To Anachronism in Heaven

As civilization evolves, some products that start as luxuries eventually become affordable for working people. Obvious modern examples include refrigerators, televisions, and indoor plumbing.

This can lead to anachronism in our understanding of history. Today, India Pale Ales are basically affordable for everyone, and they are commonly marketed as "the beer that the British drank in India." What this obscures is that they would have been drunk by the upper classes in British India, while the bulk of British soldiers were drinking porter. (This was not necessarily purely a matter of affordability. Working class Britons were accustomed to porter and may have preferred it.) Because of the way class and history work (and, admittedly, because of the near-total disappearance of porter in the intervening years), we think of IPA as the archetypal British beer in India, though porter was the typical drink. (These links are only indicative, if I feel less lazy I will dig up more definitive numbers later.)

Similarly, mead looms large in our understanding of Viking culture, but it appears likely that mead was very rarely drunk and the typical drink was beer. (Here's another analysis along the same lines.)

Of course this kind of thing is inevitable, but I find it a little sad. Even in our cultural memories, we discount the experiences of regular people and elevate the tastes and aspirations of the elite, and we end up understanding our history poorly or not at all.

Market Power Through the Lens of Beer

Matt Stoller has become famous (at least on Twitter) for his distinctive views on political economics. In particular, his theory is that firms have increased their market power to the detriment of consumers and (especially) workers, that the field of antitrust has been hobbled by a misguided focus on consumer welfare, and that this state of affairs explains why U.S. voters were so eager to vote for Trump.

I'll have more to write later, but I thought I would describe an interesting test case that I happen to know something about. A few decades ago, a very high percentage of beer brewed in the United States was made by "macro" breweries. The breweries were not quite so macro as they are today—the big brewers had not yet merged into the behemoths that now dominate the industry—but they were very big, and their collective market share was much higher than today.

In the following decades, smaller breweries (called "micro" for a while and now mostly called "craft") multiplied and increased their market share. The statistics probably aren't perfect, but apparently in the late 70s and early 80s there were under 100 breweries in the United States. Today there are over 6,000, with over 300 breweries in Colorado alone. (We don't need to get into the role of homebrewing in this increase, but for what it's worth homebrewing was legalized at the federal level in 1978.) "Craft" breweries (the term is controversial, but for our purposes it basically captures the market segment we care about) now supply about 12.7% of U.S. beer by volume and more than 23% by value. (The difference, of course, is explained by the much higher price that craft beer commands in the market.)

It is interesting to contemplate what this meant for beer consumers, but I think very few people acquainted with the beer scene would argue that it has been bad for them. The quality and variety of beer available today is vastly better than it was even ten years ago, let alone 40 years ago. I suppose the area you would want to scrutinize is the consolidation of the macro brewers and the effect on the price of macro beer, but even if you view that as a policy failure, I wouldn't think it would lead you to regret the emergence of "craft" breweries. It is true that if the macros had not been allowed to merge, it is possible that macro beer would have remained cheaper and craft breweries would have found it harder to compete. Based on my experience as a beer consumer, I do not find this to be a plausible theory, but I admit you would need to do the math to be sure.

Anyway that's not my point. Stoller's primary concern is not the consumer but the worker. So I think the interesting question to ask is whether brewery workers have benefited from the profusion of small breweries with practically no market power. On Stoller's view, it would seem that we've created something of a workers' paradise in the beer industry.

But in fact my understanding is that macro breweries are better employers along pretty much every dimension. Many of the macro breweries are unionized, and I believe pay is much better at macro breweries than at craft breweries. (The common advice given to people wanting to get employment in the craft brewing industry is to volunteer—that is, to work for free—at a craft brewery for a while to gain experience. Needless to say, this is very good for craft brewery owners and very bad for craft brewery employees. I am unaware that any macro brewery seeks or accepts volunteer labor.)

Worker safety is also better at the macros (this has been a persistent problem in the craft beer sector). Macro breweries provide regular, predictable working hours. Recently it has come to light that there is a lot of sexism and sexual harassment in the craft beer industry, and while I imagine the macro breweries are also not free of such problems, I would guess that they have professionalized human resource departments and established complaint procedures.

