Brief Thought on Zingalesism

by Reihan Salam

Having hopped on the Zingales bandwagon almost a decade ago, when he was the co-author, with Raghuram Rajan, of the excellent Saving Capitalism from the Capitalists, I’ve been very pleased to see him emerge as one of the leading intellectual lights of the pro-market center-right. Zingales’s new A Capitalism for the People, like Alex Tabarrok’s Launching the Innovation Renaissance, builds on an insight I associate with Andrei Shleifer: advocates of market-oriented reform must embrace strategic policy activism because stable societies are always in danger of falling into an Olsonian special interest trap.

In today’s New York Times, Zingales has an op-ed that offers a better way for nonaffluent students to finance a college education:

Investors could finance students’ education with equity rather than debt. In exchange for their capital, the investors would receive a fraction of a student’s future income — or, even better, a fraction of the increase in her income that derives from college attendance. (This increase can be easily calculated as the difference between the actual income and the average income of high school graduates in the same area.)

Alex Tabarrok has more thoughts on the proposal, and he makes note of Lumni’s success in Latin America, a subject we’ve discussed in this space. 

Zingales has also drawn attention for his musings on the political economy impact of the repeal of Glass-Steagall, which in turn sparked a sharp reply from Mark Calabria of Cato. (Briefly, Zingales argues that the consolidation of the financial sector has amplified its political power while Calabria suggests that a fragmented financial industry might in some respects prove even more influential.) What’s interesting, however, is that Zingales and Calabria don’t disagree on the need for a serious overhaul of how we regulate the financial system. Indeed, Calabria has emerged as one of the more creative thinkers on this front, having called for limiting deposit insurance for too-big-to-fail banks to contain systemic risk. 

To be a bit meta, I’m encouraged by these discussions and debates because it looks to me like the rise of the Fourth Way, a derisive term that Mark Steyn introduced in an article for The Spectator published in 2000. Basically, Steyn was poking fun at how various center-right politicians had responded to the emergence of Third Way politicians on the left by advancing their own more “compassionate” ideological synthesis. Compassionate conservatism was, for a variety of reasons, a false start, particularly in the U.S. It wound up having a very limited impact on the margins of domestic policy: faith-based initiatives, marriage-promotion initiatives, school choice aimed at the poorest students, etc. The domains that center-right thinkers are rethinking now — financial regulation, the industrial organization of the public sector, the market for K-12 and tertiary education, health system business models, the basics of how we tax and spend — are absolutely central to our future growth prospects. 

While Zingales and Tabarrok offer larger architectures for Fourth Way thinking, others, like Rick Hess and James Capretta, are focused on particular policy domains. (I can think of dozens of other names, but you can find them just as easily by reading back issues of Yuval Levin’s National Affairs.) But what we’re seeing is the emergence of a pretty coherent and compelling program. My hope is that Scott Sumner’s market monetarism becomes a part of this synthesis, though it remains very controversial on the right. 

Final thought: as Ross Douthat has argued in a recent column, the Romney campaign could use an injection of Zingalesism. Apart from giving the former Massachusetts governor a more attractive governing agenda, it might also give him a populist narrative that could help him “scale the blue wall,” to use Josh Kraushaar’s term. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.