Government Gives Us the Illusion of Control

Sloppy language can betray hidden assumptions. The case for this-or-that government intervention often employs such sloppy language. I want to explore an example here.

The case for government often rests on an assumption that government action gives us control over a problem, whereas non-government solutions don’t. I often hear phrases such as, “You can’t just leave that to the marketplace.” Or  “What if there isn’t enough charity? Won’t some people get left out in the cold?” Or “Should we just let people do whatever drugs they want? Like, all the time?”

Implicitly there is this assumption that government gives us a handle on social problems. We have some kind of social problem: poverty, crime, greed, discrimination, whatever. It is a mistake to insist that leaving the problem to the marketplace is “doing nothing.” There are always private individuals working hard at solving existing problems. Some of these problems are very difficult, even inherently unsolvable. The great mistake is to think that “government” gives us a control lever over this problem, and the only question is how hard to crank the lever. One might ask, can you think of no examples of government intervention backfiring? Don’t welfare programs create very high marginal tax rates for the beneficiaries, discouraging work and leading to greater poverty? Doesn’t drug prohibition create an unpredictable, violent black market and lead to more overdoses? Do state-run services never run out of resources, such that the needy get left out in the cold anyway? Aren’t those private citizens who are supposedly stingy with their charitable givings the very same taxpayers who fund the welfare state? Should we suppose those people will suddenly become more "generous" in one context than the other?

Markets are an imperfect way of doing things. Government is another imperfect way of doing things. Both solutions are unpredictable. Both operate under enormous uncertainty. Market institutions and government institutions both often fail to achieve their stated goals. Let’s not implicitly favor one over the other. If anyone actually believes, “This government program will solve this problem, and with relative certainty!” let them say so plainly. How much private effort goes into solving that particular problem? How well does it work? What has been the track record of other government programs (similar to the one being proposed)? What can be learned from history? From other countries trying similar approaches? Are there countries where the problem is much smaller or doesn’t exist, but where the government is “doing nothing”? What’s needed here is a comparison of institutions. What one often actually gets is this glib presumption that the government intervention will work as intended.

Here are some examples of what I'm talking about. See this video with Tibor Machan on William F. Buckley's show Firing Line, around the 14 minute mark. Ernest Van den Haag apparently thinks he has a terrific "gotcha": either government intervenes or orphans starve. Van den Haag is far too glib. Bryan Caplan pointed out in an excellent post from a few years ago that every system eventually has to say "tough luck". Sure, sometimes private charity is inadequate and somebody gets thrown to the wolves. But this happens under a robust welfare state, too. (The very familiar phrase "falling through the cracks" expresses this phenomenon.)  Van den Haag offers a vaguely worded historical example of orphans starving because of inadequate private charity, apparently not realizing that the government also failed these same orphans. There was no magical "government" lever to crank. The same society that provided insufficient charity also provided insufficient government. Everyone's gotta say "tough luck" now and then. (Machan, who passed away recently, appears to  have had Caplan's "tough luck" insight on the fly, in spite of being ambushed by this "gotcha" question.)

For another example, a guest from a recent Econtalk:

Moreover, I think I would say that I don't think it should be the case that if you are a child born to poor parents you should have to rely on charity to get an education.

Again, the guest is assuming that "government education" is a control lever, which you can simply crank up (perhaps all the way to 11) if "free-market education" is inadequate.

And a guest from a not-so-recent Econtalk:

And frankly, I realize that your libertarian views aren't necessarily the same as my views about what should be done, but you libertarians have a fundamental problem that you don't seem to get, I think, which is that you are altruistic; you care about people; and when people care about other people we have the free rider problem. Who is going to take care of other people? You say charity. But if I care about that person who has got a broken arm laying in the street, and I know you do, I let you go out and try and help them; and then you let me go out and try and help them. And the guy stays there in the street with a broken arm. That's what we have--it's a public good taking care of that person.

Kotlikoff pulls out the classic "free-rider problem" (or "externality" or "tragedy of the commons" or "prisoner's dilemma") from econ 101. He apparently doesn't realize that the very same free-rider problem is what prevents us from getting good government. I could paraphrase him like this:

and when people care about good government we have the free rider problem. Who is going to read social science literature and policy whitepapers and become an informed voter? You say "civic virtue". You say "democracy". But if I care about informed voting, and I know you do, I let you go out and research government policy; and then you let me go out research government policy. And the citizens sit there in the street with broken institutions and bad policy. That's what we have--it's a public good becoming an informed voter.

Kotlikoff, like others who make this argument, is being far too glib. He's assuming there is this exogenous solution called "government" that fixes social problems, such as those free-rider type problems he describes. But "government" is endogenous. It is the same individuals living in that society infested with social problems who are supposed to give us those government solutions. "Government" isn't a generic steering wheel, or control lever, or series of adjustable dials. It's those same imperfect people who are causing society's problems, except now we are empowering them with the legitimate use of force over their fellow creatures. What could possibly go right?