Bottom-up

I’m a longtime donor to the Institute for Justice, the nation’s premiere libertarian civil liberties organization. They’ve taken cases to the Supreme Court a number of times, and on every previous occasion, I’ve been rooting for their success. But on Monday, when the Supreme Court sided with IJ (and my Cato colleagues) in Arizona Free Enterprise v. Bennett, I found myself disagreeing with the majority’s arguments.

Let’s start by reviewing the broader campaign finance debate, and especially the arguments in Citizens United. Advocates of regulation argued that “independent expenditures”—that is spending on political speech by people unconnected to any campaign—were a grave threat to the integrity of the democratic process. They warned that a wealthy interest group could walk into the offices of a member of Congress and threaten that if the member didn’t vote the way the group wanted, the group would pour millions of dollars into negative ads in the member’s district. Faced with a threat to his political survival, the member will be forced to do what the interest group wants.

First Amendment zealots like me had two responses. First, running ads praising or criticizing a candidate in the weeks before an election is precisely the kind of “core” political speech the First Amendment is supposed to protect. Therefore, we’d better have an extremely solid reason for restricting such speech.

Second: if it were really true that elections were decided based on which candidate had the most spent on his behalf, this would be a pretty strong argument for regulating independent expenditures. But fortunately, voters are not mindless automatons. They evaluate the messages being presented to them and compare them with elected officials’ records in office. An incumbent with a good record will find his ads reach a receptive audience. Conversely, an interest group whose agenda is broadly unpopular with voters is going to have a harder time using ads to reduce the candidate’s poll numbers.

Relatedly, as Meg Whitman recently learned, advertising dollars are subject to diminishing returns. If the average voter sees candidate A’s ad 10 times and candidate B’ ad only once, that’s likely to give candidate A a sizable advantage. But if the average voter sees candidate A’s ad 1000 times and candidate B’s ad only 100 times, the gap is unlikely to matter. Indeed, some voters might get so tired of seeing candidate A’s ads that they vote for candidate B out of spite.

Put these arguments together, and we see that the threat from our hypothetical interest group isn’t as dire as the advocates of regulation think. If an incumbent has a good record and enough funding to explain that record to the voters, he’s likely to get re-elected regardless of how much is spent against him. Conversely, if an incumbent has a bad record and his challenger has enough money to inform voters about why it’s bad, the incumbent is likely to lose no matter how many millions in independent expenditures are made in his defense.

OK, with that background, let’s think about the Arizona Free Enterprise v. Bennett. This case focused on Arizona’s “clean elections” system of public financing. Under the Arizona system, a candidate has a choice between accepting public funds or raising funds privately. If a candidate opts to raise money privately and spends more than the default public subsidy, then all publicly-financed candidates are automatically given matching amounts to spend on their campaigns. Public candidates are also given funds to match any money spent by independent groups in support of private candidates.

In an opinion by Chief Justice Roberts, the Supreme Court ruled that when the state matches a private candidate’s spending, the state is effectively “punishing” the candidate for exercising his first Amendment rights. This isn’t a crazy argument. Obviously, a candidate isn’t going to want his opponent to get a larger public subsidy, and so at the margin it does provide some disincentive to campaign spending.

But there’s a few things to note about this. First, the regulation in Citizens United was direct and literal censorship—criticizing a candidate for office in the 60 days before an election was illegal. Here, the “punishment” is much more indirect and indeed its status as a punishment is somewhat speculative. So First Amendment scrutiny is called for, but the justification probably doesn’t need to be as compelling as you’d need to justify direct censorship.

Second, the degree to which having your opponent subsidized will be perceived as a “punishment” greatly depends on the circumstances. If the privately candidate is handsome and charismatic with an impressive record, while the publicly-financed incumbent is a politically tone-deaf hack with a long record of corruption and incompetence, then the challenger might welcome his opponent having more money to spend putting his ugly mug on TV. Similarly, if an independent organization is running ads in order to get candidates to talk more about its pet issue, it might not care at all about whether its spending causes certain candidates to get more money in the process.

Conversely, a candidate whose strategy is to bury his opponent in noisy attack ads that don’t stand up to scrutiny will find the matching funds provision very burdensome indeed. But it’s only “burdensome” in the same sense that robust debate always burdens people with unpersuasive messages.

