community voted for Donald Trump. Of course, in a population that large, there are different groupings that cut across what the entire subculture has in common—an openness to the supernatural, a belief in the necessity of having an intense religious experience (being born again) in order to be a Christian, a strong belief in the authority of the Bible, a strong moral code (much of it preoccupied with sexuality). It is useful to understand that from its beginnings in the First Great Awakening (1730s and 1740s) Evangelicalism had a gloomy and a cheerful version. The gloom comes, I think, from the deeply pessimistic Calvinism of early New England Puritanism, its best-known text the terrible sermon “Sinners in the Hands of an Angry God” preached by the famed theologian Jonathan Edwards in Northampton in 1741, presumably (literally) scaring his audience to hell with the message that most of humanity is predestined for eternal damnation. But a more optimistic note crept into his preaching despite its ultra-pessimistic assumptions: After all, the Great Awakening was an appeal to sinners to be saved from hell by an act of faith! Other famous preachers of the early period maintained a better balance between a gloomy theology of pervasive sinfulness and the promise of salvation to all who answer the call from the altar—especially preachers coming from Methodist and Baptist churches. This continued all the way to Billy Graham in the 20th century, whose basically gloomy theology did not keep him from playing amicable golf with Richard Nixon.

The Evangelicals have imposed a ritual on American life that goes far beyond its properly religious enactment—a ritual of (possibly stern) moral judgment, repentance, forgiveness, and reinstatement in the company of the saints. That ritual dominates the American moral imagination and is reiterated many times in matrimonial affairs, politics, business, and even in the practice of criminal justice. America has long been the land of second chances. It appears even in the gloomier versions of Evangelicalism, where the old Calvinism still lingers on, and is periodically revived in the broad smile of Methodist reconciliation. Where the latter prevails, the promise of atonement is the center of the message. But one should not be surprised that the Evangelical subculture resonates with political calls for law and order, harsh legislation, and even favorable attitudes toward the death penalty. Also, it is understandable why Evangelicals are friendly to the military—I don’t think Trump lost much Evangelical support by dropping the “mother of all bombs” on Islamists in Afghanistan.

One particularly interesting development is that the military chaplaincy, in its Protestant group, is increasingly filled with Evangelicals, who feel more at home in the military than among largely liberal mainline clergy, whose concerns over gender and multiculturalism Evangelicals don’t resonate with. Some years ago I presided over a seminar dealing with whatever issues members of the seminar were concerned about. One of the seminar students was an Evangelical Air Force chaplain. This was the issue she wanted to think through: She served on a small base in the Arctic where she was the only Protestant chaplain. Of course she was not expected to perform religious services that did not agree with her own beliefs. But she was expected to facilitate services for any group of Air Force personnel. A group of Air Force women wanted to perform the rituals of Wicca, which defines itself as a modernized version of the old witches’ Sabbath. How, she asked, could she help organize a worship service of the devil without betraying the core of her Christian faith? I tried to convince her that the devil part was not to be taken seriously, that Wicca was a rather harmless form of nature worship—dancing naked in the moonlight and showing respect for menstrual blood. She said that the way I spoke about this showed I did not take the religious beliefs of this group seriously. I’m afraid she was quite right. In the end she had no choice unless she wanted to resign from the chaplaincy—so the would-be witches did their thing as facilitated by a nonsectarian Evangelical minister. (Religious freedom bears strange fruit, including the struggle of conscience of an Evangelical pastor ordered to go against her conscience by her commanding officer.)

Around April 2017 my restless meandering in both religious and mainstream media led me to a rich trove of Evangelical news items from Alabama. I rather doubt whether Evangelical residents of that state are more prone to produce scandalous news than their coreligionists in neighboring states. Probably just a coincidence, unless the anonymous hero of country music “who came from Alabama with a banjo on his knee” seeks occasional incarnations in the flesh. We may as well begin at the top, in the Governor’s mansion. After a painful and very visible process of public disclosures, Robert Bentley, a medical doctor described as “grandfatherly,” was a popular Governor with particular ties to the Evangelical community. He was forced to resign because of an “inappropriate relationship” with a state official serving under him. There were also other “improprieties” associated with the libidinous scandal. Bentley was accused of having used state funds to subsidize his affair while it lasted and of having asked others to help terminate it when the lady in question clung on. Perhaps H.L. Mencken was right when he observed in a similar case that breaking the central sexual taboo is so wrenching that afterward anything is possible. There were some other financial scandals in Alabama at the time, apparently unrelated to the favorite Evangelical sin, the one that occurs south of the navel.

Another interesting episode, which attracted the attention of even the New York Times, was the passage of an Alabama law authorizing the large Briarwood Presbyterian Church near Birmingham to set up its own police force, with all the rights of, say, the police force of a college. The American Civil Liberties Union promptly challenged this project for violating the constitutional separation of church and state. (Imagine that: “I arrest you for inappropriate behavior on land belonging to Briarwood Presbyterian Church. You are sentenced to four weeks of Sunday morning attendance at Briarwood Church.” Apparently some delinquents chose the option of five weeks in the county jail.)

Then there is one news item that accords with the darkest versions of the Evangelical spirit. The state of Alabama had suspended carrying out death sentences for some months, because it had run out of a medication that was supposed to prevent severe pain while a death sentence is being carried out. Death row was filling up with people lining up to be executed (a practice which, I suspect, continues to be approved of by Alabama Evangelicals committed to law and order). Then the supply of the medication was replenished or a substitute was found. The state wanted to empty out death row as speedily as possible and scheduled a lot of executions within a short time span. Some courts, at the behest of defense lawyers, declared that this project falls under the constitutional prohibition of “cruel and unusual punishment” (I don’t know where this matter stands now). No thanks to advocates of the death penalty, the practice in most states has become increasingly “unusual”—prosecutors and juries increasingly favor lesser penalties. It has not yet penetrated the minds of law-and-order ideologues that it is impossible to kill people without “cruelty” (it has been tried repeatedly, ever since the guillotine was invented to express the kindness of the French Republic—perhaps rightly so compared to being tortured to death under the jurisprudence of the ancien régime).

