Freakonomics Radio - 595. Why Don't We Have Better Candidates for President?

Episode Date: July 4, 2024

American politics is trapped in a duopoly, with two all-powerful parties colluding to stifle competition. We revisit a 2018 episode to explain how the political industry works, and talk to a reformer (and former presidential candidate) who is pushing for change. SOURCES:Katherine Gehl, former president and C.E.O. of Gehl Foods.Michael Porter, professor at Harvard Business School.Andrew Yang, co-chair of the Forward Party and former U.S. presidential candidate. RESOURCES:"Why U.S. Politics Is Broken — and How to Fix It," by Andrew Yang (TED, 2024).The Politics Industry: How Political Innovation Can Break Partisan Gridlock and Save Our Democracy, by Michael Porter and Katherine Gehl (2020).“Why Competition in the Politics Industry is Failing America,” Katherine Gehl and Michael Porter (Harvard Business School, 2017).“Stronger Parties, Stronger Democracy: Rethinking Reform,” by Ian Vandewalker and  Daniel I. Weiner (Brennan Center for Justice, 2015).On Competition, by Michael Porter (2008).Competitive Strategy: Techniques for Analyzing Industries and Competitors, by Michael Porter (1980). EXTRAS:"Andrew Yang Is Not Giving Up on Politics — or the U.S. — Yet," by People I (Mostly) Admire (2021)."The Future of New York City Is in Question. Could Andrew Yang Be the Answer?" by Freakonomics Radio (2021)."Why Is This Man Running for President? (Update)," by Freakonomics Radio (2019).“Ten Ideas to Make Politics Less Rotten,” Freakonomics Radio (2016).

If you saw the recent presidential debate between Joe Biden and Donald Trump, you may have found yourself thinking, really? These are the two best candidates the United States has to offer? How did that happen? The episode you're about to hear can help explain how that happened. The core of this episode was first published in 2018 during Donald Trump's presidency. This is an update, but we've also added a new voice. Andrew, it's Stephen. How are you?

Hey, Stephen. How are you, my friend? First of all, just introduce yourself, please. I am Andrew Yang. I'm an all-around interesting bon vivant. Andrew Yang has been on this show before. The first time was in early 2019 in an episode we called Why Is This Man Running for President? Yang did run as a Democrat in the 2020 election, and for a time, he was everyone's favorite entrepreneur, a businessman with a taste for policy research. He offered sharp diagnoses and prescriptions for some of our country's biggest economic and social problems. In support, there arose a substantial Yang gang,

and his campaign caught fire for a while. He made the big Democratic debate stage in 2020, but ultimately he flamed out. In 2021, he ran for mayor of New York City. He lost that election too. Soon after, he left the Democratic Party and launched what is called the Forward Party. Why? Imagine if you had a business, a restaurant, eight out of 10 of your customers were unhappy and then you proceeded to change absolutely nothing for years at a time that's the way most americans interact with our political system okay so you recently gave this ted talk called why u.s politics is broken and how to fix it can you give me the tldr on that sure thing why are we so ticked off all the time? A lot of us are at least. And I tried to make the case in numbers. There's a 15% approval rating for U.S. Congress today and a 94% reelect

rate for incumbent House members. So the fiction we've been sold is our leaders have to make 51% of us happy to stay in office. That's actually not true for 9 out of 10 seats. The real job of members is to stay on the good side of their party's base voters. And if they win their primary, they cruise. But all of their attention and energy is on making sure they win the primary. Is it fair to overall call that setup a duopoly? Oh, yeah, of course it's fair to call it a duopoly, where the two parties have carved up the country into blue zones and red zones. And it's very hard for certainly anyone else to run and win in the vast majority of locations. And what other duopolies does our political duopoly remind you of?

You know, the first thing that popped into mind for me was something like Microsoft and Apple. I don't know if there are others that pop into people's minds. Pepsi and Coke, maybe? Pepsi and Coke, sure. Boeing and Airbus? Yeah, definitely. Visa MasterCard? The Discover fans would agree.

Okay, the episode you are about to hear is called America's Hidden Duopoly, first published, as I mentioned, several years ago. We've updated facts and figures as necessary, but things being what they are, there wasn't all that much updating needed. What is new is a conversation later on with Andrew Yang about what could and should be done. I think this is one of the most important episodes we've ever made,

and that is reflected in the amount of correspondence we still get about this topic. And that's why we thought this episode was due for an update. As always, thanks for listening. Imagine a gigantic industry that's being dominated by just one or two companies. Actually, you don't have to imagine. Google has more than 90% of the global search engine market. So not quite a monopoly, but pretty close. Such cases are rare, but not so rare is the duopoly, when two firms dominate an industry,

like Intel and AMD and computer processors, Boeing and Airbus and jet airliners, the sharks and the jets, and the fictional gangs from the 50s industry. But surely the most famous from the 50s industry. But surely the most famous duopoly is this one. People who think young say Pepsi, please. The rivalry between Coca-Cola and Pepsi-Cola goes back to the 19th century. Coke was long dominant, that most people, even Coke employees, preferred Pepsi.

