Neither Evil Nor Incompetent
What's the problem with government?
Classical liberals spend a great deal of time pointing out the failures of government. When we enter into public discourse over politics, we are often challenged to explain the nature and frequency of those failings. There are three kinds of explanations we might offer, but only one really explains not only why governments fail in specific cases, but also why government in general is likely to fail at pretty much everything.
One type of explanation classical liberals might offer, and that some among us do with distressing frequency, is to argue that politicians and bureaucrats have evil designs to undermine the economy or the social order to forward their own careers or other goals. No doubt, political history gives us plenty of reason to think that, in Hayek’s words, the “worst rise to the top” in the political world.
However, the weakness of this approach is that there’s a convenient response available to the defenders of government: Okay, then we just have to elect or appoint better, more morally upright people to political office. The “evil people” theory does not actually explain the failures of government at a fundamental level. Rather it suggests that with a better captain, the “ship of state” might be steered clear of the icebergs and actually reach its destination. The classical-liberal response to this counterargument must somehow maintain that it’s endemic in politics that “bad” people rise to the top. If that’s the case, then we need to get beyond the “evil people” argument and go straight to whatever causes that endemic problem.
The other problem with the “evil people” argument, and I will explore this point in more depth next week, is that it concedes that people can manipulate the economy for their ends. It’s not clear this is a concession that classical liberals want to make.
Incompetence?
Rather than invoking malevolence, we could instead invoke incompetence. The
“worst” who get on top simply refers to those with the least ability. Invoking incompetence has the advantage of avoiding the implication that people can manipulate the economy. However, that argument is open to a similar response: So elect/appoint more competent people. If Michael Brown, head of FEMA during Hurricane Katrina, simply was incompetent, then there’s nothing fundamentally wrong with FEMA that someone better trained in disaster response couldn’t fix, right?
Here, too, if there’s some reason to expect that government will attract incompetents, or at least have no way to weed them out, then we need to get to those arguments, rather than getting hung up on incompetence in itself.
The third alternative is superior to both the “evil” and “incompetence” arguments: focusing on what makes government agencies structurally unable to accomplish the tasks assigned them. For example, the failures of the Federal Reserve are not the result of the Fed’s being run by a cabal of global bankers intending to undermine the U.S. economy; nor are the failures the fault of the incompetence of the Board of Governors or Federal Open Market Committee. Even with the kindest, most public-spirited, and most brilliant economists at the helm, the task facing the Fed is simply impossible. No one can control the money supply and manipulate the macroeconomy the way the Fed is expected to. It cannot obtain the knowledge it needs to undertake that task, unlike firms in the market, which can rely on the prices to inform their decisions.
Think of the analogous debate over the public schools. We classical liberals sound silly, in my view, if we argue that public school teachers are all either evil or incompetent. I know a lot of public school teachers, and most of them are dedicated and reasonably competent. Public schools fail because of their structural features, not because of the morality or intelligence of the people they employ. And if we demonize our neighbors who teach there, people are likely to tune us out.
If we classical liberals assume that those in office are the best and the brightest yet still have a solid explanation for why they cannot get the job done, the case for freedom is much stronger and less alienating than if we focus on the morality or competence of government employees. Never assume evil or incompetence. Explanations of systemic, structural failure are available and more effective.
Comment by Dan Larsen on 13 May 2010:
Moreover, the inability of government to garner success in any task is the underlying knowledge that, for any government worker, doing a poor/inadequate/incompetent/less-than-expected job on any given task carries no downside. There is no system of incentives. There is no reward for going the extrra mile. There is only a systematic standard operating procedure (SOP) which encourages programming employees to a lower common denominator, where less is more, and budgetary concerns, as well as continued employment is paramount to every other objective. When one solves a problem in any manner that would allow that problem to become something no longer considered an issue, one can only assure themselves that they are no longer needed for such a role, hence lowering the standards of behavior, in order to secure the future necessity of the position. Sad but true from city government to county government to state government and finally, (or originally), all federal government.
Pingback by Neither Evil Nor Incompetent « Defund & Disobey on 13 May 2010:
[...] Courtesy, The Freeman Online [...]