But perhaps I should end on a lighter note (Methodist rather than Puritan). I distrust the use of survey methods in the study of religion (with the exception of the religious demography of Todd Johnson and Brian Grim and of the Pew Research Center, who practice this methodology very cautiously and with a keen sense of its limits). But too much depends on the way questions are formulated. (I’d always have a hard time choosing between “none—no religious affiliation,” “relatively conservative Lutheran,” and “agnostic.” In the words of the great Islamic philosopher Ibn al-Arabi, “deliver me, oh Allah, from the sea of names.”) But once in a while one comes upon survey data that are unexpected and suggest interesting interpretations. A few years ago there was a survey that showed Evangelical wives saying they were “very satisfied” with sex in their marriage, compared with less-exuberant grades given by non-Evangelical women. How could this be? Secrets of the harem practiced under cover (literally) of Puritan rectitude? Then I ran into a young man, a confessing born-again Christian—perpetually depressed, uneasy around women, socially awkward. Then, one day, he introduced an attractive young woman—bouncy, jolly, constantly all over him—as “since last week his fiancée.” The man was transformed—obviously happy, gregarious, full of jokes. Then it hit me: What must it be like, after years of sexual repression, to enjoy a more than customarily broad understanding of what it means to “be engaged to be married”—probably a minority position among Evangelicals, but not too unusual. From “nothing permitted” to, suddenly, “everything permitted.” No wonder that here was a very happy couple! Super-Christmas!

North Korea Hoarding Gas

A curious thing has been happening in North Korea, with the state apparently restricting gas sales soon after China threatened to restrict fuel exports. AP:

Car users in Pyongyang are scrambling to fill up their tanks as gas stations begin limiting services or even closing amid concerns of a spreading shortage.

A sign outside one station in the North Korean capital said Friday that sales were being restricted to diplomats or vehicles used by international organizations, while others were closed or turning away local residents. Lines at other stations were much longer than usual and prices appeared to be rising significantly.

The cause of the restrictions or how long they might last were not immediately known.

North Korea relies heavily on China for its fuel supply and Beijing has reportedly been tightening its enforcement of international sanctions aimed at getting Pyongyang to abandon its development of nuclear weapons and long-range missiles.

Beijing is officially staying mum about whether it has anything to do with the fuel rationing. But the North Korean move comes after a highly-discussed editorial in China’s Global Times said that Beijing could cut off oil exports if Pyongyang launches another nuclear test. That message got the attention of many—including President Trump—as a sign that China might try to tighten the screws on Pyongyang. As noted China watcher Bill Bishop notes, the current chaos at North Korea’s gas stations could either be the result of Chinese pressure, or pre-emptive hoarding in anticipation of a coming embargo.

So far, we have been skeptical that Beijing is serious about exerting meaningful economic pressure on Pyongyang, but the fuel rationing in North Korea is a story that bears watching. Perhaps Pyongyang finds Beijing’s threats credible after all.

The Sanctuary City Fights Aren’t Going Away

President Trump has suffered another defeat in court on immigration issues, as a federal judge in the Northern District of California issued a nationwide injunction stopping enforcement of the “sanctuary cities” executive order. The New York Times reports:

U.S. District Judge William Orrick issued the temporary ruling in a lawsuit against the executive order targeting so-called sanctuary cities. The decision will stay in place while the lawsuit works its way through court.

The Trump administration and two California governments that sued over the order disagreed about its scope during a recent court hearing.

San Francisco and Santa Clara County argued that it threatened billions of dollars in federal funding for each of them, making it difficult to plan their budgets.

“It’s not like it’s just some small amount of money,” John Keker, an attorney for Santa Clara County, told Orrick at the April 14 hearing.

Chad Readler, acting assistant attorney general, said the county and San Francisco were interpreting the executive order too broadly. The funding cutoff applies to three Justice Department and Homeland Security Department grants that require complying with a federal law that local governments not block officials from providing people’s immigration status, he said.

The order would affect less than $1 million in funding for Santa Clara County and possibly no money for San Francisco, Readler said.

The legal issues at play here are complicated, and we’ll leave it to other, more expert sites to explicate them. In short, it appears that the judge’s order found that the executive order did not square with Acting Assistant Attorney General Readler’s explanation—but then issued a court order that adopted Readler’s reading: the government cannot withhold anything more than the small amount of grant money it was already permitted to by law.

Politically, this ruling shows why this suit was fought, will continue to be fought, and why there will be other fights like it after: if you construe the order as affecting as all federal funds, the sanctuary cities have to fight this—there are billions at stake. If you construe it as just those narrowly tied to the specific law enforcement issues at question, there’s no reason not to fight it. There are only millions, perhaps less, at stake for even the biggest cities, so there’s little downside to trying and losing. And there’s every political incentive to fight: with the Democratic base in #resist mode, and facing the very real challenges that would come with full-throated immigration enforcement in cities with large illegal immigrant populations, the blue mayors get far more out of pushing back than they lose in terms of having to replace the funding.

Meanwhile, the Trump Administration will continue to push back, again for reasons that are a mix of pragmatic concerns, conviction, and politics. It’s hard for the U.S. government to enforce immigration laws without the cooperation of state and local governments, who employ the vast majority of the nation’s cops. It seems outrageous to Trump’s core constituency that state and local leaders flout the President’s authority to protect those who have already broken the law. (The ironies of history, or derision with which leaders like Bill de Blasio would usually speak of “state’s rights,” are not lost on this group.) And many who are not Trump supporters share worries about what this does to the rule of law and cooperation between local, state, and federal officials.

