Posts tagged: trust

Sweden, Venezuela, and Socialism

Now that socialism* is no longer a dirty word in American politics, we’re starting to argue about what socialism in the United States would look like. Conservatives and libertarians argue that American socialism will make us more like Venezuela, whereas progressives argue that American socialism will make us more like Sweden. I think both arguments have strengths and weaknesses.

I. Welfare vs Regulation

To see why, let’s distinguish between the welfare state and the regulatory state. The welfare state provides various kinds of transfers, tax-funded social programs that typically take the form of social insurance. The regulatory state intervenes in markets to fix various purported flaws, say through imposing price controls, providing subsidies, restricting the activities of business, creating unstable property rights regimes, and the like.

Substantially expanding the American welfare state is probably not going to lead us to become more like Venezuela.** The freest countries tend to have extensive welfare states. But substantially expanding the regulatory state runs that risk. If we look at the most influential economic freedom index, which is comprised mostly of measures relating to the regulatory state, Venezuela ranks 179th out of 180. Sweden, by contrast, is in the top 20. And if you remove government spending from the economic freedom index, Sweden should climb even higher, and further away from Venezuela. Sweden has one of the freest and most stable market economies in the history of the world, whereas Venezuela is riddled with constant, desperate market manipulation. The Venezuelan nation-state messes with the economy far too much, and that has led to massive dislocations and to tyranny. The Swedish economy, by contrast, redistributes a lot of wealth, but Swedes deliberately moved away from a heavy regulatory state a few decades ago, and it’s done them a world of good.

Here’s how this point can improve our political discourse. Bernie Sanders stands above all the other Democratic presidential contenders in his enthusiasm for the regulatory state, and has proposed dramatic expansions of the welfare state. When Bernie talks about expanding the regulatory state, such as supporting nationwide rent control, pointing to Venezuela is fair game. But when Bernie talks about expanding the welfare state, pointing to Sweden (today) is perhaps more appropriate.

That’s not to say that an extensive welfare state is justified. The point is that expanding the welfare state doesn’t set us on the road to Venezuela, while expanding the regulatory state very well might.

II. Trust Matters Too

Both sides should also bear in mind that social trust plays a huge role in explaining how well a society’s political and economic institutions work. Venezuela is a low trust society, whereas Sweden is a ridiculously high trust society, with the United States in between (trust data).

For instance, in the mid 90s, nearly 60% of Swedes said most people can be trusted, 35% of Americans said most people can be trusted, and 14% of Venezuelans said most people can be trusted. Sweden continues to hover around 60-65%, the US around 35-40%, and Venezuela around 13-15%. If you don’t trust most people, transactions are harder, including transactions with the civil service. The programs that work in Sweden may work worse in the US, and will tend to work worse still in Venezuela. So it’s important to recognize social trust as a variable in policy efficacy.

This limits the claims of both sides. Progressives shouldn’t expect that Swedish policies will work as well in the US, and conservatives and libertarians shouldn’t expect that Venezuelan policies will work as badly in the US.

* Here “socialism” refers to an extensive social democratic state, not government ownership of the means of production.

** Unless the social programs are funded with unstable resources subject to great government control, like revenue from government-run oil companies, as this mixes the welfare state and the regulatory state.

Trump, Trust, and Impeachment

The greatest danger Trump poses to the country is norm erosion. All free and democratic societies depend on norms beyond the law itself in order to function well. In particular, they rely on social norms, patterns of behavior that are not only backed by empirical expectations (people think most others will follow the norm) but by normative expectations (people share a belief that we think others think we ought to follow it). So social norms are publicly recognized rules that are seen to be in effect and normatively binding. Social norms are one of the key sources of social order. In many cases, if laws contradict social norms, they will simply be ineffective.

Democracy depends on political officials following social norms like, well, don’t use your office for personal gain. These are acts that researchers call “grand corruption,” and they are probably the greatest threat to trust in government. What’s worse, corruption is one of the few factors that clearly negatively impact social trust, a precious resources that makes just about every institution work well. When an elected official, usually a very high status person, violates an anti-corruption social norm, they therefore not only facilitate the harm the social norm discourages, they undermine the basis for social cooperation itself.

Ordinarily, social norms are enforced through sanctions – blame and punishment – where violators are held accountable by members of their community, and most importantly by high status members. The hope is that the sanction, or the prospect of sanction, motivates compliance with the norm, and some kind of repentance by the norm violator. The primary aim is to impose costs on the violator, which will include the moral emotions of guilt and shame, and drive compliance. If the violator can’t be successfully punished, the aim is to discourage others from violating the norm in the future.

Impeachment might not cost Trump, who I think welcomes it, but it can impose costs on future violators, since most officials have a capacity for guilt and shame and don’t want to be remembered for being impeached. So I think it makes sense to move forward. However, I also worry that Trump may benefit from the impeachment process, especially because failing to remove him can be spun as exoneration, and Trump can easily control the media narrative throughout the trial. If he benefits from this sanction by creating a counter-sanction, that may embolden not only him, but future officials.

For this reason, it is essential that Trump be successfully sanctioned. But successfully sanctioning someone who feels no guilt or shame, and who is a master media manipulator, is hard. It will require skillful political maneuvering. If it succeeds, we may preserve the precious resources of social and political trust. If it fails, God help us all.


Trust Papers Series #1 – Trust and Monarchy

Trust makes reconciliation possible. That’s what’s led me to my research on trust and society-wide trust, often called social trust. There are a massive number of papers in political science and economics that try to establish the causes and consequences of social trust. I’ve spent the last few years reading them. In light of my work, I’m starting a series of posts on my favorite trust papers, and I hope to share new papers as I read them. If any trust researchers are reading this post, please send me your papers. I can’t promise to post them all, but I’d love for this blog to become a place where you can share your work.

I’ll begin the series by sharing one of my favorite trust papers. I like it in part because it contains a really weird result – monarchies are more trusting than non-monarchies.

The paper explores the determinants of generalized trust across countries. The findings suggest that only few variables can be considered significant. Social polarization in the form of income inequality and ethnic diversity reduces trust, Protestantism and having a monarchy increases trust while post-communist societies are less trusting than other. The findings also provide support for the use of a standard indicator as a stable measure of generalized trust and emphasize the importance of taking endogeneity seriously.

My sense is that monarchy promotes trust because it provides people with a high status, non-partisan person. So people can unite around someone who seems to transcend some salient social cleavages.

The paper has other interesting results too. Protestantism promotes trust. I think the reason is that Protestant countries tend to break up large families, since large families can tempt people to only trust their clan and not their institutions or people from different walks of life. Post-communist societies are less trusting, and here my guess is that communist countries have secret police, so you never know if you can trust someone not to report you and get you sent off to Siberia.