Bad Libertarian Arguments against Sweatshop Regulation

I’m generally pretty skeptical of sweatshop regulation. I buy the argument that for most workers at low-wage factories in developing countries, these jobs are their best option relative to alternatives such as working in agriculture or in the underground economy. I think many Western efforts to regulate or boycott arguments are misguided and harm people who they think they’re helping. But some libertarians make really bad arguments against sweatshop regulation, and intellectual honesty requires  me to call them out. The existence of bad arguments for X, even when there are also good arguments, tends to undermine support for X.

One prominent recent book that defends sweatshop jobs is Out of Poverty: Sweatshops in the 21st Century by Ben Powell. It’s an interesting book with lots to think about, but I want to focus on one excerpt where Powell discusses workplace harassment. Powell objects to criticisms by anti-sweatshop groups of sexual harassment on the job:

If the risk of sexual harassment is part of the working conditions at a factory, then firms have to offer higher wages to attract workers…. In short, the analysis of sexual harassment on the job is much the same as the analysis of other working conditions. Laws that effectively eliminate sexual harassment would lower wages. If employees desired this, then market forces would remix the compensation package to minimize harassment and lower wages. (p. 184)


The mechanism here is the idea of “compensating differentials” for labor. If a job is unattractive in some dimension, such in the level of abuse workers endure, in a competitive market the employer will have to pay higher wages to compensate for that unattractive feature. Powell cites as evidence for this mechanism a 2010 study of U.S. markets by Joni Hersch, which finds that women do in fact enjoy a compensating differential of about $0.25.

The first thing to note, though, is that Hersch’s analysis cannot simply be applied uncritically to markets outside the US. There are at least two reasons for this. First, markets for sweatshop labor may be much less competitive than US labor markets. This is an important condition for the positive effect of compensating differentials on wages

Second, even if the compensating differentials mechanism has an effect, sexual harassment may have other negative effects on wages such as higher turnover, lower employee morale, or inefficient efforts to avoid harassment, which leads to lower productivity. Because we cannot decide from the armchair which effect dominates (the productivity effect or the effect of compensating differentials), we need to do careful empirical analysis of the labor markets in sweatshop countries before we conclude that workers are paid higher wages as compensation for harassment.

But let’s assume that workers are, in fact, paid higher wages as compensation for harassment. Powell argues that we should infer from the fact that workers take these sweatshop jobs that workers prefer the money to a harassment-free workplace, since if workers had different preferences, the employer would pay a lower wage and reduce the level of harassment. Because workers agree to jobs where they sexual harassment, anti-sweatshop activists shouldn’t oppose it.

This argument is, to put it charitably, not very good. In the first place, it doesn’t at all follow from the fact that workers accept jobs with sexual harassment that we shouldn’t object to those terms of employment. Sometimes we shouldn’t make offers to people even though they accept it, particularly the offer reflects some objectionable preference (such as the desire to grope and physically violate women). We should do what we can to change those preferences (or at least the behavior associated with them) rather than take them as a fixed cost, which is the position of most anti-sweatshop activists. Even if workers accept those terms of employment, for example, they may prefer that employers didn’t have the desire to sexually harass them. They may prefer not be part of a collective enterprise where anyone’s harassed. This possibility, raised by Amartya Sen in a critique of the revealed preference concept, means we cannot necessarily infer welfare from choice or behavior.

There are good arguments against some regulations of sweatshop labor, but those arguments are generally sensitive to the costs and benefits of different regulations or the voluntary nature of the worker’s choice. In this case of Powell’s argument against sweatshop regulation, unfortunately, neither of these desirable conditions obtain.



Two things the new administration may get right

The GOP’s corporate tax reform proposal. Republicans have proposed replacing the corporate income tax with a destination-based cash flow tax (DBCTF). This is an idea that’s received support across the partisan aisle. Economists generally object to the corporate income tax because corporations ultimately don’t may much of the tax–the real burden of the tax generally falls on workers, consumers, and owners of stock. In addition, the corporate income tax represents a falling share of government revenue and an increasingly inefficient means of revenue generation. The DBCTF proposed by the GOP would significantly reduce the corporate income tax from 35 to 20% and modify several common deductions. These are quite significant: the elimination of depreciation means that companies can write off an investment in a single year rather than pay tax on a depreciated basis every year. This eliminates a tremendous disincentive to capital investments by essentially making them tax free. The elimination of the interest deduction eliminates the distortionary treatment of debt and equity, but some worry the elimination would impose a serious burden on the financial industry given that most of that industry’s cash flow comes from borrowing to lend.

