The analysis is interesting, but ignores huge problems with Elon/Trump cutting agencies without regard to separation of powers. It's not just cutting and reducing regulations or simple "corruption" that is getting around the state. Instead it's a power grab by the executive that by a clearly unhinged and hugely ideological Elon/Trump pair. Elon also has been transformed from some businessman mad at regulation to something much more dangerous. This article would make sense in a world where the actual separation of powers between the executive and the legislative were not under extreme threat.
This is a fair point, although I would argue that executive abuse of power has been a bipartisan phenomenon over the past few decades. Think about EOs from Biden on student loan forgiveness or Obama on immigration. In Obama’s case the media was also often on his side, saying that the Republican congress was “obstructing” when they simply disagreed with his policies and didn’t want to vote for them.
Also a significant reason for the current executive power grab is the impression many on the right have that politically hostile federal employees impeded Trump from implementing his agenda in his first term, even though the federal bureaucracy is not itself a branch of government. For better or worse, we’re about to find out what government looks like after they try to correct that.
Is this tired "separation of powers" argument still convincing anyone? It's just one of those things that the minority party says when the majority is enacting policies it doesn't like.
It's not entirely obvious to me that it is a power grab. It could just be tactical virtue signalling. In the same way that expansive but obviously unconstitutional legislation, or ineffective resolutions, may be passed just to secure some kind of reaction from other parties, but not to secure the nominal purpose of the bill, Trump's executive orders may be designed more to force particular issues and signal than to actually expand power dramatically.
The birthright citizenship issue is a good example of this. There aren't enough conservative judges who believe the Claremont line on that matter to ever uphold that EO, there's no world in which that gets upheld in the courts. But he did it anyway. It makes no sense even as a power grab if it decreases the perceived legitimacy of the grab among the base that enables him. But it makes sense if the goal is to force an issue into public consciousness and control the media, as Trump is arguably often prone to do.
Maybe I'm misunderstanding something, but this whole article seems founded on a truly bizarre contradiction.
Possibility 1: We want people to be sufficiently pro-growth that they support pro-growth corruption. But surely people could instead just support pro-growth policy instead? And they clearly don't. It would also be much easier to convince people to support pro-growth policy than to support pro-growth corruption.
Possibility 2: We want people to be more willing to tolerate corruption in general. But corruption is bad, for the reasons you discuss - people do not meaningfully distinguish between "let me get around X regulation" and "let me crush my competitors with the power of the state."
I can try to create weird edge cases ("well, maybe DAs are not concerned about their reelection prospects just like city councilmen, so they'll totally let the giant bribes get passed over even though it would probably kill their reelection campaign"), but I just can't make this actually a coherent situation that would actually happen. Either [the government] (a broadly democratically-accountable body) likes pro-growth policies enough to make them legal, or it dislikes them enough to go after corruption in service of pro-growth policies. Quite possibly both! There's no situation where you're getting an elected DA to glide over some city councilman getting bribed by a Chinese billionaire to let him build a casino, but not getting an elected city councilman to just let the guy build a casino without bribes, at least not in any consistent fashion.
I think the point Hanania was making is that elected officials implement low-growth policies because of elections. Bribes bypass this incentive by simply offering cash payments.
Therefore, instead of simply banning all corruption, we should judge politicians based on results. If they corruptly lowered housing cost, that seems like a ripe area to exercise prosecutorial discretion.
Right, but if "we" are judging them based on results, we would just not judge them poorly for pro-growth policies in the first place, and they would not "implement low-growth policies because of elections." Thus, there would be no need for the corruption, the politician would just do the thing we want.
In the US, DAs are elected and therefore face the same incentive structure as other politicians - except I find it much easier to imagine a California politician approving a casino and not facing enough backlash to lose his seat, than I find it to imagine a DA ignoring a case of a California politician taking a million bucks in bribes without facing enough backlash to lose his seat.
You can’t imagine different people influenced by different things? Maybe voters are NIMBY but articles like this reach some prosecutor who looks the other way next time there’s something like the LA Grand hotel. Law enforcement, bureaucrats, etc have all kinds of norms and procedures that are not reflected in public opinion. If YIMBY wins elite opinion but not the masses, we need to start thinking of ways to get around mass preferences.