In 1985, they abandoned their classic recipe in favor of New Coke, which tasted more like Pepsi. This did not work out so well. I'm Don Keogh, president of the Coca-Cola Company. When we brought you the new taste of Coke, we knew that millions would prefer it, and millions do. What we didn't know was how many thousands of you would phone and write asking us to bring back the classic taste of original Coca-Cola. Coke eventually got rid of New Coke altogether. And, despite the flip-flop, or maybe because of it, and the attendant-free media. In any case, Coke regained the top spot. Today, even as soda consumption falls,

the rivalry rages on, with both companies adding juices, teas, and waters to their portfolios. You can afford to make those big acquisitions when you've got a ton of cash on hand, when you're one of just two companies sharing a huge market. And there's another advantage to being half of a duopoly, self-perpetuation. This was covered pretty extensively in the media during the so-called cola wars. The, quote, war is good for both of them. I believe that Coke and Pepsi together, this cola war they've been in for decades now, actually help each other

sell an awful lot of product. There are plenty of reasons why duopolies exist, and they're not necessarily all sinister. In capitalism, scale is really important. There are all sorts of advantages to being big, which leads big companies to get even bigger, gobbling up smaller companies and essentially dictating the rules of their market. Not everyone likes this trend. In many quarters, there's a strong appetite for a smaller scale, for mom and pop and indie and artisanal. But let's be honest, that smaller scale idea is cute, but it's not winning. What's winning is dominance. Entire industries dominated by just a couple behemoths. We've already given you a few examples from a variety of industries, but there's another duopoly, a mighty one, that you probably

don't even think about as an industry. Which duopoly am I talking about? I'll give you some clues. Let's go back over what we just discussed about duopolies. They're big institutions that take advantage of their size to get even bigger. I'm talking to consultants on both sides, many of whom have been doing this for a long time, and they've never seen this amount of money. As we said, not everyone likes this trend, but the opposition is not winning.

I'd like to see more competition. You know, competition makes a better product. And this leaves an entire industry run by just two behemoths. Ladies and gentlemen, my mother, my hero, and our next president. I could not be more proud tonight to present to you and to all of America, my father and our next president, Hillary Clinton. Donald J. Trump. Does it surprise you to hear our political system characterized as an industry?

It surprised this guy. Absolutely never thought of it in those terms. And that's Michael Porter, the world-famous business strategist. And at the core of it is what we call the duopoly. Comparing our political system to something like Coke and Pepsi? That can't be right, can it? No, Porter says. It's worse than that. Coke and Pepsi don't control

their market nearly as fully as the Republicans and Democrats do. Even in soft drinks, we have a lot of new competitors. Even though Coke and Pepsi are so big, they don't truly dominate. Indeed, Coke and Pepsi only control about 70 percent of the soft drink market. At least they've got the Dr. Pepper Snapple Alliance to worry about. Whereas Republicans and Democrats, you can take all the libertarians and independents, the Green Party, Working Families Party, the American Delta Party, the United States Pirate Party, which is a real thing. You add them all together and they're not even close to Dr. Pepper.

And yet, from both Republicans and Democrats in Washington, we've been hearing the same complaint for decades now. Washington is totally broken. Washington is broken. This system is broken. It's not working. Washington is not working. Mr. Speaker, Washington is broken.

But what if the Washington is broken idea is just a line? I like to teach the world to sing. Maybe it's even a slogan that the industry approves. Yeah. What if they're just selling and we're buying? What if it's not broken at all? The core idea here is that Washington isn't broken. In fact, it turns out that Washington is doing exactly what it's designed to do. Today on Freakonomics Radio, is Washington really an industry just like any other?

How'd it get that way? And what's it mean? And when the duopoly wins, does that mean the rest of us lose? This is Freakonomics Radio, the podcast that explores the hidden side of everything, with your host, Stephen Dubner. Once upon a time, there was a dairy products company in Wisconsin called Gale Foods, G-E-H-L. My name is Catherine Gale. Catherine Gale was the CEO of the company. It had been founded well over a century earlier by her great-grandfather.

For years, Gale Foods sold the standard dairy items, butter, milk, ice cream. In the 1960s, they got into pudding and cheese sauces. And more recently, Gale Foods kept keeping up with the times. High-tech food manufacturing. Meaning low-acid, aseptic processing and packaging using robots, which creates shelf-stable foods without the use of preservatives. The process is also useful for products like weight loss shakes and iced coffee drinks. Under Catherine Gale, Gale Foods had more than 300 employees and was doing nearly $250 million a year in sales. But there were a lot of challenges. Why? Because the food industry is incredibly competitive. There are new competitors all the time, also new technologies, new consumer preferences.

So to plot a path forward, Gail turned to one of the most acclaimed consultants in the world. I'm Michael Porter. I'm a professor at Harvard Business School, and I work most of the time on strategy and competitiveness. Porter is now in his late 70s. As an undergraduate, he studied aerospace and mechanical engineering. Then he got an MBA and a PhD in business economics. So he understands systems as well as how things are made within those systems. He's written landmark books called Competitive Strategy and On Competition. He is cited more than any other scholar in the field.

