As political scientist Jacob Grumbach describes, concentrated partisan power, which has built up over the past 30 years and is approaching an apex, means that the states, once hailed by Justice Louis Brandeis as laboratories of democracy, are increasingly turning into laboratories for partisan advantage. And this has stirred the latent potential for rising interstate aggression and conflict, with states governed by Republicans in particular adopting policies and practices expressly designed to impose their power and policy preferences on unwilling citizens, officials, businesses, and states beyond their borders.
To be fair, blue states have also used policy to drive national standards. For decades, conservatives have fretted that California’s emissions and environmental standards stand in for the nation, since it may be too expensive to make one product to meet California’s strict requirements and another for Nebraska’s. Yet our review of state actions in recent years suggests that red states are more determined on this front, and more effective from the perspective of achieving their objectives.
In our view, effective responses to the increasingly ambitious red-state aggression hinge on two critical objectives. The first is to win (or at least not lose) the policy battles around which these conflicts are arising, vindicating the power of blue-state voters to determine their own destinies. The second is to contain the conflicts between states sufficiently to avoid a conflagration. You could say that these objectives draw from two doctrines, one from recent legal theory and practice, and one from common negotiating strategy: constitutional hardball and deterrence.
In the face of red-state aggression, we think it’s time for blue states to embrace their governing majorities as affirmative sources of power—and began to exercise those powers more fully, more effectively, and with greater coordination.
In The American Prospect
On August 19, 2019, the Business Roundtable issued a press release containing a roughly 300-word statement, signed by 181 of its members. “Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans,’” its headline read, citing a quote from its chair, Jamie Dimon. The CEOs pledged to “lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities and shareholders,” and “move away from shareholder primacy.” The CEOs added, “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
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A new narrative quickly began to solidify: Milton Friedman’s profits-at-all-costs way of thinking was dead. In fact, Fortune wrote in its cover story that “Friedman must be turning in his grave.”
There was just one catch: CEOs weren’t actually promising a new way of doing business, but simply a new way of talking about doing business.
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As Columbia Business School’s Shiva Rajgopal, co-author of one study that investigated whether Business Roundtable CEOs followed through on their pledges, observed, “When these guys signed the BRT statement, the stock prices of these firms [did not] move … There was no heartbeat at all.” This suggests, as Rajgopal and his co-author wrote, “market participants agree with the assessment that the BRT statement represents cheap talk.”
Regardless of what framework you think makes the most sense, tackling the housing shortage in America is an imperative to tame the cost of living, promote community development, reduce financial stress, and even reduce carbon emissions. The only people who have any problem with making housing more affordable, in fact, are homeowners. And that’s the whole problem.
An ingenious little study from researchers Eren Cifci of Austin Peay State University, Alan Tidwell of the University of Alabama, J. Sherwood Clements of Virginia Tech University, and Andres Jauregui of Fresno State starts from the fairly obvious premise of self-interest: Homeowners want home prices, and therefore their property values, to go up. It’s a simple case of the wealth effect, and people, unsurprisingly, like to be richer. William Fischel, a former economics professor at Dartmouth, coined the term “homevoter” to describe the link between property values and local voting trends. But this paper is the first to track it at the presidential level.
The authors look at voting patterns in 87 percent of all U.S. counties across the past six election cycles, looking for correlations between home prices and vote-switching. Homeowners in counties where home prices rose in the four years before the presidential election were more likely to switch their votes toward the party holding the presidency at that time, whether Republicans or Democrats. Conversely, when housing prices plummeted, homeowner voters switched their votes away from the incumbent party.
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This is a problem for enlightened policy on housing. It’s not about whether zoning deregulation by itself is popular, or rent control. The crux of the matter is this: The population that wants higher home prices is bigger and votes at higher rates than the population that wants lower home prices. In some ways, our dysfunctional housing policies are just that simple. The easiest way to keep prices up, after all, is to mobilize and prevent the construction of new housing nearby. Contrast Tokyo, which has historically permitted nearly twice as many housing units as the entire state of California despite having a third the population and one-two-hundredth the amount of land, so rent therefore remains cheap.
Today, the fine-graining of data and the isolation of consumers has changed the game. The old idiom is that every man has his price. But that’s literally true now, much more than you know, and it’s certainly the plan for the future.
