The Elite arise in part because of that peculiarity that we examined in Chapter 6. Depositing villains in jails that almost certainly won’t hold them means that the rules sustaining order are failing. When that happens the populace can easily become disenchanted with the political and economic institutions governing them. If people don’t believe law and order will be upheld, if the negative incentives put in place to discourage bad behavior don’t accomplish what they are supposed to, civil society has a tendency to deteriorate.
OK, so back to Superman, the defender of two of the most important institutions as far as economics are concerned. In economic research on institutions, there are certain rules which, when adopted, provide a good predictor of economic success. If you guessed “truth and justice”, move to the head of the class. Perhaps, then, Superman isn’t just fighting for the American Way. Maybe he isn’t fighting for that at all, but rather a much grander idea: the Economic Way. By defending institutions that make it more likely that the economic welfare of society will improve, Superman might just be the greatest defender of economics since Adam Smith.2
Not convinced? Vollum and Adkinson (2003) explain the differences between Batman and Superman in the crime-fighting world, noting that while both are effective, Supes “works within the boundaries of the law and in cooperation with official law enforcement” (p. 101). Gavaler (2012) illustrates Superman’s devotion to the rule of law in his work on the Ku Klux Klan and superheroes. He notes that the first punch Superman ever throws is against a Klan-styled leader attempting to lynch a man who has not had his day in court. The scene was added to the opening sequence in Action Comics #1, when Siegel and Shuster moved on to write Superman #1 in 1939.
Superman is the purest of jurists. He believes everyone should have a fair shake and will step in front of an angry mob to ensure that happens. That is part of what it means to support the Economic Way. So, does that mean we shouldn’t be afraid of the rogue hero who might install themselves as emperor supreme? That depends entirely upon the hero.
Be Afraid, Be Very Afraid
Some heroes are so obviously unsuited for taking over the world that we don’t have to consider them seriously. For example, Deadpool is as likely to adopt an Alexander the Great complex as Big Bird. He’s usually in it for the money, and when he’s not he can’t keep his thoughts straight enough to formulate a plan for world domination. The biggest problem he faces, and this applies to most heroes, is that his powers aren’t significant enough to take over the world. Similarly, the Tick isn’t nearly smart enough to get the job done. To accomplish this, you need to be clever as well as powerful. You must also possess a sense of narcissism that leads you to believe you are the savior of the world. Someone like Squirrel Girl fits the first two categories, but certainly not the last one. Luke Cage has no ambition beyond cleaning up Harlem. Aquaman just wants the seas to be Spic-and-Span. Imagining the Flash, at least Barry Allen’s Flash, contemplating world domination draws a smile. He’s a nice guy who wants everyone to be safe. His job is crime-fighting, not nation-building.
There are others, though, who should be looked at with a little more suspicion. At the top of the list is Dr Manhattan from the Watchmen. His moral compass is, at best, tilted. He knows things about the past and the future and isn’t afraid of changing either. Similarly, Ozymandias, another one of the Watchmen, is a concern. He actually puts in place a plan that Dr Manhattan finds defensible, even though it ends with the deaths of millions. This is a seriously crazy dude, both intellectually dominant and psychologically unstable.
The Authority, a Warren Ellis creation, involves a group of heroes who start out with all the best intentions, but they adopt more and more aggressive tactics in their pursuit of enforcing justice. The Authority initially defends the Earth against alien and interdimensional attacks, but they move from a policing role to engage in more proactive, international meddling. The president of the United States attempts to corral them, but the Authority dismisses the effort out of hand. They exercise very little restraint and thus fear of them spreads. Human groups start to speak out against them, questioning the moral authority of the Authority and equating their actions to those of rogue nations. Nevertheless, the Authority continues to work to protect the Earth from extraterrestrial threats, but they ultimately have enough of the meddling and hypocrisy from democratically elected people and take over the United States (Morrison and Portacio, 2004).
While other heroes or groups let the power go to their heads, this is an unlikely scenario for Superman. The Man of Steel may occasionally question his role on Earth, but it is never an issue of whether he should continue to fight on the side of good. Instead he questions whether he should continue fighting at all. In Superman #713 (Straczynski and Roberson, 2011), Clark Kent does some quiet introspection and decides he can do as much good without a cape as he can being Superman. A Superman fanboy reads some of Clark’s musings and chafes at the reporter’s lack of understanding of the role model Superman is for so many people. The Superman devotee drags Clark around town as he interviews one person after another about their thoughts on the Man of Steel. One person is asked about whether Superman kills people. He answers “Superman is a ‘law and order’ guy…Everybody has a right to a fair trial and innocent before proven guilty, all that jazz…[p. 20]…I guess if I was the one accused of a crime, I’d want a court to decide if I was guilty or innocent, and not some guy, super or not. Wouldn’t you?” (p. 22).
At the end of it all, Clark’s faith in people is restored and he drops the idea of abandoning his life as Superman. The world needs someone to maintain order, not take over, and that’s what Superman does, and because of it he promotes the Economic Way. He defends institutions.