He's best known for creating a popular framework for analyzing the competitiveness of different industries. The framework that I introduced many years ago says that there's these five forces. These five forces help determine just how competitive a given industry is. The five forces are the threat of new entrants, the threat of substitute products or services, the bargaining power of suppliers, the bargaining power of buyers, and rivalry among existing competitors. We're not there yet, but if you want to jump ahead and consider how these forces apply to our political system, I'm going to say them again. The threat of new entrants, the threat of

substitute products or services, the bargaining power of suppliers, bargaining power of buyers, and rivalry among existing competitors. Anyway, you can see why someone like Catherine Gale, the CEO of a century-old food company, might want to bring in someone like Michael Porter to figure out what to do next. It was a classic business strategy exercise. Now, Gayle, in addition to her family business, had another abiding interest, politics. Yes, I've certainly moved around in the partisan classification. During high school, she was a Republican. Over time, she drifted left. My daughter, actually, when she was six, came to me and said, Mommy, I think I'm a Republican or maybe a Democrat.

And I think that gives a good sense of where things are at in our household. In 2007, Gayle joined the National Finance Committee of Barack Obama's presidential campaign. She became one of his top fundraisers. A couple of years after Obama was elected, Gail joined the board of a government organization called the Overseas Private Investment Corporation, which helps U.S. firms do business in emerging markets. And I was paying a lot of attention to what was happening in Washington, D.C. And Gail did not like what she saw in Washington, D.C. She didn't like it one bit. It became really clear to me that this fight was not about solving problems for American people.

This fight was about one party beating the other party and that the parties were more committed to that than to actually solving problems or creating opportunities. Eventually, I understood that it didn't matter who we elected. It didn't matter the quality of the candidates. And so once it became clear to me that it was a systems problem, I switched from investing my time in searching for the next great candidate and turned an eye to the fundamental root cause structures in the political system that pretty much guarantee that as voters, we are perpetually dissatisfied. So she started raising money for nonpartisan organizations working toward political reform. And one of the things that became clear is that there was no thesis for investment in political reform and innovation. In other words, people

didn't want to give money to nonpartisan organizations working toward political reform. They only wanted to give money to political parties and their candidates. In fact, Catherine Gale found that potential donors had a hard time believing that such a thing as nonpartisan political reform even existed. That's how conditioned they were to seeing the political system through a two-party lens. Gale Foods to help figure out the company's strategy going forward, keeping in mind his five famous forces about industry competitiveness, new rivals, existing rivalries, substitute products, supplier power, and customer power. I would consistently make the case to Michael that, wow, how we're analyzing this industry of low-acid aseptic food production, which is the business I was in, all of these tools are directly applicable to analyzing the business of politics.

And frankly, I knew almost nothing about politics. But the more I heard and the more we talked, the more it became clear that we really needed to take a fresh look here. And so it was out of that crucible of analyzing a traditional business strategy and at the same time devoting so much time to political reform and innovation that it became clear that politics was an industry, the industry was thriving, and that all of the tools of conventional business analysis were applicable here. And that's where looking at this as an industry starts to provide some power. Okay, so you came to the conclusion that politics is an industry much like many of the other industries that you've been studying over your career. You never really thought of it in those terms before? Absolutely never thought of it in those terms. We always thought of politics as a public before? Absolutely never thought of it in those terms. We always thought of politics as a public institution, that the rules were somehow codified in the rule of law

and in our constitution. But what we came to see is that politics is really about competition between largely private actors. And at the core of it is what we call the duopoly. The duopoly, Republicans and Democrats. And that competition has been structured around a set of practices and rules, and in some cases, policies that have been created over time, largely by the actors themselves. Actually, the founders left a lot of room in terms of how the actual plumbing would work. But it was interesting, multiple of our founders actually expressed a deep fear that parties would take over. John Adams said at one point, there is nothing which I dread so much as a division of the republic into two great parties, each arranged under its leader and concerting

measures in opposition to each other. And if you take a look at Washington's farewell address, which he wrote in 1796, he talks about dangers which could come in front of the republic in the future. And he specifically focuses on two. One is foreign influence and the other is partisanship. The other danger is the formation of strong parties. Having come to the conclusion that the political system operated more like a traditional industry than a public institution, Catherine Gale and Michael Porter set down their ideas in a Harvard Business School report. It's called Why Competition in the Politics Industry is Failing America. When you read the paper, right there under key findings

is this sentence in bright red print. The political system isn't broken. It's doing what it is designed to do. In other words, it was no coincidence that politics had become self-sustaining, self-dealing, and self-centered. They were the blue team and the red team, kind of like Pepsi and Coke. Essentially, they divided up an entire industry into two sides.

We ended up seeing that it wasn't just the parties competing, it's that they had created, you know, influence and in a sense captured the other actors in the industry. media and political consultants and lobbyists and candidates and policies all divided onto, you know, one of two sides. What you see is the system has been optimized over time. For the benefit of private gain-seeking organizations, our two political parties and their industry allies, what we together call the political industrial complex. This industry has made it very, very hard to play at all if you're not playing their game. How does the political industry compare in size and scope, dollars, employees, direct and indirect, penetration and influence to other industries that you've studied, pharmaceutical industry, auto industry, and so on? It's a great question, and we have done enormous amounts of work on it.

