Resolving to Reduce Policy Failures

This December marks the first anniversary of my AIER book, Pathways to Policy Failure. It contains a great deal of insight into public policy, but came out too late to influence anyone’s New Year’s resolutions for 2021. So it might be worth revisiting with an eye to resolutions for 2022, after a string of notable public policy failures this past year. 

To that end, for those who might be interested in what sorts of areas the book offers insights into, the following is adapted from my introduction.  

Many years ago, Paul Heyne wrote that “Too many people ‘know’ how to solve pressing social problems…But we still underestimate the difficulties in bringing about planned social changes.” Consequently, “‘It won’t work out that way’ is the economist’s standard response to many well-intentioned policy proposals.”

That insight raises a very important question: How have people so often been convinced that what turned out to be policy failures–often egregious ones–were good ideas? That is, what are the pathways that can lead us from good intentions to policy failures? 

That there are many such pathways is reflected in expressions such as “there’s many a slip ‘twixt cup and lip” and “the best-laid plans of mice and men oft-times go astray,” though “good intentions are not enough” is more commonly used by economists.

Think in terms of a multistep logic problem. In logic, if all the premises are true and each step is logically valid, the conclusions must be true. But what if just one of those steps is logically invalid? We can no longer rely on the conclusions drawn, even if all the premises are true and every other step of logic is valid. In fact, if that one step were the reverse of the truth, such as concluding that X goes up when it in fact goes down, the conclusion reached could be the opposite of the truth (as when people argue that raising the minimum wage will increase employment because more people would be willing to work at higher wages, even though it will decrease employment because employers will become willing to hire fewer low-skill worker-hours because it has become more costly to do so).

If multiple errors are made in that multistep logic problem, one’s conclusions may be virtually unrelated to reality, providing no reliable guidance at all. And all the errors would need to be fixed before the reliability of one’s conclusions could be justified. 

Even if the logic is correct, there is still the issue of whether the premises are true with regard to the question at hand. And parallel with the problems of logic, even one false premise (a common current example is that “the rich are getting richer while the poor are getting poorer”) could create a vast gap between one’s analysis and reality, and even put them directly at odds. Multiple false premises would mean you could only arrive at correct conclusions by luck. 

When it comes to public policies, the most powerful false premises involve underselling self-government and overselling the state. People routinely presume or assert that self-government under private property rights (that is, liberty or freedom) has less attractive qualities than it actually has (e.g., that market competition is a dog-eat-dog survival-of-the fittest jungle), while they presume or assert that government (whose essence is coercion) has more attractive qualities than it actually has (e.g.. treating it as a benevolent market-failure solution, rather than itself the greatest cause of societal breakdown). Yet to the extent such arguments convince others, they move choices from where information and incentives are better to where they are worse, virtually guaranteeing policy failure.

Those false premises are reinforced by the problem of lax language. Since language is the basis of thought, language that misrepresents reality will lead to conclusions that misrepresent reality. For example, much of the language about public policy treats choices as nonexistent or all-or-nothing (e.g., using the words like “need” and “must” or claiming that there is “no substitute” for something), yet scarcity means we face ubiquitous choices in multiple dimensions, and that the choices faced are primarily marginal–whether to do somewhat more or less of something than one is already committed to. Lax language also sneaks in misleading modifiers, as when people criticize market mechanisms as “impersonal,” focusing on the mechanisms of markets, but ignoring that markets are the premier means of accommodating the many differing personal tradeoffs each person is willing to make, or using “protectionism” to describe policies whose essence is to reduce the protection of consumers’ rights over themselves and their resources.

There is the further problem of numbers you can’t count on. Not only does data often mean different things than people think (e.g., being officially unemployed is not the same as not working or having been fired from one’s job), the power to select what period will be looked at can easily be engineered to produce misleading trends. Conclusions can also be “improved” (from the perspectives of those employing the analysts) by simply omitting costs that are relevant (e.g., the opportunity costs of resources already owned, even though they still entail lost opportunities for alternative productive employment, or what economists call the welfare cost from the market distortions caused by the taxation utilized to finance projects). Making matters worse, people often overcount benefits (as when transfers from one party to another are counted as if they are net benefits, as when both jobs and income or increased productivity and the increased property values they cause are counted as if they are separate benefits, not to mention counting multiplier effects where money is spent, but ignoring the same effects where the resources are taken from). If that weren’t enough, statistical tools, because people are widely ignorant of them, can be used as easily to mislead people as to inform them (and the financial rewards to the former are often greater). 

Each of these issues–underselling self-government while overselling the state, lax language, numbers you can’t count on, combined with erroneous logic–put public policy on a path toward failure. Further, there are many public policy examples of each of them. And there is no guarantee against all of them being involved in a given case.

There is much to be learned from thinking along these lines, even when there is no definitive “right” answer to issues, because when valid principles are being violated, logic is being bent, language is warping our understanding, and/or measurements are misrepresented, public policies will be less effective than advertised. In fact, they commonly fail to achieve their intentions, in part if not entirely, while imposing huge avoidable costs on citizens. But the more we understand these things, the more sunlight we have to cast on it as a disinfectant.

Related Articles – Books, Economic Education, Government, Policy