Ignore Empty Words: Does Socialism Pass the Market Test? | Opinion

One defining difference between President Donald Trump and former Vice President Joe Biden is their support of socialism, defined roughly here by the degree to which a central government regulates its people and finances its services. There has been endless opining about the merits of socialism for at least a century. As socialism recently re-emerged in the American debate, the White House Council of Economic Advisers even wrote a report on its economic effects, and how the rhetoric of its current proponents mimics many historical ones.

None of the opining gets at how much the people living under socialism actually value it, rather than how much politicians or others claim they should value it. A more populist approach to evaluating socialism looks at how the people, as opposed to those inside the Beltway or ivory towers, value big government. A good analogy to this shortcoming is that the best measure of the value of a movie is how many want to see it, not what the film critics think.

The populist approach to evaluating socialism relies on what economists call "revealed preference," which infers what people want from their behavior rather than from their empty words. For socialism, this boils down to asking: Do people who live under more government control leave more often than people who live in places that are freer? This question is a more direct way to infer how people value socialism than is voting because an individual's vote does not matter on the margin, and may be based on non-policy factors like candidates' personalities.

It is telling that only socialist countries impose restrictions on people leaving, while freer countries impose restrictions on people entering them. For China, strict controls limited emigration before the country started opening in the 1980s. For the Soviet Union, emigration could mostly only be taken advantage of by those who had the government's permission to travel. Restrictions on emigration only take place when people have a strong desire to leave, which apparently citizens did under these oppressive socialist regimes.

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Additionally, when leaving a socialist country is legal, there is often a massive exodus. About 13 percent of the Venezuelan population has emigrated since 1999. Cubans have been among the top ten immigrant groups in the United States since 1970, with more than 11 percent of Cuba's current population size living in the United States.

Some argue that these countries are not ruled under socialism, but under dictatorships. However, they started socialist and, since they were so centralized, were easier to take control of by dictators than would a decentralized country. Socialism is thus one cause of enabling these dictatorships—and thus a cause of eventual emigration.

For less draconian socialist countries such as in Scandinavia, it is telling that they have liberal immigration policies. It is not difficult to have an open door when no one wants to enter. The weather is not to blame, as Stockholm's weather is not that much different from New York City's. If Swedes could make money without most of it going to their government, people from other countries would come knocking and the country's immigration policy would be altered. In their defense, many Scandinavian countries have scaled back their socialist policies far below those called for in Biden's platform, and now have less progressive income taxation and sometimes fewer regulations than here in the U.S. Consequently, immigration has increased.

Democratic socialist Sen. Bernie Sanders of Vermont
Democratic socialist Sen. Bernie Sanders of Vermont Spencer Platt/Getty Images

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The lack of voluntary participation in socialism, and that force is needed to implement it, is of course related to why people leave. There has been attempts of "voluntary socialism" without force, such as the Israeli kibbutz, but the people left those as well.

Looking closer to home, there is an overwhelming amount of economic research that finds Americans "vote with their feet" and move from high-tax states with larger governments to low-tax states with smaller ones. Of the 25 highest‐​tax states, 24 of them had net out‐​migration in 2016. Of the 25 lowest‐​tax states, 17 had net in‐​migration. The largest out‐​migration was from high‐​tax New York, whereas the largest in‐​migration was to low‐​tax Florida.

Part of the most recent exodus out of big-government states is due to the 2017 tax reform law that greatly reduced "socialism without taxation," where residents could write off their state and local taxes to lower their federal tax bills. Before tax reform, more of the costs of big local governments were borne by the federal government. When local governments charge a price more reflective of their size, people leave.

Some argue that the lack of demand for socialism is because rich people do not want it, and that socialism is designed for the poor. But there is no way to finance big government off the back of the poor. For example, the top 1 percent of income earners pay 41 percent of state income taxes in New York, 37 percent in New Jersey and 50 percent in California. When you redistribute wealth, you get less of it—particularly when the rich leave. In addition, the large governments of many socialist countries, such as those in Europe, cannot be financed off the rich alone. Instead, they need regressive sales and payroll taxes on the middle class in order to scale up revenue.

Despite common claims about its popularity from politicians, the media and academia, socialism suffers from a lack of demand for it from the people who have to live under it. This raises the question: If socialism is so good, why aren't people buying it?

Tomas J. Philipson is a professor of public policy at the University of Chicago. He served as a member of White House Council of Economic Advisers from 2017 to 2020, and its acting chairman from 2019 to 2020.

The views expressed in this article are the writer's own.

Ignore Empty Words: Does Socialism Pass the Market Test? | Opinion | Opinion