A “destination-based” tax is good because it taxes corporations based on where they spend money, not where they produce goods. This eliminates US companies’ incentive to move profit-making activities off-shore to avoid high US rates. Such a tax may appear to subsidize exporters over importers, since importers will bear taxes on their purchases while exporters will not bear any tax on their overseas sales. While this might have a nominal effect, the real effect would be offset by changes in the exchange rate. A tax on imports and a subsidy to exports both lead to dollar appreciation–there are fewer dollars out there to buy imported goods so they’re worth more, and foreign buyers bid up the price of dollars to buy exported goods. The net appreciation of the dollar would mean no change in the US trade balance. One possibly distortionary effect, however, would be that dollar appreciation would reduce the value of foreign-denominated assets held by US citizens overseas. It’s likely that financial interests will object to this proposal as a result.

The reduction in the statutory tax rates from 35% to 20% would also put the US below the OECD statutory average of 24.7%. However, the effective tax rate faced by companies would depend on the details of the final bill.

Another prospect that excites me is the prospect of FDA reform. If you think that improved health is one of the most, maybe the most important improvement in well-being we’ve had over the last 200 years, reforming the process by which we develop new pharmaceuticals is really important. The new FDA commissioner could do important things like implement reciprocal recognition of drugs and devices with other licensing boards in advanced economies. Another policy change would eliminate the application procedure where companies have to apply to the FDA to start producing a generic drug, which is the regulatory barrier that makes it possible for entrepreneurs to implement monopoly pricing on generic drugs.



How biased advice can be good advice

Confirmation hearings for Donald Trump’s cabinet nominees are getting underway, and many commentators have expressed concern over the lack of ideological and political diversity among Trump’s cabinet nominees and advisors. I don’t want to get in to the specifics of these individuals’ qualifications, but I do want to examine an underlying assumption behind worries about ideological homogeneity in the incoming administration.

There is an idea, summarized by the expression “team of rivals,” that great leaders surround themselves with advisors with very different views of the world. Great leaders, according to this idea, incorporate a diversity of perspectives among their advisors to counteract their own biases rather than surround themselves with an echo chamber of like-minded individuals.

The team of rivals idea is only half-true, however. It’s true that good advisors should not falsify or misrepresent their beliefs to leaders. Good advisors need to have integrity and honesty, and flatterers generally make poor advisors as Machiavelli emphasized.

However, good advisors should not necessarily be unbiased or have very different biases* from the leader they advise. It is often optimal for leaders to solicit advisors with biases similar to the leader’s, or simply advisors with a bias rather than unbiased ones. The advantage of biased advisors is even stronger when there is urgency or information is costly (as all interesting decisions are). The optimal level of bias is not zero–instead, the optimal level of bias is that level most likely to shift the leader’s decision from what the leader would choose in the absence of advice.

In his 1985 paper “The Value of Biased Information: A Rational Choice Model of Political Advice,” Randall Calvert explains this counter-intuitive claim. The intuition here is that advice from someone who has a very different bias from you is a less credible source of information and less likely to change your own views. It is hard to tell with such an advisor how much of the recommendation reflects the true probability of the action’s success, and how much it reflects the advisor’s own bias. However, if someone with a similar bias to you recommends against the action toward which you’re both biased, or in favor of the action you’re biased against, that sends a very credible message.

An advisor with the same biases as a leader is more likely to advise actions consistent with the leader’s bias, which is a cost. But when the advisor recommends against his bias, that recommendation is much more credible. Put differently, suppose the advice in question concerns whether to stick with the status quo or adopt an alternative. Suppose the advisor and the leader are both biased in favor of the status quo. If the advisor recommends accepting the alternative, this is far more valuable to the leader a recommendation to accept the alternative from a neutral advisor or an advisor biased in favor of the alternative. The value of this information–a recommendation against one’s own bias–outweighs the cost of the advisor’s own status quo bias. Such a recommendation may eliminate the need for the leader to seek out further advisors and the cost of gathering further information.

