Why I harp so much on libertarianism

If anyone reads this blog regularly, they know I write a lot about libertarianism, and in most of those posts, I usually hasten to say that I am not a libertarian and explain why.  Why, then, do I write so much about it, spending precious time that I could devote to writing my dissertation?  I can think of at least two reasons.

First, I have a certain vision of how I'd like the world to be, a certain vision of what laws I'd like to see passed and of how people should treat each other and of how the state should influence how people treat each other.  This vision is not particularly coherent, nor is it all that unusual.  For example, I support gay marriage, I support universal health care provision, I support a robust social welfare system, I support an alert, but cautious role for the US in international relations (i.e., I don't like military intervention but am not fully convinced its always wrong), I support some forms of what I understand to be affirmative action, I support in principle a tax system in which the more affluent pay a greater share of their income, I support the end or sharp curtailment of the "war" on drugs, I'm coming around to supporting an open-borders immigration policy, and I support robust government coordination of the free market system (I'm purposefully avoiding the term "centralized planning" because that's not what I support).

But to be realized much (not all) of my vision would demand a certain intervention by the state, or something similar to a state.  And libertarianism provides the best critique of this vision.  And if I want to justify this vision, I find that overcoming, or at least addressing, this critique is essential.  In other words libertarianism, with its emphasis on individual "liberty" (variously and, in my opinion, often poorly defined), is a check on the authoritarian implications of my vision.

On some issues (the "war" on drugs, gay marriage), my vision is more or less compatible from the get-go with the received libertarian position (acknowledging that there is no one "received libertarian position").  On other issues--immigration policy, for example--I have been drawn more or less to the libertarian position, even if I strongly object to some of the arguments that are advanced in favor of that position.  (I really do think an "open-borders" policy is the most humane, and I support such a policy on the basis of what is humane, but I reject the frequent and sloganeering trope of "people just don't want to do the jobs immigrants do," which to my mind is mostly a way of rejecting out of hand many good-faith (if ultimately faulty) objections to open immigration.)

On still other issues, libertarian critiques have informed the way and degree to which I support certain policies.  In principle, I have no problem with compelling the more affluent to pay a higher income tax rate.  In practice, I realize one has to worry about the effects of a robust system of progressive taxation.  It's partly an issue of how much revenue is actually increased and how a tax structure may create or dismantle incentives to invest in the economy.  It's also partly an issue of fairness.  To the libertarian critique that income inequality is not necessarily so unfair that it demands government intervention, I am compelled to claim that the more affluent simply owe something to society in which they have benefited so much, which is a good assertion as far as it goes, but only if one already accepts the existence of an abstraction called "society" to which one can owe obligations.

Second, I'm already a strong believer in "individual liberty," even if I don't know what exactly I mean by "individual liberty" and even if I probably means something different from what libertarians mean by it.  Therefore my "vision" is largely congruent with what libertarians claim to want, even if I get to very different conclusions.  It is for that reason, for example, that I support measures for universal health care provision:  I believe that having a dependable and affordable access to health care helps make people "freer" because the cost of health care is thereby one less thing to worry about.  In practice, there are plenty of caveats and qualifications.  To wit a few:  most libertarians would like everybody to have access to affordable health care, too, even if they would have a different way of ensuring that access; there will always be a cost to any system of health care that can't simply be legislated away; the particular health care reform I support now (the ACA), may very well make things worse if it's implemented poorly and is not improved upon (assuming, of course, that the Supreme Court doesn't strike it down), and the shaky constitutional grounds on which it's predicated might very well serve as a bad precedent.

In other words, in some ways I am already a libertarian and in other ways, libertarianism offers the best critique and best check against my own policy preferences.  It is, in this sense, a sort of ideological conscience that reminds me I may not have yet found the true and only heaven.

First, do no not strut

In one of the less believable episodes of the "West Wing," a candidate for Secretary of Education is pretty much disqualified because she had been a publicity hound in her former post as a board of education director in some district.  In the name of "separation of church and state," she as director apparently had several teenagers arrested for forming a prayer group on school grounds.  Not only did she have them arrested, she made sure news cameras were on the scene to photograph her coming in to bust a prayer group.

Now, it's entirely believable that a school board director would forbid a prayer group at a public school because that's one plausible way of interpreting the injunction against the state recognizing or endorsing religion (assuming we leave aside that no school director, to my knowledge, actually forbids prayer itself).  It's much less believable that a school board director would have such students arrested.  It's even less believable to imagine that the director would be so proud of the accomplishment as to ensure the widest possible publicity.  Most school directors who I am aware of, if they didn't find some sort of compromise to permit the prayer group, would state that banning them was something required by the constitution and would probably add the words "it is regrettable that I have to take this step...."   As the chief of staff on the show, Leo McGeary tells the candidate, "these laws need to be enforced and it's good that they're enforced.  But we do not strut ever..."

Leo sums up my feelings pretty well about the disgusting internet commercial the Obama administration has put online about his decision to order the killing of Osama bin-Laden.  A version of it is here, if you want to see it.  The gist of it is that Obama is a man of courage who made the tough call to kill somebody.  As Bill Clinton says in the video, if the Navy SEALsin the mission had been killed or captured, it would have been really bad for Obama.  The commercial also takes something presumptive Republican candidate Mitt Romney supposedly said in 2007 or so that implied the US was spending too much effort trying to capture bin-Laden.  The commercial implies from this statement that Romney is weak and wouldn't have made the "courageous decision" to order the killing of someone.

Some criticism has been leveled at this commercial for Clinton's statement that if something had happened to the SEALs, things would have been bad for Obama without really pointing out that it would have been worse for the SEALs.  One might in fact make the same criticism of Obama's recent state of the union address, where he discusses  how "we"--he and his administration and the military--worked together to kill the terrorist.

That criticism is just.  I won't focus on it other than to say that the stakes for Obama were much lesser than those for the SEALs.  At worst, his ratings would have gone down in the polls, been seen as ineffective or even reckless (Clinton in fact hints at this, albeit unwittingly, when he suggests that Obama made the decision on imperfect intelligence about the compound in which Osama bin-Laden was hiding).  I suspect that even this outcome would not have been bad for Obama:  for all we know Obama and his predecessor ordered similar attacks in Afghanistan that failed and came up fruitless, and the resulting casualties attributed to some military operation.  Obviously, a similar operation in Pakistan borders was perhaps more (politically) gutsy.  But a failure, I hazard, would have been written off, if reported at all, as an "attempt to protect the Pakistani people from a suspected terrorist compound."

But I want to focus instead on the commercial's unabashed celebration--its rejoicing--of killing someone.  The same man whose image looking out into the future in a message of hope is now the man who has taken the brave action and with the military is making us safer in our war against Eurasia or Eastasia I forget which.  They are both essentially the same image, one benevolent and one triumphant, our hero-in-chief to whom we owe loyalty.  Or maybe we owe loyalty to the state, or maybe he is the state, I'm not sure it matters.  His opponent--assuming he actually made the statement attributed to him and assuming the statement isn't taken out of context--wasn't speaking about the proper allocation of limited resources, but is weak because he would not have ordered the killing.

Democrats, or at least the leadership of the party, respond to criticisms about the ad with what is essentially a tu quoque:  the Republicans would do it, too, and they have done it.  Apparently, if one person does something, it's bad.  If two or more do it, it's less bad.  If at least one of the two is from an opposing political party, it's good. 

It's not only tu quoque's, however.  Look at Senator Dick Durbin's statement on the ad [click here, his statement is at around the 10 minute mark]:  "Do you know how many elections Democrats have been on the defensive when it comes to national security?....whether we're tough enough to keep America safe?"  It seems to me the Democrats are still on the defensive:  if you have to respond to criticisms with "we've been on the defensive" for too long, then you're still on the defensive.

The era of the polite Democrats is over:  they can now give tit-for-tat what the Republicans give:  no more a victim of FOX news and Karl Rove:  they can start wars and order killings like the best of them.  Not that they didn't do so before, but never mind.

