Want to create a more just society? Reform private property radically and change how we vote. This is the message of a new book that came out this month.
Eric Posner and Glen Weyl recently published Radical Markets: Uprooting Capitalism and Democracy for a Just Society, Princeton University Press, 2018. You can get a taste of what’s in the book by the authors’ May 1st piece in the New York Times. The Economist called the book “arresting if eccentric manifesto for rebooting liberalism” in a mainly positive review.
The average person who has taken at least one introductory economics course might well be bewildered by the main economic idea in this book. It posits that private property of assets is a deep-seated, powerful source of monopoly power that undermines competition in economic markets. So reform private property, they argue. How? Didn’t we learn in school that without well-defined and well-enforced property rights perfect competition cannot take root?
The idea is not to abolish private property, however. It is to reform it drastically. Each person would publicly state the value of every asset they own. They would then be taxed on this. A wealth tax, you say, big deal, nothing new. What’s to prevent one from undervaluing their holdings to lessen their tax burden? The other part of this tax proposal, that’s what. Once you have declared a value for each of your assets, you must be willing to sell it for that amount to anyone willing to pay it. Technology, perhaps in the form of a smartphone app, would take care of the technicalities; something like Uber for trading houses.
The proceeds from this wealth tax can be used for public projects, perhaps funding a universal basic income, while the tax system would allow the efficient allocation of assets. So far, so Henry George in a modern guise. (And I learned from this book something really new to me: that no less a well-regarded economist than Léon Walras had ideas similar to those of Henry George on taxing land.)
But that’s not all! Posner and Weyl also want to bring into the voting system ideas from the economics of mechanism design. In fact, I only bought the book after I read a short article by Weyl with Steven Lalley on this in the American Economic Review’s Papers and Proceedings for 2018 (an ungated version is here).
Imagine every citizen being given a budget of “vote-buying money”, just as much as every other citizen. They would then be able to spend some of this “money” to buy extra votes for elections that concern issues they care a lot, at the cost of having fewer votes to cast in other elections. The prices of votes wouldn’t be linear, but quadratic. That is, one vote would cost one vote “dollar”, two votes would cost four, three would cost nine, and so on.
Incredibly at first thought, a voting system like this market-inspired one has nice properties in theory. Markets in everything, indeed!
It is natural for this proposal to raise concerns about individual rights, as the review in The Economist points out. However, a radical proposal may well be what we need in our time of political polarization and economic strain for more and more people. I will happily read this book to the end and prepare something to say about it in my economic inequality course. You will probably hear from me about it again in this very website.