It turns out to be very difficult to get what I would call a completely comprehensive answer. We estimate that in the most recent two-year election cycle, the industry's total revenue was approximately $16 billion. This is not the biggest industry in the economy, but it's substantial. It would be one thing if this large industry were delivering value to its customers, who are supposed to be us, the citizenry. But Gale and Porter argue that the political industry is much better at generating revenue for itself and creating jobs for itself while treating its customers with something closer to disdain. Think about cable TV on steroids. And the numbers back up their argument. Customer satisfaction with the political industry is at historic lows. Just 16 percent of Americans currently say they trust the federal government. In terms of popularity, it ranks below every private industry. That includes

the health care and pharmaceutical industries, the airline industry, and yes, cable TV. Generally, in industries where customers are not happy and yet the players in the industry are doing well, you'll see a new entrant. You'll see a new company come into business to serve those customers. A new company like Netflix or Hulu or Amazon Prime or Sling TV or, well, you get the point. So in today's world, we have the majority of voters say in polls that they would rather have an independent. So in a normal industry, you'd have a whole new competitor coming up that was about independence, you know, to serve that unmet need. And yet in politics, we don't see any new entrance. So why is that? Well, it turns out that our political parties work well together

in one particular area, and that is actually colluding together over time behind the scenes to create rules and practices that essentially erect barriers to entry, ways to keep out new competition. In their report, Gale and Porter identify the five key inputs to modern political competition. Candidates, campaign talent, voter data, idea suppliers, and lobbyists. Here's what they write. Increasingly, most everything required to run a modern campaign and govern is tied to or heavily influenced by one party or the other, including think tanks, voter data, and talent. What's happened is the parties have now divided up the key inputs to political competition. And if you're not a Republican or a Democrat, then you're in trouble in even finding a campaign manager, much less getting the best up-to-date voter data and the best analytics and so forth.

It's not enough to monopolize the campaign machinery. Gale and Porter argue that the political industry has essentially co-opted the media, which spreads their messages for free. This helps Donald Trump tonight. This is a big, big beginning to the end of what has been a witch hunt. Trump watched a man in the White House is behaving now like a character on that old detective show, Columbo. Perhaps most important, the two parties rig the election system against would-be disruptors. The rules they set allow for partisan primaries, gerrymandered congressional Democrats, and the players that are playing for those teams, have over time worked to improve their own side's fortunes. But collectively, they also have come together to improve the ability of the industry as a whole to protect itself from new competition,

from third parties that could threaten either of the two sides of the duopoly. What the parties have done is they've been very, very clever. They don't compete head-to-head for the same voters. They're not competing for the middle. It's likely that we have a much more powerful center, a much more powerful group of moderates than our current duopoly demonstrates. What they've understood is competing for the middle is a sort of destructive competition. It's kind of a zero-sum competition.

So the parties have divided the voters and kind of sort of ignored the ones in the middle because they don't have to worry about them. Because if the middle voter is unhappy, which most middle voters are today in America, what can they do? The only thing either party has to do to thrive, to win the next election, is to convince the public that they are just this much less hated than the one other choice that the voter has. That gives those two companies, the Democrats and the Republicans, the incentive to prioritize other customers. And their target customer on each side is the special interest and the partisans. And they get a lot of resources and a lot of campaign contributions and massive amounts of lobbying money to try to get their support with whatever those partisan or special interest needs are. There is now an entire industry of politics that moves forward independent

of whether that industry actually solves problems for the American people. What's happened is that the barriers to getting into this industry and providing a different type of competition have been built to enormous heights, which has allowed the parties to structure the nature of the rivalry among themselves in a way that really maximizes their benefit to them as institutions, but doesn't actually serve the public interest. Well, that's depressing, isn't it? Insightful, perhaps, but depressing nonetheless. So, do Katherine Gale and Michael Porter have any bright ideas for tackling this problem? Yes. Yes. Yeah. Oh, yeah.

Oh, my God. That's coming up right after this. The business strategist Michael Porter and the CEO-turned-political reformist Catherine Gale argue in a Harvard Business School report that our political system has been turned into an industry with no real competition. The industry's primary beneficiaries are itself and its many ancillary participants, including the media. But the vast majority of Americans who are somewhere in the middle are feeling very, very disaffected. The lack of vigorous competition, quote unquote, smoke-filled back room and give the selection of the party candidate choice to citizens.

So that was designed to give more control to citizens. It turns out it has had a very deleterious effect on competition and has increased the power of the parties. And the parties, Gayle and Porter argue, use those partisan bases to support the desires of the political industry's true customers and its wealthiest special interests. Industries like health care, real estate, and financial services. Also labor unions and lobbyists. In this duopolistic business model, polarization is a feature, not a bug. We have a chart in our report that just selects some what we call landmark type legislation over the last 50, 60 years. And if you go back,

you know, even 20 or 30 years ago, the landmark legislation was consensus. For instance, the Social Security Act of 1935 had 90% Democratic support and 75% Republican. The Civil Rights Act of 1964 had 60% Democratic support and, again, 75% Republican. Now, for the last decade or two, that's been the opposite pattern. The only way landmark legislation gets passed is one party has enough votes to pass that by itself. The Affordable Care Act, also known as Obamacare, was passed in 2010 with zero Republican votes in Congress. President Trump's 2018 tax reform bill? Zero Democratic votes. So your diagnosis suggests that this industry serves itself incredibly well.