You Say You Want an Institution
Institutions are important in economic development because they establish certainty. When you know the rules of the game, you are able to plan accordingly. Nevertheless, not all institutions are created equal. Dictatorships have certainty. If you talk bad about the czar, you’re going to disappear in the middle of the night. The vanishing of malcontents might keep the government in power, but it also makes for a distrustful society, and trust is a valuable commodity in an economy. In his book Trust: The Social Virtues and the Creation of Prosperity, Francis Fukuyama (1995) explains why economic and social life go hand in hand. In societies where trust is absent, economic activity will flounder. At the microeconomic level, trust is needed to form contracts and to build connections that will help a company grow. Without trust, businesses stay small and inefficient because they can’t find the networks they need to provide inputs into the production process. Thus, each business has to do everything for themselves. As Adam Smith ([1776] 1994) pointed out, the inability to specialize in production ensures inefficiency.3
So what institutions are needed to promote a healthy economy? By protecting truth and justice, Superman is practically following the playbook an economist would write to promote economic vitality. The question is, how do these manifest themselves in a society? We all want to know the truth. When justice is denied, it makes us a little less certain about the world in which we live. No one is against these things but they don’t just appear. There need to be sanctioned mechanisms that promote and encapsulate these ideas. Truth and justice aren’t institutions, they are notions. Institutions are the bodies and structures that protect the ideals a society values. Superman is aided in his defense of truth and justice by three of the most important institutions the world has ever seen, and while there are a myriad of other conventions a state could adopt, as far as economic development is concerned, these are possibly the most important: Impartial courts, protection of property, and eliminating corruption.
Here Comes the Judge, Here Comes the Judge, Here Comes the Judge
Courts are in place to arbitrate disputes. Parties who come before the court will presumably abide by the decision and the court system will preferably dole out justice equitably. Without this properly functioning i
nstitution, the laws of the land hold little sway over people. The courts might only be the adjudication mechanism, not the enforcement mechanism for society, but they do give credence to those who would coerce compliance. If the court system doesn’t perform its duties impartially, if it favors the elite, connected, or wealthy at the expense of everyone else, fewer cases will come before it and more justice will be carried out Old West-style; however, the lack of faith in the court system imposes negative economic consequences beyond the potential loss of employees to duals.
In order for economic transactions to be carried out in a complex economy, it is vital that there be clearly defined and enforceable contracts. As noted earlier, this is based on trust, not just trust in the folks on the other side of the table, but also trust that if there is a dispute the courts will dispassionately enforce the terms of the agreement. If you have a court system that enforces contracts, you may be able to get past any trust issues. Additionally, it expands the scope of potential trading partners. You no longer have to actually know the people you do business with, because after negotiating the terms of the pact, you are satisfied that they will be carried out, and if the other side reneges you have the court to back you up. This increases the number of trades that people engage in and allows for greater degrees of specialization in production, both of which are very good for economic activity and standards of living.
Dude, That’s My Car!
The court system doesn’t matter, though, unless there is a firm commitment to the protection of property rights. When property is owned, the possessor can benefit financially from its use or sale. One of the classic papers in economics, written by Ronald Coase (1960), established that when property rights are not clearly defined, economic outcomes are suboptimal. Defined property rights ensure that transactions that do occur move goods to those who value them most. As such, the agents who need resources to be productive will get them. This outcome also encourages investment in businesses (Besley, 1995). If it is well established that courts will protect the investments that individuals make in their businesses, then business will begin to expand. This leads to more production, more hiring, and eventually greater incomes.
Protection of property rights also expands the scale of market transactions. Consider the process of buying a house. Most of us will buy a house that has had previous owners. When you sit down to close the sale, you might be overwhelmed by the number of forms that require signatures. Among the stacks of papers is an acknowledgement that the seller is the owner of the house and they are transferring ownership to you. This is possibly the most overlooked aspect of the purchase. Imagine if in the process of buying a house this part of the transaction was missing. Yes, there is a for sale sign in the front yard and a real estate agent walks you through the structure, answering all of your questions. Inspections are conducted and papers are signed, but on the first night in your new home someone appears on the doorstep claiming that the house is theirs. You call up the police to help settle the, admittedly odd, dispute and come to realize that you do not have the deed to the property. Neither, it turns out, does the interloper, nor do the people who sold the house to you. Possession might be nine tenths of the law, but a legal document wouldn’t hurt. In developed countries, the papers get filed and property ownership is firmly established, especially in the case of large purchases like a home, but in some parts of the world this paper trail simply doesn’t exist. Establishing who owns something is a much more difficult process. Buying property in a place such as Haiti might just be done with a handshake. Identifying the proper owner can take years of trying to track down former transactions. If it becomes enough of a problem, one of three things is likely to happen. First, the transaction might not take place. If that is the case, the buyer is deprived of an asset they wished to possess and the seller is deprived of the income from that asset (although it wasn’t theirs to sell). Fewer transactions are a bad thing. People trade because they believe the transaction will make them better off. If trading is limited because no one is sure who owns the goods being traded, then people are prevented from improving their lot in life in a way they see fit.