Finally, the state’s interest in reducing corruption seems pretty compelling. Not compelling enough to justify censorship, but strong enough to justify a system of subsidies that creates a mild disincentive to private spending on political speech.

Speech is never a punishment, and it strikes me as especially dangerous for supporters of free speech to suggest otherwise. If libertarians call it a “punishment” when the government subsidizes your opponent’s political campaign, it’s hard to object when more censorious types call it a “punishment” when a third party runs a nasty campaign ad against a politician. The solution to speech is more speech. I don’t love the Arizona campaign finance system, but I think it’s hard to argue that it runs afoul of the First Amendment.

My brilliant and thoughtful friend Reihan Salam was kind enough to critique last week’s immigration posts. Here, I think, is the gist of our disagreement:

My basic frustration with my interlocutors on the immigration question is this: is access to the U.S. economy a fixed pie or not? If you’re arguing that it’s not, you will lose every political debate, because U.S. citizens don’t believe, rightly or wrongly, that everyone in the world should, by virtue of being a free and equal human being, be allowed to work and settle in the U.S. If you’re arguing that it is, we get into thorny questions of what kind of immigration policy we should have and how we should go about implementing it.

This passage left me scratching my heads. Reihan carefully avoids answering his own question here, but reading between the lines, he seems to be conceding that the pie isn’t fixed. However, he argues, “immigration doves” like me (and, he claims, himself) can’t afford to say so because the general public can’t handle the truth.

This is a deeply un-Salamian position to take. One of the things that makes Reihan’s work so delightful is his contrarian streak. If fixed-pieism is false, then Reihan, of all people, should be willing to say so even if the argument is a loser at the polls.

With that said, I actually agree with his assessment of the political climate. The low level of economic literacy among the general public makes it extremely difficult to convince voters that the American economy could gracefully accommodate much higher levels of immigration, even though that’s what the evidence shows. But that’s precisely why it’s important that the immigration debate not be primarily a debate about economics. The beauty of the DREAM Act, and Jose Vargas’s campaign on its behalf, is that it focuses the debate on concrete injustices perpetrated against specific, sympathetic immigrants. It’s much easier to whip up public anger about “illegal immigration” in general than it is to defend the deportation of an individual immigrant like Julio Hernandez.

Now, Reihan wants me to explain what I would consider an “acceptable immigration enforcement regime.” But I think this is the wrong place to start the analysis. No conceivable set of enforcement measures can enforce our current, broken immigration rules; that’s one of the reasons we need to change them. If we did a better job of welcoming immigrants who will make positive contributions to our economy and the federal treasury, one of the happy side effects would be that it would be a lot easier to deport the minority of criminals and deadbeats we really don’t want in our country.

But more generally, I reject the proposition that unless I’ve developed a comprehensive immigration reform agenda, I’m not allowed to make value judgments about individual parts of the immigration system. It’s obvious that Jose Vargas should be allowed to stay in this country. The exact details of how we accomplish that—whether we pass the DREAM Act, raise the quota for skilled Filipino immigrants, grant blanket amnesty, etc—is a question that reasonable people can disagree about. But our current immigration system is indefensible, as is the large number of people who seem to believe the top priority is to crack down even harder on its victims.

I also want to endorse Adam Ozimek’s response to Reihan’s arguments.

There’s a long-running argument between the left and right about whether economic policy should focus more on efficiency questions or distributional questions. At the risk of oversimplifying, progressives tend to focus on inequalities of income and wealth, and they worry that unfettered free markets will funnel too much money to the wealthy few and leave the rest of us behind. Conservatives counter that the economic pie is not fixed. Leaving people free to innovate will expand the pie and ultimately benefit everyone. And conversely, government interventions in the economy designed to to make peoples’ slices more equal in size will shrink the pie and leave everyone worse off.

And conservatives have another powerful argument against the government picking winners and losers. Like Jefferson, they believe that our rights come from God, and are only recognized, not granted, by governments. They reject progressive theorists like Cass Sunstein who argue to the contrary. This is why they’re so vehemently against progressive taxation; they believe that everyone is entitled to the fruits of their own labor, and that it’s unjust for the government to take from some to give to others in the name of fairness.