But the federal government’s tools to get recalcitrant cities to cooperate here are pretty poor, and mostly funding-related. Moreover, those are trammeled by a host of rules—many, ironically, designed to protect federalism and separation of powers, and which lead to court cases like this one. And so long as the Congressional wing of the G.O.P. remains split on this issue, and the legislative branch generally remains paralyzed, this state of affairs is likely to continue. In the absence of creative solutions or grand bargains, more President-vs.-the-mayors fights will continue to crop up, carried out along these basic lines.

President Trump is the second President in a row who, frustrated by the state of our immigration politics, has decided to try to enforce his priorities through unilateral executive action. Both were smacked down by the courts—President Obama in U.S. v Texas, President Trump in both the “travel ban” cases and this one. The difference so far is that President Obama sought what was ultimately a form of inaction. As a result, even after U.S. v. Texas prevented the expansion of overt authorizations to remain, much of the framework of executive amnesty remains in place (some of it has even been embraced by the Trump Administration.)

President Trump, for his part, has had far more trouble compelling action that he wants but others won’t go along with. He’s yet to figure out how to get either the courts or Congress to work with him on this issue. And when it comes to unilateral action, the Administration is back to the drawing board again. Meanwhile, as long as both Trump and the Democrats think that keeping the immigration pot boiling helps them politically, neither side is going to let the issue cool.

A Bad Idea Gains Momentum

America’s elite technocrats (or at least the not insignificant subset who go to TED talks) seem increasingly enthusiastic about the idea of a universal basic income to address the job losses brought about by technological change. Business Insider reports:

Universal basic income — a system of wealth distribution that involves giving people a monthly wage just for being alive — just got a standing ovation at this year’s TED conference. […]

People in Silicon Valley are working to build autonomous robots that could replace human labor. But as economists have started speculating about the ways those innovations could lead to widespread unemployment, many tech elites have begun searching for solutions to the problem they’re creating.

It’s easy to see why this idea is appealing to Silicon Valley technologists, to economic policy wonks, to citizens of rationalia. It satisfies fully the demands of what Shadi Hamid has called “chart-based” liberalism, with its homo economicus model of human behavior. Globalized capitalism is exacerbating inequality and squeezing jobs outside of metropolitan centers? The capitalist winners can just pay off the losers with a UBI and go about their merry way. The price of long-term social peace is just a slightly higher marginal tax rate; the rest of our economic model can remain untouched.

The problem is that work, for most people, isn’t just a means of making money—it is a source of dignity and meaning and a central part of the social compact. Simply opting for accelerated creative destruction while deliberately warehousing the part of the population that cannot participate might work as a theoretical exercise, but it does not mesh with the wants and desires and aspirations of human beings. Communities subsisting on UBIs will not be happy or healthy; the spectacle of free public redistribution without any work requirement will breed resentment and distrust.

Countries across the West are struggling with ways to politically accommodate the dislocation brought about by 21st century economic forces. We don’t have a complete answer yet. But we will have to do better than simply resigning ourselves to the existence of a vast, subsidized underclass.

The Nuclear Deal That Keeps Getting Worse

By now we know all about the pallets of cash that suspiciously coincided with the release of American prisoners, and the secret side deals between Iran and the IAEA—not that we know what they entail, that part is still secret— but it seems that even the public portions of the Joint Comprehensive Plan of Action (JCPOA, the Iran Nuclear Deal) were worse than we knew. Seven men released from U.S custody and another fourteen fugitives whose charges were dropped are now known to have been far more serious threats to national security than was previously disclosed. As Politico reports:

Three of the fugitives allegedly sought to lease Boeing aircraft for an Iranian airline that authorities say had supported Hezbollah, the U.S.-designated terrorist organization. A fourth, Behrouz Dolatzadeh, was charged with conspiring to buy thousands of U.S.-made assault rifles and illegally import them into Iran.

A fifth, Amin Ravan, was charged with smuggling U.S. military antennas to Hong Kong and Singapore for use in Iran. U.S. authorities also believe he was part of a procurement network providing Iran with high-tech components for an especially deadly type of IED used by Shiite militias to kill hundreds of American troops in Iraq.

What’s more, the decision to drop these cases had and continues to have a profound knock-on effect, as the Justice Department, FBI, and related agencies involved in counter-proliferation efforts were ordered to hold off, have scaled back, lost leads, or been forced to discontinue action against key suspects. More:

Through action in some cases and inaction in others, the White House derailed its own much-touted National Counterproliferation Initiative at a time when it was making unprecedented headway in thwarting Iran’s proliferation networks. In addition, the POLITICO investigation found that Justice and State Department officials denied or delayed requests from prosecutors and agents to lure some key Iranian fugitives to friendly countries so they could be arrested. Similarly, Justice and State, at times in consultation with the White House, slowed down efforts to extradite some suspects already in custody overseas, according to current and former officials and others involved in the counterproliferation effort. [….]

“A lot of people were furious; they had cases in the pipeline for months, in some cases years, and then, all of a sudden, they were gone — all because they were trying to sell the nuke deal,” a former Department of Commerce counterproliferation agent said. “Things fell apart after that. There are some really good cases out there and they are not going forward. They just let them die on the vine.”

As we’ve written before, the Iran nuclear deal was a gift to Iranian hardliners who, in return for delaying their nuclear ambitions, were rewarded with carte blanche for all of their other activities by an Obama administration that was willing to turn a blind eye in order to preserve the deal.

As Secretary of State Tillerson has noted, while Iran has remained compliant on the nuclear portion, their other activities constitute “alarming ongoing provocations.” The Trump administration, by understanding the threat posed to U.S. interests by Iran’s non-nuclear activities, including these global smuggling operations that support Iran’s deadly agenda,  seems likely to change the calculus on U.S. policy towards Iran.

