Back in mid-December, Ed Kilgore wrote a piece "Taking Ideological Differences Seriously". The piece was useful in that it argued that differences among "progressives" were not simply differences over political strategy, but also over ideology. It's a pretty basic idea, but one it seems that most folks have paid far too little attention to.
However, the piece ran into trouble when trying to describe the ideological differences. Indeed, it never even attempted to describe both sides of the divide. Rather it focused on the so-called "Third Way" and on distinguishing it from conservative approaches. Chris linked to it precisely for this reason. But because it fails to even attempt to describe both sides, this approach is more justificatory than explanatory--though it certainly does explain how Third Way types would like to be seen. The explanation itself is presented in terms of policy mechanisms--specifically, the Third Way "strategy of deploying regulated and subsidized private sector entities to achieve progressive policy results" But this completely avoids the more fundamental question: what about differences in ends, not just means? What if one person's "progressive policy results" are another person's "not so much"?
I first tried to do that myself, by responded to Kilgore's piece with a diary "What's Wrong With The Third Third Way" which described how historically this was the third such "compromise" between naked capitalism and an oppositional alternative. The first "Third Way" was democratic socialism, the second "Third Way" was the market-supporting "liberal" welfare state in the typology of Gosta Epsing-Anderson's The Three Worlds of Welfare Capitalism, and the third "Third Way" is--despite frequent disavowals--largely a repurposing of the market-supporting welfare state for politically conservative ends, but with
"competent" centrist Democrats in charge. I'm afraid that this analysis was too far-flung for some. So I want to take another stab, first at providing a more down-to-earth set of test-points, and only after that by presenting yet another grand vision sort of overview.
Here, again is Kilgore's central presentation of Obama's "Third Way":
To put it simply, and perhaps over-simply, on a variety of fronts (most notably financial restructuring and health care reform, but arguably on climate change as well), the Obama administration has chosen the strategy of deploying regulated and subsidized private sector entities to achieve progressive policy results. This approach was a hallmark of the so-called Clintonian, "New Democrat" movement, and the broader international movement sometimes referred to as "the Third Way," which often defended the use of private means for public ends. (It's also arguably central to the American liberal tradition going back to Woodrow Wilson, and is even evident in parts of the New Deal and Great Society initiatives alongside elements of the "social democratic" tradition, which is characterized by support for publicly operated programs in key areas).
Does It Work?
The problem here, as I see it, is that Kilgore is avoiding the central concern for populist (as opposed to, say, corporatist) progressives: Does it get the job done? I'm sure that Obamaphiles would say, "Yes it does!" but that only brings us down to the real bottom line: what exactly is the job? When it comes to healthcare reform, there's plenty of room for disagreement, but a fairly good starting point might be "reducing overall system costs to something close to the OECD median while improving overall health outcomes to something close to the OECD media." There's nothing particularly ideological about this formulation, at least in the commonplace meaning of the word, which Third Way types like to use in dismissing populist progressives. It's just (a) quite commonsensical, and (b) rendered in measurable terms that ought to appeal to the purported wonkiness of Third Way types.
As a follow-up to my earlier post, "Identity economics--a major breakthrough?", here's a look at how differences in ideological identities produce different activities, while simultaneously revealing a major conceptual problem with the minimalist "Third Way" infatuation with "nudges".
A couple of weeks back, at the Monkey Cage, Erik Voeten called attention to a very interesting finding about how Cass Sunstein-touted "nudges" can work like a charm to reduce energy consumption with liberals, but utterly fail with conservatives, who actually increased their energy usage in response to nudges pushing them the other way. This is, I believe, a fascinating example of how Identity Economics can help shed light on the limits of more narrow-minded technocratic fixes--and possibly even help to craft them more intelligently. (It should be noted that Sunstein's "nudges" are presented within the context of "behavioral economics", and take into account deviations from perfect information along the lines of Akerlof's earlier work, but they still fall within the overall narrative framework pushed by market fundamentalists that privileges approaches that don't rock the boat, don't raise systemic questions, and don't challenge existing structures of power.) Here's Erik:
This is pretty startling evidence of how political polarization affects every day life choices, and not in a good way (although the effects are not huge). The NBER paper [by Dora Costa and Matthew Kahn] is here, a short discussion by the authors is here and the abstract is below.
