In an interview with ProMarket, Glen Weyl, co-author of the wildly ambitious (and wildly controversial) new book Radical Markets: Uprooting Capitalism and Democracy for a Just Society, talks about antitrust, data as labor, and why he thinks the free market system is not actually free. “The entire business community has been speaking with one voice in the common interest of capital as a class,” he says.
Inequality is soaring, market power is on the rise, digital platforms are harvesting our deepest, darkest secrets in order to better sell our eyeballs to advertisers and political groups, and across the Western world, politicians have been unwilling or unable to deal with these threats. With our institutions failing and far-right authoritarian populists on the rise, it has become increasingly clear that we need new ideas—and fast.
Enter Eric Posner and Glen Weyl. In their wildly ambitious (and wildly controversial) new book Radical Markets: Uprooting Capitalism and Democracy for a Just Society, Posner, a University of Chicago law professor, and Weyl, a researcher at Microsoft, suggest a set of radical changes to our economies, politics and societies. To do this, they rely on a wide range of thinkers across the ideological spectrum, from the late Canadian-American economist William Vickrey and the 19th-century economist Henry George to Proudhon and Marx.
To say the two swing for the fences would be an understatement. Their proposals include: a near-complete abolishment of private property in favor of a system in which property is mostly publicly owned and perpetually auctioned off; taxing the value of all property based on a self-assessment system that would yield a “social dividend” spread equally among the population, thus “giving every citizen a share of national wealth”; swapping the “one-person-one-vote” principle for a system of “quadratic voting” in which people literally buy votes; breaking up institutional investment firms and forcing digital platforms to pay for data; and a “sponsor your own immigrant” system that has generated a lot of controversy.
Naturally, these proposals will horrify many. To hear more about their ideas and why they feel such a radical departure from our current system is required, we recently interviewed Weyl, a Principal Researcher at Microsoft Research New England and a senior research scholar at Yale’s economics department and law school. Below is a transcript of our interview, edited and condensed for length and clarity:
Q: Your book proposes a complete overhaul of the free market system as we know it. What is so wrong with it that it would require such a change?
The first thing about the free market system today is that we don’t have a free market system, we just think we do. The markets are increasingly monopolized by both relatively diffuse property owners who have local monopolies and by the growing power of a variety of extremely concentrated corporate interests that are distorting innovation, our politics, workplaces, corporate economy, and the prices that consumers face.
It used to be that almost all Americans lived better than their parents did, now that’s only true for about 50 percent. It used to be similar in Europe and that’s not true there anymore as well. Our political system is increasingly viewed as illegitimate by much of the population in Western Europe and the US. We are really struggling to resolve conflicts between a variety of minority and majority groups. Partly because of this, we’ve turned to judicial systems and supernatural authorities that don’t have a lot of democratic legitimacy and don’t really offer a long-term solution to these social conflicts, and that’s fundamentally undermining people’s beliefs and reliance on democracy.
I think we’re in a pretty dire situation and I think it’s what a lot of people feel and see with the rise of populists like Donald Trump. I think we’re at a moment when we desperately need new thinking, and we’re not getting it from standard economics.
Q: In the book and in a recent New York Times piece, you argue that market power, not automation or globalization or anything else, is “the true villain” of our time. What role did market power play in leading us to the state you just described?
Market power is the way in which the owners of capital and businesses are taxing the rest of the economy. It’s not fundamentally any different than, say, when the government raises taxes on work in order to fund programs. Supply-siders for years have said that would slow down the economy. With market power it’s the same idea: raising prices or reducing wages so that more is appropriated by the owners of capital.
Anytime you tax something, you reduce the amount of that activity. It’s actually very simple and very consistent with precisely the story that Thatcher and Reagan were telling, except that they ignored the fact that it’s not only or mostly governments that do that, companies can do that as well. One way which we mention in our article is the way that large investment companies have coordinated the whole corporate economy to compete less. Another is the way in which companies have gained market power over workers, who are much more vulnerable than consumers, and used that to reduce wages and drive people out of the labor force.