Campus Chaos Makes Case Against Tenure

The New York Times has published a remarkable op-ed by NYU humanities professor and vice provost Ulrich Baer making the Orwellian argument that campus administrations and student mobs are justified in forcibly shutting down right-wing speakers because… this allows more viewpoints to be heard! A taste:

The recent student demonstrations at Auburn against Spencer’s visit — as well as protests on other campuses against Charles Murray, Milo Yiannopoulos and others — should be understood as an attempt to ensure the conditions of free speech for a greater group of people, rather than censorship. Liberal free-speech advocates rush to point out that the views of these individuals must be heard first to be rejected. But this is not the case. Universities invite speakers not chiefly to present otherwise unavailable discoveries, but to present to the public views they have presented elsewhere. When those views invalidate the humanity of some people, they restrict speech as a public good.

There’s no room here to rehash the case for an open marketplace of ideas and against centralized control of what viewpoints can and can’t be expressed. That case has been made before, and experience tells us it will need to be made in perpetuity if we want to preserve America’s unique free speech tradition.

But Baer’s piece raises another, more narrow issue: Why should academia offer tenure if it is not institutionally committed to protecting a diversity of opinion?

Tenure came into being in the late 19th-century as a way to protect professors from being fired for holding unpopular opinions. And it remains the case that the only principled justification for academic jobs-for-life is to protect the intellectual freedom of the professoriate. But this case for tenure looks a lot weaker if academia as a whole is not willing to defend the idea of free speech.

Logically, a university administration that no longer believes in free speech should proceed to abolish tenure. Professors, like Baer, who do not believe in free speech, have no legitimate argument for tenure—other than they want jobs from which they cannot be fired.

State legislatures could rationally vote to ban tenure at all institutions of higher education who do not commit to free speech principles. Because if a university is not committed to free speech, tenure is simply a civil service protection rather than a statement about how seriously a university takes the importance of the right of its professors to think, publish and say what they think.

Tenured academics who are arguing against liberal debate on their campuses should think twice. They may be surprised about where those arguments lead.

No One Believes Saudi Aramco Is Worth $2 Trillion

No one, that is, except for the Saudi deputy crown prince Muhammad bin Salman. Saudi Arabia’s state-owned oil company Saudi Aramco is gearing up for an initial public offering next year, selling off 5 percent of the firm. But expectations for how much money that is going to raise vary widely, stemming from disagreements over just how much Saudi Aramco is worth. Bin Salman pegs that valuation at $2 trillion—which, if true, would make the company the most valuable on the planet—while other officials and analysts estimate the company to be worth anywhere between $500 billion and $1.5 trillion.

Part of the trouble with this valuation stems from the fact that so few people understand the inner workings of the company, and little of that information is made public. As a result, there’s a huge amount of uncertainty going into next year’s IPO. To top that off, the price of crude has a tremendous effect on the company’s revenue, which makes oil market volatility yet another unknown in this equation. Finally, as the WSJ reports, a decision by Riyadh earlier this year to lower Saudi Aramco’s tax rate may have tripled the company’s value:

The Saudi government last month said it is reducing Aramco’s tax rate to 50% from 85%, bringing its tax rate closer to the level of the world’s biggest oil companies such as Exxon Mobil and Royal Dutch Shell.

That move would result in higher dividends for potential shareholders, and it brought Aramco’s internal value estimates to $1.3 trillion to $1.5 trillion from about half a trillion dollars, say people involved in the process.

$1.5 trillion is a lot of money, but even after accounting for those tax cuts and oil price uncertainty, it’s hard to see how bin Salman got his nice, round $2 trillion figure.

We noted last week that China was putting together a consortium bid to become a cornerstone investor in Saudi Aramco, a move which marked the latest example of Beijing casting a wide net across the planet to secure new supplies of oil imports. There is clearly appetite for investment in Saudi Aramco, but just how much these shares are going to cost—and how much their sale will raise for Riyadh—still remains very much in doubt. We’ll be watching.

Nord Stream 2 Gets Funded

Gazprom’s dreams of doubling the pipeline capacity of its key supply route into Europe via Germany got a big boost this week, as the state-owned Russian company reached a deal with five energy majors—Engie, OMV, Shell, Uniper, and Wintershall—to finance half of the controversial Nord Stream 2 pipeline project.

Polish regulators stymied the pipeline last summer, back when it was billed as a joint venture between Russia’s Gazprom and the aftorementioned European companies. Now, as the FT reports, the EU may be fresh out of legal challenges after Gazprom has decided to retain full ownership of the project:

Despite pressure from Warsaw and other EU capitals, the European Commission has been struggling to find a legal basis to challenge Nord Stream 2. This year its legal services department decided that EU energy laws did not apply to the pipeline. Germany’s network regulator agreed with that assessment. […]

Two people briefed on the new agreement told the Financial Times that the companies involved believe the financing proposal will avoid legal obstacles in the EU because it does not involve equity financing.

Though 50 percent of the proposed pipeline’s costs will be paid for by loans from these five energy companies, Gazprom will still have to pay half of cost of the project up front itself. In the end, this allows the Russian firm to stay the sole investor in the project, but helps defray some of those large up-front capital costs through long-term loans.

Nord Stream 2 is a vitally important project for Russia. It doesn’t just give Gazprom another way to make money off of Europe, but it also helps keep Europe dependent on Russian natural gas supplies, and in so doing gives the Kremlin another geopolitical lever over the continent.

This story is far from over, but the Kremlin has to be pleased by how events have unfolded recently.

China Rushes To Rescue Pakistan

China has lately made a major public display of its growing partnership with Pakistan—and behind the scenes, they’ve been putting up the bailout money to prove it. Financial Times reports: 

China has provided Pakistan with over $1bn in bailout loans since June last year, as the south Asian country looks to stave off a foreign currency crisis that could yet lead to another multinational rescue package.

State-backed Chinese banks have come to Pakistan’s rescue on two separate occasions, officials have told the Financial Times, with $900m coming in 2016, followed by another $300m in the first three months of this year.