Of course, there are also other dangers to advisors who share a leader’s own biases as explained above. But as Calvert showed, the optimal level of bias in an advisor is not zero for rational decision-makers. We are often better off receiving advice from people who share our own biases when information is costly and time is scarce.

*I should note that “bias” here refers to different things in the case of the leader and the advisor. In the leader’s case, a bias represents a prior belief that a particular action will be good or bad. In the advisor’s case, the advisor makes recommendations about an action that’s imperfectly based on the true probability of the action’s success. The advisor’s bias is how much the advisor discounts the true probability of success before recommending the action.



Your Epistemic Neighborhood is Really Important

One of the most important concepts in social psychology is the Fundamental Attribution Error (FAE). The FAE leads us to mistakenly attribute the effects of circumstance or environment to the inherent qualities of individual people. For example, I might think the person who cuts me off on the highway is just a jerk or a poor driver, when he might have instead simply been distracted or in a hurry. One corollary of this that we also take credit for features of ourselves that are in fact reflections of circumstance, and that we ignore the role of background circumstances explaining individual decisions.

On the face of it, the problem with the FAE seems simple enough. It’s obviously a mistake to confuse people with their circumstances–a confusion we’re taught to avoid as young children. But the FAE is a surprisingly supple concept.

Many people who vaccinate their children believe that vaccine refusers (people who either partially or wholly refuse to vaccinate their children) are irrational and ignorant. This view is partly true, since many vaccine refusers do have false beliefs about vaccine science. But the problem with the view is that it tries to explain vaccine refusal with the concept of individual irrationality. Vaccine refusers are generally neither more or less irrational than vaccine compliers. For example, one bias at play in the decision to vaccinate is the affect heuristic, where reasoners mistake how a belief makes them feel with whether the belief is true. Vaccine refusers may refuse on the basis of bad experiences with their pediatricians or other medical professionals on grounds that the belief that vaccination is dangerous would be consistent with their negative affect toward medical professionals. The affect heuristic clearly can lead us astray. However, vaccine compliers are also susceptible to the affect heuristic. A positive relationship with your pediatrician is the most important predictor of whether you will vaccinate your children. Fortuitously, the affect heuristic leads vaccine compliers to act in accordance with accurate medical science, but not because vaccine compliers are more individually rational than vaccine refusers.

The problem with vaccine refusers is not that they are individually irrational, but that they are a part of an irrational environment. Refusers form (often online) communities that are closed to outside voices and fail to give appropriate weight to scientific expertise. The FAE, however, leads us to mistake a defective epistemic environment for defective individual reasoners. Competent individual reasoners in an uncritical or closed environment will not reason competently.

One personal implication from this application is not to take too much credit for one’s good beliefs. Good beliefs reflect a good “epistemic neighborhood” as much as one’s own individual competence, and bad “epistemic neighborhoods” more than bad individual reasoning explain perverse practices like vaccine refusal.




On the responsibilities of student-activists

A recent Brown Daily Herald article on students’ struggle to balance schoolwork and activism is making the rounds online. I have mixed feelings toward the student-activists described in this article. On the one hand, insofar as they have legitimate physical or mental illnesses, these students should receive the institutional support to which they’re entitled without question. I wonder how much of these academic difficulties are concerns of first-generation college students who have not absorbed the tacit and explicit knowledge necessary to succeed in a self-directed learning environment.

Moreover, I cannot help but wonder how much of this is content-sensitive. Does it depend on what the students in question are protesting? How much of a difference they are likely to make? After all, many of the comments and objections to the protestors seem primarily motivated by the substance and seriousness of the protestors. They seem to believe that this activist is doing the equivalent of surfing Facebook. But suppose the student identified in the article for losing participation points due to work on time-sensitive work leaked a troubling government memo during that same time? Would their objection be as strong then? I’m not so sure.

There is also a set of issues about fairness. Your initial reaction to this story–it was mine–might be to think how unfair these claims are to athletes, musicians, writers, debaters, and other Brown students who participate in serious extracurricular activities. On further reflection, however, student-athletes do receive institutional accommodations, formal and informal, to balance their commitments. Universities like Brown have made sports a priority in a way they have not with activists, musicians, or writers. Is this fair? Is there something objectively valuable about sport that demands this preferential treatment? s Perhaps these activists’ grievance is that their professors do not take their extracurricular work as seriously as other activities like sports or music.

