March 5, 2021 Reading Time: 5 minutes

When it comes to economic policy, I know I know better than most. This September will mark the end of my thirtieth year studying the history of public policies. Over that time, I have averaged 70-hour work weeks (and can prove it). Thirty times 52 times 70 equals 109,200 hours on task, i.e., the expertise of almost 11 Malcolm Gladwellian experts. (So in the spirit of Eric Cartman, I’m not fat, I am 10 big boned people!)

Yet for all that, I would never presume to know what is best for another adult human being. I guided many during my university teaching career, pleading with a few but never coercing because while I intuited that Jack would be a good financial planner and Jill a great attorney, I could never be sure. I don’t even know for sure what is best for my own adult children. How could I? How could anyone?

Public policies present a paradox. How can policymakers possibly know what it is best for me, Jack, Jill, my children, or anyone else for that matter? Even if they did, what could they do about it? If a behavior helps some individual, s/he will behave in that way, law or no. If the behavior hurts, s/he will avoid it, again regardless of law or policy. The best that policymakers can do is to tweak incentives at the margin to try to get more (or fewer, as the case may be) people to engage in the behavior. 

Such tweaks, though, tend to apply equally to all. But everyone is different, so the policy “carrot” or “stick” may not be big enough to induce many individuals to change their preferences. Or, as we learned in 2020, the carrot and stick might be too big, wreaking havoc on the economy and society as policymakers ban normal life, causing costlier problems than they were trying to solve in the process.

Another example of gross government overreach was “Prohibition,” the failed attempt to ban the manufacture and sale of alcohol in the United States in the 1920s-30s. Criminals simply took over the industry and many people died, from bullets or bad brew.

Something few know about Prohibition is that it had been attempted in about a dozen northern states in the 1850s. The tale should have been instructive. Starting in the 1830s, temperance advocates tried to tax liquor away via licensing fees, but as I recently pointed out here, that just induced license holders (and governments addicted to alcohol revenue) to push drink sales all the harder, to compensate for the licensing fee.

So temperance types started to push for the repeal of all alcohol licensing, thinking that a lack of licenses would mean a lack of liquor. It didn’t. Instead, retailers flooded into the deregulated market. Under the licensing regime, you see, those who paid the license fee made sure that unlicensed vendors were not free-riding by ratting them out to authorities when discovered. When they had no licensing fees to recoup, alcohol retailers resorted to “live and let live” rules, competing with each other on the basis of price and quality instead of access to licenses.

By 1851, Maine teetotallers had had enough and induced the state to ban the manufacture and sale of alcohol within its boundaries. Other northern states soon jumped on the bandwagon. Some of the laws were struck down as unconstitutional and others were so roundly ignored that voluntary associations called Carson Leagues formed to try to force local officials to uphold the law. It didn’t work. Maine repealed its ban in 1856 after the Portland Rum Riot left one dead and seven wounded when locals became enraged at rumors that the mayor maintained a large private stash. Elsewhere, the law simply became a dead letter. For example, in 1859 the Grand Rapid City Directory openly listed 25 saloons and 4 breweries despite prohibition remaining on the books in Michigan. [Ya can’t make this stuff up. For details, see Bruce Tap (his real name!), “‘The Evils of Intemperance Are Universally Conceded’: The Temperance Debate in Early Grand Rapids,” Michigan Historical Review 19, 1 (Spring 1993): 17-45.]

Big policies like bans invariably break the Hippocratic Oath to “do no harm.” While policymakers do not take that oath, which is for doctors, they ought to. In fact, I argue that it is embedded in their oaths to uphold their respective state constitutions and the U.S. Constitution. This is the equivalent of saying that all policies should be Pareto improving, i.e., that they make at least one person better off while injuring no one. If that sounds impossible, it is what happens every day when people are left to their own devices, i.e., when they engage in voluntary exchange. In fact, both parties to a trade are generally left better off, which is why they bother to consummate the transaction.

This all suggests that governments ought to remain small in scope, using their coercive powers only when absolutely necessary. Yet throughout the last few hundred years, we see governments that wax ever larger and more powerful. Why? The explanation is of course complex but a major component is something called paternalism, the belief that some authority, be it a family patriarch or matriarch, a dictator, a democratically-elected legislative body, or an executive agency wielding considerable discretionary power, magically knows what is best for other people.

One would think that there would be more pushback on paternalism. In the early nineteenth century, for example, some Americans mocked voluntary associations that behaved too paternalistically by satirically suggesting, and sometimes actually forming, anti-societies like the “Anti-poke-your-nose-into-other-people’s-business Society.” The notion was that voluntary associations had every right to form and try to alleviate some social problem or another but they did not have the right to push their nostrums on others unconvinced of their solutions, or even the existence of the problem itself, even if a majority of the people in the community wanted to take action. Have at it if you must, the anti-society folks said, but leave us out of it. 

The nosey do-gooding paternalists countered by ostracizing drinkers and other “sinners,” pledging not to do business with them or to socialize with them or their families, in a fashion similar to what we today call “cancel culture.” Drinkers retorted by cancelling temperance teetotallers, socially ostracising and cutting business ties with intemperate temperance radicals. [For details about all this nonsense, see Maartje Janse, “‘Anti-Societies Are Now All the Rage’: Jokes, Criticism, and Violence in Response to the Transformation of American Reform, 1825-1835,” Journal of the Early Republic 36, 2 (Summer 2016): 247-82.] 

Eventually, the nosey ones got tired of trying to convince, cajole, or coerce their neighbors to join them in mighty crusades against alcohol, doing stuff on Sunday, and so forth. They then turned to the government for succor, and lucre. So much easier, it is, to use the coercive power of the state to fund pet projects than to convince numerous individuals to give of their own accord! Simply dupe or bribe a few officials and you, too, can impose your views on others, and even convince yourself it is for their own good. 

But take it from one who knows, paternalism most often leads to toil and trouble. Cancel not, lest ye be cancelled; he who summons the demons of the swamp may be consumed by those same demons.

Robert E. Wright

Robert E. Wright

Robert E. Wright is the (co)author or (co)editor of over two dozen major books, book series, and edited collections, including AIER’s The Best of Thomas Paine (2021) and Financial Exclusion (2019). He has also (co)authored numerous articles for important journals, including the American Economic ReviewBusiness History ReviewIndependent ReviewJournal of Private EnterpriseReview of Finance, and Southern Economic Review. Robert has taught business, economics, and policy courses at Augustana University, NYU’s Stern School of Business, Temple University, the University of Virginia, and elsewhere since taking his Ph.D. in History from SUNY Buffalo in 1997. Robert E. Wright was formerly a Senior Research Faculty at the American Institute for Economic Research.

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