Now, consider the following passage from conservatism’s flagship magazine:

Punishing a minor by removing him from the culture he’s adopted as his own, for the crimes of his parents, does strike me as fundamentally unfair. But what liberals leave out of this story, time and again, is a competing — and in my view overriding — unfairness. Reihan has argued repeatedly, and effectively, that we should treat access to the U.S. economy, not to mention its extensive welfare state, as a scarce resource. We can debate and debate the best way of distributing this resource– from “not at all” to “come one, come all” and everywhere in between. But distributing it based on who manages most successfully to violate the law, at the expense of would-be immigrants who are honoring the process, is surely not a valid option.

Apparently, when the topic turns to people born outside the United States, all that stuff about expanding pies and inalienable rights goes out the windows. Now the pie is fixed—a “scarce resource”—and it’s up to the government to decide who is eligible for a slice. People are no longer endowed by their Creator with the right to keep the fruits of their labor. Rather, the freedom to earn a living must be carefully “distributed” by the government only to those it deems worthy.

Liberals like my friend Matt Yglesias like to argue that conservative rhetoric about freedom and individual rights is a cynical cover for policies that serve the interests of the rich and powerful. I think he’s wrong, but passages like this one do give his argument a certain plausibility.

Here are some immigration links:

• Jose Antonio Vargas’s new website, Define American, is really fantastic. It’s a pitch-perfect example of the kind of humanizing effort I wrote about on Wednesday. Not only does it portray Vargas himself as a sympathetic victim of our crazy immigration system, it also portrays the many Americans who helped him break the law as heros, which is what they are:

• “We are undocumented, unafraid, and unapologetic in our defense for our rights.” (Thanks to reader Sara Mayeux for the link)
• Another reader points to this Australian show about the difficulties of being an undocumented immigrant.
• I predict Ezra Klein will live to regret writing posts like this.

Was my last post, despite its claims to the contrary, a brief for open-borders zealotry? That seems to have been the reaction of a number of commenters and folks on Twitter. Josh Barro, for example, tweeted “I’m not sure there’s a right to live in America.”

A lot of people seem to believe that raising moral objections to an immigration enforcement program like e-verify is tantamount to advocating the repeal of all immigration restrictions. The more I think about this proposition, the less sense it makes. To return to one of my favorite examples: speeding is illegal, but laws against speeding are routinely ignored. The government enforces those laws haphazardly; perhaps one in a thousand speeders on any given freeway are caught.

Now, if we really wanted to, we could get people to stop speeding. For example, we could install license-plate-reading cameras along the freeway at regular intervals, and automatically send tickets to anyone who moves from one camera to the next too quickly to have been following the speed limit.

Personally, I think this is a horrible idea. One reason is that this kind of massive surveillance infrastructure could be misused for other, more sinister purposes. Objecting to this particular enforcement mechanism on civil libertarian grounds isn’t the same as saying people have a “right to speed,” or that we should repeal all speeding laws. We have any number of laws, jaywalking, peer-to-peer file sharing, paying taxes on goods we buy online, and so forth, that for a variety of practical reasons are hard to enforce, and we just live with the fact that they’re routinely broken.

The same point applies to immigration. Entering the country without government permission is illegal, and probably should be so. The federal government has any number of powers to enforce the law, including refusing to let you cross the border (leave the airport, etc), investigating over-stayed visas, limiting access to driver’s licenses, auditing employers, deporting people, and so forth. Objecting to any particular immigration enforcement mechanism isn’t the same thing as objecting to immigration regulations altogether. It’s perfectly coherent to say that the government should make a reasonable effort to prevent people from moving here illegally, but that certain types of particularly invasive enforcement methods (like employer verification) should be off the table. This is just how our legal system works.

But I also think speeding cameras are a bad idea because I sometimes think the posted speed limit is too low and I like the fact that I can ignore it and (mostly) not get caught. Similarly, our copyright laws are too strict; it’s a good thing that people can sometimes share content in circumstances that a strict reading of the law wouldn’t allow. In other words, the fact that people can mostly get away with breaking certain laws is a feature, not a bug, of our legal system. It provides a “safety valve” that ensures that stupid legislation doesn’t do too much damage.