A few months ago--I don't have the link--Jason Kuznicki at the League of Ordinary Gentlemen criticized Obama's use of militaristic language in the state of the union.  He said that the language was "the very essence of fascism."  I thought that was laying it on a bit thick.  That's what I thought then.

Look, Obama had limited options.  If I were president, I might very well have ordered the killing or regretted not doing so.  That's what presidents do.  It was the best to be done in a series of bad things that had to be done to address a chain of events caused by the person who had to be killed.  I get it.

But I would hope that I could keep enough of my humanity to say that it's regrettable that it has come to this, to say that given the circumstances, there was nothing else to do but take this human life. 

Ultimately irrelevant reasons I'm not a libertarian

One of these days I plan to explore some of the fundamental assumptions of what I understand libertarianism to be and, staying faithful to those assumptions, explain I am not a libertarian.  However, today is not one of those days.

Instead, I'm going to list some of the side reasons I'm not a libertarian.  By "side reasons," I mean things that libertarians tend to do or say, or things that people, some of whom are libertarians and some of whom are not, associate with libertarians and libertarianism.  Almost by definition, these second-order reasons are at least partially unfair to the many good-faith libertarians I've met online and on some occasions in person.  These reasons are unfair in at least two ways:  First, they involve foibles that are common probably to almost any people who try to adhere to a system of thought or who identify with a political orientation.  Second, they involve things that libertarians have little control over.

Yet I do offer these as items that make it difficult for me to sign on as a "libertarian," no matter how closely I buy into some of the assumptions of libertarianism, properly understood.

First, the "ism" of libertarianism bothers me.  I have in the past subscribed to certain ism's, or at least watered-down versions of those ism's.  There was a time, for example, when I identified closely with Marxism, or what I understood Marxism to be.  There was another time when I identified closely with what I now consider to be evangelical Christianity, with "New Right" social conservatism, and a neo-con quasi-messianic foreign policy of the sort that would later be so evident in the drumbeat for war in Iraq.  (I'll acknowledge that those three views were not logically consistent, but hey, I was pretty young at the time.)

I'm wary of making the same mistakes again, of embracing a way of seeing the world that organizes it so neatly on some fundamental,  a priori, principles.  I do not mean this as a jibe against the libertarians I have met, or at least not against most of them:  most of them adopt a spirit of charitable discussion with people who disagree with them or see things differently, and they often go more than halfway.  I also realize that libertarianism is not a well organized ism in the same way that Marxism can be.  But I'm wary of (re)becoming a zealous convert.

Second, some libertarians are overfond of using "liberty" in an almost question-begging way that strikes me as dishonest.  I really do mean "some" and not "all."  I'm referring specifically to invocations of the word "liberty" when there are competing notions of what liberty is.  If someone is for "liberty" and who in their right mind would be against "liberty"?  Now, perhaps a precise reckoning of "liberty" jives pretty well with a libertarian understanding of the word.  In fact, according to dictionary dot com, the first four definitions of "liberty" refer to freedom from some kind of (usually state-imposed) interference, which appears to me close to what most libertarians mean.  But it can't escape them that in everyday speech, we often use the word "liberty" more broadly to mean something like "freedom" in general, and people have different conceptions of "freedom."  Some examples:  doing whatever one wants; living according to one's reason independent of one's "passions"; living with the knowledge that society will provide a minimal amount of material support (healthcare, affordable housing, etc.).

To simply say "I support liberty" is to elide all those meanings and put one's interlocutor on the defensive.  Some examples of this use:

From libertarianism dot org [emphases in original]:

Liberty. It’s a simple idea, but it’s also the linchpin of a complex system of values and practices: justice, prosperity, responsibility, toleration, cooperation, and peace. Many people believe that liberty is the core political value of modern civilization itself, the one that gives substance and form to all the other values of social life. They’re called libertarians.

From Timothy Sandefur of the Pacific Legal Foundation [this quotation is from a series of posts he wrote fort he Volokh Conspiracy, the link is provided in the original, the emphasis in bold is my own]:

In Minnesota a few years ago, the Midwest Oil company charged customers less than cost at its four Minneapolis area gas stations. I don’t know why — seems like a foolish idea to me, but they have the right to sell their gas for whatever they want. (That’s called “liberty.”) Certainly there was no likelihood that this four-station chain would come to monopolize gasoline sales in Minneapolis, which is full of Shells and Mobils. Still, other gas stations (not consumers, of course) complained, and Midwest Oil was assessed a heavy fine.

Now, the point he is making is certainly a good one to consider, and it's one I'm particularly interested in because of my interest in the antitrust movement.  His conception of liberty is also serviceable.  But it's preachy.  The way he uses it here and in his other posts assumes that his notion of liberty is something that need not be proven, only asserted.

A few concessions and qualifications are in order.  My problem is when people use the freestanding word "liberty."  I have much less of a problem when people qualify it--for example, by saying "economic liberty."  I also acknowledge it is unfair for me to attack what is essentially a rhetorical style--take up a loaded word ("liberty") and use it in a larger argument that either stands or falls on its own merits--as the substance tout court of the argument.  I also acknowledge that many of the offenders do elsewhere make clear which notion of "liberty" they are invoking, and it's probably unfair for me to require them to redefine and remind me, the reader, each and every time they use the term.  Finally, not all libertarians are so clumsy with their use of the word.

Still, I'm dealing in "side reasons."  Invoking "liberty" so clumsily is a noise-making drive-by argument that turns off people who might otherwise be willing to listen.    It's naive pedantry for me to insist that people elucidate the assumptions behind a key word every single time they use it, but sometimes a word can become a crutch--in the event the U.S. Supreme Court strikes down the health insurance law, I can hear even now some libertarians or people who claim to be libertarians say "This is a great advance for liberty."--and if libertarians wish to gain converts, they might wish to reconsider how they mark their key concept.


Third, libertarianism is too associated with conservatism, even the non-libertarian social conservatism and militaristic conservatism.  Probably at least since the New Deal, some movement closely allied with the Republican party and what one might call nascent conservatism used rhetoric of what we might today call libertarianism.  I'm thinking of the "Liberty League" that campaigned (and failed) against F.D.R. in the mid 1930s, particularly the 1936 presidential election.  Over the years, something that might be called "libertarianism" or a libertarian streak allied itself with the GOP, as instantiated in, for example, Barry Goldwater's "extremism in the pursuit of liberty is no vice" quip in 1964, Ronald Reagan's famous admonition that government is not the solution to our problems, but that government is the problem, and the various efforts by the GOP to claim the policies of Chicago school economists as their own.

Now, I have performed a sleight of hand here and elided some key concerns.  Just because the Liberty League called itself the "LIBERTY League," that doesn't mean that all or much of what it supported was properly libertarian, nor does it mean that there weren't good reasons to oppose at least parts of the New Deal.  If people are out of work and starving, for example, did we really need a policy aimed at increasing the price of food?  If people agree that a surfeit of competition is what bedevils the economy, a claim that is at least debatable, is it necessarily a good thing to have a cartel system, operating under rules set by the president with minimal Congressional oversight and enforced by criminal penalties?

Moreover,in the mid-twentieth century, someone who liked "liberty" in the way libertarians seem to define it would have a good case for allying with the GOP.  The Democratic Party was the haven of Jim Crow politicians.  Both parties were complicit in the formation of the national security state that has eroded civil liberties, but it was  Harry Truman, a Democrat, who presided over what were arguably the crucial first steps in that direction.

In the 1970s and 1980s, a case was to be made that some regulations were onerous and some policies were downright unjust, and the GOP under Reagan lent some moral support to this position even though the Democratic party also adopted it, even before the days of the Democratic Leadership Council.  (For example, Carter's deregulation of the airline industry (sometimes wrongly attributed to Reagan) set in motion a process that led to cheaper air fares (although some have raised concern about the implications for the safety of air travel).