On the other hand, I also feel that if these student activists had their way, we would miseducate students two ways. The first is about a distinction between personal and institutional responsibility. The second is about corruption and the mission of a liberal arts university.

Educational institutions have responsibilities to their students. We can describe these responsibilities in abstract ways–prepare them for economic success, draw out their wisdom, impart values upon them–but these responsibilities are invariably relative to the institution. Secondary associations, or what Michael Oakeshott calls “enterprise associations,” are guided by a set of values that are not necessarily universal. Their values reflect a particular mission or enterprise. They are often particular, and secondary associations are not necessarily evangelical (though they of course may be). These values shape the way enterprise associations properly treat their members through their primary rules. Of course, enterprise associations of any sophistication will have secondary rules as well–rules for changing the primary rules. But primary rules are the primary business of life in an enterprise association. The point of an enterprise association is not to debate what kinds of rules the enterprise association should have! An enterprise association whose primary purpose was to debate what kind of rules it should have would be a very strange group indeed.


Personal responsibility is partially internal to the primary rules of a secondary association. That is, the primary rules define for what members are responsible. A great example of this is plagiarism. Plagiarism is not a legal or moral crime, and people plagiarize in the professional world all the time (“good artists borrow…”). Universities spend so much time and energy on policing plagiarism because it is a primary rule of the university, reflecting a deeper value of the scholarly process. We can imagine other ways of organizing scholarship, of course, and not totally foreclose the possibility of changing the rules of plagiarism. But it requires a strong argument to change the rules, and the rules have an internal authority.

Personal responsibility in part depends on institutional responsibility, then. However, personal responsibility is not entirely an artifact of institutions, and we make a deep mistake when we treat it like one. We have a pre-institutional understanding of responsibility, and as Dave Schmidtz argues, the dependency of personal on institutional responsibility means we should design institutions that produce personally responsible people. Within limits, of course, we want institutions with primary rules that enable people to take care of their work without having to make demands at the level of secondary rules.

In a pragmatic sense, this is particularly important for a university that educate sstudents for work in a variety of environments. We want graduates who can succeed and thrive in different organizational environments. We also want graduates, of course, who will notice and speak up when the rules treat people unjustly. But we also want graduates who will lead successful lives in the world, not just criticize and try to go beyond it. Universities should not only aim to produce the next Socrates, who we sometimes forget was a royal pain in the ass.

The other problem I worry about is corruption. By corruption I mean the politicization of the university, and specifically a liberal arts university. The momentum today at universities like Brown is to produce scholarship that’s “relevant” and “practical.” Part of this is to the good. But it also involves serious risks of corruption. Now, there is plenty of corruption already in the university, and this point should not be read as a defense of the status quo. The privileged position of athletics, in particular, deserves skepticism, as does the erosion of faculty control over the university. Still, my complaint is against one more source of corruption. It is that the university should be wary of institutional entanglement with activism.

Part of my concern is for the quality of scholarship. It is hard to write for the ages when your research is close to the fight. Partisanship undermines the independence and integrity of research, which is basically the only thing that distinguishes universities from hack think tanks. And partisanship also narrows your informational base. Universities will not produce good research if they are so in hock to the latest activist cause. They will miss the insights that other groups and factions produce, even those who are deeply mistaken.

Part of my concern is for student education. A university education should allow students to see their commitments and values from a more abstract and objective point of view. Even if students will have ideologies (sets of beliefs and values), we want students to be “responsible ideologues.” We want them to understand alternative points of view and their strengths and weaknesses. We want them to have respect for the truth as a regulative ideal. We are not adding to their knowledge if we simply abet and enable their activist projects.

If you committed activist, you should realize there are tradeoffs with other valuable activities (Incidentally, this insight is probably going to make you a better activist…). The job of the university is not to make those tradeoffs disappear, in particular when those foregone academic activities are the constitutive activities of the university itself. It is unreasonable for student activists to demand, merely in virtue of their activism, to receive special treatment.




A puzzle about consent

Suppose you don’t want to do something, like drink a bitter-tasting but healthy beverage. A friend, C, is offering to give you the beverage. You know that it’s healthy for you, but you refuse it because it tastes bitter. Suppose C knows that you refuse it because it tastes bitter.

