Public Policy Insights

January 23, 2020

by

Morgan Reynolds, Ph.D.

Economics Professor Emeritus

While I have been around public policy debates for decades, only recently did I become involved in a full-blown political campaign here in Arkansas.  I did some research on tax policy, medical care and school choice but then thought, what are the general policy principles for our candidate?  And so I wrote the following memo:

The usual political debate begins this way: “Look, here is a pressing public policy problem and here is the solution.”  The proposed solution usually involves more government intervention.  Few seem to notice government’s record number of “fails” in favor of trusting (just a little) “more government” as the answer.  Government never seems large enough.

Two questions arise immediately:
1. Is the alleged problem real or imagined?  If imagined as shown by reason and evidence, no public policy response is necessary.
2. If real, what are its causes?  No solution can work unless it addresses causes of the problem, especially its long run, not temporary, causes.

Most policy “solutions” skip over causation even though it is absolutely vital to achieve an effective policy response, i.e., a reduction if not elimination of the problem rather than aggravation of the problem.  Examples are legion of failure to go beyond superficial and naive arguments but let’s take poverty.  Poor people have too little money/income. Solution?  Simple, we’re a rich nation, the government should just give ‘em more money. Tragically, however, progress against poverty as shown by the government’s own data ended with the LBJ-inspired expansion of the welfare state.

One cause of such mistakes is the failure to take into account the (predictable!) behavioral responses to new incentives.  These adaptations–including the idleness of able-bodied adults–are too often excused or dismissed as “unanticipated (or unintended) consequences.”  The real answer to diminishing poverty, of course, is the much-vilified system of more and more production offered for sale to the ultimate directors of production—consumers—via the capitalist mode of production.  Turns out, the historic and contemporary misery of the masses of “people is not caused by capitalism, but by the absence of capitalism.” [Mises, Human Action, p. 832].  “The main obstacle to the improvement of their own (third world poverty) conditions is their abhorrence of capitalism.” [p.833].

Consider a generalization most libertarians can repair to, although candidates may not want to state it so bluntly: the answer to most if not all policy problems is MORE, not less FREEDOM.  Indeed, many economists point out that the problem(s) is/are usually caused by prior government interventions.  Yet undoing previous regulations, bureaucracies and related interventionist flotsam is nearly impossible despite all the harm they do.

In 1948 Harry S. Truman campaigned on the slogan “Do Nothing Congress” referring to the Republican majorities in both Houses in the 80th Congress, although it had passed 906 public bills [https://en.wikipedia.org/wiki/80th_United_States_Congress].  But what reduces or eliminates problems?  A “DO SOMETHING PEOPLE,” not Congress.  Especially if coordinated via a pro-capitalist system based on private property rights, free markets and hard (honest) money.

Most legislation is special interest rather than “doing good” for the general public.  Bills consist of favors in the form of privileges and immunities for groups with “clout” because of numbers, money, lobbyists, court intellectuals and campaign contributions.  Most importantly, this includes businessmen, most of whom are anything but in favor of laissez faire economic policy.  Corporate welfare, protectionism (against both domestic and foreign competition), monopoly/oligopoly, subsidies, tax favors, etc., they are all in.  As a result, a libertarian must oppose and end up voting “NO” to most legislation, regardless of their disguises in pro-public garb.

There are exceptions to the lesson above of course.  School choice is an example, a “more freedom” change for the better, a topic for another op/ed.

(621 words)

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