It's probably true that the GOP / libertarian alliance was more equivocal than not.  The War on Drugs--variously attributed to Nixon and Reagan even if presidents of both parties have pursued it since the 1970s--led arguably to the incarceration of hundreds of thousands of citizens (and resulting social costs) whose primary crime was acting on the desire to get high and led (perhaps more arguably, but the causal chain seems at least reasonable) to extra-statist cartels ("gangs") that used violence to control their competitors.  Ronald Reagan's Strategic Defense Initiative and his increases in military spending generally--again, the increased spending represented a process initiated by Carter, but Reagan appears to have pursued it more vigorously--may have helped hasten the demise of the Soviet Union (something libertarians might sign on to), but it was also a boon to rent-seeking weapons manufacturers, the National Administration for Space-scientists' Alms, and the national-security state generally.

These qualifications aside--and add to them those libertarians who have been vociferous critics of Republicans as well as Democrats--it is still probably the case that in 2012, to identify oneself as a "libertarian" is to identify oneself as someone who supports the GOP for more than strategic purposes.  (A strategic purpose in this case might be, for example, a wish for divided government, or a preference for a non-ideologue managerial president who was instrumental in coming up with the template for the current health insurance law over a more ideological president who signed a very similar law.)

My linking of libertarians with the GOP, despite some of the historical linkages and the ronpaulian racism and homophobia that a disturbing number of libertarians tolerate even if they disapprove, is unfair.  Many of the libertarians I have met online have been very careful to define the terms of their libertarianism.  It's not their fault that others adopt the term for partisan advantage, and it's probably not fair to ask them to conjure up another name any more than it would be fair to demand that I use another word for my liberalism (say, petrocornellianism?) which differs from what most people seem to call liberalism today.  Still, the linkage is there, and to aver libertarianism without the GOP baggage is hard; and it's something that turns me off.

Fourth:  I'm suspicious of whose interests are served by libertarianism.

Libertarians seem to believe, with much reason, that libertarianism benefits all and has special promise for the most oppressed and disfranchised among us.  That belief inspires such libertarian-inspired sites as the Moorfield Storey Blog, and Bleeding Heart Libertarians.  I buy this claim to a large degree.  Aggressive enforcement of civil rights by the federal government, for example, can be argued to be "libertarian" without much of a stretch, although I will leave aside the point that the 1964 Civil Rights Act outlaws some arguably private activity that a freedom of conscious loving libertarians would want to defend, not necessarily out of agreement but as a matter of principle, against state intervention.

I too think that some libertarian projects may benefit those who suffer most from state repression.  Curtailing the war on drugs would curtail a policy that functions as a way to target and incarcerate poor people, with an emphasis on persons of color.  Even something as simple (or apparently simple) as zoning requirements might hurt the least affluent people.  I suspect that one of the many factors that contribute to the food-desert phenomenon in the poorer neighborhoods of Chicago, for example, is the fact that a large retailer like Walmart has to go through special negotiations--that sometimes last years--with the city council and with dues-seeking unions to open one store.  All the while we hear the plaints of alderpersons who are concerned about the "small businesses" that, if they really exist, must charge high prices (because of tight margins and, probably, bribes to alderpersons) to those least capable of paying them.  Walmart, of course, is not the simple solution some claim it is.  But I would suggest a less restrictive, or at least more standardized, zoning or licensing practice might encourage competitors to Walmart; as it is, it appears one needs to have the resources of a Walmart to negotiate with the city for the privilege of going into business without the support of a local alderperson.  There are probably other advantages of libertarian-ish policies for the less affluent and otherwise less advantaged members of society aside:  one that comes to mind is less restrictive immigration policies, which would probably counteract some of the extortionate power that employers of undocumented labor now enjoy.

Leaving these (probably very real) benefits aside, however, it seems that those who stand most to benefit from a generalized libertarian program are, unsurprisingly, those most in a position to take advantage of them.  Some specific disadvantaged people might support one or two libertarian policies:  for example, an undocumented worker might support less restrictive immigration policies; or someone from a service-deficient neighborhood might want it to be easier for a Walmart to open shop.  But in general, the range of policies promoted by libertarians seems, as a generalized program, to benefit most those who have the most, or who have the types of marketable skills, or aptitudes for such skills, that would benefit them most in a very libertarian polity.

I am being deliberately vague (as opposed, I guess, to "being spuriously vague") about which policies I'm referring to.   I am mostly describing my sense of a lot of the policy preferences of libertarians.  A political-economy, for example, that arranges its incentives so as to permit  the right to pursue a lawful calling best benefits those whose lawful calling commands the higher wages.  This doesn't mean that others don't benefit.  It's probably a positive good all around; and rising tides lift even tugboats.

At basis, this particular "side reason" is a spiteful ad hominem.  Yet I confess it gives me pause.

Fifth, the Koch brothers vs. Cato imbroglio.

As some of my readers may know, the Koch brothers have initiated a lawsuit to try to gain more control over the Cato institute, which they either founded or played a strong role in funding.  That suit began a couple months ago, and I don't know its status.  One of the reasons why this is all a turnoff is the way some of my online libertarian acquaintances have reacted to it.

Before the lawsuit, at least some of them vigorously defended the Koch brothers, simply as people who promoted some libertarian policies and who were unfairly being vilified for participating in the public sphere.  Now, some of these same libertarians are (probably justly) denouncing the Kochs' lawsuit as an attempt to destroy or bring under a conservative (non-libertarian) fold, what is / was a bona fide libertarian think-tank.

I don't know all the in's and out's of the Cato-Koch suit, and I still know too little about Cato to speak intelligently on it as a think-tank (although what I've read of Jason Kuznicki's writings on marriage give me reason to think favorably of it as a serious, good-faith intellectual endeavor).  On some level, there's something that smells bad here:  as recently as a 18 months ago, the Kochs were all right with their conservative program as long as they were nominally libertarians, and now they're almost evil because they have declared war against real libertarians.

My charge here is rank ad hominemism.  Petty--or even not so petty--legal squabbles like the Koch-Cato suit mean nothing for the efficacy of libertarian policies or the rightness of libertarianism.  Similar squabbles can happen and have happened among any combination of interests, libertarian or not.  I should know better than to base my approval or disapproval on a dispute that could happen between any two interests.

In fact, I should know better than to base any objection to libertarianism on what I call the "side reasons" I mention above.  I recognize their irrelevance.  Still, I confess that they play a part in my reluctance to identify as a libertarian.

The constitution and me

The US Supreme Court seems poised to strike down the individual mandate, a key provision of Obama's Health Insurance Reform, or ACA.  I personally find implausible the argument that the other key provisions ought to stand if the mandate is struck down.  It's not only the absence of a severability clause, a clause which I understand the Court usually takes only as "advisory."  (I base this claim on Kevin Walsh's statement that "A legislature may try to control the severability determination with a severability or inseverability clause, but under current doctrine such clauses are neither necessary nor sufficient to control the judicial determination of severability."  Click here to see his article.)

Whether the other provisions are maintained or not, I find it very likely that they would be practically unenforceable:  it would not surprise me in the least that insurers could find some loophole where they would essentially practice as before, just not under the name of "insurer," or where they might be able to charge, say, an "insurance verification fee" to people with pre-existing conditions, so that, for instance, such people's premiums would be quite low, but they might have to pay a monthly fee of thousands of dollars.  I'm not saying this will happen, only that something like it is a distinct possibility.

I do not share, in other words, the optimism of other ACA supporters that striking down only the mandate would lead insurance companies to come begging for some sort of public option or would lead politicians from all sides of the aisle to come together to save universal health care.

Never before have I been so emotionally invested in what the Supreme Court decides.  In part, this investment comes from the fact that I know at least a few people who, if they lost their jobs and exhausted their COBRA insurance, would be uninsurable.  I've also had so many jobs that don't offer insurance that I find the platitude "well, they just need to work and be responsible" to be an unconvincing solution to the question of their access to health care.

It's not that I didn't care what the Court decides on other issues.  I did and do care what the Court said in Citizens United, Raich v. Gonzales, Heller, McDonald v. Chicago, Lopez v. US, Lawrence v. Texas, Boumedine, Bush v. Gore, Kelo, and Romer v. Evans, to name a few.  They simply seemed to me academic explorations, like reading a history textbook in real time, even though I know and care for people who are conceivably affected by some of these decisions, in particular Lawrence and Romer. 