The loans demonstrate the perilous fragility of Pakistan’s stocks of foreign currency, which have been depleted in the past few months as imports have risen while both exports and inbound remittances from Pakistanis abroad have fallen.

There are plenty of political reasons why Beijing would offer Islamabad cushy loans. China is increasingly courting Pakistan as a key ally in order to balance against India, consolidate its “string of pearls” of strategic ports in the Indian Ocean, and use the China-Pakistan Economic Corridor as the lynchpin for its broader One Belt, One Road initiative. But much like China’s doomed investments in Venezuela, its bailout of Pakistan seems to be a classic case of political considerations trumping sound economic strategy.

As the FT explains, Pakistan last year finished repaying a $6.6 billion loan from the IMF, leading some to prematurely conclude that Islamabad was on the road to stability. But meanwhile, its growing trade deficit with China has continued to deplete its currency reserves, leading China to quietly extend emergency loans so Pakistan can repay the older loans and stave off default. And the vicious cycle could well get worse: as Pakistan’s trade gap with China widens, experts are warning that it may need return to the IMF cap in hand for further loans.

This is hardly the recipe for a healthy long-term economic relationship, but it does provide yet another data point in how China’s politically motivated lending will cause Beijing headaches for years to come.

Notes on “Notes on Cost Disease”

Not long ago TAI published (online and in the print magazine) an essay by Scott Alexander called “Notes on Cost Disease.” This essay originated as an extended blog post from the author and, like a lot of blog posts, it was written in a personal, loosely structured way. The author, whose real name I came to learn is not (just) Scott Alexander buried his lede about two-thirds of the way into the piece.

Moreover, his palate of explanations for the phenomenon he identified struck me, as an omnivorously curious but “non-practicing” (that is, not an academic or think-tanker doing original research) social science type, as probably incomplete. It turned out that the author is not, as many of his blogosphere followers assumed, an economist or a social scientist of another flavor, but a psychiatrist practicing “somewhere in the Midwest.” Maybe Detroit. So the paucity of explanation in the blog post ends up being not so surprising; one would want a medical doctor to be better and more deeply read in the medical literature than in decades’ worth of social science esoterica. Still, he had the very big right question, impressive data sets at least related to an answer, and an obviously formidable capacity for creative analysis, so I took the plunge: As I sometimes do, when I find an idea powerful and interesting enough, I will do whatever is necessary to repackage it properly and present it to readers.

The outcome of the effort has been well worth it: The essay is dynamite. I wish I could force it down the throat or inject into the bloodstream of every member of the American political class (and that’s what it would take to get the idea across since so few of them deep read anymore).1 Everyone who cares about the underlying condition of the American economy, and its social and political implications (which are vast…just look at who occupies the Oval Office) should read the Alexander essay, and I would wager that a substantial number of those who do will experience that frisson of excitement trilling the hairs up and down one’s neck. This essay is a Necker Cube flipper, a paradigm somersault maker, a brain lift of the first order.

Maybe the piece could have been still better. I asked the author to allow me to suggest via the edit a range of other explanatory possibilities that might give the essay greater heuristic power. He agreed to let me try but, as an honest man, he declined to accept some of these suggestions because he could not personally vouch for them. (He did take on others.) He is not, to repeat, a social science guy, anymore than I am a psychiatrist guy. So fine; I understood and let it pass.

Except I can’t let it pass completely. So let me know show you the omitted suggestions I made, and let me note as I do that none of these suggestions are assertions, merely research avenues that might bear a fruitful trip or two. I do this in a spirit of collegial aspiration: I would love nothing more than to stimulate some smart people, economists and others, to apply themselves to the mystery of cost disease to see if we, together, can come up with a better account of what is happening. If we can, we will have taken a first step, perhaps, to knowing what to do about it.

Before discussing explanatory possibilities not in the Alexander essay, let’s first review briefly those that are there—which the author freely admits do not sum to a persuasive answer.

First is the famous 1960s-era Baumol Effect, which Alexander raises, explains, and pretty much dismisses. The Baumol Effect is based on the simple idea that a significant productivity increase in one sector will raise many if not all boats in other sectors because labor pools are malleable over time and will follow high-wage work unless incentives are proffered to keep them busy elsewhere. Incentives are offered, says the Baumol Effect, and so wages (and costs passed along) rise even when no productivity increases justify them.

Alexander’s description of the Baumol Effrct is fine enough, so if you don’t already know what it is, just go back and read his summary. I, for one, have never been entirely persuaded by this argument because the fungibility of the labor pool, even over time, seems to me to be more constrained than the theory suggests. The original formulation contrasts high-paying manufacturing labor aided by technological innovation with work in a symphony orchestra, and Alexander repeats the pairing. I doubt, however, that a young music student—especially perhaps a female one—is likely to switch aspirations and go into a manufacturing career just because the pay figures to be higher. The old model of the individual, functionally interchangeable value-maximizer as the ideal actor model in economic theory never made much sense. The storied originators of this theory, mostly at the University of Chicago, knew its limits and acknowledged that it was just a model useful for certain purposes but not others. (Those who came after sometimes ignored the caveat about limits.) So if the Baumol Effect is real, the means by which it works are probably subtler than originally imagined and the maximal effects probably more limited. I wonder, too, how much empirical research exists on the Baumol Effect; I suspect not very much.

But, in any event, Alexander dismisses the Baumol Effect as a major source of cost disease because labor niches where major productivity increases have not occurred for one reason or another—health care, education, housing, and others—do not show sustained relative wage growth over time, in this case about fifty years. It may not be such a good idea to dismiss the Baumol Effect so quickly, however, of which more below.

