Downside and Upside: An Essay on Green Liberalism
My simplistic theory of left and right: and how green liberalism can move beyond one-dimensional models
"Upside / Downside (explored)" by schoeband is licensed under CC BY-NC-ND 2.0.
Libertarian economist Bryan Caplan has a simplistic theory of left and right, which will probably make you chuckle and will definitely make you think. In the version he proposed in 2016, he said that leftists are anti-market on an emotional level, while rightists are anti-leftist on an emotional level. His view is simple yet insightful and explains much of what you see around you in politics.
I would like to humbly offer my own simplistic theory of economic policy across the left and the right. My idea has the advantage of offering a way of transcending partisan politics. It is based on two terms from business, upside and downside.
Before an investor will put money into a project, he or she will model the upside, which refers to the likely profits in the base case (the project meets expectations) and the best case (it beats expectations). Meanwhile, downside refers to the risks in the worst case (the expectations for the project were wildly wrong).
So, my simplistic theory of right and left is this:
the right tends to be more interested by upside, while the left tends to be pay more attention to downside
Let’s take the right first. An interest in upside can be healthy and it can be toxic. When it is healthy, liberal currents of the right are interested in creating the conditions for permissionless innovation and value creation to thrive in the private sector. When this works, the economy will tend to grow and people like you and me will be able to find jobs and projects that can keep the wolf from the door. Investor-friendly policies like modest taxes and budget surpluses can be part of the picture. Venture capitalist Marc Andreesen’s recent techno-optimist manifesto is an attractive example of a right-leaning interest in upside, despite some flaws that we will discuss later in this essay.
Unfortunately, rightist concerns with upside can become toxic in a number of ways. First of all, people on the right can be too quick to see society as a collection of atomised individuals, who have no common interests. Critiques of “wokeness” can often conceal bigotry and a lack of solidarity. In its extreme forms - seen among anarcho-capitalists and followers of novelist Ayn Rand among others - rightists want to smash the welfare state in order to lower taxes for billionaires. The result often looks chillingly like the Social Darwinism of the 1870s.
Secondly, some rightists can become a little too excited about people who happen to find a way to be successful in a market-based economy. This can lead to a culture of tolerating and celebrating grifters, who are quick to sell magic potions, cryptocurrencies and seminars that promote unlikely paths to personal success. Former US President Donald Trump is the perfect example of this tendency. His personal branding is designed to exemplify the poor person’s gaudy idea of what unapologetic success looks like.
Thirdly, nationalists often grossly over-estimate the upside of doing one big, slightly mad thing to “take back control” or make their territories great again in the name of sovereignty. We can see this with Brexit and the coup attempts promoted by Trump and the Catalan nationalists. Fascism takes this tendency to an extreme.
Turning to the other side of the spectrum, leftists tend to be worried that the best way of generating great wealth is to exploit workers while ripping off customers - something that is sometimes true, but obviously is not always the case. As a result of this wariness about upside, leftists are often cynical about those who talk about economic growth and job creation, while being very interested in protecting ordinary people against the downsides of a market-based economy.
A concern with protecting people against downside can be healthy, as we see with social democrats who want to build a robust welfare state to curb the excesses of free markets, with all the ups and downs that this entails, as well as preparing future generations to participate in the economy and taking care of the sick. Many social democrats are keen to keep permissionless innovation as the motor of the economy.
On the other hand, an interest in downside can also become toxic when it is taken too far. For example, old-school socialists, who want to do away with any inequalities in society, have a terrible track record as they have rounded down, as the citizens of Venezuela are finding out to their cost. The crisis in Venezuela has become so bad that the country barely has a welfare state at all nowadays. Getting rid of feedback loops creates unintended consequences; and trying to remove downside itself generates massive downside. Communism takes this tendency to an extreme.
Climate change is one of the biggest downside risks facing humanity, as astrophysicists like Adam Frank warn us, so it should come as no surprise that on average leftists are more concerned about greenhouse gases than rightists. In fact, conspiracy theories about climate change allegedly being a myth often act as a bodyguard to the worldview of rightists who hate thinking about downside risks.
The section of Andreessen’s techno-optimism manifesto where the venture capitalist claims that sustainability and environmental, social and governance (ESG) investing are anti-technological ideas that will only promote stagnation is another example of the same tendency. He believes that any regulation will be a slippery slope that leads to humanity repeating the failures of central planning and socialism.
I suspect that Andreessen might have missed the tensions in the environmental movement between pro-growth and anti-growth strands, which was identified by Charles Mann. Left-leaning tech optimist Noah Smith argues that, while broadly pushing in the correct direction, the venture capitalist “underestimates the role of government in pressing science and technology forward,” whether that is through tax credits for research and development (R&D), the patent system (when it works well) or supporting basic research at universities. He cites work by economist Mariana Mazzucato on how state investment underpins and supports the startup scene. In an interesting X thread, left accelerationist Nick Pinkston made a similar point while calling on democratic accountability to distribute tech through society.
