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Monday, September 12, 2011

Après moi, le déluge


Back in March I discussed some problems of intergenerational justice. Some of that discussion was framed in fairly abstract terms, even dealing with millennial timeframes. In this post, I’d like to return to the theme of intergenerational justice. I recently read an interesting argument on intergenerational justice which I will present for you to mull over. I don’t buy it myself, but I’d certainly be interested in your thoughts.

It’s a well-known fact that in Canada and the US, older citizens are more likely than younger citizens to vote. Several reasons have been offered for this, none of which I intend to delve into hear. However, it is safe to say that the elderly have the attention of politicians and that policy is shaped accordingly. Thus, looking with trepidation towards the future, as our population ages we can expect policies to be adopted that are favourable to the old. For example, I’m sure we can expect increased funding for our medical system, since an older citizenry will be more reliant upon it.

Now, increased funding may be music to the ears of many, but the costs will probably be quite exorbitant. It must be funded somehow. Unfortunately, demography will work against such viable funding, since the number of people comprising the body of the nation’s taxpayers will shrink proportionally to the number of those who are demographically the greatest consumers of tax revenue. The simple fact is that fewer young people will have to work a lot harder to support the increased health care requirements of a growing number of old people — old people who, for the most part, are no longer contributing to their own health care needs.

In his book The Constitution of Liberty (1960), Friedrich Hayek predicted that a time would come when the burden of funding public medical and pension schemes would be so high that the young would simply baulk at continuing to contribute to them. Economist Gordon Tullock has made a similar claim, predicting that a point would be reached when the realization kicks in among the young that over their lives they will contribute more to such schemes than they can expect to receive from them. As soon as that happens, the whole pyramid scheme will collapse. Although our current society is one that eats its young, it may eventually swing to the opposite extreme, becoming a society in which the old are pushed out onto the proverbial ice floe to die. I am not quite so pessimistic, but there are serious structural problems to be dealt with.

I recently read a paper by Philippe van Parijs which floats a thought-provoking idea, although it is an idea that has no hope of ever being put into effect. Still, it is worth pondering, not so much for its feasibility (it has none), but because of the issues of social justice it brings to the fore. The paper is called “The Disenfranchisement of the Elderly, and Other Attempts to Secure Intergenerational Justice” (Philosophy and Public Affairs 27 (1998), 292-333). The title gives more than a hint as to the proposal it contains.

When we vote, we are exercising a right to have a say in policies that will have effects on others besides ourselves. For example, when I vote in favour of a policy that will raise prices in the industry in which I work, or artificially subsidizes it, if the policy is passed, my vote will redound to my benefit, but it will be to the detriment of consumers generally, who will now have to pay artificially higher prices for the goods my industry produces. A perfect example of such a policy would be agricultural price supports.

The point here is that, much like economic activity, such political activities as voting can have negative externalities. However, unlike in most economic externalities, at least in voting the parties affected get some say in the matter.

Or do they? When I vote for some expensive social program that is to be financed by borrowing, I reap the benefits of that program, while leaving the cost of it to be paid by future persons (among whom I may or may not be included). Again, this is a situation where voting creates a negative externality. However, in this case the people negatively affected do not get a say, because they are not yet born or are perhaps too young to vote. This is essentially a form of taxation without representation. Don’t get me wrong. I’m not against expensive social programs per se. If they have broad and informed support, then in principle I don’t have a problem with them. I just think that they should be financed through current revenues. In other words, we should have to pay for them, not others who have no say in the matter and who will possibly never reap any of the benefits.

Which brings me back to van Parijs. He argues that since voting can result in such negative externalities, either extra weight ought to be given to the votes of those who will bear the costs of those externalities, or else the votes of those who stand to benefit without bearing the full costs ought to be discounted. Now here’s the catch: There is often a temporal dimension to externalities. Many policies have distant cost “horizons”, in which benefits are experienced now, while real costs are experienced quite far off in the future. Because humans have finite lifespans, where the cost horizon of a policy lies beyond the lifespan of the person who votes for it, an incentive is created for the old to vote for such policies and the young to vote against them.

Imagine that you are a very old person in a society without a publicly-funded defined benefit pension scheme. Such a scheme is offered as a policy by some clever politician. Given how close you are to retirement, you would have every reason to vote for this policy, since you stand to contribute much less to it than you would receive in benefits from it. Sooner or later it must be paid for, but when the final bill becomes due, someone else will be stuck with it.

The same goes for publicly-funded health care: since the elderly are disproportionately greater consumers of health care resources, if a public system were being set up from scratch, although all might have some incentive to vote for it, the old would have a greater incentive, since they would use it much and contribute to it relatively little. In effect, they would be free riders on the system, even if that is not their primary intent.