Most of the problems with zoning, etc aren’t necessarily even about public opinion anyway. It’s structures that have been built that are too complicated or hard to fix. Also activists play a major role, “community organizers” are an issue here. You can have public opinion in one direction and government policy in another, it’s very common.
This still doesn't speak to why "corruption" is a more expedient solution.
The fact that good policy and public opinion sometimes diverge only speaks to the conditional need for systems that require limited input from the public, which exist all over the place, and often run just fine.
In fact, there's no reason to believe that more corruption would produce more efficient outcomes. Benign "corruption" as you envision it is an amplified form of individual influence that can override gatekeepers. It seems to me that unless other barriers were erected, other interests would come and compete for influence. Now the corrupt party's incentive isn't good governance, it's rent-seeking between interest groups. That doesn't seem desirable.
I can imagine some marginal case where this article makes one DA in the whole country decide to exercise prosecutorial discretion at an early enough phase of the whole thing to let pro-growth corruption fly... but I can also imagine three years later the news media breaking the story of the corrupt California politician who expedited development of a casino in exchange for bribes, and the consequences being (just as in this case) no actual casino being built. The problem isn't insufficient corruption, the problem is insufficient YIMBYism, and corruption is an ineffective (and probably counterproductive - I can't imagine the case you mention being good for YIMBY types, politically) way to paper over that.
I believe the point is that at times democracy fails, and people are wrong. And the mechanisms that the republic has in place to address the flaws in the wisdom of the people are not working. Therefore, even though people may be anti-development, they don’t understand that that is hurting people as a whole.
The distinction you're looking for is honest vs dishonest graft per that famous Tammany Hall speech. Corruption is fine when it aligns elite interests with those of the public (your example of the LA official receiving a bribe to approve construction is certainly a case of honest graft.)
The issue is that, as you note, Trump frequently engages in *dishonest* graft; e.g. scamming his followers & illegally withholding federal funds from socially useful things, like scientific research, to punish political opponents. Seems bad! Maybe Elite Human Capital was right about it being a dumb idea to make this dude president!
You're over optimistic that corruption would only be used to cut through red tape. But if Musk can bribe officials to get his rockets launched he can also bribe officials to prevent his competitors from launching their rockets. And while NEPA may be wasteful, not all regulations are, and there's no reason to expect that only the wasteful regulations will be cut through with bribes. You also risk just becoming a kleptocracy, where systems are intentionally made slower so that the regulators can extract bribes to speed them up.
You suggest we just need a way to decide between the "good" and "bad" corruption, but we already essentially have that in the form of governance. At least in theory, bad laws and regulations are repealed while good ones stay in place. This doesn't always work in practice, but that's because people differ on what is "good" and "bad," but those same judgements will be applied to sorting corruption as well, just now with more rent seeking.
China is great at building stuff? I've seen videos of entire cities worth of buildings that have no one in them with door frames that fall apart in your hands. Producing en masse doesn't mean it's any good.
- It's virtually impossible to beat the S&P500 ("the market") by chance, there are paid professionals who do it for a living and they don't even succeed 50% of the time. Beating the market is not a 50/50 proposition even if there are two outcomes, more like 99/1.
- Insider trading does not incorporate any information at all into the market, because most of the time the insiders do not buy enough to influence the stock price. Given companies with billions/trillions in market cap this would be impossible. What insider trading DOES do is incentivize anti-competitive behavior and cause corporate officers to take actions for themselves instead of the stockholders. For example a small increase in stock price with predictable timing would be more beneficial to an individual than a large increase with unpredictable timing.
It’s not impossible to beat the market by chance. Imagine holding the market. You can change your holdings marginally by going long or short one individual stock. You flip a coin to make this decision. 50% of the time you beat the market. 50% of the time you don’t. 50/50 proposition.
Transaction costs are a fly in the ointment. Holding one stock exposes you to extreme volatility. You could be long and it suddenly goes to zero. Another is that alternating 50% wins and 50% losses ratchets to 0.