Other explanations offered in the essay—some of them in the original blog and some of them my interpolations as editor—include the possibility of massive market failures in certain areas because of institutional rentier behavior, some of which may be further shaped by socially mediated factors. (Again, read the original, but note here that the idea of institutional rentier behavior differs from the classical definition, which focuses on oligopolistic behavior—so, for example, Carefirst is an institution heavily involved in health care, but as a service provider whose guard rails for profit are defined largely by government it does not fit the definition of a participant in a private industrial/manufacturing oligopoly. This is a distinction about which, I suspect, little analysis has been done thus far.)

They also include the cost of government ineptitude, but Alexander dismisses the standard libertarian argument here by noting that private hospitals and schools are not on the whole that much less vulnerable to cost disease than public ones. He focuses instead on regulation as a cost of government, and in particular on the real and anticipated costs of litigation. Housing is a particularly vivid example, but Alexander does not go into this in depth, possibly because it isn’t easy to separate out the cost disease effects of safely regulations as against the effects caused by land-use policy regulations. HIPAA is another example Alexander might have mentioned but did not: A whole private service industry has arisen in recent years—and not a small one—whose purpose is to guide medical practices through the maze of regulations pertaining to electronic medical records. As a concept, HIPAA is necessary in an age of digitized records, but no doctor I have ever met thinks the system the reg-writers created is anything other an unwieldy, counterproductive, and massively expensive albatross.

Yet Alexander also notes, quite shrewdly, that some of this regulation burden may be because social norms have changed, people being less willing to run risks of any kind but not able to reckon the wider social costs of indulging that new norm. So government is not entirely to blame in a democracy if more regulation is what people actually want to shield them from risk.

And lastly, Alexander points in the essay to the role of delinquency in cost disease—some people defaulting on payment, leaving others in the relevant pool liable collectively for their missing share. He mentions examples of delinquency from the worlds of student loans and health care, but other examples may be cited, too. It also applies to car insurance, for example.

In some auto insurance pools—like large cities with a lot of poor people—costs are much higher because a fairly large number of people go driving around without insurance (and often without even a valid license), even though doing so is against the law. But the city—Philadelphia is a stark case in point—for whatever reason, doesn’t enforce the law, so responsible consumers in the insurance pool pay the consequences when uninsured motorists cause harm to others. (One would think there would be more class-action lawsuits against city governments that act in such a way. There ought to be.) Just how much does delinquency in this case contribute to cost disease in auto insurance rates, or for that matter in student loan interest rates and health care costs? That would be a fascinating area of comparative research. I, for one, would like to see the results.

But even by Alexander’s own calculus, all these putative sources of cost disease do not add up to a satisfying explanation of his own data sets concerning health care, housing, infrastructure, education, and other economic domains. So what did I add that the author declined to take on?

I added one small idea about an economic oddity that is in some ways a variation of the Baumol Effect in the sense that it shows how market dynamics can have unexpected outcomes related to cost disease. And I added two larger suggestions, one that asks us to look again at the data concerning the Baumol Effect, and another that concerns the generic issue of transactional costs, which Alexander mentioned in passing in his blog but did not pursue. Let’s look at these in turn.

Cost-Pull Progress. Say there is a medical breakthrough of a sort that combines some new method of scientific measurement with a procedure (or a pharmacological application) that can remedy or sharply ameliorate some costly chronic ailment (an array of diabetes symptoms, say). And suppose that this new ensemble of capabilities, though not cheap, is nevertheless vastly cheaper than the rippling costs of dealing with a chronic ailment over an extended period. So we would have what amounts to a productivity advance for treating a disease, and for any given patient thus afflicted costs would go way down as reckoned over time as a result.

Ah, but the desirability of the new procedure brings a great many people to seek it, thus sharply increasing demand and pushing up the cost of applying the breakthrough. So, as in the Baumol Effect, we have a productivity gain that can nevertheless increase costs per unit of application of an innovation as well as aggregate spending (two different things2), at least for a time, instead of lessening the cost as normal economic logic would expect. (It could be hard to measure this because, if an innovation in a health care setting is “protected” by a patent or by some proprietary limit on others using the innovation, then supply could be as distorted by limitation as demand is suddenly increased, and it would be no simple matter to parse out the variance between the two.)

There is no word or phrase that economists use to describe this sort of thing; if you ask them (and I did), they will tell you that cases of this sort are rare, and have to do with very non-average elasticities of demand. So be it, but it would be nice to know the extent to which these things happen, notably in medicine as technology drives rapidly onward. So I propose to give this phenomenon a name: Cost-Pull Progress. It would be interesting to collect documentable examples from health care, but even more interesting to identify examples from other areas of the economy ravaged by cost disease. Is any empirical research going on here? I am eager to find out from anyone who knows.

Baumol Revisited. It may be that the Baumol Effect, or something like it, is more relevant to explaining cost disease than Alexander thinks. It is true, as he shows, that labor costs for teachers, doctors, nurses, and so on have not been pulled upward in real (inflation adjusted) and relative terms over time in reaction to more productive sectors. And we know the reason for the differences among sectors, which is really very simple as these things go. In virtually every industrial process it has proved possible to substitute capital for labor and make stuff both better and cheaper than in the old way. And that goes, incidentally, for monoculture agriculture, which is more capital intensive than the steel industry was just three or four decades ago.

Industries used to do this because effective capital substitution for labor made basic economic sense for efficiency and hence profit margins, but when the cost of mandatory benefits for workers began skyrocketing thanks to cost disease, the incentives for substituting capital for labor multiplied with them. Hence, in part anyway, automation mania. So cost disease has had a recursive, magnifying impact on the incentive structure of some businesses and led them to seek out new ways of balancing their fixed costs.

But alas, there are some kinds of economic activity where capital cannot be so readily substituted for labor, or where the impact of substitution is limited. Machines cannot readily replace doctors and nurses, so medical care in particular has been afflicted by cost disease in a double-whammy way: capital intensive innovation has proceeded rapidly in recent years, significantly expanding the availability of ameliorative medical procedures, but labor costs remain high as well because of the very nature of the activity. (Not that labor costs need be as high as they are and have been—there’s a difference between a fee-for-service for-profit model in health care and a Cleveland Clinic, salaried-group practice approach, for example—but that’s another topic.)

