Henderson Responds to Cliff Winston
On July 3, I posted my critique of an email sent to me by Clifford Winston, a well-known and productive economist at the Brookings Institution. Cliff then sent me his response, which I published on July 5.
Here is my response to Cliff. The quotes from him are highlighted. Mine are not.
To the best of my knowledge, economists have not reached a consensus on defining government failure. A plausible definition of a government failure, which is useful for my purposes because it lends itself to empirical measurement and does not limit its scope, is a policy intervention that significantly wastes resources. Those resources include firms’ compliance costs and the cost of taxpayers’ funds to pay for government’s implementation and enforcement of the policy.
That does sound reasonable when we’re thinking of governments as legislators and as bureaucrats. If we could reasonably think of judges and justices the same way, then I would agree with Cliff. But I don’t think of them the same way. You’ll see why soon.
Economists tend to think of government failure as applying to elected officials in the legislative and executive branches who formulate and implement public policies at various levels of government. I have synthesized many studies (see the following books free and free in certain cases) that have assessed the effects of those policies and found enormous evidence of government failure. Such studies have been useful for policy debates. For example, evidence on the effects of Civil Aeronautics Board regulation of airline fares on interstate routes that found those regulated fares were higher than comparable unregulated routes in California and Texas supported the case for deregulating the airline industry to correct government’s regulatory failure.
I agree and, as I have written elsewhere, economists including Alfred Kahn but also other lesser-known economists were very important in making the intellectual case for deregulating airlines.
Although economic efficiency is important for policymaking, there are far more counterexamples to the airline case. For these, empirical evidence identifies a government failure that supports an efficient policy reform, but policymakers are unwilling to consider that reform. For example, agricultural subsidies to farmers and Agri-business are hard to justify on economic grounds and urban rail transit’s social benefits are exceeded by its huge subsidies, yet money continues to be funneled into those enterprises. Apparently, there is something more important than efficiency that enables those subsidies to grow. That “something” causes government failure and impedes any efforts to reform policy to significantly reduce that failure. It is certainly possible to speculate on what that “something” is, but I don’t know of any causal evidence to support such speculations.
I agree with his examples. But although Cliff doesn’t know of causal evidence, I do. Strong concentrated interest groups get together and get large benefits per person or per firm, while the much larger costs are borne in smaller amounts per consumer and/or per taxpayer. We have lots of evidence on that.
Of course, elected officials and their surrogates are not the only people in government who make policy. Judges and Justices also make policy. For example, policy toward abortion over the last fifty years was not the result of an act passed by Congress and signed by the President. The nation’s abortion policy was shaped first by the Supreme Court’s decision on Roe v. Wade and more recently by the Dobbs decision. Similarly, affirmative action policies by public and private colleges and universities will have to conform to the Supreme Court’s recent decision to undo the Bakke decision.
I think Cliff is mixing two things here. It’s true that judges and justices sometimes make policy. And they shouldn’t. What they should do is read the rules and see if the particular legislation conforms to those rules. Here you can see Cliff’s and my very different views of the proper roles of judges and justices.
Thus, in the context of government failure, how should we assess SCOTUS decisions and determine if they are likely to result in government failure? How can we reduce the chance that the decisions are likely to result in government failure? Two immediate objections to this exercise are that SCOTUS is supposed to be narrowly constitutional providing a check within the structure of governance, and that SCOTUS makes legal not economic decisions. In other words, it is inappropriate to assess SCOTUS rulings as possibly failing like we have assessed other government policy failures.
Here Cliff, to his credit, understands the objections. His last sentence is a little ambiguous. If by his last sentence he means that the objection is that it’s inappropriate to assess SCOTUS rulings the same way we assess other government policy failures, that is, by an efficiency test, then yes, I think he understands the objection. If he means that the objection is that we shouldn’t judge judges, then no, almost no one has that objection.
However, I agree with Richard Posner’s perspective that a case is just a policy (my insert) dispute, which opens up the playing field to assessing the case by cost-benefit analysis and by other empirical approaches that are commonly used to assess government policies. To be sure, Justices are not trained in economics, but does that mean economics should be ignored in assessing their decisions, especially if it could identify a more socially desirable resolution of a policy dispute? Economic efficiency considerations are not ignored in assessments of other government policies; what makes assessments of the public policies facing SCOTUS different?