The second potential outcome is that the property might be seized by force. In this case, whoever is the strongest, or has the bigger guns, gets the property. Third, the courts might step in to solve the dispute and, without a tradition of protecting property rights and no paper trail to establish the rights, they favor their friends and the connected people in society, so the poor end up being prejudiced.
In short, if courts can’t or won’t deliver justice to the correct party, the number of transactions is likely to fall. If property rights aren’t protected, innovation will slow. Why spend time developing new products if someone can come along and steal your ideas? Without an impartial judiciary you might be arrested for a crime you didn’t commit because you ended up on the wrong side of a local politician. Any of these situations will lead to less economic and political freedom, and consequently a poorer populace.
Authority Plus Monopoly Minus Transparency Equals Corruption
The final of our three institutions in focus involves limiting corruption. Corruption is a way for the connected to get what they want at the expense of everyone else. The corruption tends to enrich a small group of people (like the judge you paid off) at the expense of a larger group. Simply, corruption reduces economic growth. This is the main finding of papers by Mauro (1995) and Jain (2002). If the only people who are able to do business are the ones connected to the government, there is no incentive to experiment, innovate, or create. No matter what you do, there is some impediment keeping you from getting ahead. Corruption can also cause resources to flow from where they are needed to pet projects of bureaucrats. Think about taking food aid from the poor due to tight budgets. That tight budget might be the result of a sports stadium that was built for a politician’s favorite team. Perhaps it is the case that in order to open a shop you need to pay off the local sheriff. This will ensure that no competitors enter the market; that is unless they pay more than you do. While it might be the way business gets done in parts of the world, corruption is not efficient, nor does it encourage business activity. In many cases, it drives activity away.
While these three institutions might seem obvious, there are still plenty of countries where they do not apply. Annual measures published by Transparency International (2017) regularly note that corruption is rampant in the overwhelming majority of the countries it surveys. The Economic Freedom of the World Index (McMahon et al., 2017) compiled by the Frasier Institute shows that the protection of private property rights and a fair court are key components in free nations. Yet, establishing these institutions are most definitely not priorities in many places. Then again, Superman is defending the American Way, not the Eritrean Way. Which reminds me, all of this discussion of institutions is supposed to be illustrating the importance of Superman. So where does he fit into this?
Superman Began As a Law and Order Man
Remember the endeavors of Superman in Action Comics #1? Supes is shown preventing the death of a woman for a crime she did not commit. In Superman #1 he stops a lynching because not only is it bad to lynch someone, there is no evidence that the man is guilty. In both situations Superman is not just protecting the innocent, he is also trying to uphold the integrity of the court system. People need to trust that justice will be served. This is the very first act of super-heroics the Man of Steel carries out.
The woman who is being beaten by her husband is, in essence, having her property rights violated. The most personal thing you can own is yourself. When a life is being threatened, that property should be protected post-haste. It may not be possible for the police or the courts to act in a timely fashion, but Superman can. He won’t carry out a punishment against the abuser, but he’ll put a stop to it.
The corrupt politician is violating the trust of the electorate. Sure, it happens all the time but we don’t have to like it, and in this case there are repercussi
ons far beyond Washington. The lobbyist, in no uncertain terms, tells the lawmaker he will be well taken care of. In Action Comics #2 (Siegel and Shuster, 1938b) we find out that the bribe originates from a weapons manufacturer who figures to get rich if America enters a war in Europe. Very shady dealings are afoot, and Superman not only wants to prevent getting involved in a war, but he also wants to keep politics as clean as possible.
Working Within the System … The Economic System
In economics, we divide macroeconomies into systems.4 These systems coordinate how societies allocate resources, goods, and services by answering three questions: What will we produce, how will we produce it, and for whom will things be produced? To put systems in the most succinct fashion, they can be considered along a continuum; at one end is the pure capitalist system, the other the pure command system.
Capitalism is typically accompanied by economic and political freedom, higher standards of living, and more innovation. This system answers the three questions of what, how and for whom through the market. The interaction of buyers and sellers, driven by self-interest, will determine what to produce. If buyers want something and are willing to pay for it, sellers have an incentive to provide it. How will those things be produced? In the most efficient way if you want to earn the largest profit possible. If you don’t do it well and sell goods at a price buyers are willing to pay, then either you’ll immediately be out of business, or someone else will step in and do the job and you will eventually be out of business. Whatever is produced will be available to whoever can pay for it, which brings us to the largest drawback for the capitalist system: Inequality. There is the potential for great wealth to be generated in a capitalist system, but that income need not find its way to the poorest. The rich are free to give away what they make to help the less fortunate, but there is no compulsion to do so. To put it bluntly, capitalism is not fair.
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