The same goes for housing, education, and infrastructure. Buildings and subways cannot build themselves, and “intelligent” machines can substitute for teachers only to a limited degree before the quality of education, as we properly understand the term, is severely affected. All the areas Alexander identifies as having been so vulnerable to cost disease fit this description: The need for labor can be curtailed only so much due to the intrinsic nature of the activity.

But what Alexander may have missed is not the average wage of workers in these fields over time, but the sheer number of jobs in these fields and hence the aggregate costs of this labor. An interesting area of research might be to establish the number of health care workers, and K-12 teachers and administrators, as a percentage of the entire labor force and of the adult population of the United States. So too with housing construction and infrastructure construction and operation, taking care to add in the OSHA and other governmental/bureaucratic personnel that have become baked into the cost structures in these domains. My guess is that these numbers have grown, perhaps significantly, over the past half century.

Here is an anecdotal illustration from K-12 education. I went to public schools in the 1950s and 1960s, and, in my experience, there was always one and only one teacher per classroom with about 25-30 students, with an occasional unpaid student teacher wandering about observing how this sort of thing is done. That ratio is now a rarity. As to management, there used to be a principal, vice principal, a head-office typist or two, and, at the high school level, a couple of guidance counselors. As non-teaching employment in schools went, this norm was pretty lean measured by today’s situation, for this is no longer the case in most schools. It would be nice to see data on the increase over the past fifty years in the average number of non-teaching jobs in K-12 schools, public and private.

The point here is that, in many cases it seems, what one worker used to do is now split down into tasks that more than one worker—sometimes three or even four workers—typically does. Seen from the perspective of the Baumol Effect, then, what we may need to do is to look not at individual salaries, but at how much it costs now to do functionally what it used to cost then. If two or three or four workers are now doing what one worker used to do, then the right way to “think Baumol” is to sum their labor costs. If we do that, the picture might look very different, although what we might end up with would be something a little different than just a more rigorous re-application of the Baumol Effect theory. Of course we need the data called for above to know what the right multiplier ought to be in various affected sectors, and it is not clear to me that we have such data.

If this turns out to be an interesting avenue of research, I think I know why at least some of this has happened. It’s the 800-pound gorilla sitting on the sofa that no one notices or wants to mention. It comes down to a technological innovation that touched off the most massive political economy change in the West (and certainly in the United States) since the Industrial Revolution: the birth control pill, and the consequent massive and rapid movement of women into the commercial work force. The pill debuted in 1960, but it wasn’t until the mid-1960s that its use became widespread. I am reasonably confident that Bureau of Labor Statistics data would illustrate what happened next in terms of the American labor force.

Far be it from me to pronounce all this a bad thing. (I do sometimes wonder how it will all look fifty or a hundred years hence, but that’s another matter.) But to just stick to the facts, the U.S. economy experienced a significant growth in labor supply just at a time when the demand for labor was less than buoyant, thanks, in part, to capital-for-labor substitution. That depressed wages for men as well as women in many economic niches, and it hurt trade unions. It’s certainly not the only thing that depressed wages and hurt trade unions, to be sure; the ur-era of offshoring U.S. manufacturing jobs began earlier than most people think.3 But it is remarkable that, when lists are compiled to account for these phenomena, the massive and by historical standards rapid entry of both well-educated and less-well educated women into the labor pool is rarely mentioned. Remember that these were “boomer” cohort women, and so there were lots of them, and remember that these cohorts of women were the first in American history to have graduated en masse from four-year colleges.

Note, too, that women who used to stay at home to shape and manage households and raise children were paid literally nothing for work worth by any measure many tens if not hundreds of billions of dollars yearly—we know this now because we know what it costs to replace that “free” labor with day care and house cleaning and restaurant expenditures and security systems and so on and on. Not that this has ever been calculated systematically to my knowledge. Were it calculated properly, we might have reason to go back and adjust the data in our national GNP accounts. We would need to add the value of this womanly “free” labor to, roughly, pre-1970 accounts, and the effect of doing that would be to rebalance the calculations of growth rates thereafter. After all, just because large amounts of non-monetized labor got transmuted into monetized labor does not mean that the economy really grew by the difference.4

Now, women joining the labor force in record numbers did not typically go into steel or other manufacturing sectors; they typically went into precisely (some of) the fields afflicted most by cost disease. It’s an open field for research to determine how the sudden boost in labor supply drove the reshaping of various areas of the economy to multiply the number of jobs “needed” to fulfill a given function. That certainly goes for women who have gone into government work at various levels—Federal, but mostly state and local (see below). We would need a Geertzian “thick description” of what has happened as well as some numbers to show us how new work protocols evolved in health care, teaching, government, and so on—in short, we’d need a sociological filter to tell us what any numbers actually mean.

Note, just to take one example, that as better-educated women poured into the monetized workforce it did not take long before women managers and HR staff directors began hiring other women—something relatively new as a mass phenomenon. No one, to my knowledge, has studied what that meant for how labor protocols developed. This research, taken all together, could constitute several dozen doctoral dissertations in sociology and labor economics, and I hope it one day does.

If my hunch is right, and if new research could quantify it at least to some extent, we might well see that some variant of the Baumol Effect can explain as least some aspects of cost disease. Someone would have to do the research, however, before we could say for certain.

Transactional Costs. Finally by way of explanatory factors for cost disease is one that inhabits several of the foregoing possibilities but that still deserves its own voice: transactional costs.

At the outset, let me try to head off possible misunderstanding of what I am about to argue. When economists talk of transactional costs, they usually mean the costs of the market infrastructure that enables transactions. They refer to theories of the firm in which managerial hierarchies can be more efficient means of transaction (especially business-to-business transactions, but others too) than continued random spot transactions. It follows that more vertically integrated companies means fewer transactions if the term is taken to mean only market transactions.