It suggests that it serves us, the citizenry, really poorly. And it also suggests that more competition would improve the industry, as it does in just about every industry. But just having more competition in parties doesn't seem to be the answer alone. I mean, there are plenty of multi-party political systems around the world that have similar cases of dysfunction and corruption and cronyism like ours. So how direct a step or direct a prescription would that be? I think in our system in particular where we have only two and they have been able to actually set up the rules of competition that reinforce their partisan competition, dividing voters and so forth. More competition I think would be incredibly valuable. But it has to be a different kind of competition. It can't be just another party that's going to split our electorate

into three partisan groups. And so in our work, we focus on what would it take to make the competition less about dividing the voters and how could we make the competition more around building up more choices for voters that were more about solutions. By the way, let me be clear. We're not against parties per se. What we are against is the nature of the competition that our existing dominant parties have created. When you suggest that these rules were carefully constructed,

I guess if I were thinking about something other than politics, the first thought that would come to mind then is, well, collusion, right? If I can be one member of a duopoly, I actually hate my rival much less than I hate the idea of anybody else who would interrupt that rivalry because we're splitting the spoils now. Do you have any evidence of collusion between the parties to create a system that essentially keeps the rest out? First of all, that is the right word. It is collusion. There's probably a legal definition of collusion, which I don't know. I'm not a lawyer, but the effect is exactly the same. The parties have agreed on a set of rules that benefit the duopoly and preserve this nature of competition. You can really put

rules into a number of buckets. There's legislative machinery, as we call it, which is how the Senate and the Congress are run. And then there's the election rules having to do with what is the primary process like and what does it take to get on the ballot as an independent and the various campaign finance stuff that surrounds elections. Has anyone ever considered filing, whether in earnest or not, an antitrust suit against Republicans and Democrats? You know, Stephen, that's a great question. You know, I have. We've actually had a significant effort to see if that's feasible, what the law is, you know, looking at the antitrust statutes. But this is absolutely what antitrust policy is all about. It's creating, you know, open, effective competition that serves the customer and the public interest. And this industry cries out for that. All right. So in the report, you discuss the many advantages the two parties have. And I think we all recognize that, you know, there's real power in size and there's leverage,

especially when you're making your own rules for your own industry. And you're right that they use those advantages to retain control and to constrict competition and so on. But it strikes me that Donald Trump really got around a lot of those advantages. So you write that the parties, quote, control the inputs to modern campaigning governing. But he didn't rely on that, really. You wrote that the parties co-opt channels for reaching voters, but he kind of co-opted or maybe took advantage of his own channels, including free media and his own social media accounts. You write that the parties, quote, erect high and rising barriers to new competition. But in the case of Trump,

you know, his own party tried as hard as they could to erect the highest barrier and couldn't keep him out. And so on those fronts, it would strike me that the parties failed, failed to constrict a certain competitor. So I don't know how you personally feel about President Trump, but according to those advantages and his end run around them, it would sound as though he is at least one example of the solution to the problems that you're describing. Well, yeah, I think that is definitely a good question, and we must take that on. I would say a couple of things. First of all, the best choice that President Trump made was to run in a party. He had to pick one side of the duopoly because he knew he couldn't win as an independent.

He had actually explored running as an independent in previous years, but that in the current system is not seen to be a winning strategy. The other thing I would say about him was that he had resources. In the end, he didn't have to use that many of them, but he could almost have self-financed. And he was appealing to a certain subset of the partisans, maybe a somewhat neglected subset of the people on the right. And he had a very strong existing brand identity. So he was able to get a lot of recognition and coverage without having to spend that much on advertising. He represents a personality-driven campaign within a party, but we don't believe that he represents fundamentally transforming the structure

of competition in the industry. So far, Trump is just the third in a row president that may have said that he was going to do things differently and cut across lines and all that kind of stuff. But frankly, he didn't, Obama didn't, and President Bush didn't. Even though President Obama and President Bush campaigned on bipartisanship and bringing people together, they failed. So I think that those recent case studies are sobering. Okay, remember, this conversation was from 2018, just to put this in context. But back to the core issue, some political scientists argue that Gale and Porter's analysis of party power has it backwards. These scholars say our political system is in bad shape because the parties have gotten weaker over time.

They argue that stronger parties could help beat back special interests and produce more compromise and moderation. Want some interesting evidence for this parties are weak argument? Think back to the 2016 presidential election. You had one national party, the Democrats, that tried as hard as it could, to the point of cheating, essentially, to pre-select its candidate, Hillary Clinton, who then lost. And you had the other national party, the Republicans, try as hard as it could to keep a certain candidate off the ballot. But they failed and he won. It's true that the parties are not as strong as they were in the past.

