Second best policy arguments
By Scott Sumner
Economists use the term “second best policy” for a public policy that may not be optimal, but nonetheless might improve things if public policy is off target in other respects. Thus if we don’t have a tax on pollution emitted from cars, a second best policy might requite all car companies to build cars that emit no more than a certain quantity of pollutants. Or one might argue that taxing “Cadillac” health plans is a bad idea when considered in isolation, but becomes a good second best policy when those plans are already being heavily subsidized via the tax deductibility of employer provided health insurance benefits.
Roughly 95% of the time I’m skeptical of second best policy arguments (although I think the two examples discussed above might be in the justifiable 5%.) In a recent post, Scott Alexander recently made a surprisingly powerful argument for a seemingly far-fetched second best policy. Here’s the conclusion of his post:
If I were Sanders, I’d propose a different strategy. Make “college degree” a protected characteristic, like race and religion and sexuality. If you’re not allowed to ask a job candidate whether they’re gay, you’re not allowed to ask them whether they’re a college graduate or not. You can give them all sorts of examinations, you can ask them their high school grades and SAT scores, you can ask their work history, but if you ask them if they have a degree then that’s illegal class-based discrimination and you’re going to jail. I realize this is a blatant violation of my usual semi-libertarian principles, but at this point I don’t care.
If you had merely showed me the conclusion presented above, with no supporting arguments, I would have thought the proposal was undesirable, even foolish. After reading his post I’m not so sure, indeed I wonder if it isn’t a good idea. It’s a surprisingly persuasive post. (Although given that it’s written by Scott Alexander, I guess I shouldn’t be surprised.)
PS. If you are short of time, skip over section one of his post, and start at section two.
PPS. Scott also has doubts about K-12, expressed in the form of the best graduation speech ever.