Rule-of-law is inherently valuable. For multiple reasons. One of them is that if you're willing to say "we should undermine rule of law-to-pass my preferred policies", then your political opponents will hear that, and say the same thing about *their* preferred policies. Rule of law is a compromise that prevents society from descending in to chaos.
I agree that we should build more, and part of the solution to that might involve passing laws that change the incentives for elected leaders. Heck, we could even pass a law that gives them a bigger pension if more houses got built during their term, or something like that. It's still better to operate in a lawful way. Even if that means something like removing a cap on donations to political campaigns.
Insider trading is banned due to the principle-agent problem it creates. We want a company's CEO to be focused on increasing its stock price, not on making that price volatile.
Agree and think that part of the reason for America's economic success is it's corruption is very 'good'/efficient. Often similar to the hotel example - e.g. might generally known that if you want to do a sizeable development in a city you have to donate $500k to the mayor's campaign. Typically open to anyone and as you say helps to get (often necessary) things done.
In contrast French corruption seems to have much smaller payments but you have to have gone to school with the guy (or someone very close to you has to have a very close relationship to him). This is much less 'free market' and reduces competition - particularly foreign businesses really seem to struggle.
The UK generally despises using cash and corruption is more based on the exchange of favors over time. There is also probably a bit more reluctance (at least historically) to do this for nakedly money generating reasons. Again this is less free market than the US approach, and generally advantages large, established businesses that have built up relationships over time.
Interestingly probably the most corrupt part of the UK (Tower Hamlets, where the current mayor was kicked out of office during his previous term for election fraud, and was found guilty of corrupt practices) is one of the few boroughs with a great record on housebuilding (10% of all of London's new builds last year, with just 3% of the population). Maybe YIMBY's should give Bangladeshi patronage networks a try?
There is a good argument to be made that business influence on government can lead to pro growth policies. But actual corruption is corrosive to trust and predictable rule of law, which is toxic to business formation. This is a bad take.
This used to be said in Italy before the reform of the early 90s. Without corruption nothing would get done. What that meant is that unless YOU had the money to grease the wheels, nothing would get done. If you didn't have the money, forget about it. But there is corruption and corruption. Sending social security payments to persons who don't exist or are 150 years old is not benign corruption
Allow me to put a finer point on this. In a perfect world the amount of corruption would be zero, just like the amount of homicide would be zero.
However, in an imperfect world sometimes homicides happen, and for good cause. Ditto with corruption--that is, in pursuit of a greater net good?
Not trying to reduce this to utilitarianism (utilitarianism has its own issues), but rather as a defensive move against other evil. Punching people is bad. Punching people back is good and deters punching people overall.
This pursuit of "zero corruption" reminds me of "zero tolerance" school policies where punching back is considered at least as bad of an offense as the initial punch.
We can all agree some activities are best avoided but sometimes necessary.
I came to basically this conclusion about corruption a while ago. Some prominent contributors to my thought:
1. Jamie Zawinski made money in software and decided to become a nightclub owner in San Francisco. He kept a blog about the process, which mostly involved absurd process-based denials and permit refusals. One theme on his blog was that most of his readers were unable to imagine that the San Francisco local government was functioning as intended, and they frequently advised him that all of the officials he had to deal with were subtly requesting bribes. He would respond that as best he could tell, he had met a total of zero people who wanted to be bribed.
2. Everyone in the United States seems to be straightforwardly in favor of government corruption when the example is Nazi functionaries taking bribes to allow Jews to emigrate.
3. There was a blog years ago by a rich guy who wanted to build a house on a vacant lot he'd purchased in California. It chronicled his dealings with the California Coastal Commission. The blog is now defunct, but most of it can still be read on the Internet Archive: https://web.archive.org/web/20160229001722/http://www.sloleaks.com/
The analysis is interesting, but ignores huge problems with Elon/Trump cutting agencies without regard to separation of powers. It's not just cutting and reducing regulations or simple "corruption" that is getting around the state. Instead it's a power grab by the executive that by a clearly unhinged and hugely ideological Elon/Trump pair. Elon also has been transformed from some businessman mad at regulation to something much more dangerous. This article would make sense in a world where the actual separation of powers between the executive and the legislative were not under extreme threat.
