List of Seven Public Policy Principles That Are Common Sense Sounding But Not Really

head-up-assSomeone in a Facebook econ/politics forum directed me to this pile of crud – Lawrence Reed’s “Seven Principles of Sound Public Policy.”

Here’s my overly long, but lovely explanation of the problems with Mr. Reed’s…

List of Seven Public Policy Principles That Are Common Sense Sounding But Not Really

I recommend reading Mr. Reed’s blah blah blah before reading this monstrosity.

Let us start with number one!

1. Equal people are not free, the second half of my first principle, really gets down to brass tacks. Show me a people anywhere on the planet who are indeed equal economically, and I’ll show you a very unfree people.

Actually, the thing progressives gripe about most is income inequality. Wealth inequality comes second only for political economic reasons, but the first can lead to a dulling of the problems that come with very high wealth inequality.

Can I use the socialist-capitalist Nordic countries as examples of a people on the planet who are indeed equal economically? Why, yes, I can, because there’s not a very high income inequality problem in most of those countries. There IS a high wealth inequality, but income? No. To have socialist policies that lift all boats does not mean you have less sound economic policy. That just means you are not a zero sum ignorant buffoon. These countries still top the list of in the freedom and capitalism scales.

2. What belongs to you, you tend to take care of; what belongs to no one or everyone tends to fall into disrepair.

This is largely true only because of the symptoms that come about from the first principle. Our greatest time of growth was when we were building our infrastructure. Our infrastructure spending tapered off as the “I’ve got mine, tax is theft, go die in a fire, grandma!” crowd started masturbating in public, spreading its disease.

3. Sound policy requires that we consider long-run effects and all people, not simply short-run effects and a few people.

The examples he makes are completely bunk and quite ironic. For one, in each society in the world, a social safety net acts as a buffer from recessions and economic collapse when it happens. Without a social safety net, the natural unemployment rate increases during recessions for longer periods. Instead of everyone losing their shirt and their homes, a social safety net allows people the room to keep their livelihood until the economy recovers.

Unemployment insurance, for example, allows people to be more careful of what job they take when they become unemployed. Instead of taking the first job they find, they can be more selective and find a job that best fits their work skills. This saves employers money not having to train people over and over again and increases aggregate productivity. It also ensures that people who have certain skills take the jobs that require those skills instead of taking jobs that don’t which could have gone to someone else who doesn’t have a strong skill set. Without unemployment insurance, the higher skilled can wait out and find a good job and let those less skilled get a job so they don’t end up becoming destitute and dependent on society or taking up a life of crime to survive.

Another example commonly ignored is the freedom the retirement safety net grandma and grandpa give to their children. Instead of grandma and grandpa having to move back in with their kids once they’re incapable of working, placing a financial burden onto the next generation, grandma and grandpa can live on their own. Imagine the Baby Boom generation moving in with their kids. Can you just picture the huge drop in GDP because their grandparents cut into their income?

These are the kind of things people like Lawrence Reed don’t think about. The guy’s not a consequentialist at all. He can’t even think through the consequences of practicing the principles he puts forth. It’s kind of ironic since he’s arguing for long-term thinking instead of short-term. The social safety net he’s arguing against actually is long-term thinking.

There’s also the irony behind what he’s arguing. Take, for example, the long-term thinking the capitalist financial system was practicing during the 2000s. Boy, how did that work out?

It’s fine for businesses to take long-term thinking into their business decisions and it can work out, but that’s not how business works anymore. It can work in a smaller, closed economic system but there are far too many toxic and chaotic variables in a world economy. What long-term plan can withstand oil shocks in a foreign country causing economic devastation there? Businesses have to think short-term because nothing is sure. Where that’s concerned, what Keynes said could not have been more true.

4. If you encourage something, you get more of it; if you discourage something, you get less of it.

Sadly, Mr. Reed doesn’t understand incentives, either. Conservatives and libertarians tend to put a lot of their faith in the concept of deadweight loss. It does make sense. Common sense trumps all, right? Except it’s a bunch of garbage.

The man uses the George Bush Sr. tax hikes on certain luxury goods as an example, as if it makes any sense outside of a zero sum ignoramus world. Never mind that we were in fact in a recession at the time, let’s go ahead and play with the idea that there was actual deadweight loss due to this new tax burden. The rich decided to not buy these luxury goods, people lost their jobs. What of it?

Read the words Mr. Reed uses. “We shelled out $24 million in additional unemployment benefits because of the people thrown out of work in those industries by the higher taxes.”

Uh huh. What about the jobs created in the other industries where the wealthy decided to spend their money that didn’t go toward those specific luxury goods? Let’s ignore that increased demand in other industries. “Only in Washington, D.C…” No, only in a zero sum world do we forget that slight nuance Mr. Reed will try to make you forget.

He’ also unaware of the concept of false causality. Families don’t break up because welfare checks are convenient. Single parent homes who are eligible for welfare tend to break up because of the same reasons they always do, welfare checks notwithstanding. Again, Mr. Reed doesn’t understand human psychology and incentives.

Heck, you know what else increases divorce and family break ups? Long commutes.

But let’s get rid of welfare checks to entrap women in dangerous situations.

5. Nobody spends somebody else’s money as carefully as he spends his own.

“Ever wonder about those stories of $600 hammers and $800 toilet seats that the government sometimes buys?”

I’m not even going to bother with this one. This guy’s a idiot for not realizing why the government buys $800 toilet seats.