Returning to the pension scheme example, we might note that the politician proposing it also has a perverse incentive. Generally speaking, in any such proposed policy, the higher the defined benefit relative to expected contribution, the greater the likelihood that people will vote for it. The old will do so for obvious reasons. The young may vote for it in the hopes that, so long as over their lifetimes they will take out more than they put in, they will have entered the pyramid scheme early enough to cash in. Thus, the system most likely to be proposed will be one that is not viable in the long term (which is in fact the case in most Western nations today), but is at least viable enough in the short or near term to induce a majority of people to vote for it. After all, if a system was proposed whereby you got precisely what you put in, most rational people would opt out, since they could do better through a private scheme. And of course, if the cost horizon is far enough off, the people who will be around when the bill becomes due are not present here and now, when the policy is to be voted on.

Van Parijs’ corrective is disarmingly simple, at least in theory: the old should somehow be disenfranchised, either absolutely, or by relative weighting of votes, since they are too apt to vote for policies that will produce negative externalities on the young and on future generations. Old people simply do not bear the full cost of their voting decisions and should therefore be prohibited from voting, or should at least have their votes count for less.

Of course, there are difficulties with this idea, quite apart from the practical barriers to its implementation, not least being, what exactly should the cut-off age be? Perhaps instead of a precise cut-off age, it could be introduced gradually over a person’s lifetime, with the relative weight of one’s vote bearing an inverse relation to one’s age.

Van Parijs also considers the other option, namely increasing the value of young people’s votes. Unfortunately there are limits to this. For example, how do you give votes to those who are yet unborn? And although the voting age could also be lowered, thereby allowing more young people into the voting pool, giving voting rights to eight-year-olds might be a cure worse than the disease. Eight-year-olds are not likely to understand the issues or policies in any great depth (indeed, most adult voters are intellectually unprepared for democratic participation). What is more likely to happen is that most of those newly empowered eight-year-olds would simply not bother to exercise their voting rights at all, which upon consideration is probably a good thing.

There is the additional danger of children voting for whomever mommy or daddy tell them they should vote for. Ironically, this might not be such a bad outcome, since assuming the parents are below the age of, say, fifty, this would effectively give them extra voting weight. The downside is that it would arbitrarily privilege parents, likely leading to a system that inclines towards policies overly favourable to parents and their offspring (in my opinion, the current system is already too favourable to parents). After all, parents can impose their own forms of voting externality if given the opportunity. For example, parents might use their beefed-up electoral weight to vote for lavish publicly-funded daycare schemes that would impose involuntary costs on the childless.

And this brings us to what I think is the crux of the problem. Van Parijs focuses on the unfair advantage old people get from their demographic strength, their relatively high voter turnout, and from the low voter turnout of the young. But there could just as easily come a time when demography works out differently, and where the young vastly outnumber the old at the polling booths and push them out onto the proverbial ice floe. How far should we go in disenfranchising people on the basis of what could prove to be a relatively short-lived demographic fluctuation?

Right now the old vote for policies that benefit them disproportionately. We can also safely predict that young people — at least the ones who bother to vote — would display a tendency to vote for policies that would disproportionately benefit the young. If the current upside-down demographic pyramid were suddenly to be right-sided, instead of our current gerontocracy we would merely have a different kind of intergenerational injustice, where policies benefit the young at the expense of the old. Van Parijs’ immodest proposal is a temporary bandage for current demographic circumstances. It is not a viable plan for long-term intergenerational justice.

On the fairly conservative assumption that the political behavior of each voter is at least moderately self-interested, just about any demographic subset would benefit itself by imposing costs on others if it was in the position to do so. Age is not the core problem from the point of view of justice.

Usually such free-riding is not even done consciously. In order to get buy-in, every group tells itself that its favoured projects — i.e. the ones from which it coincidentally stands to benefit the most — are good for everyone, and that therefore everyone ought to contribute to them, even when this is clearly not the case. For example, many farmers support policies of agricultural price supports, telling themselves (and the rest of us) that it’s in our interest to have profitable small farmers. In reality, such price supports tend to favour larger farmers even more. Meanwhile, the majority of us who are non-farmers pay more for food. At the end of the day, it probably would be more efficient and rational to simply take money directly out of the pockets of non-farmers and put it into the pockets of small farmers. But if such a pill is to be swallowed by the public, it must be wrapped in conventional pastoral poetry about the superior moral virtue of the agriculturalist and how his valor somehow ennobles us all.

That is just an example. My aim is not to ridicule or demonize farmers. My point is to show that old people are not the only group in society that lives off the rents of others. Handicapping the elderly would probably only serve to empower a new group of people to leverage government for rents.

The sad fact is that we would all be rent-seekers if we could. We all have things we’d like and we’d all prefer it if other people paid for them. That is why in the final analysis, rather than disenfranchising people, we should instead concentrate on structural political reforms that take away government’s power to distribute rents, so that when people vote, they do as little damage to others as possible.

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