Seems like you’re just parroting a talking point. It’s normal for president’s vice president and commissions to do this going back 100 years.
This is a fair point, although I would argue that executive abuse of power has been a bipartisan phenomenon over the past few decades. Think about EOs from Biden on student loan forgiveness or Obama on immigration. In Obama’s case the media was also often on his side, saying that the Republican congress was “obstructing” when they simply disagreed with his policies and didn’t want to vote for them.
Also a significant reason for the current executive power grab is the impression many on the right have that politically hostile federal employees impeded Trump from implementing his agenda in his first term, even though the federal bureaucracy is not itself a branch of government. For better or worse, we’re about to find out what government looks like after they try to correct that.
Is this tired "separation of powers" argument still convincing anyone? It's just one of those things that the minority party says when the majority is enacting policies it doesn't like.
It's not entirely obvious to me that it is a power grab. It could just be tactical virtue signalling. In the same way that expansive but obviously unconstitutional legislation, or ineffective resolutions, may be passed just to secure some kind of reaction from other parties, but not to secure the nominal purpose of the bill, Trump's executive orders may be designed more to force particular issues and signal than to actually expand power dramatically.
The birthright citizenship issue is a good example of this. There aren't enough conservative judges who believe the Claremont line on that matter to ever uphold that EO, there's no world in which that gets upheld in the courts. But he did it anyway. It makes no sense even as a power grab if it decreases the perceived legitimacy of the grab among the base that enables him. But it makes sense if the goal is to force an issue into public consciousness and control the media, as Trump is arguably often prone to do.
Maybe I'm misunderstanding something, but this whole article seems founded on a truly bizarre contradiction.
Possibility 1: We want people to be sufficiently pro-growth that they support pro-growth corruption. But surely people could instead just support pro-growth policy instead? And they clearly don't. It would also be much easier to convince people to support pro-growth policy than to support pro-growth corruption.
Possibility 2: We want people to be more willing to tolerate corruption in general. But corruption is bad, for the reasons you discuss - people do not meaningfully distinguish between "let me get around X regulation" and "let me crush my competitors with the power of the state."
I can try to create weird edge cases ("well, maybe DAs are not concerned about their reelection prospects just like city councilmen, so they'll totally let the giant bribes get passed over even though it would probably kill their reelection campaign"), but I just can't make this actually a coherent situation that would actually happen. Either [the government] (a broadly democratically-accountable body) likes pro-growth policies enough to make them legal, or it dislikes them enough to go after corruption in service of pro-growth policies. Quite possibly both! There's no situation where you're getting an elected DA to glide over some city councilman getting bribed by a Chinese billionaire to let him build a casino, but not getting an elected city councilman to just let the guy build a casino without bribes, at least not in any consistent fashion.
I think the point Hanania was making is that elected officials implement low-growth policies because of elections. Bribes bypass this incentive by simply offering cash payments.
Therefore, instead of simply banning all corruption, we should judge politicians based on results. If they corruptly lowered housing cost, that seems like a ripe area to exercise prosecutorial discretion.
Right, but if "we" are judging them based on results, we would just not judge them poorly for pro-growth policies in the first place, and they would not "implement low-growth policies because of elections." Thus, there would be no need for the corruption, the politician would just do the thing we want.
In the US, DAs are elected and therefore face the same incentive structure as other politicians - except I find it much easier to imagine a California politician approving a casino and not facing enough backlash to lose his seat, than I find it to imagine a DA ignoring a case of a California politician taking a million bucks in bribes without facing enough backlash to lose his seat.
You can’t imagine different people influenced by different things? Maybe voters are NIMBY but articles like this reach some prosecutor who looks the other way next time there’s something like the LA Grand hotel. Law enforcement, bureaucrats, etc have all kinds of norms and procedures that are not reflected in public opinion. If YIMBY wins elite opinion but not the masses, we need to start thinking of ways to get around mass preferences.
Most of the problems with zoning, etc aren’t necessarily even about public opinion anyway. It’s structures that have been built that are too complicated or hard to fix. Also activists play a major role, “community organizers” are an issue here. You can have public opinion in one direction and government policy in another, it’s very common.