That is perfectly correct, but it’s not how I wish to use the term. Other economists, though not mainstream ones, have argued that the larger an organization is, whether governmental or not, the larger the proportion of its internal (not market) transactional costs: costs incurred just to keep the organization running. There is a biological analogy here: in small animals, like birds, the ratio of bone weight to the weight of the whole animal is exponentially smaller than it is in large animals, like elephants.5

Increased transactional costs can be worth bearing if size produces disproportional benefits, so I am not arguing that bigness alone is necessarily inefficient. But economies of scale can reach a tipping point after which further increases in size may become dysfunctional. If so, then a company that has become inefficient from becoming too large and hence perhaps too inflexible to adapt to change will be undercut, in theory, by more efficient firms. That may be one reason why the average size of economic units in the United States has fallen somewhat in recent years, perhaps because information technology-based managerial innovation in start-ups and other firms has enabled a form of internal managerial disintermediation that has disadvantaged some suddenly-too-large-to thrive firms, especially in certain fields.

This suggests, logically albeit at a different level, that we probably need to know more about the conditions under which industry consolidation as a whole, beyond individual businesses, produces net benefits for the economy and the conditions under which it produces net harm. (Institutional rentierism, I suspect, can produce benefits for the firm while at the same time producing net harm for sectors of the population and hence, possibly, for society as a whole.)

So, insofar as cost disease is concerned, consider how the average size of economic units and governmental bureaucracies in the United States has grown over the past fifty years, or past hundred years. They have grown a lot, although, again, in recent years the average size of economic units has begun to shrink back. Data here is available but elusive and, I am warned, perhaps of questionable accuracy. Maybe we can do better.

Data issues aside, perhaps cost disease is a consequence of rising internal transactional costs over time—perhaps abetted somehow (it’s not obvious how) by the need to absorb many new entrants to the labor force during the period to which Alexander’s data sets pertain—which by definition produce nothing and hence may be construed as drags on productivity increases elsewhere in the economy. This is why some economists and others suggest subtracting these kinds of transactional costs and other diseconomies from gross national product to get net national product (NNP), which would be, arguably, a more accurate way to describe productivity levels. GNP rises every time there is a car wreck and damaged vehicles get hauled off to a body shop for repair. But NNP does not rise from such events, since nothing new is produced from them.

And perhaps overlawyering, as noted above, is a special and especially insidious case of internal, not market, transactional costs generating still more transactional costs. Rule of law itself is obviously crucial to economic well being, and there should be no need to belabor the reasons. Still, every lawyerly extraction of money begets another lawyerly effort to avoid the extraction, and every new lawyer-drafted government regulation at every level begets a pestilence of lawyers hired in the private sector to “manage” the regulation to best advantage or least disadvantage.

Data on this is not easy to come by in general, but one datum is: the increase in the per capita number of lawyers in the United States over time. Per 100,000 population, the numbers look roughly like this:

1850 103
1950 141
1980 230
2000 295
2003 350
2010 400

More recent data elude me at the moment, but should not be hard to find.

Among major Western countries, the number of lawyers per capita is vastly higher in the United States than in any other country. Lawyers are expensive, and they make everything expensive as their fees are passed through the entire chain of economic transaction. Perhaps this is natural for a “Tudor” state, a state of courts and parties, as Samuel Huntington once called it. But that does not make it cheap.

So as far as a composite explanation for cost disease is concerned, the question is whether—if we sum together all of the factors adduced inside the Alexander essay and outside it as enumerated and described here—we would get close to explaining the data sets Alexander has presented? Are there possibilities still missing? The role of unions comes to mind, especially in more recent times unions of teachers, say. The role of guild-like barriers to entry that are not exactly unions but more professional associations also comes to mind, for example in the health care case, where the American Medical Association still limits the number of medical school acceptances. Are there yet others?

Of course, it is obviously one thing to establish that a given would-be cause really is a cause, and another to assign relative weights to the factors established as contributing causes. And, as already suggested, the challenge may not be merely additive, since some factors may interact with and magnify other factors. So this is a complicated challenge.

What comes out of all this, it seems to me, is a need for a multifaceted social science research project that involves economists but also sociologists and perhaps even anthropologists and psychologists. It is one worth undertaking considering the political impact of cost disease, which the Alexander essay brilliantly illustrates in its final section.

It may turn out, once the research has made strides, that the factors driving American cost disease are baked into the way we are, the way we do business, and cannot be much ameliorated. But it may be that some or many of the factors can be ameliorated by the right public policy choices. This is something we need to know, and right now don’t know. The stakes are, it seems to me, large.

1On this you’ll definitely be wanting to read Maryanne Wolf, Tales of Literacy in the 21st Century (Oxford, 2016).

2It is obvious that desirable new goods and services can stimulate increased spending, but that is not the same as costs per unit of production and so has nothing directly to do with cost disease. But, as others have pointed out, in health care, for example, it can affect costs indirectly. One way to think of medical insurance (and especially dental insurance) is not just as insurance against contingency but as partial pre-payment for medical care. All of that pre-payment cash, however, gets transmuted through markets grossly distorted by third-party payments and, under institutionalized rentier conditions, that can affect costs both of insurance and of medical care itself.

3Note that foreign subsidiaries of U.S. corporations quadrupled U.S. capital sent abroad from $25.4 billion in 1957 to $103.7 billion in 1973.

4What is especially galling about all this, on a different level, is that many women who lost their working husbands to divorce or early death ended up having very little social security earnings in the kitty to sustain them as they aged. They did not pay into the system, and their essential work on society’s behalf was never monetized in such a way as to compensate for the lack of actual withholding dollars. This was (and remains to the extent it still goes on) obscenely unfair.

5See here the pathbreaking work, still largely ignored by many economists, of Nicholas Georgescu-Roegen.