The Genius of Bastiat
If, for example, you were against the FDA because it prevents good medicine from getting on the market equally as it prevents bad, and possibly to greater detriment than if the bad were allowed, people don't understand how bad medicine would not come to dominate the market. "Who will protect us?" they will ask. Similarly, if there were no minimum wage, it is presumed that everyone would start paying $0.25 an hour. If there were no Medicaid, nobody making below $100k/year would have access to health care. Without a Department of Transportation, there would be no roads. Without a Department of Commerce, there would be no commerce, without a Department of Energy, there would be no energy suppliers, etc. Close military bases, and the unemployment rate will skyrocket. Stop the government provision of resource X, and X would no longer be supplied, whether X is "safe drugs", "flat roads", "parks", or whatever else you want to substitute for X.
Among the variety of arguments supplied for each of these, some will be at least partly true. There are market failures, but market failures are, by and large, the exception rather than the rule. Regardless of whether you agree with that last statement, it must be admitted that some of those market failures are created by the government, and government failure also exists. Examples of these include legal monopolies (monopoly created by the government), corporate welfare, log-rolling, rent-seeking, regulatory capture, tax distortion, and deadweight losses incurred in trying to avoid regulatory and tax burdens.
In many cases, it is true that if the government did not provide a given service, then it will not be provided. But it is not a binary situation: we must be careful to distinguish between services that should not be provided at all as well as between those that should be provided by the government, and those that should be provided privately. Do we really need a mohair subsidy? For that matter, do we need any farm subsidies? If the government stops providing illicit drug interdiction or sodomy law enforcement, does the private sector really need to pick those up?
I think it will be universally recognized that a serious problem with our mixed system is not government or business per se, but rather the nexus between them. People will take sides as to whether the limitations should be placed on government or on business to reduce the mischief arising from the nexus. Does Walmart "place a burden on taxpayers" by underpaying its staff and forcing them on welfare, or by relying on the road system? Or does the creation and enforcement of a myriad of rules and regulations prevent Walmart's employees from availing themselves of a free market in health care services, and does the creation of a publicly provided transportation system enable and encourage car-based enterprises like Walmart? There are strong arguments to be made both ways, but a richer understanding of history would allow a fairer examination of the limited government argument.
For example, The Progressive Era in American politics oversaw the vast expansion of the regulatory state not for consumers, but for the competitors. The quintessential example of the triumph of that era is the Pure Food and Drug Act of 1906, ostensibly passed in the wake of Upton Sinclair's hyperbolic The Jungle. The truth is that the Act had been desired by meat packagers for years in order to reduce competition from smaller competitors and enhance their image among foreign buyers, and the muckraking following the release of Sinclair's over-the-top fiction served as the moral cover they needed (see this NBER paper, for example). The same story replayed itself several times in the era: bankers wanted relief from risk and got the Federal Reserve, railroaders wanted relief from competition and got several laws which finally culminated in the establishment of a regulatory power to set minimum rates.
In the same era, the American Medical Association sought and won the establishment of state boards to control competition, and then won control of the medical education system to control entry to the profession. After that, they won the ability to be the sole gatekeepers to drugs and other therapies with the sole power to prescribe. In every case, they did so by concealing or downplaying the benefit to themselves, and sold the measures on the basis of how well they protected patients. Patients, apparently, needed to be protected from low prices, competition, and their own bad judgement.
It may be true that if I were king for a day, and did something radical like restore the authority of the federal government to the limited government described in the Constitution (as amended -- no need to falsely accuse me of favoring slavery or opposing universal suffrage), that the private provision of these services would not exist tomorrow. There are always two separate questions that we must answer: "What will it look like?" and "How do we get there?" The second is probably the harder. Unfortunately, since we classical liberals (what you might call "libertarians") must spend most of our time arguing against the expansion of the existing structure favored by both dominant parties, and a little time outlining the desired system, we rarely address the path between the two. Furthermore, since we generally believe in the creativity and competition of a mass of solution-providers, it is difficult and dangerous to try to describe a system that will emerge by evolution, not by conscious design. If it could be designed consciously, we might be more in favor of central planning, wouldn't we?
Our preferred solution to most of the problems described above is "the unseen". It's not that we don't care for the poor, the non-white, the female, it's just that we don't want government to solve their problems because we believe that most of the "solutions" actually lead to worse outcomes. We aren't even necessarily, universally, and consistently in favor of people having to solve their own problems, though obviously they are in the best position to identify, prioritize, and aggressively pursue the solutions when they have a choice. What we want is to ensure that their choices are not limited to prescriptions that are often short-sighted, feel-good, proven failures dictated from afar by an authority that doesn't know, care, or emphasize outcomes over inputs. The problems faced by the 3,000,000-strong federal workforce are worse than those faced by the largest corporations regarding the lack of information flow of problems and potential solutions between the front line and the rear echelon. At least everyone at GM knows what the goal is, there is consistency from one decade to the next, and they all have an incentive to achieve the intended goals rather than incentives not to.
Just to reflect on the problems noted above:
FDA -- drug safety could be ensured by competition among several 3rd party, reputation-driven providers like Consumer Reports, AMA, and CSPI. These are not seen because they are by law not allowed (you cannot make unapproved statements about drugs).
Medicaid -- at the turn of the century, health care was privately provided by the workers themselves who participated in high rates in lodges and friendly societies. The emphasis was on avoiding destitution, and participation was in the 50% range (50% of everyone), but higher among the working poor. "Lodge practice evil", as it was known by the AMA, was strangled in the crib as the AMA sought to distance itself from the rest of society and establish themselves as a politically powerful craft guild. Given the advance of professional skills like finance and engineering, productivity advances in truly essential sectors like agriculture, and the general advance of income and therefore the affordability of housing and transport since 1900, we can only guess at how far advanced a truly free market medical would be by now. Instead, the capture of the regulatory body by the AMA, and then the distortion of the tax-driven third party payer system in the wake of WWII price controls, has led to measures designed to make health care an affordable right but which in reality have made health care markets distorted beyond belief. Successful low income health care measures like lodge practice are now unseen and impossible to establish under current laws.