Q: You devote a large portion of the book to institutional investors. What part did institutional investors play in the creation of this highly concentrated economy?
Institutional investors were not designed by some dastardly conspiracy. They were designed to try to reduce the amount of money that was being taken by the finance industry out from investments. But the unintended consequence of them has been to concentrate all of the effective control of corporations in the whole economy in the hands of a small number of institutional investors.
Because of the structure they ended up creating, institutional investors own all of the major companies that are supposed to be competing with each other. They have effective control over those companies and no interest in seeing them compete. It’s not just that they have no interest in seeing them compete for consumers, but for workers as well, and also politically. There’s a bunch of evidence from political science that companies have increasingly coordinated their actions, where they used to compete for influencing governments.
Increasingly, the entire business community has been speaking with one voice in the common interest of capital as a class. And that’s been extremely effective in working our politics. In fact, they have the power, I think, to a large extent, to stop themselves from being investigated. Any firm that brought a suit against them would be blacklisted, not just from working with them, but from working with any other corporation. It’s really quite sinister, the comprehensive control they have over the economy.
Also quite disturbing is the emergence of this “Merchants of Doubt”-type material they’ve been turning out to try to refute these ideas. They’ve been funding all sorts of misinformation campaigns, trying to undermine concerns about their power.
Q: We’ve faced this kind of market power problem before, during the Gilded Age. Have we forgotten or ignored the lessons of that period?
I think there is something broader, which is that there came to be an assumption after World War II that if social institutions stand still and technology advances, we will have prosperity. You can call it the “end of history” idea, the notion that we had arrived to the perfect set of social institutions and that all we needed to do was allow technology to progress. And I think that was just fundamentally confused. Social institutions need to be as innovative as technology is, because otherwise there’s a natural tendency of rigidity and calcification and rents that creep into the system.
Q: That also applies, of course, to tech platforms.
It also applies to Walmart, to labor market power as unions have declined, to what’s happening with land and land use. Throughout the economy, the failure of institutional innovation to keep up with the changes on the technology side is itself intimidating.
Q: But it’s not just complacency. Ideology, as you write, played a crucial part in this as well.
Absolutely, ideology is a crucial part of it. The enemies of progress are always a combination of prejudice and privilege. There are people who benefit from an existing order and there are people whose beliefs close their minds to changes in that order. My perspective is that the rhetoric that has been used to defend existing privilege [revolves] so much around free markets that if we can show people that truly free markets require fundamental institutional reform, rather than maintaining the status quo, then we can deny the defenders of established privilege one of their most powerful weapons.
|“The rhetoric that has been used to defend existing privilege [revolves] so much around free markets that if we can show people that truly free markets require fundamental institutional reform, rather than maintaining the status quo, then we can deny the defenders of established privilege one of their most powerful weapons.”|
Q: You pin much of the responsibility for our current predicament on market fundamentalism. How is market fundamentalism different from “market radicalism,” which you advocate for?
Market fundamentalism is the mistaken view that some idealized version of 19th-century private property and contractual enforcement is the condition necessary to have a free market. That’s not really something that the 19th-century liberal radicals who we look up to believed in. That’s not what John Stuart Mill believed in. But there’s a sort of nostalgic desire to turn backwards to that time as some notion of perfection, rather than to realize that social institutions have to constantly adapt in order to allow continued social progress and continue to break the forces of monopoly power to hold back innovation. That’s what the founders of modern radical liberalism understood.
Q: You credit Henry George for a lot of the inspiration behind some of your proposals. What would you say is the importance of Henry George in today’s world?
The thing I most admire about Henry George is the spirit of his engagement with the public, the way in which he wrote and viewed his role within society, the coalition that he tried to form and the way he tried to build bridges between what has come to be called the “left” and what has come to be called the “right.”
But Henry George also had a fundamental brilliant insight, which was that land and other natural endowments of nature are not created by people, but they can be monopolized by people. And that while private property is usually thought of as a way of encouraging people to care for things, it can also be a basis for allowing people to appropriate the rents and thereby eliminate the chance for innovative improvements in the way in which resources are used. That insight, that a true competitive market requires common ownership of some resources, is, I think, one of the deepest insights. It’s not that original to Henry George, but he fully articulated it.