But both sides of the political industrial complex, Democrats and Republicans, are as strong as ever. It's just that the power may not all reside within the party. If parties were stronger, that doesn't mean they'd be moderating forces. That's what some people say. I really don't understand that argument. The stronger they are, the less moderating they're going to be, given the nature of the competition that's been created. I think we are really asking for too little when we say, let's tinker around the edges and get stronger parties so that we can have a little bit of a cleaner process. What we believe is we need to create structural reforms that would actually better align the election process and the legislative

process with the needs of the average citizen. All right. So you've diagnosed the problem in a really interesting and profound way by overlaying a template that's more commonly applied to firms, to the political industry. And of course, it theoretically leads to a different set of solutions than we've typically been hearing. So then you discuss four major solutions. Let's go through them point by point. Number one, you talk about restructuring the election process itself. Give me some really concrete examples

of what that would look like. I'd also love to hear whether you do see some evidence of these examples happening, because it does seem there has been some election reform in states and regions around the country. Yes, well, when we think about reform, we have to think about really two questions. Number one, is a reform powerful? Will it actually change the competition? And a lot of what people are proposing now is actually not going to make much difference. So term limits are a great example.

We aren't fans of term limits because we think that without changing the root cause incentives, you'll actually just have different faces playing the same game. So number one is we have to re-engineer the election processes, the election machinery. And there are three electoral reforms that are important. We call it the election trifecta. The first and probably the single most powerful is to move to nonpartisan single ballot primaries. Currently, if you're going to vote in the primary, you show up and you get a Democratic ballot or a Republican ballot, and then you vote for who's going to represent that party on the farthest left or the one that's on the farthest right has a tendency to win because the people that turn out for primaries are a relatively small fraction of even the party. And those are the people that show up because, you know, they're really partisans and they really have special interests and they really, really care about getting somebody on the ballot that's for them. In a single ballot, nonpartisan primary, all the candidates for any office, no matter what party they're in, are on the same ballot.

And we propose that the top four vote getters advance out of that primary to the general election. And the reason a single primary where everybody's in it is so important is that if you want to win, you want to appeal to as many voters as you can. And therefore, you're going to get people that are not just trying to appeal to their particular extreme. The second part of the Gail Porter election reform trifecta, ranked choice voting. Here's how ranked choice voting works. You'll now have four candidates that made it out of the top four primary. Those four candidates will all be listed on the general election ballot.

And you come and vote for them in order of preference. So it's easy. This is my first choice. This candidate's my second choice. It's my third easy. This is my first choice. This candidate's my second choice. It's my third choice. This is my fourth choice. When the votes are tabulated, if no candidate has received over 50%, then whoever came in last is dropped and votes for that candidate are then reallocated to those voters' second choice, and the count is run again until one candidate reaches over 50%. What that does is it gives a candidate the hugest barriers to competition in the existing system, and that is the spoiler argument.

So what happens currently is that if there's, let's say, an attractive third-party candidate or an independent candidate, both Democrats and Republicans will make the argument that nobody should vote for them because they will simply draw votes away from a Democrat or draw votes away from a Republican and therefore spoil the election for one of the duopoly candidates. Once you have ranked choice voting, everybody can pick whoever they want as their first choice, second choice, third choice. No vote is wasted and no vote spoils the election for another candidate. And then the last part of the trifecta is nonpartisan redistricting. Gerrymandering has to go. When parties control drawing the districts, they can draw districts that will be more likely to tilt in favor of their party.

And they can end up having a disproportionate number of, quote unquote, safe Republican seats or safe Democratic seats by the way that they draw the districts. And we want to make that go away. In addition to election rule reforms, Porter and Gale would like to see changes to the rules around governing. Congress makes its own rules for how it functions. And over time, these rules, customs, and practices have been set in place to give an enormous amount of power to the party that controls the chamber. And this is sort of collusion in a way, is when the other party takes over, they do it the same way.

So we propose moving away from partisan control of the day-to-day legislating in Congress and also in state legislatures as well. The third leg of their reform agenda is about money in politics, but their analysis led them to a different conclusion than many reformers. Where we differ with so many people championing these reforms is that we don't believe that money in politics is the core issue. The problem is really this nature of competition that leads to this partisanship. And that's not a money issue per se. That's a structural issue. If you take money out of politics without changing

the rules of the game, you'll simply make it cheaper for those using the existing system to get the self-interested results that they want without changing the incentives to actually deliver solutions for the American people. Having said that, we do believe that there are benefits to increasing the power of smaller donors. And so the reforms that we have suggested are primarily focused on increasing the power of smaller donors. For instance, having the government itself match donations from small donors. We should note that most of the ideas Gail and Porter are presenting here are not all that novel if you follow election reform even a little bit. Even we poked into a lot of them in an episode called 10 Ideas to Make Politics Less Rotten.