Andreessen’s fears about regulation being a slippery slope to a state-run economy had parallels among many defenders of Brexit, a percentage of whom thought the European Union (EU) would collapse afterwards. However, exiting the EU actually put the UK on a lower growth trajectory, much to the surprise of the people who thought leaving the world’s largest free-market bloc would be a triumph for free markets.
It is interesting that Elon Musk, the maker of the favourite electric car of wealthy leftists who are concerned about climate change, ended up supporting right-wing narratives. He infamously called progressive policies, which stress an awareness of structural injustices instead of celebrating Silicon Valley billionaires, a “mind virus.” There were probably many reasons for him to come to this rather regrettable conclusion, but leftist concerns about the value of can-do entrepreneurship, as discussed in Andreessen’s essay on techno optimism, are no doubt part of the picture.
One of the recurring themes of the Sharpen Your Axe project is the difference between hedgehogs (who take one model to an extreme) and foxes (who are happy running multiple models in parallel). Foxes tend to develop a better connection with outside reality than hedgehogs, who are better at engaging with our emotions. If we are going to adopt multiple models, we will need to develop intellectual virtues like “carefulness, perseverance, humility, vigor, flexibility, courage, and thoroughness, as well as open-mindedness, fair-mindedness, insightfulness, and the virtues opposed to wishful thinking, obtuseness, and conformity,” according to philosopher Linda Trinkhaus Zagzebski.
The direction of travel is different, but liberals who believe in the welfare state and ESG investing and social democrats who believe in harnessing the power of lightly regulated free markets are both foxes. They will tend to have more in common with each other than they will with hedgehogs who want to massively shrink the state or to replace markets with a giant bureaucracy. I would suggest grounding centrist approaches like these, which integrate an understanding of downside and upside, in institutionalism (anti-populist policies to protect liberal democracy from its many enemies and stop elected officials from instigating a system of gangster capitalism).
It is worth mentioning that laissez faire (standing back and letting markets do their work - a key idea underpinning Andreessen’s essay) has been an incredibly powerful tool for humanity as we have left our ancestral poverty behind. This task that isn’t complete yet, as the venture capitalist correctly argues. Laissez faire has generated enormous upside. However, markets have their limits, as political philosopher Michael Sandel teaches us. We should pay heed to our moral intuitions about the dangers of creating markets in babies or organs, for example.
Also, economist Karl Polanyi teaches us that markets emerged in a contingent way. This means that we can re-imagine what they might look like in the future. A true fox, Polanyi realised that marketisation was a powerful force, but that it needed to be counterbalanced by social protection to shield people against marketisation. Living in a market society can be hard for our species, as many of us realise every time the alarm clock goes off on Monday morning! Caplan himself wrote a whole book about why anti-markets bias is so deeply entrenched in our brains.
It is difficult to see how we can laissez faire our way out of the exponential risks of a changing climate without re-thinking the incentive structures embedded in our market institutions. We don’t know the full answer yet, but Bidenomics, which involves state investment in cleantech infrastructure combined with incentives for private-sector investment, is a move in an interesting direction. Elite-led initiatives like the Agenda 2030 and the Great Reset are modest attempts to nudge policy in a similar direction, while much-maligned progressive philanthropist George Soros has criticised “market fundamentalism” and has called melting ice sheets “a threat to the survival of our civilisation.”
The benefits and risks of creating incentives for innovation to tackle a warming world and combining this with industrial policy will be the subject of much debate among economists in the years to come. I suspect that the success or failure of this approach will largely depend on the extent that it incorporates the same feedback loops that made laissez faire 1.0 so successful at getting people out of poverty. Creating new structures for laissez faire 2.0 to continue to thrive in new environmentally friendly ways is always going to be better than throwing the baby out with the bathwater and moving to a centrally planned economy. Hedgehogs on both sides will hate this point!
Having come this far, it should be unsurprising that instead of making the case that industrial policy is too bureaucratic to succeed, many angry rightists instead often choose to spread conspiracy theories about President Joe Biden and his recovering addict son, Agenda 2030, the Great Reset and Soros, as well as refusing to accept the reality of climate change. Grappling directly with new ways to grapple with the world’s most pressing downside risk would give better results.
This week’s column makes the modest suggestion that Catalan nationalism is a right-wing ideology. Having survived multiple attacks by the bot army deployed by Vladimir Putin on behalf of the Catalan independence movement during its coup attempt, I hope you will understand my decision to close the comments today. See you next week!
Further Reading
Cognitive Dissonance: 50 Years of a Classic Theory by Joel M. Cooper
Light of the Stars: Alien Worlds and the Fate of the Earth by Adam Frank
The Wizard and the Prophet: Two Remarkable Scientists and Their Dueling Visions to Shape Tomorrow’s World by Charles C. Mann
The Entrepreneurial State: Debunking Public vs Private Sector Myths by Mariana Mazzucato
The Great Transformation: The Political and Economic Origins of Our Time by Karl Polanyi
What Money Can’t Buy: The Moral Limits of Markets by Michael Sandel
Virtues of the Mind: An Inquiry into the Nature of Virtue and the Ethical Foundations of Knowledge by Linda Trinkaus Zagzebski
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