The same point applies to immigration law. Obviously, we ought to enact sane immigration laws that make it easy for people like Jose Vargas to get a green card. But given that we haven’t done that, it’s a good thing—both for him and for the rest of us—that our enforcement system wasn’t effective enough to prevent him from taking a job here.

Again, there’s a huge double standard here. We American citizens take a strictly moralistic tone toward laws that we don’t personally have to follow. But “the rule of law” goes out the window when it comes to that pot you smoked in college, or the use taxes you haven’t paid on your Amazon purchases, or those pirated MP3s on your hard drive. When we’re talking about laws that actually affect us, we’re glad there’s some breathing room between the law on the books and what people actually get punished for.

We should display the same kind of magnanimity toward people who have to deal with our immigration system, which is much, much more screwed up than our copyright and traffic laws. Jose Vargas didn’t hurt anyone when he illegally entered the country as a teenager, just as Barack Obama didn’t hurt anyone when he illegally smoked pot in college. Law enforcement has, correctly, turned a blind eye to Obama’s youthful lawbreaking. It should do the same for Vargas and thousands of others like him.

Jose Antonio Vargas’s riveting story about life as an undocumented immigrant has been taking the Internet by storm. It powerfully illustrates the contrast between our nation’s professed ideals of equality and opportunity and the actual, shameful results of the laws we have allowed our government to enact.

As I’ve written before, I think the fundamental problem is that most American voters don’t understand our own immigration system. Though few undocumented immigrants succeed as spectacularly as Vargas has, there are millions of undocumented Americans who, like him, have been hampered in their pursuit of freedom and opportunity by our immigration laws. Many American voters angrily demand that immigrants “get in line” for their green cards, ignoring the fact that for many undocumented immigrants, there is no line they could wait in that will get them a green card in the foreseeable future.

It’s interesting that Vargas mentions coming out of the closet because I think many immigration advocates could learn from success of the gay rights movement. Ignorant anti-immigrant beliefs are driven by the same kind of intellectual laziness people always display when thinking about people different from themselves. Go back to the 1970s and you’ll find millions of people who didn’t consider themselves to be bigots but harbored fundamentally bigoted beliefs about gay people. Go a little further back and you’ll find millions of whites who didn’t consider themselves racists but who would readily repeat crude stereotypes about blacks and tacitly supported America’s system of racial apartheid.

The same basic dynamic is at work in modern immigration debate. Hardly anyone considers himself an anti-immigrant bigot, but a large majority of Americans tacitly endorse ridiculous, discriminatory immigration laws that make it virtually impossible for people like Jose Antonio Vargas to become full-fledged members of our society. They demand a level of law abidingness from undocumented immigrants (even those who have been here since childhood) that they would never tolerate if applied to themselves.

Eradicating racism from polite society wasn’t simply a matter of evidence and argument. Rather, it was accomplished through a consciously ideological project to stigmatize bigotry. Making prejudicial comments about black people doesn’t just get you a strong counter-argument, it can lose you friends and even your job. A similar ideological project, typified by Seinfeld‘s “not that there’s anything wrong with that,” is making rapid progress on the gay rights front.

People don’t really think about immigration debates in these terms. Even most liberals talk about immigration in terms of economic efficiency and citizen self-interest. During the 2007 immigration debate, my friend Ezra Klein actually complained that business interests were trying to weaken “employer verification” laws that would have made it even harder for people like Jose Antonio Vargas to find a job. Whatever else you might say about this position, it’s not one that treats undocumented immigrants as human beings deserving compassion and fair treatment.

More to the point, this kind of transactional politics—give us a guest worker program and we’ll support beefing up the surveillance state—isn’t going to work. Once established, an “employer verification” system will be with us forever, whereas the next Congress can easily scale back or cancel the guest worker program. At the same time, advocacy for such a bargain reinforces the basic restrictionist worldview that the interests of Americans and immigrants are fundamentally opposed.