I'd look at these decisions from on high and sometimes was at least inwardly critical of those who complained about them.  Bush v. Gore is illustrative here.  It may have been a crappy, poorly argued decision--I actually have not read it--but I had, and still have, a bit of sneering distaste for those whose main criticism seems to be that the Court made a decision at all, not that it made the wrong decision or that it justified its decision poorly.  "Don't they understand," I say to myself, "that in different circumstances and with a different outcome they would be cheering the Court's decision as the triumph of participatory democracy?"  Similar was my reaction to a baptist minister I knew--he was the father of a close friend of mine--who complained bitterly about Romer v. Evans but would have praised it highly if two justices had voted differently.

Now I have a better, that is, more empathetic, view of the frustrations.  In my more bitter moments I'm inclined to sneer, for example,  that Scalia--who acceded, if only reluctantly, to an expansive view of Congress's power to regulate growing medical marijuana for one's own use--should now be, so it appears, so insistent that Congress's power shall not be so expansive when it comes to ensuring access to medical care.

In my less bitter moments, however, I realize my sneer is poorly reasoned.  I see a distinction between the exercise of commerce clause power in Raich and that claimed in the ACA case.  The mandate, I believe, is truly unprecedented and is at least arguably unconstitutional by most good-faith readings of the Constitution.  I even so believed as early as December 2009, before the ACA had been passed and before a strong legal movement had begun to argue against the mandate's constitutionality.  (I'm not necessarily claiming I came up with this belief on my own....it's possible I had read others, say at the Volokh Conspiracy, who might have raised the objections that early.  I simply don't remember how I came to that conclusion.)  I also believe that supporting something which however just in other respects goes against a good-faith reading of the Constitution creates the precedent for less just seizures of power and violations of civil liberties and other rights.  It's no defense for me to say that the civil liberties have already eroded and that therefore we might as well enact something good.

Moreover, the ACA is not an unqualified good.  It's a gamble.  Even I can see that.  The mandate also strikes me, and has stricken me for quite a while, as a bit too much of an "x factor," by which I mean it represents some simplistic and probably specious reasoning:  just throw almost everybody into the insurance pool and that will somehow be enough to take care of costs, or at least premium prices.  I concede that the ACA, even if it works in a way that I would call "successful,"  will probably increase the price of premiums for at least a majority of Americans and not only the vilified 1 per centers.  In my view, if the increase is moderate and if thereby poorer people can have access to more affordable health care when they get sick, then the law will have been a success.

I supported and continue to support the ACA because I think it is the best option that is likely to be enacted.  It may be true that a single-payer system might work better or that a truly market-oriented insurance system, with due care taken to treat "uninsurable" people and the very poor might be better.  But I don't see the first as happening, and a single-payer system, or even a "robust public option," would have its own problems that cannot be legislated away simply by Congressional decree.

And whatever the virtues of the market approach, the version that would likely be passed would probably not end the employer tax exemptions for insurance, and the "market" reforms would be limited to a few additional tax breaks and some optional pilot programs that only a handful of states would try for a few years before abandoning.  The version would the status quo ante ACA that would entrench the prior system, albeit with a few gestures to subsidizing poorer people.  (I don't mean this as a jab against the market idea, only that I suspect it couldn't be enacted robustly enough to work.)

So here I am.  I continue to hope that the ACA will be sustained, but I realize that it would be folly to claim that sustaining it would be a cure-all or that invalidating it would be an unalloyed bad thing.

Abdicating the Ms./r.(s)

I've been an occasional commenter on others' blogs for at least 3 years or so, and until very recently, I have usually insisted on using "Mr." or "Ms." whenever I knew the last name.  I have, in the last month or two, started using first names almost all the time.  It's much less supercilious to use first names, and when I use last names, I think I usually come off as cloying and saccharine.  It also takes longer to write "Mr./Ms. so-and-so," especially because a large number of last names are either longer or the same length as the first names, and so adding the "Mr." or "Ms." simply requires more writing than I want to do. 

I think I used the last names because I thought it was a way of engaging people politely and respectfully.  I still use last names with people I don't know.  And I use them with some professors:  as a general rule, I like to call my professors "Mr." or "Ms." instead of "Dr." because as far as I'm concerned someone with a PHD in history is no doctor.  (Doctors are people who take care of your health and prescribe medication.  By that standard, I call my nurse practitioner "Dr." and I would call her that even if she didn't have a PHD in public health in addition to her nursing degree.)  I still relent when I talk to a professor who seems like he (usually it's a he who this applies to) might be exceptionally sensitive to being called anything other than "Dr."  Of course, there are a lot of professors I call by their first names, and most of these are those who are so known by their first name in the department that it seems ridiculous to call them "Mr." or "Ms."

I think I got my preference for using last names when I was a bank teller.  We were encouraged to call each of our customers by name.  I don't know if we were also encouraged to call them by their first name, too, but that was the standard practice.  Most of my customers were older than I (I was about 23 or 24 at the time), and I found it ridiculous to call people by their first names when I knew them only because I cashed their checks or accepted their deposits.  So that's when I developed a policy of calling people "Mr." or "Ms."

Anyway, it doesn't seem to work with blogging.  So I've been going back to first names.

At the borders of three social classes

Jason Kuzinicki, at the League of Ordinary Gentlemen, links to a quiz [click here to read it, it's part of a sample of book by Charles Murray] that purports to show--or at least explore--how much the quiz-taker is in touch with "the common person."  The lower the score, the less "in touch" one is.  On a scale of 0 to 100, here are what the scores mean (hint:  the points overlap):

• 48-99 points:   A lifelong resident of a working-class neighborhood with average television and movie going habits
• 42-100 points:  A first- generation middle-class person with working-class parents and average television and movie going habits
• 11-80:  A first- generation upper-middle- class person with middle-class parents.
• 0-43:  A second- generation (or more) upper-middle-class person who has made a point of getting out a lot.

I scored a 33, which places me pretty solidly in the "middle class" and potentially in the "upper-middle class."  Now, since we live in a small-d democratic age, it's considered poor form not to have empathetic ties to something called the "middle class" or lower, and I could point out to certain assumptions inherent in that quiz that might serve more to stereotype working-class people than to illuminate affective class differences [I really do mean "affective" and not "effective"].  I won't dwell on those, except to say that I purposely biased my answers to make my score lower.  For example,

• I answered "no" to the question that asked whether I knew anyone in school who, no matter how hard they tried, couldn't get passing grades.  (First, note the assumption that working people not only don't get passing grades, but cannot get them.)  Now, one of my best friends in high school got very poor grades--I won't say he never got passing grades, but mostly they were very poor--and he ended up dropping out and joining the Navy (I think the navy at the time had a requirement that new recruits be at least high school graduates, but somehow he got around that).  I answered "no" to the question because my friend was (and is) quite intelligent, and probably could have gotten very good grades if he had known how, or had the will to, apply himself.  In fact, I hear that he has since gone to school and become a radiologist.
• I answered "no" to the question "do you have a close with whom you have strong and wide ranging political disagreements" even though I disagree profoundly with the kind of liberalism most of my friends espouse.  I answered "no" because I am probably coming from the same spectrum as they:  like them, I do not support the Republican party and probably will not unless the party makes some pretty radical changes in the constituency it tolerates.  (But unlike (a lot of) them, I don't think that party or Republicans in general are evil incarnate, it's just that the party is at a place that I cannot support it in good conscience.)
• When the quiz presented a list of movies and asked if I had ever seen them, I almost said "yes" because "True Grit" was on the list.  But then I realized the question was referring to the remake of the John Wayne classic and not the John Wayne classic itself, which my father watched, along with several other Wayne movies, almost whenever they were on television.
• I said "no" when the quiz asked if I had ever been to a union local meeting because I don't think the Graduate Employees Organization I belong to necessarily qualifies as a union local in the sense that Murray intended it.
• I said "no" when the quiz asked if I ever had a job where I hurt when I got off work.  Fortunately, my jobs have never really caused chronic pain, and aside from grease burns and small cuts and sometimes aching muscles , I've never been injured on any job.  Still, I have had jobs that were physically exhausting, but I didn't think that counted.