“The idea of being able to charge every individual person based on their individual willingness to pay has for the most part been a thought experiment,” said Lina Khan, chairwoman of the Federal Trade Commission. “And now … through the enormous amount of behavioral and individualized data that these data brokers and other firms have been collecting, we’re now in an environment that technologically it actually is much more possible to be serving every individual person an individual price based on everything they know about you.”
Economists soft-pedal this emerging trend by calling it “personalized” pricing, which reflects their view that tying price to individual characteristics adds value for consumers. But Zephyr Teachout, who helped write anti-price-gouging rules in the New York attorney general’s office, has a different name for it: surveillance pricing.
“I think public pricing is foundational to economic liberty,” said Teachout, now a law professor at Fordham University. “Now we need to lock it down with rules.”
It all began with the new world of aviation that followed the Airline Deregulation Act, signed into law in 1978 by President Jimmy Carter. By gutting the Civil Aeronautics Board, which had tightly managed airlines, Carter did away with a slew of regulations, including price controls capping airfares.
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The airlines reorganized an existing quasi-independent service they owned called the Airline Tariff Publishing Company (ATPCO), headquartered near Dulles Airport outside of Washington, D.C. By today’s standards, ATPCO wasn’t especially high-tech, but it essentially functioned as a clearinghouse to share information across the industry, helping airlines to set airfares. Weeks in advance, airlines would send ATPCO scheduled airfares along with detailed route information, seat numbers, and discount loyalty offers. None of this was public information. ATPCO in turn compiled this data and made it available to other airlines, so they could respond accordingly.
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In hindsight, by not enforcing major penalties or banning ATPCO entirely, the DOJ effectively greenlit conduct that its own legal team deemed unlawful. Other actors across the economy took the hint and a proliferation of third-party price-fixing schemes sprung up, now seen in housing, agriculture, hospitality, and even health care.
These new pricing intermediaries are similar to ATPCO, but don’t just act as information exchanges between competitors. They actually set the prices for an entire industry by using machine-learning algorithms and artificial intelligence, which are programmed to maximize profits. To arrive at optimal prices, these software applications aggregate vast amounts of relevant market data, some of which is public and much of which is competitively sensitive information given to them by their clients.
Each algorithmic scheme has its own distinct features, but they all share the same underlying philosophy: Competing on price in an open market is a race to the bottom, so why not instead coordinate together to grow industry’s profits? In other words, it’s another version of the notorious Peter Thiel adage that “competition is for losers.”
For decades, the most ruthless form of American capitalism centered on cost-cutting. […] The results can be seen in ruined industrial ghost towns across the Midwest, and businesses strip-mined by leveraged buyouts. But there is a tipping point to all this cost-cutting. There’s only so much fat to cut before you hit bone. The strategy eventually had diminishing returns, and without a new strategy, profits would hit a plateau. That wouldn’t cut it on Wall Street.
Enter the age of recoupment. Instead of cutting costs, the new mantra is raising prices.
Price hikes are old as dirt. But today’s companies have reinvented them. They’re using a dizzying array of sophisticated and deceitful tricks to do something pretty darn simple: rip you off.
The new tricks have fancy new names. Charging you more for less is a corporate practice known as “shrinkflation.” Revealing part of the total price up front, only to tack on all manner of ridiculous-sounding fees and service charges: Industry insiders call that one “drip pricing.” Stealing your online shopping data to predict the maximum price you would be willing to pay for your next e-commerce purchase: That’s personalized pricing. Using software to coordinate pricing with other companies to make sure they don’t undercut each other: That’s algorithmic price-fixing (or plain old-fashioned collusion). And charging you more for an item when supply is limited: That’s Jay Powell’s favorite, dynamic pricing.
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With prices rising everywhere they turned, nobody could discern which were justified by companies’ own rising costs, and which were truly excessive. Highly engineered “dark patterns,” where people are tricked into signing up or paying more, were chalked up to the way things are now, rather than something more insidious. If a price surges, if a fee is tacked onto the bill, the culprit is the economy, not the company shoving their hands into your wallet.
CEOs hardly contain their delight on calls with investors. From the CFO of the international conglomerate 3M patting their team on the back for doing a “marvelous job in driving price,” to the CFO of the largest beer importer in the United States, Constellation Brands, who promised investors the company would “make sure we’re not leaving any pricing on the table” and “take as much as we can,” to the tech CEO who copped to “praying for inflation” and doing his “inflation dance,” these corporate executives were clear on one thing: Inflation was very good for business.