What if everything was for sale? What if you had to name a price for everything you owned and be willing to sell it if a buyer matched your offer? And you couldn’t cheat by overestimating the price to keep your property because your taxes would be based on the value you chose.
It’s enough to make even the most ardent believers in free markets squirm a little. But a system like this is at the heart of a plan that Eric Posner, a professor at the University of Chicago Law School, and Glen Weyl, a principal researcher at Microsoft Research, believe could put an end to inequality, economic stagnation, and other ills. In their new book Radical Markets: Uprooting Capitalism and Democracy for a Just Society (Princeton University Press), they promise that “the auction will set you free.”
There is a sense that something is amiss in the global economic order, whether it’s worsening inequality, the tepid recovery after the financial crisis, or a shift towards authoritarianism. Posner and Weyl’s book is the economic version of what corporations call “blue-sky thinking.” It imagines a world in which there is a market for everything and property isn’t private but commonly owned.
The authors appear to relish in their radicalism. They’ve certainly caught the attention of other economists and commentators, with some appreciating the boldness of their ideas, which they say are inspired by Adam Smith, Henry George, and William Vickrey. The latter two are known for anti-monopoly theory and auction theory, respectively.
The authors also faced a torrent of criticism for one of their suggestions that involves people in wealthy countries personally sponsoring migrants from poorer ones, and reaping direct financial gains from the arrangement (the phrase “modern servitude” came up).
At the same time, their ideas, which reduce the role of government and replace it with collective action, have found favor with the crypto crowd. Vitalik Buterin, inventor of the ethereum blockchain system, has expressed a keen interest in Posner and Weyl’s work. Speaking to Quartz last year, Buterin said, “they are good at coming up with ideas that maximize what I think are valuable libertarian goals but without the cultural prejudices that inhibit that entire movement… does a system of private property really have to work the exact way it does now?” (You can read 5,000 more words of Buterin’s thoughts on the book here.)
Quartz spoke with Weyl about his ambitious (and at times discomforting) plan to rethink markets. The following conversation has been condensed and edited for clarity.
Quartz: Let’s start with phrases in the book’s title: “radical markets” and “uprooting capitalism.” The word radical suggests this book may be on the left-wing of the political spectrum. If people think that, they are going to be surprised when they read it.
Weyl: In what direction? I think they are going to be surprised by the content in all directions, hopefully.
It’s not uprooting capitalism and discarding it, but supercharging it. What is the “radical” message you’re trying to get across?
I really don’t think it’s left wing or right wing, it’s trying to reimagine politics. I don’t think what we are describing is capitalist but we do think it’s pro-market. Actually, my co-author and I disagree about this. My co-author would say it’s an extreme form of capitalism and I would say it’s not capitalism, it’s markets, but it’s more socialist.
Capitalism is a system of free markets based on the principle of private property. This is based on common property. Socialism is a principle of common ownership of property with a greater role for collective action. That’s better at describing our system: it is market-oriented but not capitalist.
What are the biggest problems with modern markets that you want to address?
We’ve got dramatically rising inequality, stagnating economies, and growing political divisions and populism. Those are the symptoms, but the underlying root cause is monopoly. Monopoly comes in the form of government power, the power of judges, the power of bureaucrats. Even more today it comes in the form of corporate monopolies and the monopolies the wealthy have over land and other resources that they hold away from other people that might want to use them better.
So let’s talk about the ideas in the book and start with housing…
“It is market-oriented but not capitalist.” It’s not just housing, it’s all wealth. There would be a very large tax on wealth but people would determine the value of all the wealth and assets they own, whether that’s intellectual property, drilling rights, commercial real estate, business assets, stocks and bonds, houses, everything. But they would have to stand ready to sell those assets at the price they self-assess.
What this does is dramatically redistribute the ownership of wealth in our society. About two-thirds of wealth would go from private hands to being commonly owned.
Take me through the steps of how that works.
A 7% tax is roughly what we advocate.
On all assets. It doesn’t sound like a large tax but that’s because we are not used to wealth taxes. It would generate revenue of about 20% of national income, which we would use to eliminate other taxes on capital and fund public goods and to give a social dividend.
You’re trying to address inequality. How do people on lower incomes benefit from a system where everything is taxed, and for sale?
They would get a social dividend, which would dramatically affect the economics of their lives. Roughly, a median family of four would be getting a net $20,000 or $22,000 a year, which is more than the total increase in the standard of living those households have seen in the last 40 years. It would be what advocates of a very aggressive, large universal basic income advocate for.
When you talk about property, does this include the homes people live in?
We want to do it in stages. We don’t want to start with something as sensitive as homes. We want to start with things like [radio] spectrum, natural drilling rights. On the ethereum blockchain I think they are going to implement this for domain addresses very soon. That’s where we want to start and those are the assets that are most disproportionately owned by the wealthy. Then we want to move to things like intellectual property, business assets, stocks and bonds. And only then do we even want to move to commercial real estate and then to things that do get taken in bankruptcy, like second homes, and then eventually to the first home.
What’s the role of government in this system?
“People monopolizing power is what inequality is about.” People monopolizing power is what inequality is about. I don’t think giving a lot of concentrated power to a small number of people, no matter how well intentioned you think those people are, is a solution to inequality, it’s the source. I want people to act together, I want collective decision making. Does my system involve government? Depends. It’s got a huge tax that’s being redistributed, but it’s happening according to automatic rules not some discretionary authority.