I biased my answers because it was as clear as day the point the quiz was aiming at, and I didn't want to claim an affinity to working-class or less-affluent-class culture that I didn't deserve.

Now, as for the score itself, which places me as a "first generation" upper-middle class person with "middle-class" parents or as a second generation or more upper-middle-class person:  it's counter-intuitive in one way but very accurate in another.

It's counter-intuitive because it's probably fair to say that my family is working class and to some degree my upbringing was working class.  My father was an electrician (a member of IBEW).  My mother has worked a variety of office jobs in what some analysts would call the "pink collar" sector, a term that I personally find condescending but that underscores and underlying truth about the way some jobs are coded as "women's work":  for example, she worked as some sort of information processer for an insurance company (this was before I was born), and while I was in school, she worked as a teachers aid for a local elementary school (although not the one I attended).  For a long time, if I understand correctly, she was also a homemaker without a waged job, and took care of my siblings when they were young.

Most of the rest of my family is probably at least arguably working class, too.  One of my brothers is also an electrician, although for a while he was a project manager for a company and for another while he tried to run his own electricians business (so maybe that history excludes him).  Another brother is a truck driver.  Another is in law enforcement (a profession that while perhaps not "working class" in terms of its members' relation to the "means of production" but which I think most people would identify as a "working-class" job).  Both of my sisters have had a variety of waged jobs in retail and other locations, although now one is running her own business (she finds furniture in the alley, refurbishes it, and sells it) while the other now has a job that might qualify to some people as "middle class."  I'm not sure I understand what she does, but as I understand it, it requires a lot of detailed oriented work and skill, and while some might consider it "middle class," I'd say it is working class at least in the sense that the job is waged labor and that its employees are subject to downsizing threats (she recently faced the prospect of a layoff, but fortunately has been kept on).


My siblings' spouses, too, tend to have working-class jobs.  One worked in a nursing home and had her own housecleaning business for a while (i.e., she cleaned people's houses for pay; she wasn't a labor-farmer who contracted out the work of others).  Another has worked various retail jobs and for while had a small cake-making business (it was of such a size that I'd say it was less entrepreneurial and more "working-class," but I can see how one might see it as "middle-class," at least in the petit bourgeois sense).  Another also works in law enforcement.  One, however, has a job in middle-management--and the upper-echelons of middle management, at that--of a very large, national corporation, so that her actual job is probably "middle class" by most standards, even though her own background is quite working class.


My working-class background therefore makes my low score seem counter-intuitive.  Yet, it's more than it might seem given only the background I just noted.  Before I go on, I should acknowledge a few things.  First, most people have a very broad definition of what counts as "middle class."  They seem to want it to mean something like "everyday people who are neither super-rich or super-poor."  (In my less charitable moments, I sometimes think certain people use it to mean "that huge, inchoate mass of people who are not part of the undeserving rich or the undeserving poor, with 'undeserving' being defined as 'someone whom I look down on for being poor or whom I dislike for having more than I have'.")  I personally would prefer a more precise definition, preferably one that stresses a combination of affluence, the ways one earns one's living, and the way one self-identifies as a "class."  It is probably a mistake, however, to impose my conception of class on others.  So, I'll just acknowledge that most people do not mean "middle class" and "working class" as mutually exclusive. 

The real point to Charles Murray's quiz--and, I presume, the book it's extracted from--is not to conjure up a new, theoretically fine schema of class distinctions.  Rather, he is trying to ask the reader to assess how he or she might fit in a spectrum between elite and non-elite.  And now, following what appears to be the spirit of his quiz, I'll explore how my relatively low score has some merit.


First, although I was raised "working class," my upbringing reflected a lot of affluence.  I imagine my parents had a lot less money when they raised my siblings, who are significantly older than I, and they probably had to scrimp and save.  But by the time I came around, I was pretty much the only one they had to take care of, so the proceeds of that scrimping and saving often went to me.  As I child, I was never concerned about whether I would have food or clothing or a place to live; and if my parents worried about such things, I never knew about it.  I may have worn hand-me-downs, but if I did, wearing them didn't bother me, and my clothes were always in good repair, and don't remember ever being self-conscious that I would be made fun of for the quality of my clothes.

Second, my parents were quite avid readers.  They didn't necessarily like much of what most people with a formal education might place onto the canon of what people must read to be educated, but I grew up with the habit of reading.  (And my father read quite complicated stuff, primers on metallurgy and whatnot, that boggled my mind.)  This propensity for reading in itself is not necessarily a marker of "elitism," but it did mean I grew up in an environment in which I would realize whatever aptitude I had for book learning.  My mother got an old set of "World Book" encyclopedias, and I used to just browse them, reading whatever articles seemed interesting to me.  There were counter-currents, too:  my parents were upset that I wasn't into playing  sports (for two years I played little league and hated it), and I think my father was disappointed that I was either unwilling to or lacked the knowledge to defend myself against bullies.  (To be fair, I should say I was not always the hapless victim, and I sometimes provoked the bullies more than my parents or school officials caught on, and in some cases, I was a bully too).  But overall, my scholastic aptitude was at least tolerated, and usually encouraged.

Third, I didn't have to work in high school and probably didn't have to work in college.  Now, I did have jobs.  With one major exception, my freshman year in College, from the end of my sophomore year in high school through the end of my senior year in college, I had a job at one of two fast food jobs.  (In college, I worked one job at school, in Fort Collins, during the school year, and another job in Denver during summer and Christmas breaks.)  Now, those jobs helped me in many ways:  I saved money, gained working experience that gave me an entree to other jobs after I got my BA, and I met people who I might never have otherwise met or socialized with.

But I didn't have to work.  In high school, my parents didn't expect me to contribute to rent or to my upbringing.  My tastes were pretty tame, and they might have outright given me an allowance if I had asked for one.  In college, working was necessary to offset having to take out loans, and I was fortunate to have scholarship that paid for most of my tuition, leaving me to cover only living expenses.  Yet, there were three points.  First, during Christmas and summer breaks, I stayed at my parents' house, rent free.  Second, I knew that if things got really bad, I could ask my parents for help and that I would probably get it.  Third, taking out student loans was always an option:  it was easy and partially subsidized credit that was available to me.  I'm not saying there aren't problems with the student loan system and that there is no exploitation in the way the system operates, but it is a resource provided at taxpayer expense, and it was open to me.

Fourth, I had the chance to go to graduate school.  And that process acquainted me with people whose tastes definitely put them on the elite side of Murray's spectrum.  I remember that in my MA program, I knew at least two people who had grown up with a maid in the house, and two people whose fathers were Harvard professors.  In both my MA and PHD programs, I encountered that strange creature I'll call the "PLACA," or the private liberal arts college alumnus/-a.  Almost all of these PLACA's, most of the time, have been almost nothing but nice to me and treated me almost as if I were one of their own and thereby gave me the social and cultural capital I might need to negotiate the rough waters of professionalism and middleclassness.

As my fourth example suggests (in what I hope is taken as a gentle, tongue-in-cheek nudge and not as a declaration of class war against my friends who graduated from private liberal arts colleges, not all of whom were from affluent backgrounds...I know one professor at such a college who said many of his students can't even buy books until their student loans come through), I think there are limits to my membership in the elite.  Among my friends in academia, I usually feel self-conscious....not necessarily "inferior," but very aware that I went to a state school and that neither of my parents went to college.  I of course knew and know other people in grad school who have more challenging backgrounds than mine ever was, so I risk claiming too much.

But I remember feeling a sense of alienation, jealousy, and envy when, as a MA student in Colorado who had never ridden an airplane, I heard people mention quite casually that they had friends in some part of the country (San Francisco, Georgetown, Chicago, New York City) and they might go visit them this weekend.  I remember a similar feeling when my classmates criticized Coloradans as provincial hicks (at least, that was my interpretation of a lot of what they said....I freely admit 1) that I placed a certain chip on my shoulder and purposely over-interpreted what were innocuous statements and, probably, expressions of homesickness for wherever it is my friends came from and 2) that I can be just as prone as the next guy to regional bigotries.)

