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  • Max Stearns


Equilibrium is a foundational concept in the study of both private and political markets. Professors convey the concept with two curves, supply, which slopes upward as a function of price, and demand, which slopes downward as a function of price. Along a two-dimensional graphic depicting price and quantity, the market clears where the curves intersect. At that equilibrium price, the quantity of a good supplied and demanded is equal.

As with most economic concepts, equilibria are neither good nor bad. For some goods or services, equilibrium prices might be so high that a meritorious class of consumers fails to gain access to the market. Scarcity, after all, is also central to economics. For other goods, the equilibrium price might be so low that it fails to reflect hidden costs, meaning burdens imposed on others who don’t benefit from the resulting transactions. Economists debate the significance of “externalities,” for, among other reasons, the epistemological challenge associated with consistently determining who is imposing costs on whom. (See here, chapter 1, at pp.22-24).

Even acknowledging such limitations, there is something comforting about private market equilibria. Someone wishing to have a fancier car, or a nicer home, might experience frustration. Even so, she has a benchmark. She might translate that into a goal, and then decide on a course of conduct that allows her to eventually meet the financial burden. Or, after mulling it over, she might decide that other demands on her time and finances are simply more important. Opportunity cost might well be the single most important economic concept. And some individuals might determine that the market for particular goods or services is problematic in ways that motivate them to engage politically, lobbying for regulatory reform, hoping to benefit the environment, a class of workers, or society in general.

I sometimes engage students with this thought experiment: would they would prefer living in a world of constant dickering, routinely negotiating the price of goods and services, or in a world in which they routinely confront a menu of contracts with fixed terms that they cannot negotiate. Economists distinguish thick versus thin markets. Thick markets are characterized by competition among buyers and sellers, and the resulting equilibrium price sends a meaningful signal as to relative values. Thin markets lack robust competition, and thus provide far more limited information. In thin markets, some skilled negotiators do well, whereas others, like me, are often left with the nagging sense of having gotten a raw deal. My thought experiment can be a challenge. Law students are sometimes taught to distrust “contracts of adhesion,” those in which sellers typically fix the terms, leaving consumers the binary choice to accept or walk away. Thick markets are like buying goods or services on the Internet, with the obligatory clickwrap; thin markets are like negotiating in the Shuk. On reflection, most students seem to prefer Internet commerce to a world of constant dickering.

Political markets also clear. Economists and political scientists study supply and demand for various forms, and levels, of regulation; for the formation and stability of political parties; and for various types of government largesse. (See here, especially chapters 11 and 12.) As in private markets, public market equilibria are neither good nor bad. But they are informative. In the US, activists and political commentators routinely lament the absence of viable alternatives to the two dominant parties; seemingly deficient government regulation affecting such areas as climate change and gun control; and the absence of universal access to health care and higher education. As in private markets, such frustration might provide its own peculiar comfort. Political equilibria provide insight into the nature of our political alliances and thus guidance as to how best to engage.

Today’s political markets are in a state of profound disequilibrium. We are in a world of Shuk politics. Some can shrewdly navigate to their advantage, and the rest have the sense of getting a raw deal. Almost everything seems up for grabs. Commentators on the left rail against the religious right, which has somehow found itself defending political leaders or candidates demonstrating a profound lack of moral rectitude. The right defends Donald Trump, who has admitted to walking in on undressed girls and to sexually assaulting women, and who has spent a lifetime philandering, committing adultery, and insulting, often in the basest possible terms, women, African-Americans, Muslims, and Mexicans. They have supported Roy Moore for the US Senate, a candidate Trump endorsed, despite credible allegations of child molestation. Those associated with Trump, including Paul Manifort, who is now on trial, have faced serious allegations of corruption, and, along with Trump, seemingly unprecedented levels of self-dealing. Whereas Ronald Reagan faced down Mikhail Gorbachev over the Soviet nuclear arsenal and the Berlin Wall, today, the Democratic party appears to express deeper concern than their Republican counterparts about Russian election meddling, seemingly a Cold War holdover, even in the upcoming midterm elections. Democrats now broadly favor international trade, expressing concern even for Trump's own constituency who are likely to suffer at the hands of any trade wars with China, Mexico, or even Canada. Republicans, once claiming to be the party of fiscal responsibility, have acquiesced to unfunded tax cuts and might be poised to fund the border wall and even a Space Force, all while further ballooning an uncontrolled national debt, against Democrats, who suddenly, if somewhat questionably, claim the need for fiscal balance.

There is little consistency in all of this. It’s not as if the Democrats and Republicans have flipped sides. In general, the Republicans support Trump because he is committed to delivering on some core conservative pledges—tax cuts, immigration restrictions, and yes, the border wall. After all, if the parties had merely flipped, we wouldn’t have disequilibrium. We would, instead, have the same equilibrium as in the past, only this time with switched party labels.

The hard left has not suddenly embraced the power of markets to create wealth, thoughtfully balancing limited regulatory constraints against the desire for robust economic growth. Instead, the Democratic party risks becoming the party of Democratic Socialists. Bernie Sander and, now, Alexandria Ocasio-Cortez imagine eliminating longstanding financial commitments they disfavor, and, as if operating in fiscal Tabula Rasa, ensuring universal, singer payer, health care along with publicly funded higher education, all while somehow magically balancing the budget.

In a world of political disequilibrium, our polling choices often devolve to which candidate poses the greatest threat. To this observer, despite her admittedly significant flaws as a candidate, Hillary Clinton was far less a threat than Donald Trump. Had the 2016 election, instead, been between John Kasich and Bernie Sanders, this Democrat would have voted Republican.

In our present political environment, some on the wings of each party might regard my seemingly fickle political preferences as extreme. Some Republicans treated anyone who voted for Hillary in the general election as part of the radical left. And some Democrats would almost certainly have regarded a vote Kasich over Sanders as signaling my abandonment for the hard right. Of course, neither characterization is true. But in this period of political disequilibrium, the extremes on both ends sometimes bend inward, toward each other, like a horseshoe, castigating centrist Democrats and Republicans alike.

Not so long ago, Democrats and Republicans routinely debated policy, sometimes intensely, but against a background of shared premises. Political moderates in both parties generally held faith in private markets as the engines of prosperity, but understood that if entirely unbounded, too many people would be denied access, and future generations risked suffering from serious environment harms. Moderates from both parties had general confidence in our institutional structures, yet they appreciated that with sufficient stress, even the strongest of systems can fail. And moderates, again on both sides, also recognized that although no politician is perfect, requiring that we sometimes look the other way, character ultimately matters. There were some lines that simply could not be crossed without the leadership, usually of the offender’s own party, finally stepping up and saying "no" in a loud and clear voice. In that world, which suddenly seems distant, however intense our political arguments may have been, thoughtful persons could engage respectfully, and the stakes, although high, were rarely existential. And as the political equilibria toggled back and forth, that too gave some comfort. After all, there would always be another election.

I welcome your comments.

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