I guess it's one measure of how successful and dominant the political duopoly is that plenty of seemingly sensible people have plenty of seemingly sensible reform ideas that for the most part gain very little traction. It is definitely challenging. This is a ground game. We're not going to be able to do this in a year or one election cycle because the resources that the current duopoly have to deploy to play their game are substantial. Despite the rather depressing or at least sobering picture that you paint of the political industry, throughout the report, you express quite a bit

of optimism. And I want to know why or how, because I don't see the avenue, I guess, for optimism? Well, you know, I do think we have a basic optimism. We have no sense that it will be easy to change the rules of this game for a whole variety of reasons. But the good news is we've had some progress. We've got some nonpartisan primary states now, including California. You know, we've got ranked choice voting in Maine. What seems to be building in America is a growing appetite and a growing recognition that this isn't working for our country. I think the younger generation are particularly outraged and concerned and open to all kinds of new ideas. But I think it's going to take time. Okay, that was our 2018 episode, America's Hidden Duopoly. A couple updates. In 2020,

Michael Porter and Catherine Gale published a book called The Politics Industry. And Gale, in particular, is still involved in electoral reform. And Michael Porter never did file that antitrust suit. Coming up after the break, Andrew Yang's 2024 take on the duopoly and some signs of change. I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back. Since we published the original episode you just heard, America's Hidden Duopoly, one of the prominent reforms embraced by Michael Porter and Catherine Gale has been spreading at least a bit. Alaska and Maine have used ranked choice voting in statewide elections. It has also been introduced in local elections, including the 2021 race in New York City to pick a new mayor. One of the candidates, Andrew Yang, was one of the most enthusiastic supporters of ranked choice voting, but it didn't seem to help him in a competitive Democratic primary. He came in fourth.

That was despite big name recognition from his presidential run. So there would seem to be something about Andrew Yang, the candidate that voters don't love. But that's fair because there's a lot about the voting system that Andrew Yang doesn't love. So what's he been up to lately? I'm co-chair of the Forward Party, the third biggest political party in the country by resources, though there's a very steep drop-off between number two and number three. What is the drop-off between number two and number three in whatever metric you'd like to measure, whether it's people, dollars, et cetera? Using dollars, I'd say there's probably something like a 98.5% drop off.

So what is the Forward Party? What are you trying to accomplish, especially in this current election cycle? The Forward Party is a movement of independent-minded Americans who are trying to reform our political system so it actually responds to us and the challenges of this era. And we do that by pushing ballot reforms and backing positive candidates with any letter next to their name. So it could be a Democrat, it could be an Independent, it could be a Republican. Is the Forward Party endorsing or backing any Republicans yet? We just recently announced the endorsement of a guy named John Curtis, who is running for Mitt Romney's old Senate seat or soon to be old Senate seat. There are 11 candidates in that race.

Eight of them have endorsed Donald Trump. John Curtis has not endorsed Donald Trump and actually started something called the Conservative Climate Caucus in Congress. So he believes in climate change. Shocker. But a lot of Democrats would look up and say, oh, he's got an R next to his name, so, you know, can't get behind him. But we think that's short-sighted. So you're not just a political person, but you're an actual business person and you understand the way the economy works, I would argue, pretty well. What are the downsides of duopoly writ large, whether it's in an economic system or a political system? Because one might say, well, maybe it makes sense because if there's too much choice, it gets baffling. And also the bigger and more powerful you get, the more resources you have, the more you know what you're doing. So maybe we should be in favor of duopoly.

Well, in the political sphere, what's interesting, Stephen, is the vast majority of us, about 70% of Americans live not under two-party rule, but one-party rule. It's not like Democrats are really trying to run and win in rural Missouri. It's not like Republicans are really trying to run and win in San Francisco. You have these only 5% to 10% genuine swing districts. And then the major exception to this is in the presidential. Even in the presidential, your vote won't matter, my vote won't matter. The only votes that are going to matter are based in Michigan, Pennsylvania, Wisconsin, Arizona, Nevada, Georgia. And that's something that most Americans also have just sort of shrugged and said, I guess that's the way we do

things. But the duopoly is effectively one party rule for about two thirds of the country. So if, as you're saying, making most districts basically one party district is the root cause of so much of this, what good would a third or fourth or fifth party do? Well, the goal of any independent party, if they're smart, is to try and reform the voting system so you have more true accountability and a feedback loop between people and our leaders. In Alaska, they shifted to an all-party primary where voters can vote for a candidate of any party with the top four getting through to the general and chosen via ranked choice voting. So a little-known former vice presidential nominee named Sarah Palin was on the ballot in 22. And in a customary system, she wins the Republican

primary and probably wins the general because it's a red-leaning state. But in the new system, there was a general election with multiple candidates, including a fairly innocuous state legislator named Mary Paltola, who is very pleasant and congenial. And a critical number of Alaskan voters placed Mary Paltola as their second choice, thus edging out Sarah Palin. And if Sarah Palin was back in DC, we'd all be subject to clips of her saying something crazy every week because there'd be a TV camera in her face every week. And we were spared that because they changed the voting system in Alaska. In the Senate race, in that same cycle in 22, Lisa Murkowski was up for re-election. She voted to impeach Donald Trump,

which is a no-no. It makes you run afoul of the base. Eight out of 10 of the Republican House members who made the same choice did not make it back to the primaries. But Lisa Murkowski made it back because, again, Alaska essentially replaced their Republican primary with an all-party primary. And so Lisa Murkowski was able to get through in the general election because a critical number of Alaskan voters ranked her second. So a couple of things here. Isn't all party primary the same as an open primary? An open primary is different. An open primary is something where, hey, you're an unregistered voter. You can show up and vote in our primary this once. And in some case, you have to register as that party for the purposes of that vote. And then you can unregister.