Even now, when I ought to know better, I think to myself as a non-elite person in an elite sea.  For example, I find NPR annoyingly condescending, even to the point of getting angry when I hear someone listening to "All Things Considered" on the radio, even though I know I'm in the wrong there.  I take certain statements that were not intended as insulting or as slights and interpret them as a remark against the class I allegedly came from.  This may be one reason why I get very offended, very fast, when I hear people, especially professional, well-educated people, criticize evangelical Christians as if the latter were just some barbarous lumpen who can't be spoken at.  (I used to self-identify, kind of, as an evangelical Christian, even though I was raised Catholic and never formally disavowed Catholicism until I became an agnostic, but that's story for another day....)

I do feel then, rightly or wrongly, that I'm on the border of something called "working class" and something called "middle class."  I say this even as I realize the immense privileges I have enjoyed throughout my life, and they are more than I listed above, too.  I say this even as I realize that some people who I consider more solidly in the middle class and who I know personally had or have even fewer resources than I am accustomed to.

Yet my low score on the quiz suggests that not only am I in the "middle class," but I'm also at the cusp of the "upper class."  And in some ways I am.  I know a few people who qualify (in my book, at least):  the rentier capitalists who do worthwhile jobs and run their own charities, but who when push comes to shove would probably call in the army to protect their wealth.  I say this not as a judgment and not solely as a statement of envy:  these people seem unhappy, and if their wealth and status is not the cause of their unhappiness, it doesn't appear to help them.

I'm not sure what conclusions to draw from all this.  Perhaps "class" as a construct is clumsy, too clumsy to make valid generalizations from.  All I can really say is that I should be wary before I claim some sort of affective understanding or "authenticity" based on my background.

Rackets, protection and otherwise

A while ago, Todd Zywicki at the volokh conspiracy linked to a paper he had written concerning what is commonly called "overdraft protection." In particular, he focuses on the recent regulations to control "overdraft protection," and proposals to regulate it further. (Click here to see his volokh conspiracy post, and here to get the link to the pdf version of the paper). Zywicki argues the regulations that have been enacted on "overdraft protection" and especially those that are currently under consideration actually harm those who make use of "overdraft protection." His argument, by and large, convinces me. But I have several reservations about it.

Anyone familiar with Zywicki's writings--or at least those writings that he advertises on the volokh conspiracy--knows that he rarely (to my ken, never) has met a regulation of the financial industry that he likes. The argument seems to be that all new regulations impose a cost, and that those costs are passed on to consumers. As a result, consumers, especially the less affluent and more marginal, have to pay more,and are priced out of credit markets either because they are now credit risks where they might not have been before or because they simply can't afford to pay for the new credit "products." In my less discerning moments, I'm inclined to believe that he starts from the assumption of what's best for the credit card company or bank and then looks long and hard for an argument that might show how a regulation affects some unfortunate class of people on the margin, and voila, he's now the champion of the poor.

In my more discerning moments, I avoid that ad hominem (note, however, that I included it in this blog post anyway). I realize that my argument against his conclusions must be more substantive than "Mr. Zywicki wrote that paper ON PURPOSE!!!" And reading his paper, I'm convinced that he's largely right insofar as he critiques regulation of what is called "overdraft protection."

A definition is in order before I explain his argument. "Overdraft protection" is the term now used for the way banks decide to honor or dishonor checks that are presented against an "overdraft," or against a checking account that lacks the funds to cover the amount of the check, almost always with a fee, per item paid or returned unpaid, in the range of $30, sometimes less, and usually more. I believe this use term is unfortunate and misleading: "overdraft protection" used to refer to lines of credit, usually unsecured, or to secondary accounts, usually savings accounts, linked to the checking account that would kick in to cover overdrafts, on the assumption that the customer would repay (in the case of lines of credit) the amount, in addition to a small amount of interest, or pay (in the case of a linked secondary account), a small fee, in the range of $3 or so.

I say the new use of the term is misleading because it feeds the fiction that the bank's practices in honoring or dishonoring checks presented against an overdraft is "product" the consumer purchases instead of an actuarial, risk management practice that the bank engages in. However, being a "fiction" doesn't make it false. "Overdraft protection" is a "product" in the sense that it is part of the set of practices that affect how a customer uses his or her checking account and that may conceivably influence which bank a customer chooses. It is also a "product" in the sense that customers end up paying for the practices, directly when it comes to being charged overdraft fees, and indirectly inasmuch as the aggregate risk assessments influence a bank's overall account-fee structure (minimum balance requirements, monthly or annual fees, fees for atm and other bank card transactions). I should say that while I wish Mr. Zywicki were more precise in how he uses the term (later in his paper he does discuss lines of credit and linked secondary accounts), I can't truly fault him for using it the way he does. Even federal regulators--the federal reserve and the FDIC--appear to have adopted that terminology.

What Zywicki is taking aim against is recent regulations that limit the way banks decide whether or not to pay against overdrafts. These regulations, if I understand them correctly, limit the number of overdraft fees a bank can charge per business day and requires customers to "opt in" to allowing a bank to honor checks against an overdraft (and thereby charge the fee). If a customer doesn't opt in, then any check or electronic item that is presented against an overdraft. Not opting in would also mean debit card authorizations would not--at least not in theory--be approved against an account with insufficient funds. For those who don't opt in, there is still a possibility of an overdraft: a debit card authorization might be approved while an account has funds, but will post a few days later, when an account might lack the funds, and my understanding is that in such situations, the usual overdraft fee would apply. Zywicki raises concerns about other proposed regulations that would, in effect, lessen the number of overdraft fees or somehow control the amount of those fees.

The ostensible reason for these regulations is to prevent what the pro-regulation side calls "abuses." Banks have to, or at least in practice they choose to, standardize the order in which items are paid against an account. Usually, banks will pay any debit authorization (once it's posted) first (because that can't be refused), then any electronic check (ACH/EFT), then paper checks or checks submitted via the normal clearing processes. (Electronic checks and paper checks are starting to meld into a new category, as some institutions are now processing paper checks as electronic items). When paper checks (or their electronic proxies) are submitted, banks follow one of three ways to clear them: by check number (usually from lowest number to highest, although conceivably the order might be reversed), by amount from lowest to highest, and by amount from highest to lowest.

The order of clearing correlates with the number of fees charged the customer. Clearing by check number has a relatively "neutral" (or perhaps "random" is a better word) effect. Clearing from lowest amount to highest amount tends to result in fewer overdraft fees because the lower amounts are more likely to be paid against posted funds before the first overdraft in a series of check presentments occurs. Clearing from the highest amount to the lowest amount tends to result in more overdraft fees because the higher amounts are more likely to induce an overdraft, and the remaining, and usually more numerous, lower amounts are likely to repeat the overdraft, incurring a new fee each time.

One of the "abuses" comes in when a bank chooses clearing by highest amount first, apparently in an attempt to gain a higher fee income. Banks tend to justify this change because 1) it gives them more money that allows them to offset the risks of defaults and charge-offs; 2) the price is born by those who overdraw; and 3) checks written for a higher amount are usually the most important checks, to pay for such necessities as rent, insurance, and utilities, and dishonoring those checks could lead to evictions, loss of coverage, and loss of access.

Zywicki argues that much of the new regulations works to impose costs on banks that will lead them to charge higher prices or to deny "overdraft protection" services to those customers that would need them most. He suggests that such regulations would be justified only if the practices they regulate represent a way for which banks to, in effect, gouge customers in a manner that's not disciplined by market competition or if customers simply don't know, and are in a position not to know fully, how the fees are charged and how much they are.

He finds such justifications lacking. He finds that the "overdraft protection" services prior to and after the regulations do not allow banks to collect "monopoly rents," the sort of unconscionable profit-seeking that harms the consumer. Although I don't fully understand what is meant by "monopoly rent," nor do I fully understand the economics behind his analysis, I'll take him at his word when he says that while banks might indeed make a profit off of overdraft protection, they do so in a largely competitive environment and from limiting their charges to those people who, by and large, use the service. That is, the people who overdraw or write checks against overdrafts are those who generally end up paying. (This is not to say that he thinks the financial industry, especially the consumer banking industry, is perfectly competitive--in fact, I seriously doubt that he believes this to be the case--only that he does not see the types of abuses that he would consider a justification for these regulations.)