Automatic rules still have to be designed by someone.
I want things that we can have open democratic debate about that are simple enough for people to understand. I’m more hesitant to have things like the Obamacare reform in the United States: it was so complicated, no one knew what was happening. They just said we trust in Obama, he’ll do a good job. I want to reduce that reliance on trusting in very powerful technocrats.
Do people want to be so actively engaged in decision making?
They can allow some of it to be delegated, but the more the principles are understood broadly and can be internalized into social norms and checked by the public, the more accountability there will be for public officials. Quadratic voting is based on that idea that not everyone can’t understand everything; we want to allow people to specialize.
And these ideas are mainly directed at the US?
It’s written with the problems of the wealthy countries in mind, and a little bit more the US.
Let’s move on to immigration…
The basic idea is that right now the people who most benefit from migration are the migrants themselves or the companies and individuals who employ them in wealthy countries. Unsurprisingly, those are the people who really support immigration. Whereas working-class people in wealthy countries generally are skeptical of immigration, and don’t get many of the benefits. We want to change the dynamic and funnel more of the benefits of migration to working-class people.
Our system does that by allowing every citizen to sponsor visas equally, and to negotiate with the migrant for some share of the benefits that the migrant obtains from moving to the wealthy country. It would create a coalition for much greater migration.
What does the sponsoring entail?
First you’d have to negotiate—subject to some protections, such as the person would be able to leave at any time they wanted to and they’d always be able to re-contract with someone else—the terms of sponsorship. It might be some percent of the income gain that [the migrant] got. There might be some fixed amount that you had to pay and if you couldn’t pay that then you’d have to leave or something like that.
The sponsor would have to take responsibility for the person that they hosted. The migrant would have to live near the sponsor and interact with them on a regular basis. What we want to do is not just create economic support for migration, but also create a social contact and interaction because that’s incredibly important to breaking down the walls of xenophobia.
Why does it matter that people in wealthy countries don’t always directly receive the financial benefits of migration? Why should migrants share the gains in that way?
I don’t think it’s an issue of the migrants sharing it. It’s an issue of the wealthy people in the countries who get huge benefits from migration sharing it with the less well-off people.
The way it sounds, and this could be a question of the language you use or design of the system, it sounds a lot like if I wanted to move to the UK, I have to pay someone in, say, Coventry to be there. But many migrants move with a company visa or get jobs some other way. If I move, pay taxes, and contribute towards the UK economy, why should I have to pay to appease some of the locals’ xenophobia?
It’s not appeasing their xenophobia. All of us believe the gains from technology should be more broadly shared. Most people agree that the gains from free trade should be more evenly shared. Why shouldn’t the gains from migration be more evenly shared? Right now, migrants offer to the capitalists who employ them huge benefits from a better labor force or a cheaper labor force. Why shouldn’t those capitalists share that with all the people who live in the country?
This isn’t the same as sharing the gains from technology. Migration is more personal—it’s about people improving their life opportunities.
If you’re thinking about the plight of migrants you have to support something like this because we know that there’s unbelievable backlash against migration. Migration is incredibly restricted in every wealthy country—we live in a global apartheid system. We live in a system where there are people willing to die to come and we’re sitting there and shooting at them to stay away. That is the unbelievable injustice that we are currently living with. How do we move beyond that?
Some of the responses to this idea have said it sounds like indentured servitude. The fictional Haiti example 1 at the start of the chapter is not a positive one—the person moves into bad living conditions in France, with meager pay. It comes across as trying to force people to have a better attitude to migrants by allowing them to have control over a migrant.
I don’t think the issue is really that much about control. The conditions the woman was coming from in Haiti are so infinitely worse than the conditions that we describe. Just because we don’t look at the suffering that we impose on the people in the poor world doesn’t mean it doesn’t exist. How are we going to offer opportunities to people? We live in an ugly world and calling it ugly and trying to be honest about how ugly it is I think is what causes this reaction from people, but you can’t just hide from the world that we live in.
Does this system only apply to foreign migrants or does it work within countries?
I wouldn’t change the current system that allows free movement within countries.
Someone can sponsor you to move and work today, but that’s mostly through companies. This is a much more personal scenario, and that’s a big step.
Our employment model isn’t that they would necessarily work directly for you. You just sponsor their visa and interact with them in some social capacity. They could work for you but the role is in sponsoring the visa, the right to enter.“Employers have a lot more power over their workers than companies have over their consumers.”
Would this require some government role to manage migration flows and targets?
We make a simple proposal which is one person-one migrant, which would be a huge expansion of migration.
One of the books other key ideas addresses institutional investors. Talk me through that.
Even though we have anti-trust and competition authorities, they don’t actually do anything. They ignore the two largest sources of market power in our economy. One is the power that institutional investor, like BlackRock, Vanguard, and State Street have. They own about a quarter of the corporate economy, owning all of the companies that compete with each other. They don’t have any interest in seeing them compete for consumers or for workers or in politics. The second thing is that anti-trust almost only focuses on the power companies have over their consumers but in fact employers have a lot more power over their workers than companies have over their consumers. The anti-trust policies completely ignore that and haven’t tried to stop mergers that would reduce the options people have for work. Anti-trust policy has a lot more potential.
Who would be responsible for designing these new systems?
I think blockchain is a place where a lot of this is going to be happening. In a very cobbled together, decentralized way, people are trying out different governance systems. That’s going to be a rich area for experimentation in the next year or two.