Q: The most radical proposal in your book is doing away with most of the private property in favor of what you call “common ownership.” What is wrong with private property?
The fundamental problem with private property is the same problem that exists with monopolies. It’s the exclusive right of someone to exploit the resources for an area which is endowed by nature. There’s a wonderful story from Henry George that best illustrates this: there’s a huge savannah, with millions of places where you could settle. Someone settles on a beautiful area of land, taking a thousand or 2000 acres for himself. The next person who comes along settles next to that other guy and takes a slightly less nice and smaller piece of land.
Gradually, more and more people come and before you know it, the first guy is the richest person in St. Louis because he owns half of the center city. What did he do to earn that? Nothing, other than just sit on that land. And that is the injustice, because who knows whether that person has anything useful to do, whether he can develop the city. He’s just some guy who happened to have been there and pass down this land through generations.
There’s a false idea called the Coase theorem, which says [the land] will automatically get reallocated to its best use, but there’s all sorts of analyses in economics showing that doesn’t in fact happen. And so you end up placing a monopoly on the most valuable social resources with whoever happened upon those resources first, with no rhyme or reason and no actual contribution that that person made.
|“Anytime you tax something, you reduce the amount of that activity. It’s actually very simple and very consistent with precisely the story that Thatcher and Reagan were telling, except that they ignored the fact that it’s not only or mostly governments that do that, companies can do that as well.”|
Q: Henry George famously advocated for socializing lands through taxing their value. Your proposed system of socializing private property through a tax on its value doesn’t sound all that different. How would it work?
The idea of the proposal is that you would self-assess the value of all major private property you own, aside from personal effects. For all significant private property, you would self-assess the value, you would pay tax on the assessed value, and then you would have to stand ready to sell that property to anybody who wants to purchase it at that price.
The idea of the system is that it provides an incentive to truthfully reveal the value of your asset—if you overstate it, you’ll have to pay higher taxes and if you understate it, you would run the risk of selling it for less than it’s worth to you. Those two incentives ensure that you’ll always report your true value and therefore that asset always ends up getting allocated to the people who are best able to use them, overcoming the monopoly problem that Henry George and others highlighted with private property.
Henry George only wanted to apply this to land and he wanted a 100 percent tax, whereas we effectively would take two-thirds of the value, but we would apply it to a wide range of different capital goods, not just land.
Q: This is a radical departure from capitalism as it’s been practiced in the past 300 years.
I wouldn’t describe this system as capitalism. I would describe it as markets. Capitalism is based fundamentally on the private ownership of property, and that’s not the fundamental basis of our system. That isn’t to say that there isn’t some degree of private property in our system—there is. But it’s not the basic idea.
Q: Wouldn’t a system in which everything is always for sale all the time and life is a constant auction create a hellish “dog eat dog” jungle? How can society function like that?
In our present society, the way that you get stability is by being rich. Poor people rent, poor people have mortgages, many of them are underwater and in constant risk of being foreclosed upon. They live in unsafe areas, some of them literally underwater every so often. Stability is costly in our present society. It’s not free. In the society that we describe, not only the rich would be able to afford that stability. Every citizen, because of the value raised by this tax and the social dividend that it would fund, would have the means to afford a reasonable stability of their lifestyle. You could buy precisely as much stability as you want to buy by setting a higher value for your assets.
Q: We live in a society that is vastly unequal. We don’t start off from the same place. Would your system involve some sort of redistribution, to avoid the rich from taking up all the resources again?
The tax itself does that. The tax would raise two-thirds of the rents of capital as income every year, and that would be divided as a social dividend to the rest of the population. So immediately, if the proposal was implemented, capital would be two-thirds social.
Q: How would you go about installing such a system? Global elites that control the political and economic systems and about 80 percent of wealth creation wouldn’t support a system that takes their property away or taxes them highly for it.