Hint: it doesn’t. These numbers come from the fact that certain government departments do not specify exactly how they spend their money for national security reasons.

Ezra Klein quotes from Mental Floss magazine:

Sure, there were invoices that showed the Pentagon shelling out $435 apiece for hammers, but the documents were more of a testament to the government’s odd accounting practices than its wastefulness. Per Pentagon accounting rules, defense contractors were expected to spread their overhead costs evenly across products to simplify bookkeeping. As a result, massive expenses for things such as research and development and factory maintenance were averaged into the cost of everyday office supplies. That meant while super-expensive items such as missiles came in cheaper on the register, the price of small-ticket items such as hammers were distorted in the other direction. And, because ‘Pentagon Gets Real Bargain on Missile!’ makes a lousy headline, the media latched onto the $435 hammer story. Since then, the Pentagon has changed its accounting rules, but it’s still trying to live down the urban legend about the costly tools lurking in its overpriced toolbox.

And if we’re going to be so buggered about #5, we should probably get rid of the entire financial system since it takes excessive risks with other people’s money.

6. Government has nothing to give anybody except what it first takes from somebody, and a government that’s big enough to give you everything you want is big enough to take away everything you’ve got.

This is yet another symptom of a zero sum mentality taking a dump on a web page.

This is the kind of thinking that comes from someone stuck in the hard money, anti-fiat money cult that’s always haunted this country since we went off the gold standard. It’s become a more vocal cult, but it’s still riddled with illogical imbeciles who think a dollar bill actually has some kind of intrinsic value.

They believe it to be printing money out of nowhere, causing inflation. They do have a point, but that’s because they think there is some kind of intrinsic value in money, as if you can do something other than buy things with money. (You can wipe your ass with money and burn it to protect you from the cold, but it’s nothing but a tool to exchange for other goods. This is why money has no intrinsic value. No intrinsic value makes these anti-Fed people’s arguments bull crap.) They do have a bit of a point: printing money can increase inflation, which destroys wealth (and makes people on fixed incomes have to pay higher prices) but the act of printing money by itself doesn’t necessarily increase inflation. Inflation is an increase in the general price of goods. Printing money can lead to increased demand for goods, which increases the prices of goods because more people are bargaining for the same number of goods, leading them to offer higher prices for them.

The thing is that printing money doesn’t necessarily lead to inflation. Not when demand is below trend. When demand is down, printing money does boost sales but it doesn’t necessarily increase prices because demand doesn’t butt up against supply.

#6 would make sense if we lived in the zero sum world Mr. Reed believes we live in, but we don’t. I’m pretty sure someone else can waste their time with this one. I’ll let them deal with that.

I’ll move on to the other problem with #6: “a government that’s big enough to give you everything you want is big enough to take away everything you’ve got.”

This actually has nothing at all to do with government. You know what it has to do with? Concentration of power, in general. People like Mr. Reed just want to concentrate on government because they simply don’t like government. What other kind of power concentration can take away everything you’ve got?

Oh, that’s right! Not the government (although you can’t leave that out!), but your generic John and Jane Q. Public can, too!

Take it away, +David Brin!

When Adam Smith gets over-simplified into a religious caricature, what you get is “faith in blind markets” – or FIBM – a dogma that proclaims the state should have no role in guiding economic affairs, in picking winners of losers, or interfering in the maneuvers or behavior of capitalists. Like many caricatures, it is based on some core wisdom. As Robb points out, the failure of Leninism shows how state meddling can become addictive, excessive, meddlesome and unwise. There is no way that 100,000 civil servants, no matter how well-educated, trained, experienced, honest and well-intentioned, can have enough information, insight or modeling clarity to replace the market’s hundreds of millions of knowing players. Guided Allocation of Resources (GAR) has at least four millennia of failures to answer for.

But in rejecting one set of knowledge-limited meddlers — 100,000 civil servants — libertarians and conservatives seem bent on ignoring market manipulation by 5,000 or so aristocratic golf buddies, who appoint each other to company boards in order to vote each other titanic “compensation packages” while trading insider information and conspiring together to eliminate competition. Lords who are not subject to inherent limits, like each bureaucrat must face, or rules of disclosure or accountability. Lords who (whether it is legal or not) collude and share the same delusions. (Source: http://bit.ly/p3vvji)

Yea, that wealth gap sure sounds like an overbearing government to me.

Oh, but wait! He’s got more to say!

Instead of the classic human social pattern — pyramid-shaped with a tiny, fierce nobility lording it over peasant multitudes — ours was diamond-shaped with a well-off middle that actually outnumbered the poor! A miracle nobody in all the past ever foresaw. Except perhaps Smith. Certainly not Karl Marx! In fact, nothing so undermined the honey-seductive mantras of Marxism so much as the living example of the U.S. middle class. Which the whole world wanted to join.

And now the penultimate point (before getting back to 1793 France). Our post-WWII flattened-diamond pattern did not quash or undermine competitive capitalism! Not at all. In fact, never before or since has there been such fecund, vigorous entrepreneurialism as during the flattest and most “level” social order the world ever saw. (Source: http://bit.ly/qSiaCA)

Oh, so this brings us back to principle #1, doesn’t it? I guess a little bit of social justice and consequentialism does have merit.

7. “Liberty makes all the difference in the world.”

The problem with seven goes back to the first problem I mentioned in #6. I guess you really can’t really get to 7 without going through 6 first, and if even #1 is invalid, he should have stopped there.

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