‘This dif­fi­cult, provoca­tive book made my head spin. Read it’

The Irish Times - Friday - The Ticket - - BOOKS REVIEWS - PASCHAL DONO­HOE

RADICALMAR­KETS,UP­ROOT­ING CAPITALISM­ANDDEMOCRA­CY FORAJUSTSO­CIETY

ERIC A POSNER AND E GLEN WEYL Prince­ton Univer­sity Press, 348pp, £24.95

This year marks the 45th an­niver­sary of the pub­li­ca­tion of the Re­port of the Com­mit­tee on the Price of Build­ing Land. Oth­er­wise known as the Kenny Re­port, it grap­pled with the con­se­quences of the soar­ing price of land and how the ben­e­fits of this wealth could be bet­ter dis­trib­uted.

In the pe­riod pre­ced­ing the re­port, land value had in­creased five­fold, en­abled by the build­ing of pub­licly funded in­fra­struc­ture. The re­port rec­om­mended that pub­lic au­thor­i­ties have the right to ac­quire land at mar­ket prices with an added pre­mium of one quar­ter.

That this pro­posal was never im­ple­mented is hardly a sur­prise. It would be an un­prece­dented in­ter­ven­tion with prop­erty rights. Fur­ther­more, it would have set the price of pur­chase, not through ex­change or ne­go­ti­a­tion but by fiat.

While the de­fi­cien­cies of mar­kets are well un­der­stood, reme­dies have mostly orig­i­nated from the left of the po­lit­i­cal spec­trum. Their ar­gu­ment is that we need smaller and less pow­er­ful mar­kets.

This provoca­tive and orig­i­nal work, by two Amer­i­can econ­o­mist lawyers, takes a rad­i­cally dif­fer­ent ap­proach. Rad­i­cal Mar­kets be­gins by ac­knowl­edg­ing cur­rent chal­lenges. This is de­scribed, some­what in­el­e­gantly, as “stag­nequal­ity”; a “lower growth com­bined with ris­ing in­equal­ity rather than in­fla­tion”.

Their pol­icy re­sponse is dif­fer­ent to cen­trist pol­i­tics: it is to rad­i­cally ex­pand the size and op­er­a­tion of mar­kets. New forms of ex­change are pro­posed for prop­erty, vot­ing, mi­gra­tion, data and com­pe­ti­tion pol­icy.

None of these ideas will make it into Bud­get 2019, or in­deed any other bud­get that I might be in­volved with. The au­thors ac­knowl­edge this when they write: “Our pro­pos­als will re­quire years of test­ing, im­prove­ment, and grad­ual scal­ing up be­fore they are ready for full im­ple­men­ta­tion”.

Cer­tain­ti­eschang­ing

But this is what makes this book worth read­ing. Cer­tain­ties are chang­ing. The most valu­able ac­com­mo­da­tion com­pany in the world owns no ho­tels. Cars might soon have no driv­ers. In­tel­lec­tual prop­erty, which we can­not touch, is worth more than many fac­to­ries.

This book imag­ines an im­pos­si­ble world. But imag­i­na­tion al­ways has a value. This im­pos­si­bil­ity is most ev­i­dent in the chap­ter on prop­erty. The very own­er­ship, it is ar­gued, of pri­vate prop­erty cre­ates a “mo­nop­oly prob­lem”, where wealth is con­cen­trated in land own­er­ship and own­ers can sti­fle any ini­tia­tive that in­creases the pub­lic good.

So the an­swer is sim­ple: “peo­ple rent land but do not own it, pri­vate prop­erty in land is abol­ished”. Even some of my col­leagues on the hard left would flinch at this!

In this world, the pos­ses­sor of the prop­erty as­sesses the value of their as­set. This value is then taxed, creat­ing an in­come stream for the State. The higher the valu­a­tion, the higher the tax.

How­ever, and stick with me on this, if any other citizen is will­ing to pay the as­set price then the prop­erty must be sold. The au­thors con­clude that “pos­ses­sors be­come lessees from so­ci­ety”. This is an at­tempt to sever own­er­ship from ex­change, and in­tro­duce a mar­ket for land use as op­posed to own­er­ship.

This is in the realm of science fic­tion, not plau­si­ble pol­icy. How­ever the dis­rup­tive na­ture of the anal­y­sis is a cause for re­flect­ing on that which ap­pears cer­tain now.

Sim­i­lar in­sights are yielded when the au­thors ex­am­ine the na­ture of vot­ing. They con­tend that “a vote can tell you only whether a per­son prefers one out­come to an­other, but not how much the per­son prefers the out­come”. This is con­trasted with the op­er­a­tion of price lev­els within economies. It is pos­si­ble to sig­nal in­ten­sity of pref­er­ence by how much you are will­ing to pay for a good or ser­vice.

Posner and Weyl ar­gue that “we need a way of de­ter­min­ing whether the in­tense pref­er­ences of the mi­nor­ity out­weigh the weak pref­er­ences of the ma­jor­ity”.

Quadrat­icVot­ing

A model called Quadratic Vot­ing is sug­gested. Each citizen has the same al­lo­ca­tion of voice cred­its. These cred­its are used to cast mul­ti­ple votes, but it costs more cred­its to cast votes on any par­tic­u­lar topic. This means the voter has to ex­press a view less on other mat­ters.

Again, there is no prospect of this hap­pen­ing in any democ­racy. But in a world where al­go­rithms de­ter­mine what news we see, it re­minds the reader of the rad­i­cal pos­si­bil­i­ties en­abled by tech­nol­ogy.

The au­thors aim to cre­ate “rad­i­cal mar­kets” to “help break down priv­i­leges based on wealth and eco­nomic ad­van­tage”. These pro­pos­als are lit­er­ally in­cred­i­ble. But we now grap­ple with de­vel­op­ments that once were the sto­ries of science fic­tion.

This is typ­i­fied by the mag­nif­i­cent epi­logue which ex­plains mar­kets through the com­put­ing con­cepts of dis­trib­uted com­put­ing and par­al­lel pro­cess­ing. It then sug­gests a world where ar­ti­fi­cial in­tel­li­gence will take the place of these mar­kets.

Read this dif­fi­cult and provoca­tive book. It made my head hurt, and then spin. In a world where our cur­rent eco­nomic and po­lit­i­cal mod­els are worth de­fend­ing but are strain­ing, this can only be a good thing. Paschal Dono­hoe TD is the Min­is­ter for Fi­nance and Pub­lic Ex­pen­di­ture and Re­form

PHOTOGRAPH: AIRBNB/PA WIRE

“Cer­tain­ties are chang­ing. The most valu­able ac­com­mo­da­tion com­pany in the world owns no ho­tels”: a float­ing house is launched by ac­com­mo­da­tion web­site Airbnb In Lon­don to pro­mote it­self.

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