A big difference between our proposal and virtually all other proposals to dramatically restructure society in this way is that our proposal actually increases the size of the pie as it redistributes it. Put together, we estimate that all our proposals would double the median income. At the same time, they would only reduce the sort of income equivalent well-being of the wealthy by about a quarter, because they would grow the whole pie by about a third.
You would certainly get opponents among at least some of the wealthy, though there are certainly a lot of wealthy people who support higher taxes. I’m not saying that that will achieve majority support among the wealthy, but at least it will achieve some divisions, a lack of a united front.
The other thing that makes this framework so powerful is that the wealthy don’t justify their wealth by saying “We want to keep our wealth.” They justify it by [saying] “The free market system is necessary to economic growth, and if you undermine the free market system you undermine the economy.” That argument is totally destroyed by this perspective, which says, no, you don’t represent the free market and the economy would grow much more strongly if we had a true free market system, which would involve you relinquishing some of your capital.
“The wealthy don’t justify their wealth by saying ‘We want to keep our wealth.’ They justify it by [saying] ‘The free market system is necessary to economic growth, and if you undermine the free market system you undermine the economy.’ That argument is totally destroyed by this perspective, which says, no, you don’t represent the free market.”
Q: Some of your critique of capitalism is drawn from Marx and Engels. Yet your conclusions are antithetical to theirs.
One of my friends said to me, Marx was a very good critic but a very poor inventor, and I agree with that. I am perfectly happy to credit Marx as a critic but I don’t think he came up with an alternative framework that is coherent or workable. What George and Vickrey and now we are trying to do is to take the dream of socialism that Marx laid out and try to talk about how, using market institutions, we can make that dream a reality.
Q: Socialism through markets?
There’s something called “market socialism” but usually what it means is socialism, but with some market institutions to keep it more efficient, and that is not what we mean at all. We mean that in order to have real free markets you have to have socialism, and in order to have socialism, you have to have markets. These two things, which seem opposite to each other, are actually two sides of the same coin.
There’s a term in theology that’s called syncretism, which is the idea that we all worship the same God, we just see different aspects of that god. At some level, that is what we’re saying here: that in fact all of these ideologies are looking at different aspects of the same underlying truth. And Henry George said that as well. He said, if I accomplished what I sought out to, I united the truth perceived by Smith and Ricardo to the truth perceived by Proudhon and Lasalle.
Q: You criticize the left and the right for drawing ideas from old modes of political and economic thinking. What should both do different?
I think the problem with the right is that it believes in the free market, which we absolutely believe in, but it doesn’t know what the market really is or what it requires to have a free market. It assumes that by going backwards to a totally monopolized and retrograde form of markets we’re going to get the dynamic free market of the future, which I think is deeply naïve and mistaken. I think they have a good goal in mind, having a truly free and competitive system, but they created systems that ignored the ways in which what they called markets actually led to concentrated forms of power, very similar to the forms of state power that they decried.
The left, on the other hand, also has good aims. It believes in greater equality and believes in breaking up concentrated corporate power, but it thinks it can trust in benevolent state actors to impartially execute this, which to me is just as naïve as trusting corporate actors or the owners of private property to somehow benevolently have the public interest in mind. Like the left, we want to reduce inequality, diffuse power more broadly, and have a more profound democracy, but we think that standard discretionary state power is a perfect way to reestablish the tyranny of the elite, precisely the same sort of oppression that they’re trying to alleviate.
“It is easy to overemphasize the importance of the digital economy, as opposed to the underlying structures of power. I think saying that people are losing their jobs or that inequality is increasing because technology is improving is largely an excuse.”
Q: There’s a view that says monopolies are the inevitable result of capitalism. Your book seems to align with that.
I think that the book’s very consistent with that but goes even further. It says the very structure of capitalism, the system of private property itself, is inherently monopolistic. Property is monopoly. From the start, it’s monopolistic. And the notion that the enforcement of contracts and the protection of property is not monopoly is crazy. Contracts are the basis of monopoly. What we need to do is find a set of rules that comes the closest to inherently diffusing concentration of power so we can have a truly competitive political and economic system, without relying on bureaucratic authorities.
