Realistic Reforming: Micheal Tanner's Inclusive Economy, Part 2
Editor’s note: The first part of this review of Michael Tanner’s The Inclusive Economy appeared earlier at Econlog. The reviewer noted that “Tanner’s deep familiarity with the literature truly shines in his chapters on the policy program he recommends. After laying out the failure of redistributive policies, Tanner suggests criminal justice reform and ending the war on drugs; education choice; elimination of zoning and land-use regulation and reduction of property taxes to bring housing costs down; the removal of asset tests for public assistance, excessive banking regulations, and barriers to non-banks to encourage saving; and reduction of taxes and regulations to stimulate economic growth (page 125). The chapters on each of these groups of policy recommendations are deep dives into the economic literature that will prove valuable to students and scholars alike.”
Her review concludes below.
Criminal Justice Reform
After laying out the details of our mass incarceration crisis, Tanner suggests that we think deeply about over-criminalization in general and victimless crimes in particular. He asks for a rethinking of police training and tactics, bail reform, limits on prosecutorial discretion, and fairness in sentencing. Finally, he deals with re-entry issues. The fact that our carceral state is out-of-control seems beyond dispute these days, but assignment of blame most certainly is not. Tanner rightly points out that federal solutions are not as pressing as state ones, since the vast majority of incarcerated people are in state prisons and local jails. However, I was quite surprised that he did not address the progressive argument that the real culprits are private prisons. While it is certainly true that private prison owners lobby for harsh sentencing, it is also true that prison guard unions and police unions do as well, making the concern over the profit motive moot. Furthermore, private prisons only house about 8% of our prisoners anyway. Perhaps Tanner thinks this argument is so wrong that it’s not worth mentioning, but considering its popularity among progressives, I’d imagine they would find this chapter more compelling had it been directly addressed.
While Tanner does emphasize the role of prosecutorial discretion in the exponential growth of the prison population when he discusses solutions, he seems to put ancillary causes on a par with prosecutors. This fundamental cause of our mass incarceration crisis can be hard for libertarians to admit, since the association with the drug war tends to be foremost in their minds. While the drug war is a terrible injustice, it only accounts for 16% of the state prison population. Since focusing on ancillary causes can divert much-needed energy away from prosecutor reform efforts, we must get this right. I wish Tanner had discussed the very concrete reform ideas from John Pfaff’s Locked In: running reform-minded prosecutors against (mostly unopposed) incumbents; adding guidelines for charging and plea bargaining; and aligning incentives by making county budgets account for state prison beds. One concrete reform he does discuss is increasing the number of public defenders.
Conversely, Tanner is crystal clear on his recommendations to deal with impoverished public education options. He rightly points out that we continue to support preschool programs that don’t work; he directly addresses the failure of arguments that emphasize lack of funding as the main issue in failing schools; and he deals with the desperate need for real competition to drive quality. I was also pleased to see him include arguments for favoring educational savings accounts and tuition tax credits over charter schools, which have many limitations because of their subjection to public school regulation.
The chapter on housing is spot-on, as Tanner presents a growing body of evidence that various regulatory measures such as growth boundaries, inclusive zoning, and historic preservation laws are keeping housing costs high and lowering the possibility of building new housing. In one excellent example of unintended consequences, Tanner shows how the salutary goal of including more affordable housing in pricier areas actually reduces the overall provision of housing by making building projects untenable for developers. Tracking these sorts of well-intended boondoggles is one of the keys to creating an inclusive economy. We need to look more at our infrastructure of rules than at creating targeted policies that try to solve a particular problem directly.
It was especially gratifying to see Tanner directly address savings for the poor in his chapter on the accumulation of wealth. I first became aware of this research from James Bailey’s book Rethinking Poverty just a few years ago. We often overlook that we have rigged our system to reward the rich for saving and the poor for consuming. For anyone who has been poor for any length of time, we know how valuable just a small amount of savings can be when it comes to the crises that can set off a domino effect, such as a car breaking down, or a period of illness. Just as we might criticize the way that our welfare systems are set up to create perverse incentives with regard to, say, marriage, we ought also criticize the perverse incentives to spend rather than save. These include asset tests for welfare programs, the lack of savings options that do not heavily penalize the user for withdrawing funds for liquidity needs, and the inflexibility of our social security system. This section is especially interesting because we so rarely discuss, or even think about, the possibility of the poor having savings. This is a necessary paradigm shift, even for those who have been thinking deeply about poverty issues.
Finally, Tanner makes the excellent choice to spend his final section discussing “inclusive economic growth.” Economic growth falls prey to the typical complaint of economists that people easily pay attention to concentrated benefits and dispersed costs, but we easily forget dispersed benefits and dispersed costs. The numbers do not lie: the one greatest and most effective way of decreasing the number of people living below the poverty line is to encourage all policies that lead to economic growth. The popular assumption that the rich really benefit here could not be more wrong-headed, since the marginal utility of one more dollar is so much higher for a poor person than a rich one. Tanner discusses various factors that influence economic growth. These include the growth of the labor force itself (which is slowing considerably these days), the improvement of human capital (which gets us back to Tanner’s section on education), and improvement of the institutional environment in which economic growth occurs. With regard to the final factor, we need economic freedom and innovation. This means having tough conversations about the real consequences of the minimum wage, occupational licensing, and many other forms of regulation that are bearable for middle and upper income families, but deeply deleterious for the poor. Just as Tanner reminded us in his opening chapter, the principle of helping the poor is part of our civilizational legacy. Part of the way we can do this is by being sensitive to the fact that there are things that are merely annoying for us and our friends, but are truly crushing to those in different and harder circumstances. We must not only know this, but act on it. As Isaiah exhorted the Hebrews, “Learn to do good; seek justice, correct oppression; bring justice to the fatherless, plead the widow’s cause” (Isaiah 1:17 ESV). It will take the voices of established and powerful people to draw attention to the fact that apparently innocent policies are destructive to the most vulnerable among us.
My hope is that Tanner’s willingness to engage both progressives and conservatives, as well as his excellent grasp of the research for his policy program, will provide fodder for many more bridge-building, practical policy conversations. The Inclusive Economy is an excellent perusal of the most pressing poverty issues of our time, with concrete policy ideas to boot. However, I hope that scholars with a flair for narrative and popular writing will take up these conversations as well. By compiling so much research into a comprehensive plan to fight poverty, Tanner has gotten us half the way. He’s written a book for the highly educated lay person who already reads a lot on these subjects. Now we need effective communicators and story-tellers to bring these proposals to the masses.
Rachel Ferguson is Professor of Managerial Philosophy and the Director of the Liberty and Ethics Center at Linwood University.
As an Amazon Associate, Econlib earns from qualifying purchases.