The Agenda

Daron Acemoglu and James Robinson on Capture and Anti-Capture

As an admirer of Daron Acemoglu, I was disappointed by a recent essay he co-authored with James Robinson. The following passage struck me as careless:

The capture of the political system is underpinned by the increase in economic inequality as well as several other factors creating a platform for the wealthy to monopolize politics to a recently unprecedented extent. These include the reaction of conservative and business groups to the “Great Society” programs of the 1960s and early 1970s and the increased taxes that paid for them; the reaction of certain conservative segments of the US population to the civil rights movement; and the decline of organized labor as an economic and more important political force.

One could identify a few other forces that might also be salient: the decline of local revenue decentralization, the dramatic increase in state and local spending, the shift from competitive to cartel federalism, the decline of public sector efficiency, the increasing influence of public sector unions within the broader labor movement, the increasing prevalence of occupational licensing, and the increase in compliance costs facing firms. These forces have magnified the influence of organized, wealthy and non-wealthy, and have contributed to the deterioration in the quality of public services, which might otherwise have done a better job of translating public resources into productivity-enhancing investment in human capital.

Acemoglu and Robinson continue in this vein: 

These shifts were coupled with technological changes, particularly rise of television as the main medium via which people get their political information, which made money much more powerful as a tool for determining the outcome of elections.

It’s not clear that the authors have thought rigorously about this question. While the claim makes intuitive sense, we’d presumably want a comparison with earlier eras (e.g., the age of ethnic patronage machines).

The marginal impact of money has been increased by the fact that perhaps as many as a quarter of US voters, mostly fundamentalist Christians, cast their ballots mainly on the basis of normative issues. The co-optation of such voters by the Republican Party has given it greater freedom to propose economic policies favored by its other constituents, most notably the wealthy.

This is one of the more extraordinary claims in the essay. Could the authors really believe that “fundamentalist Christians” are the most significant voting bloc that “cast their ballots mainly on the basis of normative issues”? Given that the authors are concerned about inequality, one would assume that they’d be interested in the affluent college-educated voters who vote for center-left policies “mainly on the basis of normative issues,” and who tend to discount questions relating to public sector efficiency. The co-optation of such voters by the Democratic Party has given it greater freedom to propose economic policies favored by its other constituents, most notably public sector employees (15.3% of the workforce), government contractors, and the institutions John DiIulio has referred to as “private administrative proxies” — the network of large non-profit organizations recognized as “public charities” which receive a large share of their funding from the government (one-third of non-profit dollars are from government sources, the non-profit sector as a whole employs a tenth of the workforce).  

The Democrats, often dragging their feet, have typically followed the money, if not in their rhetoric, in actuality in their policies on many important issues such as redistribution and regulation. The result of this cocktail of changes, greater inequality, greater power for the wealthy at unchanged levels of inequality, and greater political utility of the thing the wealthy had most of – money – created a new form of inequality multiplier. As inequality increased the rich were able to push government regulation and policy in their favor, thus creating even more inequality. Just as in the Gilded Age, this trend threatens the inclusive nature of US economic institutions.

There is definitely some truth to this analysis. But the expansion of state power has also served as an “inequality multiplier,” in ways that Acemoglu and Robinson don’t address with the subtlety and intelligence I’ve come to expect from Acemoglu’s work. 

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