Q: You are skeptical of the state as the enforcer of fair and open competition. And yet you advocate for more antitrust enforcement.
Q: Yet antitrust is administered by the state.
I’m fundamentally skeptical of discretionary authorities that are supposed to be trusted as experts. The more that we can have simple, transparent, publicly accountable rules, the better. There are far simpler, clearer, more easily observable rules in antitrust and merger policy than there are in most areas of public discretion. It’s not perfect, but I that among the tools that we can use to balance out the tendency towards concentrated power, antitrust comes quite close to making that possible.
Q: You write that antitrust has “lost track of the ways in which capital markets reconfigured themselves in order to maintain monopoly power.”
There’s something called the “red queen problem” in biology. It comes from Alice in Wonderland, where the red queen says that in her world you have to run just stay still. That’s true in a lot of areas of biology: organisms need to keep adapting and changing, or the bacteria that prey upon them will kill them. The same thing is true of antitrust. Antitrust is in constant danger of having new forms of coordination among capital destroy its ability to constrain the power of capital. If antitrust doesn’t keep up and look for these new sources of capitalist power, it is doomed to fall behind and ultimately allow capital to reestablish tyrannical control. It’s not that antitrust enforcers weren’t doing their previous job, but they weren’t doing the job of anticipating the newest, most important, and most pervasive sources of capital control.
Q: There’s also the notion that monopolies are good and efficient and welfare-enhancing.
I think that’s part of what was going on, but I don’t think that was the main thing. Most antitrust economists don’t really make that a central part of their worldview, but they have shut themselves off from the most important new forms of monopoly power. They haven’t been paying attention to those critical areas and instead have focused on this notion of consumer welfare, not thinking about all the other ways that firms can exert power over the economy.
Q: You devote a large section of the book to labor market monopsonies, something antitrust enforcement has largely ignored as of late. As a way to counteract the power of monopsonistic employers, you call for stronger labor unions. What makes unions so important in resisting monopoly power, in your view?
I would always prefer, if possible, to avoid the assembly of monopsony powered by rigorous antitrust policy over addressing it through a labor union. Ultimately a labor union is a concentrated, largely discretionary locus of power that is potentially destructive of some of the values that I’m focused on. At the same time, I feel it would be extremely naïve to ignore the fact that in certain markets it’s simply impossible to fully control the power of concentrated capital through antitrust. In some industries there are natural monopolies, and in those cases the best thing we can do it to balance the power of that monopoly is an equally strong, equally well-informed body whose interest is entirely aligned with the people that the monopolist is trying to exploit. In the case of monopsonies, it’s workers.
Whenever possible, we should avoid getting that situation in the first place, but when we get there, labor unions are the natural force to counterbalance the power of a monopsonist, to keep wages up, to ensure that the hidden things the firm is doing are being monitored by a set of experts who are accountable directly to the workers, and to ensure not just that, but also that the workers are pursuing their careers in the most productive way, that the workers are being trustworthy and providing high-quality work. Unions actually serve multiple functions. Collective bargaining is probably the most important one, but it’s not the only one by any measure.
Q: What you just said has been, for decades, anathema to economists.
That’s neoliberalism for you, the period of market fundamentalism that we discussed. Of course, economists were incredibly central to the formation of the modern labor union. Webb and other prominent economists founded the London School of Economics and were also were some of the primary founders of the British labor movement and Labour Party. There’s certainly a history there of people realizing that in certain important circumstances, it’s critical that labor unions are able to counterbalance the force of concentrated capital.
Q: When it comes to the digital economy, you argue that “data is labor” and advocate for “data labor unions.” How would those work?
I think the most compelling thing about a data labor union is how automatic and algorithmic it could be, because when calling a strike, rather than having to coordinate people to walk out, it could just interrupt the connections between those people and the digital services that they’re using. If people tried to circumvent that, [they’d] piss off all of their friends because they would be “scabbing” in this very public way.