This still doesn't speak to why "corruption" is a more expedient solution.
The fact that good policy and public opinion sometimes diverge only speaks to the conditional need for systems that require limited input from the public, which exist all over the place, and often run just fine.
In fact, there's no reason to believe that more corruption would produce more efficient outcomes. Benign "corruption" as you envision it is an amplified form of individual influence that can override gatekeepers. It seems to me that unless other barriers were erected, other interests would come and compete for influence. Now the corrupt party's incentive isn't good governance, it's rent-seeking between interest groups. That doesn't seem desirable.
I can imagine some marginal case where this article makes one DA in the whole country decide to exercise prosecutorial discretion at an early enough phase of the whole thing to let pro-growth corruption fly... but I can also imagine three years later the news media breaking the story of the corrupt California politician who expedited development of a casino in exchange for bribes, and the consequences being (just as in this case) no actual casino being built. The problem isn't insufficient corruption, the problem is insufficient YIMBYism, and corruption is an ineffective (and probably counterproductive - I can't imagine the case you mention being good for YIMBY types, politically) way to paper over that.
I believe the point is that at times democracy fails, and people are wrong. And the mechanisms that the republic has in place to address the flaws in the wisdom of the people are not working. Therefore, even though people may be anti-development, they don’t understand that that is hurting people as a whole.
The distinction you're looking for is honest vs dishonest graft per that famous Tammany Hall speech. Corruption is fine when it aligns elite interests with those of the public (your example of the LA official receiving a bribe to approve construction is certainly a case of honest graft.)
The issue is that, as you note, Trump frequently engages in *dishonest* graft; e.g. scamming his followers & illegally withholding federal funds from socially useful things, like scientific research, to punish political opponents. Seems bad! Maybe Elite Human Capital was right about it being a dumb idea to make this dude president!
You're over optimistic that corruption would only be used to cut through red tape. But if Musk can bribe officials to get his rockets launched he can also bribe officials to prevent his competitors from launching their rockets. And while NEPA may be wasteful, not all regulations are, and there's no reason to expect that only the wasteful regulations will be cut through with bribes. You also risk just becoming a kleptocracy, where systems are intentionally made slower so that the regulators can extract bribes to speed them up.
You suggest we just need a way to decide between the "good" and "bad" corruption, but we already essentially have that in the form of governance. At least in theory, bad laws and regulations are repealed while good ones stay in place. This doesn't always work in practice, but that's because people differ on what is "good" and "bad," but those same judgements will be applied to sorting corruption as well, just now with more rent seeking.
This doesnt always work in practice because of the pressure of activists and lobbies. Example NYMBIES
China is great at building stuff? I've seen videos of entire cities worth of buildings that have no one in them with door frames that fall apart in your hands. Producing en masse doesn't mean it's any good.
Just to nitpick on insider trading
- It's virtually impossible to beat the S&P500 ("the market") by chance, there are paid professionals who do it for a living and they don't even succeed 50% of the time. Beating the market is not a 50/50 proposition even if there are two outcomes, more like 99/1.
- Insider trading does not incorporate any information at all into the market, because most of the time the insiders do not buy enough to influence the stock price. Given companies with billions/trillions in market cap this would be impossible. What insider trading DOES do is incentivize anti-competitive behavior and cause corporate officers to take actions for themselves instead of the stockholders. For example a small increase in stock price with predictable timing would be more beneficial to an individual than a large increase with unpredictable timing.
It’s not impossible to beat the market by chance. Imagine holding the market. You can change your holdings marginally by going long or short one individual stock. You flip a coin to make this decision. 50% of the time you beat the market. 50% of the time you don’t. 50/50 proposition.
Transaction costs are a fly in the ointment. Holding one stock exposes you to extreme volatility. You could be long and it suddenly goes to zero. Another is that alternating 50% wins and 50% losses ratchets to 0.
Rule-of-law is inherently valuable. For multiple reasons. One of them is that if you're willing to say "we should undermine rule of law-to-pass my preferred policies", then your political opponents will hear that, and say the same thing about *their* preferred policies. Rule of law is a compromise that prevents society from descending in to chaos.
