A left-wing confab wants to rewrite the rules for how Americans do business with each other, their government, and the world. The Roosevelt Institute is hosting a conference to highlight their new report, Rewriting the Rules. The premises of the effort are a wise observation and a foolish conclusion. Wisely, the authors realize that economic outcomes are strongly determined by the rules, legal and social, that guide which markets exist, how contracts are enforced, and what decisions individuals are allowed to make for themselves. Foolishly, the authors think that many of the bedrock rules that brought us the most peaceful, wealthiest, and healthiest civilization in human history are disposable.
The authors, led by Nobel prize–winning economist Joseph Stiglitz, pay lip service to making markets more competitive. But even in the brief portion of their recommendations under that heading, only one of the four recommendations would plausibly increase competition. A look at these recommendations—which should be the most centrist in the entire report—is instructive.
- Restore balance to intellectual property rights to encourage innovation and entrepreneurship. In this area, liberals and conservatives are often in agreement. One of our social rules is that the government will give an innovator a temporary monopoly (which is anti-competitive) in order to reward her for making the effort to innovate. Many scholars have argued that expansions of the innovator’s monopoly went too far and should be rolled back.
- Restore balance to global trade agreements by ensuring investor protections are not prioritized above protections on the environment and labor, and increasing transparency in the negotiation process. Here, the authors are advocating a direct reduction in competition. They advocate limiting Americans’ ability to invest and trade abroad. They want to amend the rules to allow fewer job opportunities for the global poor and fewer investment opportunities for Americans abroad. For the average American consumer, that means higher prices at the store.
- Provide health care cost controls by allowing government bargaining. Strengthening the hand of a large, centralized purchaser (a “monopsony” in econ jargon) would move health care markets even further from a competitive model. A better approach is to give consumers the power to make more of their own health care purchases. Americans are very good at shopping.
- Expand a variant of chapter 11 bankruptcy to homeowners and student borrowers. Allowing students to default on their loans would make college even harder to afford, because lenders would be less willing to extend credit and would demand higher interest rates. Thus, this is yet another proposal under the “Making Markets Competitive” heading that would make markets less competitive. This proposal is particularly misguided coming from anti-inequality warriors: Fewer working-class kids would be able to afford college, and the benefits of declaring bankruptcy would accrue mostly to people with high earnings potential, who already possess college degrees or houses.
If the most promising section of Rewriting the Rules is only batting .250, the initiative has little hope of offering positive changes for Americans. Indeed, a policy agenda devoted to eradicating inequality can only succeed by hurting the successful and punishing free thinkers. A society that gives room for the striving lawyer, the religious devotee, and the social rebel to each be herself will be very unequal. Eradication of inequality means conforming to mediocrity.
“Inequality is not inevitable,” proclaims Rewriting the Rules. Indeed not. But it seems an essential condition for widespread human flourishing.