97-98% of the workforce makes more than the minimum wage, now, with no laws requiring it. Of the few who make minimum, 2/3 are teenagers or non-household providers, and over 2/3 are advanced within a year with no laws requiring it. The unseen are those who have no skills and are unable to find work where they could develop them because they are prevented by law from doing so; they are counted among the "non-participants" and "unemployed" and are prevented by law from negotiating a mutually agreeable outcome.
Private roads certainly existed before the creation of the DoT. See this collection of papers by Daniel Klein covering the era 1797-1860.
My statement regarding the Department of Commerce was meant to be humorous. Many of the functions, such as NOAA and NIST comply with the Constitution's "Weights and Measures" clause and are largely public goods. I don't really have a problem with those. However, the recent attempt by Senator Rick Santorum, R-PA, to restrict free public access to data from the National Weather Service because it competes unfairly with private weather services serves as both a warning and an example. It is a warning about the potential for abuse that arises from the private-public nexus, in this case a Senator is going to bat for a constituent in order to make life easier for them (rent-seeking). It is also an example of that which is not seen and normally held to be impossible by those who claim that public goods are a market failure and should therefore always be provided by the government, in this case the actual existence of private weather forecasting in the shadow of competition from "free" public service.
Electricity generation is considered to be a "natural monopoly": an industry in which it is actually less efficient and therefore impossible for true competition to arise. The telephone industry was treated the same way for 70 years: AT&T was granted a monopoly in 1914, it began to fall apart in 1984 when a judge ordered the breakup in the face of competition from MCI and McCaw Cellular, and what was left of AT&T was recently swallowed up by Cingular in their competition with Verizon, Nextel, and others – surprising outcome for a "natural monopoly". The first hydroelectric plant was built by the Aluminum Company of America (ALCOA), and Westinghouse, Edison, and Tesla were all actively building and competing long before we accepted the burden of the Department of Energy. Since the rise of the regulatory state and the Natural Monopoly theory, energy companies have largely worked hand-in-glove with the states and federal government to defend the status quo. What is not seen is what advantage a fragmented, decentralized system would hold for smaller generators like solar and windpower. FDR's Rural Electrification Administration saw to it that farmers got subsidized, high-cost electricity, leading to the demise of the nascent wind-generation industry.
I'm sensitive to critiques of classical liberal thinking. It is too easy to get blind-sided by the holes in your chosen paradigm and to be guilty of confirmation bias; there may even be a genetic reason for it. It is, however, not unique to libertarian thought that the programs we favor lead to a series of choices and bad outcomes up to and including death. By that, I am sure that the implication is that if government services were done away with tomorrow, that the replacement institutions would either be slow in coming, or would be insufficient in any period of time. I concede that may be true, though not as true as thought by people who don't look for "that which is unseen."
However, the same is true of any political philosophy of which utopia is not an explicit and practical outcome. I am willing to concede that it might be possible to devise a government and society that effectively and fairly took everything above $100k/family and distributed it among the poor, and that might be hunky-dory. However, even in that system, it must be recognized that you would give something up, like the pace of technological advance or total wealth creation. Furthermore, there would be certain undesirable responses to the incentives by those on the receiving end. Both of those are the case in the maternalist countries of Europe. Compared to the US, they all have lower GDP growth; higher rates of unemployment and use of sick leave; many of the deaths in the 2003 heatwave were due to people leaving their elders in the care of "free" but understaffed institutions; the health care systems free-ride off of the drug development machine in the US (some 50-75% of all new chemical entitites and drugs are discovered, introduced, and accepted in the US); few private companies in Sweden hire females because of the generous mandates for family leave, so 75% of the females in the Swedish workforce work in the government, etc. The sum total result of those choices will be fewer deaths now but more in future periods. Paraphrasing MarginalRevolution, after 50 more years of 1% lower growth, won't there be a substantially lower quality of life in Sweden than in the US? And by lower quality of life, I mean, also, more people dying at younger ages?
And I would go further and say that since the tradeoff is an explicit choice of voters in the present who either deny or refuse to see that which is not seen (future deaths), that they are more guilty of picking and choosing who dies than those of us who would rather see people have at least some influence through their own actions on their own destiny.
I accept that luck, genetics, family, gender, and other uncontrollable factors influence a person's ability to control their own destiny. I cannot figure out how to devise a system that fairly accounts for them all. Heck, I can't even list them all. When a black woman from an upper-middle class background is competing against a poor white guy from West Virginia, who should get the advantage? That isn't a likely competition (not because there are no poor white men - there are in fact more poor white people - but because there are few rich black women), but it is a possible one. What about a lower-middle class black woman against a poor, Asian lesbian? A society simply cannot rank all of the attributes that may influence a person's life in order. A central government is no more likely to succeed than a society, but is more likely to come under pressure to use these programs to influence competition, especially if the measures are costly and differentiate large or profitable from small or marginally profitable businesses. Therefore, some such measures designed to help poor people may in fact harm them. That is why I am against them, not because I am against the government doing helpful things.
The recent move towards using zip codes rather than gender or race seems like a better affirmative action solution to me. It was not, however, the result of a federal mandate. It was a unilateral decision that arose in competition at a local level. Had the Supreme Court shot it down in favor of the dominant, "seen", paradigm, it would be another example of a better solution that was "not seen."
Labels: philosophy
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