I agree that we should build more, and part of the solution to that might involve passing laws that change the incentives for elected leaders. Heck, we could even pass a law that gives them a bigger pension if more houses got built during their term, or something like that. It's still better to operate in a lawful way. Even if that means something like removing a cap on donations to political campaigns.
I've got to disagree here. I think what you underestimate is the public's willingness to accept reform.
YIMBYs are quietly winning the culture war, and if they continue to organise they can get rid of NEPA and get the reforms needed.
You don't need corruption, and in fact this argument makes the whole movement toxic to most normal voters.
Insider trading is banned due to the principle-agent problem it creates. We want a company's CEO to be focused on increasing its stock price, not on making that price volatile.
Agree and think that part of the reason for America's economic success is it's corruption is very 'good'/efficient. Often similar to the hotel example - e.g. might generally known that if you want to do a sizeable development in a city you have to donate $500k to the mayor's campaign. Typically open to anyone and as you say helps to get (often necessary) things done.
In contrast French corruption seems to have much smaller payments but you have to have gone to school with the guy (or someone very close to you has to have a very close relationship to him). This is much less 'free market' and reduces competition - particularly foreign businesses really seem to struggle.
The UK generally despises using cash and corruption is more based on the exchange of favors over time. There is also probably a bit more reluctance (at least historically) to do this for nakedly money generating reasons. Again this is less free market than the US approach, and generally advantages large, established businesses that have built up relationships over time.
Interestingly probably the most corrupt part of the UK (Tower Hamlets, where the current mayor was kicked out of office during his previous term for election fraud, and was found guilty of corrupt practices) is one of the few boroughs with a great record on housebuilding (10% of all of London's new builds last year, with just 3% of the population). Maybe YIMBY's should give Bangladeshi patronage networks a try?
My theory of the average cost of regulation:
1. Budget of regulatory agencies $X.
2. Private sector cost of compliance $10X.
3. Society opportunity cost $100X.
There is a good argument to be made that business influence on government can lead to pro growth policies. But actual corruption is corrosive to trust and predictable rule of law, which is toxic to business formation. This is a bad take.
This used to be said in Italy before the reform of the early 90s. Without corruption nothing would get done. What that meant is that unless YOU had the money to grease the wheels, nothing would get done. If you didn't have the money, forget about it. But there is corruption and corruption. Sending social security payments to persons who don't exist or are 150 years old is not benign corruption
Garett Jones' book "10% less democracy" comes to mind.
"the optimal amount of corruption is not zero" is a great line. and good test for the reader's intelligence/decoupling!
Allow me to put a finer point on this. In a perfect world the amount of corruption would be zero, just like the amount of homicide would be zero.
However, in an imperfect world sometimes homicides happen, and for good cause. Ditto with corruption--that is, in pursuit of a greater net good?
Not trying to reduce this to utilitarianism (utilitarianism has its own issues), but rather as a defensive move against other evil. Punching people is bad. Punching people back is good and deters punching people overall.
This pursuit of "zero corruption" reminds me of "zero tolerance" school policies where punching back is considered at least as bad of an offense as the initial punch.
We can all agree some activities are best avoided but sometimes necessary.
I came to basically this conclusion about corruption a while ago. Some prominent contributors to my thought:
1. Jamie Zawinski made money in software and decided to become a nightclub owner in San Francisco. He kept a blog about the process, which mostly involved absurd process-based denials and permit refusals. One theme on his blog was that most of his readers were unable to imagine that the San Francisco local government was functioning as intended, and they frequently advised him that all of the officials he had to deal with were subtly requesting bribes. He would respond that as best he could tell, he had met a total of zero people who wanted to be bribed.
2. Everyone in the United States seems to be straightforwardly in favor of government corruption when the example is Nazi functionaries taking bribes to allow Jews to emigrate.
3. There was a blog years ago by a rich guy who wanted to build a house on a vacant lot he'd purchased in California. It chronicled his dealings with the California Coastal Commission. The blog is now defunct, but most of it can still be read on the Internet Archive: https://web.archive.org/web/20160229001722/http://www.sloleaks.com/