"Nudges" are being widely promoted to encourage energy conservation. We show that while the electricity conservation "nudge" of providing feedback to households on own and peers' home electricity usage works with liberals, it can backfire with conservatives. Our regression estimates predict that a Democratic household that pays for electricity from renewable sources, that donates to environmental groups, and that lives in a liberal neighborhood reduces its consumption by 3 percent in response to this nudge. A Republican household that does not pay for electricity from renewable sources and that does not donate to environmental groups increases its consumption by 1 percent.
In the discussion, the researchers add:
If the same message "turns on" greens but "turns off" more conservative individuals, then to reach out to all members of a diverse population requires a mixed-messages strategy....
To design nudges effectively, a "nudger" must anticipate how diverse subjects will respond. We have shown that while energy conservation nudges work with liberals, they backfire with conservatives. Greens may reduce their consumption in response to the receipt of a Home Energy Report because both private and social effects work in the same direction. They want to be good global citizens and suffer when they are made aware that they are "part of the problem."
The obvious lesson for field experiments is that on polarised issues even seemingly innocuous messages may trigger perverse effects. What works on average in this California county may not work on average in Lubbock, Texas if the proportion of greens is less.
George Akerloff has a Nobel Prize in economics. He shared it in 2001 with Joseph Stiglitz and Michael Spence for his work on imperfect information. His seminal paper on the subject, "The Market for Lemons: Quality Uncertainty and the Market Mechanism" (1970) took the used car market as an example where the lack of reliable product information meant that lemons could be sold for more than they were worth to people who would assume their quality was average (lacking any basis to know better), whereas cherries could not get the price they were worth, so they tended not to be on the market. As Wikipedia notes, the initial reception of Akerlof's paper was not enthusiastic at first, though that changed over time:
Both the American Economic Review and The Review of Economic Studies rejected the paper for "triviality", while the reviewers for Journal of Political Economy rejected it as incorrect, arguing that if this paper was correct, then no goods could be traded. Only on the 4th attempt did the paper get published in Quarterly Journal of Economics.[2] Today, the paper is one of the most-cited papers in modern economic theory (more than 5,800 citations in academic papers as of July 2009).
It's possible that Akerlof could earn a second Nobel Prize for work he'd only just begun when he got his first one, although his co-author, Rachel Kranton, should have pride of place for this one, since she first had to convince Akerloff himself that there was something there that needed attention. This work involves the integration of a key concept from the social sciences--identity--with one of the key strategies of micro-economics--game theory. Conventional micro-economics takes the view that people are rational decisionmakers, maximizing utility with respect to their preferred tastes. Over the last two decades behavioral economics has attacked this model by discovering all sorts of behavior that doesn't fit the simplified model of rationality that micro-economists use. For example, people don't equally value losing or gaining a dollar, even though the model says that they should. But Kranton and Akerlof have developed models that explains some of this "irrational" behavior--including, I would argue, the fact that sometimes only economists and their students act the way that "economic man" is supposed to.
In 1995, economist Rachel Kranton wrote future Nobel Prize-winner George Akerlof a letter insisting that his most recent paper was wrong. Identity, she argued, was the missing element that would help to explain why people--facing the same economic circumstances--would make different choices. This was the beginning of a fourteen-year collaboration--and of Identity Economics.
Identity economics is a new way to understand people's decisions--at work, at school, and at home. With it, we can better appreciate why incentives like stock options work or don't; why some schools succeed and others don't; why some cities and towns don't invest in their futures--and much, much more.
Identity Economics bridges a critical gap in the social sciences. It brings identity and norms to economics. People's notions of what is proper, and what is forbidden, and for whom, are fundamental to how hard they work, and how they learn, spend, and save. Thus people's identity--their conception of who they are, and of who they choose to be--may be the most important factor affecting their economic lives. And the limits placed by society on people's identity can also be crucial determinants of their economic well-being.