“I don’t really think Facebook has innovated since they established their position to a significant extent. There have been minimal new services. They occupy a piece of land which is this new version of the public square, and most of the work they’ve done is just sort of deciding policies about what’s allowed and not allowed in that public square.”
Q: The digital economy is rife with natural monopolies. How can we address the power of digital platforms?
I think the digital economy is important. I work for Microsoft. [But] it is easy to overemphasize the importance of the digital economy, as opposed to the underlying structures of power. I think saying that people are losing their jobs or that inequality is increasing because technology is improving is largely an excuse. That’s not to say the failure to keep up with technology in the right way doesn’t play an important role, but I think that technology itself is not the critical thing. It’s the social institutions and our failure to innovate in social institutions in the same way we did in the past.
In terms of some particular forms of monopolization, Facebook and Google are some of the most important companies in the economy, who have extremely limited competition for most of their services. In addition to having extremely limited competition, they’re not really innovating. They are not really doing very much to earn those rents. There’s almost no real productivity gains from any of these technologies. You wouldn’t have said that about General Electric. There’s really been a paucity of the most important sorts of innovation, because of the dominance of a small number of players in these markets for so many years.
Q: Earlier this week, during a Stigler Center event, you said Facebook is a utility and it should “probably be nationalized,” along with Uber. Can you elaborate?
It’s obviously not a focus of the book and in some ways in contrast with some of the things we say in the book, but I don’t really think Facebook has innovated since they established their position to a significant extent. There have been minimal new services. They occupy a piece of land which is this new version of the public square, and most of the work they’ve done is just sort of deciding policies about what’s allowed and not allowed in that public square, which ultimately I don’t think should be their responsibility but should be democratically determined in some form.
In the case of Uber, the relevant service ultimately can only support a single player in the medium-term, both from a social efficiency and from a technical perspective. So ultimately, the infrastructure itself that does the algorithmic routing and planning probably should be in the public domain. That doesn’t mean I think the shareholders should be entirely expropriated. I think probably there should be some compensation, but it should be in proportion to a reasonable return on the investments made, rather than just the fact that they occupied this piece of public domain and appropriated the rents associated with that.
Q: Your proposals have received some harsh criticisms. How do you respond to those?
First of all, there’s always some interesting criticisms and I love debating with people. I’ve had an experience with this book that’s been very interesting, which is that young people, when they hear the ideas, it doesn’t take them long at all to understand them. Many older people come to it with assumptions, with prejudices, with “Isn’t this just communism? Isn’t this just neoliberalism? Isn’t this just this or that?” I initially got annoyed by that, but the more that it happens, the more I’m actually happy for it because when the students hear that and they see how little there is to these prejudices, the more enthusiastic they are because it really makes them think that there’s something there.
That’s a perfect example of what I just said. The term indentured servitude, the first word in that phrase is “indentured.” There is nothing in our proposal about anyone being indentured. You have an absolute right to leave. It’s another example where it’s something that is just clearly logically not what we are saying but, based on a prejudice, people are jumping to conclusions. To me, this a perfect example of the sort of thing that I think initially annoyed me, but ultimately is actually to our benefit. People will see how thin the prejudices which people use to dismiss these ideas are.
Q: Regardless of terminology, you are essentially proposing the creation of an underclass of immigrants, who, whether they are free to leave or not, live in people’s basements and work for less than minimum wage. You do see the enormous potential for abuse in a system like this, right?
There’s always going to be potential for abuse, absolutely. And it’s going to very important to design the system so that you couldn’t abuse it. But to me, the idea that because there is some potential for abuse you would completely shut down something that would give opportunities to hundreds of millions of people to completely transform their lives for the better is incredibly condescending and naïve. It’s like saying that we should keep women out of the workplace because women get sexually harassed at work. Sexual harassment is the problem, not women in the workplace.
Q: And yet, as you acknowledge yourself in the conclusion to your book, many of your proposals could be gamed and undermined by sophisticated actors.
No more than our existing system is already being constantly undermined.
Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.