A closed primary is you have to be registered four months in advance or something like that. A nonpartisan primary, what they did in Alaska, is the most dramatic, which is, hey, everyone show up in the same primary. You vote for your candidate. I vote for my candidate. We can all vote for whichever candidate we want. We can even have multiple candidates from the same party running, and then the true measure of popular will and

representation will emerge as opposed to slicing us into one party or another. Were the Alaska outcomes more about the all-party primary or more about the ranked choice voting, or did they dovetail perfectly? You know, it's an element where one plus one equals three, where nonpartisan primaries are dramatic improvement, ranked choice voting, general elections are dramatic improvement, but you put them together and you wind up with a candidate who genuinely has the backing of more than 50.1% of the people. So here's the thing. I know you a little bit. We've spoken on this show a few times. We've spoken off the show a few times. And I know you to be

sincere and intelligent and a decent person who I think wants the best for a lot of people. You also sound a little bit bonkers to me right now because you are tilting at windmills that are gigantic. You speak with sincerity and I believe you, but do you expect to have any real effect on the political system, whether in 2024 or in the next 10 years with this forward party? Anthony Williams, the mayor of Fort Collins, Colorado. I mean, these are electeds who stood up already and said, you know what? I want to represent my constituents. I don't want to be answerable to this mega party that may or may not actually align with what the folks I represent believe in and value. And this is despite having a sliver of the resources of either the parties. So if you could be a czar of some kind, even though we're not a country that embraces czars historically, and you had the ability to remake the political system, the electoral system, and you're not trying to do it in a drastic,

draconian, overnight way, let's say you could build a 10-year plan, what would be the first three or five tenets of that 10-year plan? We need elections that actually make our representatives answerable to us. That's the main thing. We've let a bunch of negative things build up and our leaders are unresponsive. If you had a genuine feedback loop, then all of a sudden our leaders would say, wait a minute, what? Like young people can't afford a house? That's a problem. What the cost of being a middle-class person with housing and transportation and education, healthcare is going up and up and you feel distraught about it. Like, let's actually get to some of the root problems. And the way to do that feasibly in an era when it's very difficult to imagine our elected leaders

doing something against their self-interest is to go to states where they have the means to change the voting system and say, look, guys, let's just make it so that anyone can vote for any candidate of any party, a la Alaska, a la, we hope, Nevada as of November, and just march through as many states as possible, freeing our elected leaders from party primaries that right now keep them from making any meaningful progress on issues. Here's the thing about Andrew Yang. He's enthusiastic, and he's enthusiastic about ideas that I think are generally good ones. But is he too enthusiastic about the odds of successful reform? What do you make of his prediction that someone like him can push our political system in a strong, positive direction?

No offense to Andrew Yang, but his track record as a political forecaster is not so good. Last year, he told me that Dean Phillips, the Minnesota congressman who challenged Joe Biden in the Democratic presidential primaries, was going to perform very well in the early states, so well that he would shake up the entire 2024 election. But Phillips didn't perform well, and he ran back into the arms of his party and endorsed President Biden. You want to know why Phillips ran in the first place? He was worried that Joe Biden was simply too weak a candidate to win and that backing him would pave the way for a Trump victory, which Phillips, being a Democrat, did not want. So getting back to Andrew Yang's prediction, he was wrong that Dean Phillips would get a lot of primary support by attacking Biden. But after Biden's disastrous performance in that first debate,

many Democrats and their supporters, including the New York Times editorial board, are calling for the president to be replaced on the Democratic ticket. So maybe Andrew Yang was on to something after all. That's our show for today. Sorry about my sore throat. Thanks for listening. I'd love to hear any feedback you have about this episode or the political duopoly in general or anything else you want to say, really.

Our email is radio at Freakonomics.com. Coming up next time on the show, Daniel Kahneman is perhaps best known as the author of Thinking Fast and Slow, but he also helped revolutionize the fields of both psychology and economics. And his influence has been enormous. Kahneman recently died at age 90.

A bunch of his peers, friends, and mentees recently got together to sort out just where that influence has landed. And we were there with microphones. He felt that this is the right way to do science. I mean, partly Danny is to blame, although he didn't learn that before he passed away. In adversarial collaborations, the arbiter is the research assistant, the tiebreaker,

and occasionally the therapist. Did they pay you for that? I'm getting paid the same as you, Maya. That's next time on the show. Until then, take care of yourself and and if you can, someone else too. and Zach Lipinski. Our staff also includes Alina Kullman, Augusta Chapman, Dalvin Aboagi, Eleanor Osborne, Elsa Hernandez, Gabriel Roth, Greg Rippin, Jasmine Klinger, Jeremy Johnston, Julie Canfor, Lyric Bowditch, Morgan Levy, Neil Carruth, Rebecca Lee Douglas, Sarah Lilly, and Tao Jacobs. Our theme song is Mr. Fortune by The Hitchhikers. Our composer is Luis Guerra.

As always, thank you for listening. The hidden side of everything.