Arnold Kling  

The Moral Authority Test

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Tim Carney reports on the latest project from the Mercatus Center.


George Mason University's Mercatus Center this week is kicking off a series of papers on cronyism and business-government collusion.

(Seemingly-related Video from LearnLiberty)

You can think of the project as having two goals. One goal would be to clarify for conservatives the distinction between being pro-market and being pro-business. I think that some progress toward this goal is possible.

The other goal would be to persuade liberals that deregulation can be a way to reduce the power of big business. On that goal, I am much less optimistic. You can talk all day about regulatory capture and how big government serves entrenched interests. And what the liberals will come back to you with is, "Yes, that is why we need campaign finance reform and to elect politicians who believe in stronger regulation."

Folks like Luigi Zingales dream of making anti-crony-capitalism a winning issue for Republicans. I want Republicans to be anti-crony-capitalist, but I don't think it's a winning issue.

I picture liberals as having an unshakable belief in the power of moral authority. That is, if you exert enough moral authority, you can overcome any problem. Or, to put it in negative terms, if any problem exists, it is because not enough moral authority has been exerted to try and solve it.

From that perspective, proposing a market solution, which is necessarily imperfect, comes across as evil. Instead of summoning moral authority, the market-advocate comes across as willing to tolerate something that is just wrong.

Imagine that any policy proposal has to pass the following criterion:


If you had unlimited moral authority, is this what you would propose?

Call this the moral authority test. And, yes, I am being coy about defining "moral authority," because I think it is more of a feeling than a tangible concept. Maybe "moral outrage" would be a better term.

The notion that the best way to reduce big-business privilege is to reduce regulation clearly fails the moral-authority test. It is almost never the case that the sole intent of regulation is to promote privilege. The usual case is that regulation is undertaken with some worthwhile purpose, and the advantages given to large incumbent firms are a side-effect.

For example, consider differentiated regulation of banks that are "too big to fail." The intended purpose is to make our financial system safer. The side-effect is to privilege the biggest banks. But to suggest deregulation as the solution would not impress liberals. Even if current policy both fails to achieve its intended objective and results in adverse side-effects, deregulation still fails the moral authority test.


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COMMENTS (22 to date)
aez writes:

Does moral outrage signal an alignment with claimed moral authority, as you are using the terms? (For example, the Occupy Whatnot movement and other such gestures.)

Ted Levy writes:

Knowing the "intent of a regulation, Arnold, requires detailed historical analysis, not just reading the press releases...

RPLong writes:
I picture liberals as having an unshakable belief in the power of moral authority. That is, if you exert enough moral authority, you can overcome any problem. Or, to put it in negative terms, if any problem exists, it is because not enough moral authority has been exerted to try and solve it.

Well put, Prof. Kling.

magilson writes:
I picture liberals as having an unshakable belief in the power of moral authority. That is, if you exert enough moral authority, you can overcome any problem. Or, to put it in negative terms, if any problem exists, it is because not enough moral authority has been exerted to try and solve it.

As opposed to conservatives who are constantly abandoning and realigning their moral positions based on policy results?

I'm no liberal. But if this is your view of your ideological opponent you're never going to hold their attention long enough to convey an idea they might consider once in a while. Liberals and conservatives have strong moral positions they rarely re-consider when policies fail to achieve their goal. This is not a useful distinction at all.

Aeon J. Skoble writes:

Wow, that perfectly describes every argument I've had on this issue. Excellent analysis.

D writes:

Excellent post. Explains a lot. In fact I'm concerned in explains too much.

collin writes:

Maybe, conservatives are great at nodding their heads over regulation but not acting while liberals are more likely to immediately disagree with you. Remember the deregulation of 1970 -1985 of many markets occurred mostly during the Carter administration (airline, Judge with AT&T, railroad, beer, etc.) Try going Matt Yglesias way with small regulations as opposed to big banking regulations. Long term small movements of kitchen table issues will produce better results.

