The distribution that matters most in a liberal democracy is not of money, or of status, but of power. A person who can exercise power over the course and content of their own life, and over the shared institutions within which that life is lived, is a citizen. To be subject to the arbitrary power of another is to be, well, a subject. (I write as someone who is both a citizen of the United States of America and subject of Her Majesty Queen Elizabeth II).
One of the most important challenges in liberal democracies is therefore to ensure the “conditions of rough power equality” that Henry Farrell, in his contribution to this series, rightly emphasizes. Classical liberals have historically been in favor of free markets because markets are effective diffusers of power, and in favor of democratic political systems that place considerable power in the hands of voters.
Power diffused is better, then, than power hoarded. But power that is contained within a particular domain is also better than power that spills over from one to another – from money power to political power, for instance. Bertrand Russell, in his 1938 essay Power: A New Social Analysis, argues that “the fundamental concept in social science is Power, in the same sense in which Energy is the fundamental concept in physics.”
Russell believed the key task of social science was to understand how power can be converted from one form to another – and that the key task of politics was to stop it. In their provocative book The Captured Economy, and their opening essay in this series, Brink Lindsey and Steve Teles write in a Russellian spirit. They show how political power is converted to regulatory power and then to economic power. Democratic political systems are used in certain instances to distort market operations in a way that encourages the hoarding, rather than dispersal, of power through market operations. Among their examples are occupational licensing, subsidies to mortgage lenders, and land use regulation.
The market in land provides a perfect example of the captured economy thesis. As Lindsey and Teles show, the increasing complexity and scope of land use regulations have badly distorted the market in favor of those with capital. Add to that the perverse and regressive tax deduction on mortgage interest, and the result is a series of market-distorting regulations, subsidies, and incentives.
As Jason Furman, chairman of the Council of Economic Advisers from 2013 to 2017 writes: “While land use regulations sometimes serve reasonable and legitimate purposes, they can also give extra-normal returns to entrenched interests at the expense of everyone else…Zoning regulations and other local barriers to housing development [can] allow a small number of individuals to capture the economic benefits of living in a community, thus limiting diversity and mobility.”
Lindsey and Teles make the same point in earthier language. “Legacy landowners,” they write, “have made out like bandits.” Local governments in over-zoned, wealthy neighborhoods, if they are to be accountable to their existing voters, are likely to maintain strong defenses against market forces operating on their land. Exclusionary zoning protects the capital of the wealthy (and often their school district too), at the cost of freeing up more land so that housing becomes more affordable in high-growth cities. In a landmark 2002 review essay, “Homes Rule,” in the Yale Law Journal, Lee Anne Fennell says that zoning regulations have become “a central organizing feature in American metropolitan life.”
Fennell is writing in response to the “homevoter” thesis put forward by William A. Fischel. In essence, the idea here is that people who own their homes will rationally seek policies that protect the value of that home. It may be that some places will end up with more expensive homes as a result of such zoning; but in Fischel’s model, this is a good thing, since they will then have to pay taxes that contribute to local services. As he puts it: “the local property tax becomes an unavoidable fee for services rendered,” such that “homebuyers get exactly what they pay for (since they have a choice of many communities’ service packages), and they pay for exactly what they get (since local zoning sees to it that they cannot shirk by building a smaller than average house).”
At a local level, this makes sense. The problem with local control over land is, as Fennell points out, a collective action one, at least if the “collective” is defined as a group bigger than the one within a local government’s jurisdiction. Wealth accrues to the wealthy, but at the expense of worse opportunities for others. There are also issues of distributive justice at stake here. Housing wealth is disproportionately white, in part because of explicitly racist policies in previous decades. Regulations that deepen the wealth divide in housing also further worsen this race gap.
You would think that the use of government power to rig markets in favor of the rich would have conservatives up in arms. But with honorable exceptions, not so much. Many trumpet the value of local democracy, and like Ilya Somin in this series, rely on “foot voters” (close cousins of Fischel’s “homevoters”) to provide the necessary corrective.
To be more direct: Lindsey and Teles help us to distinguish between two kinds of conservatives; the Burkeans who value institutional power above individual power, and the Hayekians who value the liberalizing power of markets.
Markets are social institutions that tend, other things equal, to be power-dispersers. But other things are not equal. Regulation can act to improve markets in this regard, or it can make them worse; in this sense it makes no sense to be a priori “against” or “for” regulation. It will always depend.
In terms of current dominant political divide, both sides have unhelpful biases. Those on the political right tend to err on the side of thinking that government intervention is intrinsically bad for markets; when on some occasions, regulation can improve market operations. Those on the left err in their anti-market instincts, missing how often markets act to widen opportunities and disperse power.
Lindsey and Teles describe their approach as “liberaltarian,” that is, a cross between “liberal” and “libertarian.” Such linguistic creativity results from the loss of the word liberal to the political left at some point between John Locke and John Dewey.
But there is a better label for a political philosophy that focuses on the power of individuals to pursue their own good, that seeks to maximize pluralism and diversity, and that judges both markets and governments (and indeed all institutions) by the extent to which their power it used to liberate and empower citizens. That label? Liberalism.
John Stuart Mill, one of the founders of modern liberal thought (and Russell’s godfather as it happens), wrote in 1859 that “the interference of government is with about equal frequency, improperly invoked and improperly condemned.” Lindsey and Teles, writing from a thoroughly liberal perspective, properly condemn some instances of government interference.
They intentionally focus on a few areas in which the anti-regulatory instincts of market conservatives overlap with the progressive desires of those on the left; necessarily it is an incomplete list. Their work could be seen as illuminating a narrow but important overlap on a Venn diagram of policies from left and right. That is valuable enough in itself. But there is a more ambitious agenda lurking just below the surface of their writing: the potential for a truly liberal framework for shaping and judging policy.
Editors’Note: In a later response, Richard V. Reeves has acknowledged that his characterization of Prof. Somin’s position was erroneous, and it should be considered withdrawn.