What’s needed, instead, is a serious effort to get people to think of immigrants as human beings who deserve to be treated fairly. You don’t have to be an open-borders zealot to think that we’ve been terribly unfair to Vargas and Eric Balderas. We should change the law to allow people like them earn a living not because doing so would be good for the American economy (though it would) but because we’re a country founded on the proposition that all men are created equal.

Congress is poised to pass “e-verify” legislation that will make life much worse for people like Vargas, as well as seriously inconveniencing a bunch of citizens. Libertarians like my friend Jim Harper have been beating the drum about this issue for years, and the ACLU has also been active in opposing it. But it hasn’t gotten much focus on the left more generally. And the few critiques I’ve seen have focused either on the system’s poor accuracy or the losses it would inflict on the agriculture sector.

These are both valid arguments. But I’d like to see more people—and especially more liberals—questioning the whole concept of constructing a massive surveillance system so the government can more effectively prevent people like Jose Antonio Vargas from earning a living.

As Erik Kain notes, the point I made yesterday isn’t limited to the telecommunications industry. It applies with equal force in banking.

A good example of this principle at work is Cato scholar Lawrence White’s 2004 call for greater regulation of Fannie Mae and Freddie Mac. White argued that full repeal of these companies’ various state-granted privileges would be the best way to deal with these entities. But given that that was unlikely to happen he advocated more aggressive regulation as a second-best alternative. In retrospect, it’s obvious that this was the right position to take.

The same point applies to the “too big to fail” banks. In an ideal world, the bailouts wouldn’t have happened and most of these firms would be emerging from bankruptcy around now. But we don’t live in that world, and we’re not likely to get there before the next financial crisis.

Probably the most important moment in last year’s fight over banking regulation was the failure of the Kaufman-Brown amendment, which would have established a maximum size for banks in an effort to forestall future “too big to fail” problems. It was supported by a handful of savvy conservatives like Tim Carney, but most free-market conservatives and libertarians ignored it. I’m not going to point any fingers, since I was barely paying attention to the financial reform debate myself. But I do wish more supporters of the free market had followed Carney’s lead.

Everyone knows that the contemporary telecom debate pits free-market opponents of regulation against progressives who want a more activist government. But if that’s what you’re expecting, then the 1970s and early 1980s look very puzzling. You had the Democratic Carter administration and left-wingers like Ted Kennedy pushing to deregulate major industries. And you had a government crusade to break up Ma Bell that was launched by the Republican Ford administration and completed by the conservative Reagan administration.

To understand what was going on, we have to look back even further in history. The transpartisan enthusiasm for these policies emerged as a reaction to an ideology that will seem alien to modern observers. For the majority of the 20th century, this reining orthodoxy held that central planning was efficient and too much competition was destructive. Tim Wu called it Vailism, after the AT&T president who convinced the federal government to make AT&T a regulated monopoly. And it’s closely connected to James Scott’s concept of high modernism.

This ideology shaped much of Franklin D. Roosevelt’s New Deal. His National Recovery Administration had as its explicit goal to help industries form cartels so they could raise prices. That sounds insane to modern ears, but it wasn’t an aberration; the same attitude underpinned much mid-century policymaking. The Roosevelt administration created or expanded a number of government agencies, including the Federal Communications Commission, the Interstate Commerce Commission, and the Civil Aeronautics Board, which openly discouraged new entrants into the industries they regulated in order to prop up the incumbents’ profits.

The high modernist consensus against competition only started to unravel in the 1960s when economists like George Stigler documented how economically damaging these anticompetitive policies were. In the 1970s, their arguments started to make an impression inside the beltway. When Stephen Breyer took a break from teaching law at Harvard to work on the Hill for Ted Kennedy, he brought the emerging academic consensus with him.

Libertarians (including this one) like to point this out to liberals as a kind of “gotcha” story: even Ted Kennedy supported deregulation. But it’s important to remember that this coin has two sides. It’s equally true that even the Reagan administration supported the breakup of AT&T. And that’s not all.

Consider the Computer Inquiries, a series of regulations designed to prevent AT&T from dominating the nascent market for online services. It will surprise no one that this activist, big-government regulatory project was inaugurated by the Johnson administration. But it didn’t end with Johnson. The process produced three major orders over almost two decades, and there was remarkable continuity among the Johnson, Nixon, Ford, Carter, and Reagan administrations.