For the life of me, it seems like libertarians should have been screaming at the top of their lungs that prescriptions on birth control is the original sin versus insurance mandates. I suspect most liberals would have agreed with putting birth control over the counter is the best low cost option as opposed of getting a doctor's permission slip. However, only Dave made a small post on the issue and libertarians lost an opportune time to win some liberal support.

Dave writes:

Agreed on economic issues. Ironic then that it is conservatives who take the "moral outrage" approach on social issues.

vlad writes:

This applies to libertarians as well, much of the Rothbardian lack of willingness to compromise on anything stems from moral outrage. It's just a different moral system.

Lord writes:

While regulatory authority is subject to capture, it really seems doubtful that the result is any different than the unregulated market for the power to influence government is the same power to influence markets and their influence on markets is greater.

I picture libertarians as having an unshakable belief in free markets. That is, if you exert enough free markets, you can overcome any problem. Or, to put it in negative terms, if any problem exists, it is because not enough free markets have been exerted to try and solve it. But it is because markets aren't free and aren't perfect that is the problem. The only way to prevent TBTF banks is to prevent TBTF banks, but that is regulation, it's not markets.

Steve Z writes:

Ted: No, that's wrong too. You can't know the intent of a regulation because regulations are incapable of intent. You also can't know the intent of the people who passed the regulation, because multimember bodies with multipeaked preferences are incapable of having a unitary intent. All you can know is the words of the regulation.

Costard writes:

Lord - lobbyists make money because political influence can accomplish things that economic influence cannot. Ultimately the great distinction between the public and private sectors is that the second admits competition, while the first squeezes it out. Why dominant businesses, industries, special-interest groups and ideologies all seek the protection of government, is no great mystery.

With regards to TBTF - regulation has not prevented TBTF, it has not solved TBTF, and it since it was (and is) Uncle Sam's explicit mission to prevent bank failure in the first place, I don't see how there can be any question of blame here.

A rhetorical question. If consumers are unfit to judge the businesses they buy from, how are they qualified to judge the politicians they vote for? Where free markets go -- so goes democratic government.

collin writes:

How can you say TBTF merely came from regulation? The six banks or investment companies TBTF (BofA, Citibank, Chase, JP, Wells and Goldmann) reached their size before 2008 and all cases were relatively run well until 2003. The reason why they grew bigger in 2008 is the second tier of bank size (Wa Mu., Wachovia, Merrill) were failing.

It was the bank lobbist who spent their time to deregulate the banks in the 1980's - 2005 so the government would avoid stopping the bank consolidation.

Tom E. Snyder writes:

This explains why Obama, when confronted with the fact that higher marginal tax rates on the rich would decrease revenue, said he didn't care; he still wanted to raise the rates because of "fairness".

Milton Friedman, for all his faults on Monetarism, was an avowed advocate of the free market. I remember him clearly stating he was pro-free enterprise, not pro-business.

Ken writes:

Personally, I doubt that TBTF would occur in the absence of all the public guarantees and other handouts. The big institutions exist due to massive rent seeking.

I have no problems with regulating them because we are guaranteeing their deposits. However, it should be something simple like one suggested by George Shultz: Capital requirements increase with size.

You could do similar things with fed rates. Rates go up with increasing institutional size, for example.

Foobarista writes:

Moral authority and the ultimate perfectibility of mankind ride in the same cart. If you believe in absolute moral authority, you believe that a "perfect" solution is waiting out there, and all that is needed is for people to be perfect for it to work.

Shayne Cook writes:

@ Dave:

Your second sentence confused me (forgive me, I'm easily confused when it comes to topics of left, right, moral, immoral, etc.)

Only a few days ago, Tom West and I had a Comment Exchange on this very subject where Tom assured me that the left has moral authority, or more precisely that "we [the left] believe we do."