Neither does he find that consumers are hapless and ignorant victims of "overdraft protection." He cites studies that suggest tentatively (and he admits the findings are only tentative and more research needs be done) that consumers to whom "overdraft protection" applies by and large are well aware of the fee structures and the procedure by which their bank pays the items that present to accounts, and that they are also grateful that the larger checks are paid against the overdraft.

Having excluded these two potential justifications for the regulations and even more severe proposed regulations, Zywicki finds what he calls paternalism as the primary reason for these laws. Like most libertarians, he share skepticism and not a little disdain for "paternalist" regulations, and offers that as an almost sufficient reason (absent the other justifications which he claims are not in evidence) to oppose these regulations. He cites the critique against "paternalist" regulations--that they essentially deny choices to people who acts affect primarily only themselves and in that sense make them worse off without benefiting anybody else. And he notes that as these regulations tend to increase the costs of managing overdrafts--by cutting off money that might be used to offset the risks of defaults and charged off accounts--certain people, particularly more marginal people, are priced out of these types of checking accounts and are compelled, sometimes, to use even more costly credit products, such as payday loan lenders.

Now, as I said above, I find Zywicki's overall argument convincing. I buy his claim that banks do not necessarily exact "monopoly rents," and I share his distrust of "paternalist" regulations, even if I do not distrust such regulations to the extent he does. Still, I have some reservations about some of what he says in his paper.

First, Zywicki hedges a bit about the "opt in" requirement. He is honest about this, and says that while his default preference would be for an "opt out" requirement--wherein the bank would decide to pay against overdrafts regardless of whether customers have given the bank prior permission to do so, but the customer could order the bank not to do so--the "opt in" requirement probably would not do much harm. He offers as a possibility, however, that even the opt in requirement would impose some costs on the bank and on customers who otherwise might have wanted to use the "overdraft protection" services in the time between when they opt in and opt out.

I said Zywicki "hedges" on this issue, and perhaps hedge is an unfair word. He's not on a crusade to combat the opt-in provision: he's simply noting some of its potential costs. I would, however, like to offer a more robust defense of the opt-in provision. Here it is: its tendency is to confirm that the customer knows what they are getting into. It's not an inexorable tendency, I acknowledge: the "opt in" notice that banks send their customers--or at least the ones that my two banks have sent me--tends to emphasize "protection against overdrafts" and not the fees or the fact that all items paid against overdrafts are done so at the bank's discretion. Still, it is a disclosure that the customer has to take an active step in accepting.

Another defense lies in one of the examples Zywicki gives to demonstrate that there are not true "information asymmetries" of the sort that would justify the types of regulations he by and large criticizes. He refers to an "overdraft protection" disclosure and notes how easy it is to read, and he reproduces the content of this disclosure (although apparently without any of the different fonts and bold type that might help the reader know to what extent the disclosure emphasizes some points in exclusion to others). One thing that his paper does not really mention is that such disclosures were, to my knowledge, almost unheard of before the new opt-in regulations. (If they were indeed "heard of," then the paper ought at least explain that.) In the deposit account agreements I read when I was an employee and customer of my banks, the "overdraft protection" policy was tucked into the larger account agreement (and if I recall correctly, it wasn't called "overdraft protection"), and one had to hunt it down just to read it and know the bank's policy. Also, the bank consistently reserved the right to change its overdraft policy at any time, although usually with notice. In other words the very clarity Zywicki praises was brought about, at least in part, by the requirement he has certain reservations about.

Finally, opting out of things is not as easy or simple as it sounds. Maybe it's my inner-paternalist here, but I wouldn't be surprised if, under an opt-out regime, telephone customer service reps be required to ask two or three times the equivalent of "are you sure?"--perhaps with a recitation of the long list of the "benefits" of opting in--when taking opt-out requests. In the cold light of day, that sounds harmless enough, but not all customers have an easy time saying no. I have a hard time saying no, and I should know better. (I even avoid calling my credit card company unless it's absolutely necessary because I know--or have good reason for believing--that the CSR is required to offer me some "credit protection" service I know I don't need and that the CSR is required to ask me at least twice and ask for my reason for not wanting the service. The main response that tends to keep them quiet is "I'm still trying to weigh my options.") Already, I'll note that the opt-in form the banks send out tend to be somewhat alarmist on the severity of the consequences of not opting-in. Even someone like me, who knows pretty firmly that I don't want to opt in, has second and third thoughts after reading those notices.

In sum, the opt in provision makes "overdraft protection" more obviously a product in the way that Zywicki wants it to be. I admit that it adds (probably) somewhat to the cost of managing overdrafts, but if it makes for a somewhat more transparent process, then I think it is a positive good.

Second, one thing Zywicki does not address fully is that when items are returned unpaid against an account with non-sufficient funds, they incur a fee almost as hefty as the fee incurred by paying items against an overdraft. At one of the banks I worked at, the difference was about $3 to $5. Although I don't remember the exact amounts, and they changed while I worked there, an item returned unpaid incurred a fee of $24 and an item returned paid against an overdraft incurred a fee of $27. Part of customers' preference for having items paid against an overdraft is probably attributable to the fact that the customers would get charged comparable fees by their bank. There are, of course and as mentioned earlier, other reasons customers might wish to have their checks paid against overdrafts: the potential consequences of, say, a bounced rent check, not to mention the fees for returned checks charged by most companies, which would obviously compound the bank's returned check fee.

Third, one thing that not opting into "overdraft protection" helps alleviate (but cannot, I imagine, eradicate completely) is overdrafts by use of a debit card. Under the older regime, banks could--and did--authorize debit card transactions, the dollar amount of which exceeded not only the ledger balance of funds in a person's account, but all funds in that person's account. (There's a distinction between the ledger balance--funds that were posted--collected balance, and available balance.) The rationale was that "it's embarrassing to try to purchase something with a debit card and have it declined and maybe the customer made a deposit at the branch today and it might show up on the system when the ledger balances are updated, or the customer will make another deposit before the authorized purchase actually posts." I admit that it can be embarrassing, especially if one tries to purchase a meal at a dine-in restaurant, after the meal is over, and has no other mechanism of payment....such a situation is not only embarrassing, it's also dicey. But the end result is that people could overdraw their account by making a debit card purchase. (To be sure, even under the prior regime, certain transactions--such as cash-back transactions or atm withdrawals--would generally be denied in cases where purchases might be approved.)

This result might not be so bad, especially if customers are by and large knowledgeable about the bank's policies, as Zywicki suggests they might be. All I can really say is that it would be a good idea for a customer to know what they are getting into when they use a debit card, and that these new regulations help ensure that. (Thus, here's another defense of the opt-in provision.)

Fourth, Zywicki under-appreciates the effects of "overdraft protection" on less affluent customers. Zywicki cites a New York Times article--which I didn't read so I take him at his word--that, he says, discusses the predicament of a college student who mismanaged his (or her?) account and got zapped with hundreds of dollars of fees by the bank. He suggests that these kinds of examples might demonstrate only that an impecunious young man overspent and did not pay attention to the consequences. Good enough, so far as it goes; and I'll add that my prejudices lead me to have less sympathy for the stereotypical college student whose parents might bail him or her out of periodic financial pecadillos. (All the while, I must admit that the "stereotypical" college student--white, privileged, affluent, child of college graduates--often does not exist, and can be a first generation college student, a parent, a full-time or part-time worker, child of working-class parents.) I'll finally admit that the "innocent college student oppressed by big banks" trope fits too neatly as a pro-regulatory prop, similar to the way that occasional (and as far as I can tell, rare) reports of police officers ticketing 8 year olds for operating a lemonade stand without a license fits too neatly into some libertarians' otherwise valid objections to the ill effects and perverse incentives of some licensing regimes.