A case is a policy dispute, but it’s not “just” a policy dispute. It’s also about whether the rules were followed. Here Cliff and I are diverging a lot. But wait, there’s more.
If the constitution gave unambiguous guidance that was aligned with socially desirable outcomes, then it would be dispositive. However, the constitution is not always unambiguous; Justices interpret it in different ways and have increasingly done so in accordance with their ideologies (see chapter 7 free in certain cases for empirical evidence); and the Constitution, just like transit operations, has not kept pace with changing demographics and other societal changes.
Did you catch that qualifier in the first sentence? This is why I think Cliff is advocating that judges be central planners. It’s not enough for him that the constitution gives “unambiguous guidance.” It also, in his view, must be guidance “aligned with socially desirable outcomes.” Forget about the fact that we don’t even know what “socially desirable” means. Hum a few bars from many posts by my EconLog colleague Pierre Lemieux here. Even if we did know, Cliff would have the judges rule on that basis even in the face of unambiguous guidance.
Take an extreme example. I, David R. Henderson, am not allowed to be U.S. President. The requirement that I be born an American is about as unambiguous as the U.S. Constitution can get. Imagine that 80% of Americans thought, as I do, that I would a better president than Donald Trump or Joe Biden. Imagine also that by Cliff’s own “socially desirable outcomes” standard, he agrees with those 80 percent. I run and win. In my view, the U.S. Supreme Court should prevent me from taking office. Actually, SCOTUS wouldn’t have to. A lower federal court would do the job. In Cliff’s view, the courts should allow me to take office. Who is right, Cliff or me?
Unlike other areas of economic policy, there is not accumulated evidence that SCOTUS rulings have added to government failures. As noted, I have not seen SCOTUS rulings assessed using that benchmark. One might speculate that because elected officials’ policies fail so often, when SCOTUS has a case involving the government, it is likely to reduce a government failure.
In any case, my view is that empirical economic analysis could and should be used to help reduce the chance that SCOTUS decisions will result in government failure. As noted, Justices are not trained in economics or empirical methods, so expert panels could and should be formed to help Justices to reach more informed decisions. The paper I sent to David raises and responds to several objections to expert panels: (1) Economists also are ideological; (2) Economist and non-economist experts may disagree; (3) Experts can submit amicus curiae briefs; (4) Expert panels are inconsistent with the role of the Supreme Court; (5) The Supreme Court makes legal not economic decisions; (6) The legislative branch should convene expert panels; (7) Lawyers control the evidentiary process; (8) Expert panels would amount to academic seminars; and (9) Other reforms of the Supreme Court are available.
I don’t object to SCOTUS asking economists to help them understand the effects of various laws or rules. What I object to is SCOTUS acting as if it is not constrained by what the Constitution says.
Assuming expert panels were advising the Supreme Court and the Justices respected their insights and took their advice seriously, could those panels bring evidence to a case that might affect the Justices’ thinking and understanding of arguments and amicus briefs so as to reduce the likelihood of government failure? Let me first add that the cause of government failure is probably better understood in polices that arise from Supreme Court cases than from policies instituted by elected officials. That is, I do not have evidence that explains why policymakers assign a large welfare weight to farmers and transit operators, but I do have evidence suggesting that some Justices’ ideologies could enable them to justify assigning a dispositive welfare weight to a woman who does not want to provide her services to a gay couple, or providing a higher welfare weight to a pregnancy than to the fate of that baby post-birth.
“[C]ould those panels bring evidence to a case that might affect the Justices’ thinking and understanding of arguments and amicus briefs so as to reduce the likelihood of government failure?”
Sure. But in my view it has to be in the context of following the rules.
That said, in the web designer case, the expert panel would stress the economic costs to all the parties involved, the non-economic benefits to the web designer, the bargaining issues involved, and consider any spillover effects of either allowing or disallowing the web designer’s discrimination. This is not a straightforward exercise, and it could reveal some important effects. In the final analysis, I don’t know where the assessment would land, but I think it could clarify the relevant welfare effects of the policy dispute and the most desirable resolution and scope of application for the decision among a set of options (e.g., subcontracting the web design or cake, what types of services constitute speech, and which don’t).