This consensus—repeal anticompetitive laws while actively protecting new entrants from the incumbents—survived the AT&T breakup. Indeed, the 1996 Telecommunications Act, which was passed by the conservative Gingrich Congress, is based on the same basic intellectual framework. It relaxed various restrictions on telephone and cable companies entering new markets, while simultaneously instituting an “unbundling” regime that forced incumbent telephone carriers to lease parts of their networks to competitors at regulated rates.

This might look like a philosophically confused mixture of deregulation and re-regulation, but I don’t think that’s how the legislation’s authors saw it. Rather, the unifying theme of the act was competition. Both the regulatory and deregulatory provisions of the bill were designed to increase the number of firms in various telecommunications markets.

That consensus has evaporated over the last 15 years, replaced by the pro- and anti-regulatory camps that are so familiar today. My sympathies are generally with the anti-regulatory camp, but I’m starting to think we’ve lost some important insights from that earlier consensus.

Once a “private” company becomes deeply intertwined with the state, it can be difficult to ever fully separate them. Formally repealing state privileges may not fully undo the damage if the incumbent continues to enjoy the fruits of past favoritism. And incumbents can leverage their intimate knowledge of the regulatory process—and decades of political capital accumulated from past interaction with regulators—to twist facially neutral regulations into weapons against their competitors.

This means that deregulated incumbents like AT&T and Verizon may never become fully private entities. And so a truly free-market agenda requires more than just reflexively opposing all government interventions in the telecommunications market. The government is not monolithic. Sometimes (as with the AT&T breakup and the Computer Inquiries) one part of the government works to check the harmful policies of another.

This principle is complicated, and reasonable people are going to disagree about how best to apply it. But one of the most obvious ways to check the power of incumbents is by making sure they have plenty of competitors. Competitive markets make regulators’ jobs easier because they force companies to serve consumers well even when regulators aren’t watching. So if regulators see a nice, clean opportunity to preserve or expand competition, they should probably take advantage of it.

The market and the political system are not separate, hermetically sealed spheres. It’s obvious that regulatory decisions shape the evolution of the market, but the evolution of the market shapes the options available to regulators. Promoting competition today will strengthen the case for deregulation tomorrow. Policies that undermine competition today will strengthen political pressures for regulation tomorrow.

An earlier generation of free-market economists understood this. And one way or the other, it’s a lesson we’re going to learn again. I just hope we don’t have to learn it the hard way.

There’s been an interesting back-and-forth in the left-of-center blogosphere over efforts to organize a boycott of the Huffington Post for its practice of allowing volunteer bloggers to contribute to the site. The case for the boycott seems so obviously wrong that it’s hard to muster the energy to write a rebuttal, so if you’re interested you can read Matt and Julian‘s responses.

But I think the dispute is an interesting window into the state of the contemporary labor movement. Private sector unionization has been dwindling for decades, and of course the labor movement isn’t happy about it. The HuffPo boycott gives us an interesting way of thinking about that decline and why it’s not likely to be reversed any time soon.

The high point of unionization occurred among factory workers in the early-to-mid 20th centuries. Unions thrived in highly concentrated industries like cars and steel where the lack of competition produced generous profit margins. In this top-down environment, ordinary workers had very little leverage because they had few alternative places of employment. Unions offered workers collective leverage over issues like safety and work hours. And they also helped workers seize a share of the monopoly profits their employers enjoyed.

In recent decades, many of these oligopolies have been disrupted by a combination of technological progress and world trade. The steel mills and car plants that were generating obscene profits a half-century ago are now struggling to stay in business. Workers have increasingly shifted to more competitive industries where profit margins are smaller and a real exit option gives employees more bargaining power.

The publishing industry is an extreme example of the trend. The classic daily newspaper was a large, hierarchical company that often enjoyed a monopoly (or at least an oligopoly) in its local market. It used to provide hundreds of blue-collar jobs for typesetters, electricians, truck drivers, and so forth. In many cities, newspaper typesetters wouldn’t have had a lot of alternative places to work, and so the protections of a union contract were extremely valuable.