It's not only the irresponsible college student who has lost a few weekends worth of beer money who suffers from the fees concurrent with mismanaged accounts. Sometimes it is, indeed, the single parent trying to make ends meet, or the person who is caring for an elder, or someone who is on social security disability and is barely scraping by. When I was a call-center customer service rep, I encountered several customers who claimed to fall into these categories and who often got hundreds of dollars worth of fees because of either overspending on certain things or because of a mistake in addition when balancing their checkbooks.

Now, I admit that my sample was especially skewed in favor of the conclusion I wish to draw from it. People who overdraw were probably very much over-represented among the people who called the call center (because people tend not to speak with a CSR unless they already have a problem with their account). Also, as a CSR, it was in my power to refund or waive fees up to a certain amount (although my bank had a "shaming strategy" for CSR's who did this too much, each month circulating a list of the three highest fee refunders, a list I was on almost every month...it's hard to say no when the person on the other end of the line is crying): therefore, customers are more likely to shade the truth or outright lie or claim ignorance of a bank's overdraft policies: in short, they are more likely to play the type of victim that the tentative study Zywicki cites suggests does not exist.

One doesn't have to insist that all or even most of these folks were hapless victims, ground beneath the wheel of a numbers-driven modernity. Maybe the single mother who cried because she just couldn't get ahead when I told her she had over $200 in overdraft charges really brought it on herself. Maybe she spent so much money on booze or or drugs or junk food. Maybe she wasn't even a mother. And maybe I'm a sucker. There have been times in my life where I've been taken in by people's hard luck stories, even when deep down I knew better. So anything is possible.

Still, one doesn't have to go so far and assign victimhood status to these people to acknowledge that someone who earns $2,000 a month and makes an error in addition will more likely overdraw and get more overdraft fees than someone who earns $5,000 a month. And some banks, as a general rule (at least this was true of the less than mega-sized bank I worked at as a CSR) were quite willing to refund more overdraft fees for "good customers" (that is, rich customers who overdraw only occasionally). (It's an interesting dynamic, and as Zywicki points out--if I recall correctly--a lot of repeat overdrafters are actually more affluent than; I have less sympathy for these people.)

If anything, what I want to get across is that it's these overdraft policies affect real people with real problems, not just the (largely stereotypical) slack-jawed trust fund baby who gets a write up in the New York Times. To deny that is to misread and, to some degree, belittle the urgency that some people attach to these regulatory reforms, even if the reforms themselves are misguided.

It is probably the case that the proposed regulations harms these people more than help them, and to the extent that these regulations are paternalist, they deny a little bit of dignity inherent in the ability to make choices on the market. Zywicki's under-appreciation thus does not disprove his argument, but it does, to my mind, signify a reason to be suspicious of the truth claims he makes about customer knowledge and to demand a more rigorous demonstration that "overdraft protection" does not operate in the shadows of information asymmetries.

Fifth and finally, it is these information asymmetries, which I think need further exploration, that constitute the basis for my last reservation about Zywicki's argument, an argument that I find, overall, compelling. The study that Zywicki cites suggests that customers are well-aware of their own bank's fee structures and are "grateful" that their bank pays against overdrafts. Assuming the results of this study are reproducible and generalizable, I would also like to know to what degree, if any, this ignorance results from some systematic obfuscations--the specific disclosure practices banks engage in, or even the disclosure practices mandated by law.

I would also like to point out something that, to my mind, constitutes an information asymmetry, although one that I can imagine a Zywickian analysis would account for easily. I refer to the "at the bank's discretion" proviso in most "overdraft protection" policies. To my understanding, banks used to have almost complete discretion on whether to pay a check that is presented against an account when there aren't enough funds to cover it. This makes sense. Whenever a bank pays against an overdraft, it runs the risk that consumers might not make good on the funds. Under the new regulations, my understanding is that the bank has less discretion, or at least a stronger incentive to return checks unpaid. But the principle remains valid: it's the bank's risk and it determines what risk it is comfortable with.

Therefore, the bank devises overdraft standards that are more or less rationalized based on a customer's average account balances, past history with the bank, income, and general creditworthiness. The bank at which I was a CSR observed the following procedure, which, adjusting for size, if probably in principle similar to what larger and smaller banks observe:

• It placed customers in three default categories. The first allowed overdrafts up to a given dollar amount, say $500. The second tentatively allowed overdrafts up to a given dollar amount (again, let's just say it was $500). The third allowed no overdrafts.
  
• A check that would overdraw the account of customers in the first category by less than the assigned dollar amount would automatically be paid by the bank. A similar check against the account of a customer in the second category would be flagged for attention by a bank officer who, the next business day, would review overdrafts and decide whether to pay it (the bank was small enough to make such a process feasible).
  
• A check presented that would overdraw the account of a customer in the third category would be slated to be returned automatically, subject to final review by a bank officer.
• Any check that exceeded the guidelines listed for customers in the first or second categories would also be slated for return, again subject to final review by a bank officer.

Other banks, I assume follow similar policies. Probably the larger banks that served more "national" markets had less personal officer review and more automatic decisions about payment and return of checks. And probably smaller banks had more personalized reviews of each overdraft. But the principle was the same: the bank determined ahead of time the excess dollar amounts of checks it would pay in order to speed up the process. That is how the system works.

The determination, as I said, is made along a variety of factors, but they boil down to the risk the bank believes it runs of a default or charge off of the overdrawn funds. Sometimes, that assessment of risk changes, and the bank finds it expedient to be less or more indulgent of overdrafts, and the bank changes the excess amounts accordingly.

All of this is opaque to the customer, and for understandable--and probably good--reason: if a customer knew ahead of time that the bank would automatically pay, say, a $500 overdraft, they might purposely overdraw their account by that much (and presumably pay the consequences), but if a bank did make available its assessment of an overdrawable amount, then it might have to notify the customer when it changed that assessment. Letting the customer know this information is too much of a risk for the bank.

What I'm getting at is that customers who would overdraw are writing checks in the hope that the bank might honor those checks. Sometimes--maybe even the majority of the time--such checks are written spuriously or irresponsibly to make purchases that aren't justified. Sometimes bad account management means an overdraft. But my point is customers cannot be sure in advance what the bank will pay.

I'm not sure this qualifies as an information asymmetry, or at least not one that represents a market failure. After all, the bank, in a sense, has a right to refuse payment against insufficient funds, and in practice, the per-customer assessment probably changes rarely, so an overdraft that was paid last month will probably be paid this month.

But it is something over which the customer has little control or knowledge, and if it is possible to devise a more transparent way for how this process works, while imposing only minimal costs onto the banks and to the customers they serve, then it would be worthwhile to pursue that. However, I have no idea what such a "transparent way" would look like or if it's even doable.

I have a partial solution to some of these problems, what I in another post called a "money order plus account," which is basically a savings account with money orders that operate more like checks. But it's only a solution in that it gives people another option, and this option is less convenient. Finally, I'm not certain that a critical number of persons would opt for such an account, although I might do so under certain circumstances.

I titled this post "Rackets, protection and otherwise" with the initial purpose of doing a pun on "overdraft protection" and "racket." See, "overdraft protection" + "racket" = "protection racket." Of course, if Zywicki is right--and I think he is if one accepts, as I do, most of his starting assumptions, and if one stipulates, as I do tentatively, to some of his empirical claims about customer knowledge--then "overdraft protection" is not a racket by any commonly accepted definition of the term. If I plead that consumers--even the knowledgeable ones that Zywicki claims constitutes the large majority of them--see "overdraft protection" as a racket, and if I can prove that claim, then that plea, once established as fact, only discovers that people can sincerely believe two things the logical implications of which are contradictory.

But I do think there is an opportunity for better understanding, for realizing that touting certain practices as per se good might blind us to other ways to enable people to have more choices and in effect to be more free. Maybe the answer is indeed to have minimal regulation to let loose the entrepreneurial energy that Willard Hurst discussed in his legal history scholarship. Maybe, on the other hand, we need to reconsider our values: what is the value of "having choices"? are there other ways to construct "choice" and "freedom"? is paternalism, while always suspect, therefore always necessarily bad? I won't offer the answers to these questions in this post. In fact, I'm not even sure I have the answers. But it's all worth considering.