As Frank Barone says in the TV show “Everybody Loves Raymond,” Holy Crap! Whatever you think about the role of courts, Cliff flunks basic economics. Contrary to what he says, this is a completely straightforward exercise. The web designer can decide whether the business she loses by not catering to certain groups is a worthwhile cost to pay to exercise her tastes. Let’s say, now that the case has been resolved, she sets up her business and says, “Oh, gee, I’m missing a lot of business and I think I would like to get that business, even if it means saying things I don’t believe?” The great thing about the SCOTUS decision, not just based on following the rules but, as Cliff says he wants us to think, based on economic efficiency, is that it allows for that. Either way we get efficiency.
In the Dobbs case, it would have been useful for Justices to hear from an expert panel that attempts to resolve a variety of relevant issues, many of which can and have been addressed empirically, such as: (1) the effect of abortion access on women’s lives and health; (2) risks to women who cannot get timely and appropriate healthcare in case of urgent medical issues like miscarriages or ectopic pregnancy; and (3) risks to women due to confusion and legal doubt among health care providers after Dobbs. The expert panel also could provide insights on the difficult problems of assessing the effects of abortion on the unborn child as well as the fates of children resulting from un-terminated pregnancies after Dobbs.
Yes, it would have been useful if the Justices were legislators. It’s not useful for them qua Justices. And, by the way, what we’re seeing at the state level is a whole lot of legislatures and some groups of voters tangling with these issues. And, for Republicans who oppose legalizing abortion, talk is no longer so cheap, as the 2022 Congressional elections showed.
Finally, the education loans and college admissions cases are ripe for an expert panel’s empirical analyses of the effects of those policies and assessments of alternative policies that might be more socially desirable.
Here and in the previous paragraph, Cliff is not making his case. He’s simply begging the question: that is, assuming that judges should make policy. Of course if they should make policy, these are important things for them to know.
In sum, my view is that the Supreme Court is making public policies, which like other policies have economic and non-economic effects; thus, Justices should have the benefit of assessments by experts of those possible effects, which may reduce the chances that the justices’ rulings result in government failure.
Yes, that is Cliff’s view. The question is whether his view is correct.
Cliff then turns to my objections and answers them.
I leave out the possibility of looking at the Constitution, seeing what it says, and judging accordingly. My response: I indicate my reasons above that relying on the Constitution alone is not necessarily going to lead to desirable outcomes. In particular, I agree with Posner’s 1987 article that “law is not a self-contained field of knowledge whose methods of reasoning can by themselves solve human problems in ways that best serve our society.” Expert panels are not necessarily appropriate for every case before SCOTUS, but I think Justices often could benefit from more effective help by experts. In cases where the Constitution is explicitly silent or ambiguous on the matter, neither determining judicial intent nor ascertaining original meaning is an exact science that must be practiced only by Justices.
We both agree that, if we can define “socially desirable outcomes,” relying on the Constitution alone is not going to lead us there. Cliff is arguing as if I haven’t admitted that. I have. My point is that that’s not what judges should be doing. If you think Cliff is right, how would you handle the hypothetical I gave above, where I, not born as an American citizen, am voted in as president?
Notice also how Cliff hedges on his earlier argument. Here he talks about “cases where the Constitution is explicitly silent or ambiguous on the matter.” But earlier he wanted not just unambiguous guidance but “unambiguous guidance aligned with socially desirable outcomes.”
On the web designer case, although I say that the economic benefits of greater output should be compared with the costs of not allowing the web designer to exercise her religious preferences, that, in theory, is what the web designer is doing. Accordingly, we don’t need a government agency, whether a court or a regulatory agency, to make that assessment. If a government agency were to require her to trade, we know that there would be net losses: the loss to her from being forced to trade would be greater than the gain to the consumers who miss out on the trade. If that weren’t so, they could raise their offer and she would accept.
My response: The argument is that there is no price that could result in a mutually beneficial trade because of the infinite loss to the web designer, so any ruling by SCOTUS that dictates otherwise would produce a net welfare loss and there is no need for the court to get any advice. That is certainly true if the web designer requires an infinite price. But my understanding is that the case was brought without an actual gay couple wanting the designers’ services. I therefore have no idea what tradeoffs the web designer made with an imagined consumer and consumer base. In any case, the role of the expert panel would be to guide the Justices about what we know about dispute resolution when the participants are extremely far apart. I would be more comfortable with the Justices’ ruling if they concluded, based on the insights of the expert panel, that the dispute could never be resolved more constructively after considering a plausible set of options instead of relying solely on their subjective interpretation of the constitution. It is important to be right for the right reasons. At this point in the debate about SCOTUS decisions, both sides are content to be right for the wrong or at least highly questionable reasons.