If Tom happens to read this, perhaps you and he can get together and resolve the issue, (and my confusion). Basically, I really, really have a desire to be moral, I'm just confused as to whether I have to be "left" or "right" in order to be moral.

Any conclusion you and Tom can reach on this matter would be greatly appreciated.

Joe Cushing writes:

Wow! What a great post. When I first started reading this post, I found a quote. I was going to copy it and comment that I agreed. Then the next paragraph had a great thing to quote then the next and so on. This post completely sums up my conversations with liberals. They don't seem to get it. They understand there is failure in markets to achieve perfection but they can't see that certain failures are built into government too. That most of these failures are far worse than the one they are trying to fix. I don't know how to overcome this.

It may help, as I have mentioned before, to coin the term "government failure" to counter the term "market failure." At least it is a sound bite the media can pick up and it can provoke thought. Everyone should start to the term government failure any time they are talking about an inevitable outcome of government action. When talking about regulatory capture, for example, is a time to use the term.

Sam Grove writes:

From my libertarian perspective, the problem is not moral authority, but the use of it as justification for wielding political power.

The manifestation of this as a problem is the contest between morally self authorized groups over gaining political power.

This is what distinguishes libertarians from advocates of morally authorized political power.
Libertarians don't want to seize power, we want to persuade subjects of political power that it is in their greater interest to stop supporting those that seek or have power over them.

When enough people are persuaded of this, they may then elect people to office who will dismantle state serfdom.

Fortunately, the government has perhaps become our greatest ally in persuading people that morally authorized political power is not working in their best interest.

Miles Stevenson writes:

This concept is similar to many of those Thomas Sowell expressed in "A Conflict of Visions". Liberals are uncomfortable thinking in terms of trade-offs. They prefer to think in terms of "solutions". They believe that they have some way to "solve" government corruption, crony capitalism, disparate income levels, and even poverty itself. If you haven't read it and you are interested in the issues that Arnold brings up, I can't recommend it enough.

The most recent episode of EconTalk with Joseph Stiglitz demonstrated Sowell's deep understanding of this debate. Stiglitz was readily agreeing at every turn that well-meaning government programs have been a disaster in the historical theater, yet his faith in the "correct" government solutions were un-shaken. The simple idea that a less powerful government becomes a less attractive institution for cronies to capture doesn't seem to move liberals much at all.

I do feel that I may have been mis-characterizing the left to a certain degree after that episode though. I always thought of the left as having a very simple concept of government regulation: more regulation = more solutions to problems, less regulation = more problems. But I'm not so sure that most liberals are quite that naive anymore. I think they are aware that greater volume of regulation isn't necessarily a good thing. There are plenty of liberals who believe that bills like Dodd Frank are a negative thing. Liberals do think that regulation is usually the fix that will "solve" any of our problems, but for them, it's more about quality than quantity I believe.

Sam Grove writes:

I recommend the work of Jonathan Haidt in relation to this subject. Start with this recent article by Haidt at Reason.com

RussAbbott writes:

I'm always suspicious of an argument that is based on the notion that Group X believes Y. That seems like the start of a strawman that is set up to be defeated.

So let's forget about what "liberals" believe. What's the point of the article otherwise? I'm not sure. It would certainly please me to have Republicans campaign (and follow-through) on an anti-crony-capitalism position. But I suspect that if they did that, they would lose a lot of their support from, um, crony capitalists, which they could not afford. So it's unlikely to happen.

With respect to moral authority, I'm missing the point. The "moral authority test" asked what one would do if one had unlimited moral authority. What does that mean? Presumably it doesn't mean unlimited political power.

Are we assuming that moral authority translates into political power? Probably not, but then what are we really talking about?

It's not the case that people with lots of moral authority achieve their political ends. The Catholic Church (whose moral authority may or may not be well-founded) has opposed capital punishment for years. But it hasn't changed much. They have also opposed birth control with virtually no effect. So it's not clear to me what the intent is of focusing on moral authority.

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