Admittedly some of this is conjecture, and I will try to firm up the data when I get a chance. But in general, I think a Stollerite would be gobsmacked by this state of affairs. The arrows all point in the wrong direction! The big macro breweries are, by hypothesis, abusive and exploitative. Small, scrappy employers like the craft breweries are shining examples of competition and the many benefits it provides to the working class. It is unthinkable that market concentration could be good for workers. And yet!

That's why I think Stoller's role as a kind of weird single-issue troll is unproductive. I'm sure there are plenty of examples of industries that use market power to exploit their employees, but this isn't some kind of law of nature. You have to do the empirical work (and probably the industrial economics) to understand what is going on in any particular industry. Just sitting back and lashing out at the Democrats for failing to adopt your highly idiosyncratic and mostly wrong policy agenda is a very counterproductive thing to do.

Technocracy and Ideology

I intend to write a post spelling out my thoughts on Andrew Gelman's recent post on economists (pointed out to me by Dice). But first I want to comment on the next post on Gelman's blog, concerning the EPA's proposed rule imposing new standards on the scientific evidence that can be used to support environmental rules.

I'll start by saying that I haven't seen the rule proposal. As far as I can tell, it has not yet been published in the Federal Register, and the EPA's press release doesn't link to the text of the proposed rule. So my assessment of the situation is necessarily abstract.

Based on what we know so far, this is highly reminiscent of the old cost-benefit debates. Some people believe that there is a kind of technocratic rationality that can be codified and that will lead to better regulations. They see their agenda as nonpartisan, and when people make partisan arguments ("this change will only result in weaker regulations"), they high-mindedly insist that such arguments must be dismissed. Surely the point is not to have more regulations but rather to have smarter regulations, and for that we must adopt a rational rulemaking system.

The contrary view is essentially that these people are useful idiots helping to implement a deregulatory agenda. The central argument here is that cost-benefit analysis (CBA), heightened standards for scientific evidence, etc. are pretextual and will be applied in a way that serves the ideological agenda of the decision-maker. (In the case of CBA, often the relevant ideologue would be a judge overturning a regulation on the grounds that the regulator has not considered some relevant cost.) In the interest of disclosing my own bias, I am in this camp.

The debate comes down to a factual dispute about the functioning of the regulatory agencies and the courts. Advocates of CBA, high evidentiary standards, etc. either believe that regulators and courts act in a fairly non-ideological way, or they believe that ideology is inescapable and things like CBA improve the outcome anyway. But anyway those are the terms on which the debate should be carried out.

The interesting twist in the case of the new EPA rule proposal is that people like Gelman have dogs in the fight that have nothing to do with environmental regulation. Gelman is angry that scientific papers are sometimes published without publicly sharing the underlying data, and so he has weighed in with arguments in favor of Pruitt's move. (He says his views are "mixed" and much depends on how the rule is implemented. To me, this stance seems hopelessly naive about Pruitt's agenda, but I suppose it makes sense for someone like Gelman to remain agnostic until we've seen the text, and in the meantime to give public support to the rule, provisionally.)

I'll revisit this topic when the rule is published.

Stupid Stupid Stupid

I sometimes wonder what politics was like when it was practiced by people like Gladstone. Maybe it's always been difficult, but it feels as though the advent of internet advocacy has made things ridiculous.

The most recent example that has come to my attention is the leftist push against housing density. The argument goes something like, "Well, we could upzone urban areas near mass transit, but then developers would profit through our capitalist economic system. Furthermore, for political reasons upzoning is likeliest to happen in poor neighborhoods. That's bad. Instead we should oppose all upzoning and build massive amounts of 'social housing' (projects)."

This is absurd for any number of reasons, but there it is. The left is forming an alliance with NIMBYs to prevent cities from upzoning.

I'll acknowledge that there's some merit to the argument that upzoning is likely to happen in poorer areas for any number of reasons. A reasonable leftist movement might join the urbanist coalition on the condition that the upzoning plans be equitable. (A separate question is whether it is bad for poor neighborhoods to be upzoned, but leftists seem to believe that this is the case.)

But the left is fragmented and incapable of forming a coalition on a rational basis, so we have the spectacle of leftists fighting for restrictive zoning in expensive urban areas that are desperate for housing. In short, you can sympathize with many of the left's ideological commitments, but it's hard to regard the left's role in politics as anything but deeply destructive.