Cliff says that he has “no idea what tradeoffs the web designer made with an imagined consumer and consumer base.” But he doesn’t need to know. The web designer knows her preferences better than he or any court does. He says that he doesn’t want the judges to be central planners. But here he’s pretty clearly saying that he would have the designer ask “Mother, may I?” rather than letting her exercise her preferences. That’s the ultimate in central planning.
Cliff says, “I would be more comfortable with the Justices’ ruling if they concluded, based on the insights of the expert panel, that the dispute could never be resolved more constructively after considering a plausible set of options instead of relying solely on their subjective interpretation of the constitution.” But why should we or, more important, the web designer care about his comfort. Cliff is being the man of system here, whom Adam Smith discusses in The Theory of Moral Sentiments.
Cliff says “It is important to be right for the right reasons.” It is. In my view, the reasons stack up nicely. First, the web designer should be able to exercise her freedom of speech, the point at issue here. Second, even if we go with Cliff’s extreme view that consequences are all that matter, SCOTUS still made the right decision. It refused to require an exchange that one party didn’t want. She said she would do this knowingly, meaning that whatever the excluded customers would pay her would not be enough to compensate her. In other words, SCOTUS refused to require an exchange whose costs to one party exceeded the gains to the other parties. As a believer in market efficiency, Cliff should be happy with the decision. But he’s not. Why? The only reason I can think of is that he does not respect people’s rights to make their own decisions about whom to deal with. Again, Cliff is being a central planner here.
I’m reminded of the 1991 movie Bugsy. In one scene, Bugsy Siegel goes to a nice house, rings the doorbell, and gets invited in. He tells the owner that he wants to buy it. The owner says he has no interest in selling. In a normal situation, that would be the end of the story. But Bugsy threatens the owner and so the owner gives in and sells. I think that’s horrible. What does Cliff think? Would he say that a court should intervene and weigh the competing interests? And if he wouldn’t say that, why wouldn’t he say it?
Generally, policies with the primary intent of redistributing income instead of improving efficiency are taken by economists as given, meaning democracies support them or reject them at the ballot box. Economists assess those policies from an efficiency perspective on whether they are least cost solutions to achieving the social goals they are trying to achieve by redistributing income. So, on the education loans and college admissions cases, I agree that Biden has not subjected his education loan policy to the ballot box, but that policy would influence voters’ preferences for or against him if it were maintained. In any case, I speculated on what the motivation is for Biden’s and the universities’ polices because I didn’t see a market failure. So, the economic issues are what are the least cost ways of achieving the policies’ goals? To that end, I think an expert panel would provide useful information on what we know about the effects of suspending the education loans and of admissions policies that favor certain applicants based on their race and ethnicity. Again, the objective is to be right for the right reasons.
Notice in the first sentence that Cliff is sure that voters are the ones who should get to decide whether to redistribute. In his view, there is no principle here that is being violated. In my view there is. So no, I as an economist don’t want to be an agent of the state, taking as given what the government tells me it wants or what polling data tell me the public wants. And since we’ve literally never had a vote on redistribution at the federal level, how does Cliff know this?
Cliff writes, “So, on the education loans and college admissions cases, I agree that Biden has not subjected his education loan policy to the ballot box, but that policy would influence voters’ preferences for or against him if it were maintained.” But a president, especially one with the power that modern U.S. presidents have, has thousands of policies. How do we know that if voters voted for Biden that it’s because of that policy? And even if we did know that, so what? Why is what relatively uninformed voters vote for so sacred? And especially why is it sacred when what they’re voting is what governments are going to do or not do others and it’s not sacred to let someone choose how to use her resources in her own life? This is seriously messed up and if I weren’t constrained by Liberty Fund rules, I would use another adjective.
And notice once again how comfortable Cliff is with letting one man decide how $400 billion is allocated because we get to vote against him.