Now suppose the next time C offers you the beverage (he’s persistent), I offer to pay you a sum of money to say “Yes” when C asks to give it to you. You take my offer, and when C asks to give you the beverage you say “Yes.”

The puzzle is whether C can really give you the beverage. I paid you to say, “Yes” when C asks to give you the beverage. C knows you don’t want the beverage, but you just said “Yes.” “Yes” is normally a sign of consent. But did you really consent to drink the beverage? Or did you just say “Yes” when C offered the beverage to you?

One possibility is that when you consented to say “Yes” to C, you ipso facto consent to C’s offer. This possibility is implausible. It would make it impossible for you to revoke your consent, for example, which is highly counterintuitive.

Another possibility is that when you agreed to my offer, you did consent to C’s offer. Specifically, you consented to getting a sum of money and drinking the beverage. In economic terms, the sum I offered was sufficient to make you indifferent between the sum and drinking the beverage. When C offers you the beverage, and you say “Yes,” you consent to drink the beverage. The second possibility is a more plausible analysis of our exchange, but it still leaves open the question of whether C can give you the beverage. After all, C knows you wouldn’t consent to the bitter beverage even though you consented to the bundle of (drink beverage, money). However, the worry about whether C can gives you the beverage goes away if we assume that the person drinks the beverage in order to get the money. Your will is to drink the beverage (for the instrumental reason of getting the money), so C is acting in accordance with your will.

A third possibility is that you do consent to C’s offer, but you do not consent voluntarily. That is, C’s offer is in line with your will, but your will is not a free one. A free will is where you want something, and you want something because you want it. In this case, you want the beverage because I paid you.

A fourth possibility is that you did not consent to C’s offer. Instead, you consented to getting a sum of money and saying a word that normally signifies consent. You didn’t actually consent, however. So C offers you the beverage, and you say “Yes,” he gives you the beverage without even your consent. The third possibility is the most interesting here because it raises a puzzle about the relationship between consent and expressing consent. We normally think that you can’t express consent unless you’re also consenting. But in the fourth possibility, you express consent without consenting because I pay you to say “Yes” without actually consenting.

I am most interested in the fourth possibility here. The fact that something goes wrong when I pay you to express consent without actually consenting shows that consenting is about a subjective state, not just an external performance. It can be wrong to do something even if someone expresses consent to it because expressing consent does not entail consent.

However, because consenting is a subjective state, our only means of verifying or falsifying consent is through public signals. We rely on expressions like “I consent” to indicate whether you consent. This makes my deal to you particularly dangerous, more dangerous than the third possibility of involuntary consent, because it corrupts the meaning of the expression.

The difference between the third and the fourth case is that while in the third case you are not freely consenting, and your consent is imperfect, in the fourth case you are actually lying.

Consent is an internal, subjective state, but it is also a social practice of signaling to others how we want to distribute rights and obligations. Because we cannot observe the subjective state of consent, however, the social practice of consenting needs special protection. In the third possibility, it’s probably wrong for C to give you the bitter drink. But in the fourth possibility, while it’s still wrong for C to give you the bitter drink, it is more wrongful of me to make the offer in the first place. In offering you money in exchange for merely expressing consent, I erode the integrity of a social practice for accessing consent.

The deep concern about genetic engineering

Dworkin hits the nail on the head in Sovereign Virtue:

“My hypothesis is that genetic science has suddenly made us aware of the possibility of a similar though far greater pending moral dislocation. We dread the prospect of people designing other people because that possibility itself shifts… the chance/choice boundary that structures our values as a whole, and such a shift threatens, not to offend any of our present values… but, on the contrary, to make a great part of these suddenly obsolete.

….The terror many of us feel at the thought of genetic engineering is not a fear of what is wrong; it is rather a fear of losing our grip on what is wrong. We are not entitled–it would be a serious confusion–to think that even the most dramatic shifts in the chance/choice boundary [the distinction between what we are and are not responsible for] somehow challenge morality itself: that there will one day be no more wrong or right. But we are entitled to worry that our settled convictions will, in large numbers, be undermined, that we will be in a kind of moral free-fall, that we will have to think again against a new background with uncertain results.”