The publishing industry is changing in two ways. First, most of those blue collar jobs are disappearing. A modern news organization is a team of reporters supported by editors, graphic designers, IT workers, ad salesmen, and other white-collar professionals. Second, very few news organizations are insulated from competition the way most newspapers were in 1980. This means that most news organizations couldn’t raise their workers’ wages very much even if they wanted to.

The Huffington Post is an extreme example of both trends. It’s an online-only publication consisting almost entirely of white-collar workers. And although AOL paid a lot of money for the company, this appears to have been more a reflection of its expected growth potential than actual profits. Given the intense competition in the online news business, those profits are far from guaranteed and may or may not last for very long.

The Newspapers Guild and the National Writers Union yearn for the return of the good old days where their members’ employers enjoyed monopoly profits that they could be induced to share with the employees. Apparently these organizations have convinced themselves that the AOL buyout of HuffPo is a sign that the glory days are coming back. But they’re just seeing what they want to see. The extremely low barriers to entry in Internet news means that the industry is unlikely to resemble the 20th century newspaper business any time soon.

And this means that unions don’t have much to offer 21st century writers. The problem we writers face isn’t that our employers are raking in obscene monopoly profits and not sharing them with us. The problem is that there are far more people who want to write than there are publications able to pay writers. If publishers do start to rake in obscene profits, it’s likely that they’ll plow some of those profits back into their business by hiring more writers. But forcing one particular publication to stop running volunteer content does nothing to change the dynamics of the writing market. The Newspapers Guild and the National Writers Union are basing their actions on an economic model that’s decades out of date.

In the conclusion of my interview with James Bessen we talk about the difficulty of measuring software-driven economic growth, a topic I’ve written about before.

Timothy B. Lee: How should we think about the value that consumers get from the rapid technological changes you’ve described?

James Bessen: Cowen argues that innovation today isn’t the same quality as it was in his grandmother’s day. I think you have to be very careful about that because while it’s true that innovation today tends to be qualitatively different in a couple of ways, that doesn’t necessarily mean it’s any less significant.

The innovations of a hundred years ago were a lot about the mass production of standardized goods. You think about the automobile or electrical appliances, these were things that affected most people and so you can look at an invention from that time, like the automobile was something that most people eventually used. Electrification was also something most people used. It affected most lives. That was because these were standardized products produced for a mass market.

In contrast, information technology is about meeting custom needs. It allows things to be tailored.

What’s an example of that?

One of the things that the desktop publishing revolution did was that it allowed tailored advertising. Software allowed A&P to target advertisements very finely. They could work from a database, track the items, automatically modify the flyers that were going out to each neighborhood—geared to the demographics of those neighborhoods and the particular things they were selling in those stores. It all worked in a very efficient way. It would’ve been possible to do that before, but it would’ve been way too costly.

This is an example of flexible manufacturing, which is also useful in terms of producing goods that are tailored to peoples’ needs.

Today’s super markets carry 50 times as many items as the grocery store of 80 years ago. That’s made possible by flexible manufacturing, computerized logistics, inventory control. Supermarkets have computerized systems for keeping track of what’s being sold at the register, what’s being shipped from the warehouse, and so forth.

Last time I was in the supermarket, I counted and I think there were 12 kinds of apples, 10 different tomatoes, etc. Which I’m guessing would not have been true in the 1970s.

I remember when I was in college, I went to dinner at a friend’s house. They were Italian, and we had to go down to the North End in Boston to get Italian sausage with fennel seeds. Now you can find that all over the country in all sorts of neighborhoods.

Obviously somebody is buying these things. None of these things affect most people like the automobile did. But most people are benefitting from some of these things. So it’s a qualitatively different technology. It’s much harder to measure its impact, with all of these products. It’s very hard to judge what the different qualities of those 12 types of apples, or 20 types of olive oil, or whatever it is.

This must make it hard for the statisticians at the Beureau of Labor Statistics to compute inflation rates.

It’s an impossible problem to measure those things. Quality change is difficult enough to measure for something like an automobile or a computer. Here you’re talking about two orders of magnitude more products. So in a sense, innovation and technological change have a very different feel today than they did in Grandma’s day, but that doesn’t mean that they’re anything less.