Comment by Norman Gorback on 13 May 2010:
“Public schools fail because of their structural features” you say. I would say to all of you “Classical Liberals” most Americans do not believe public schools are a failure, nor are most other government programs.
I think persons would pay more attention to government success or failure if all persons were taxed equally through a sales tax vs a progressive income tax, where half of the citizens don’t even pay. Eliminate government borrowing and run a pay as you go system. Then it will be easy to decide whether spending is warranted.
ONE MORE THING. I AM INTERESTED TO KNOW HOW MANY PEOPLE EVEN READ THESE ARTICLES. JUST TODAY IF YOU READ THIS ARTICLE, PLEASE SUBMIT A COMMENT: READ ARTICLE. THANKS
Comment by Russell on 13 May 2010:
gov’t doesn’t work because the incentives are not there for gov’t to work…and they never will be.
Comment by Eric on 13 May 2010:
“Explanations of systemic, structural failure are available and more effective.”
I wish the article started where it ends. I would live to read an in depth article on what Steven thinks are the “structural failures” especially of public schools. I’m sure that would make for good reading.
Comment by Mark Black on 13 May 2010:
I agree with Russell, Government by nature seeks power to justify it’s existence, never mind the intent of many power grabbing “public servants”. The only way to keep government at bay is to cut the purse strings. We must write into the Constitution a balanced budget requirement, and a budgetary cap of around 10% of GDP. We can do this through an Article 5 Constitutional Convention. Time is running out. At the current rate of spending we will have approximately 3 to 5 years (according to Moody’s) until we are bankrupt, like Greece is. What comes then will be devastating. We must act soon.
Comment by Roger Koppl on 13 May 2010:
We need the assumptions of possible evil and incompetence to guide our institutional design. We need them to ensure that our political institutions are robust. You know: checks and balances. That approach reflects Hume’s maxim about assuming everyone to be a “knave.” But we can often show that a given policy will not work or a given agency cannot do its job *even if* state functionaries are skilled and virtuous.
I assume your point is the latter and not meant to deny the former?
Please let me make one more point that is independent of your argument, with which I agree of course. If you wish to explain why the state behaves as it does, then you may need to identify correctly the approximate levels of virtue and competence of the relevant actors. We need to understand, for example, that prohibition may be supported by a coalition of bootleggers and baptists. For such problems, we miss the mark if we assume everyone is evil or everyone is bad.
Comment by Dwight Lee on 13 May 2010:
Well done. And similarly we shouldn’t glorify entrepreneurs and business people to make the case for the market. Doing so makes it easier to dismmis the market as having failed when market participants are found to be corrupt. In fact, one of the advantages of markets is that it doesn’t require saints to perform well and it exposes the fraud and corruption that is inevitable in human action far faster than does the political process.
Comment by Current on 13 May 2010:
Although the knowledge argument is very strong I think that the incentive/public choice argument is too. The two are strongly interconnected, often government can’t know how to give the right incentives.
The public choice argument is wrong when it suggests that people know how to profit from wrecking the macroeconomy. But, this isn’t the argument of proper public choice which is on the microeconomic level: the benefits of policy can be concentrated and losses dispersed.
Comment by Eric Hanson on 13 May 2010:
Might be more accurate to indicate “There Are 2 APPROVED Responses So Far.” Interesting that The Freeman appears to reject any responses which might fail the test of adequate support to the views of the author.
Comment by Eric Hanson on 13 May 2010:
(attn: moderator – - please use this corrected copy instead)
Politicians are selected irresponsibly by too many of those exercising a “right” to vote rather than acting on a call to participate with integrity in a representative system. When voting is misbranded as a “right” it encourages those who simply ask for “stuff” they “want” from whomever makes the “offer” of the wrong kind of “free”-dom.
When voting is instead understood a responsibility only to those who both have adequate understanding of our Constitution and concern for a greater good, the few politicians with a little something called integrity stand a chance.
Keep in mind that none of our core freedoms were “voted for” at the polls. They were won often at grave personal cost of a select few with integrity. And of our freedoms lost, those were simply voted away by those herded through the polls in the manner of a “shopping spree”.
To achieve a more mature understanding of our own “endemic problem”, it will be better to start with that particular and very real example of “structural failure”.
Power tends to corrupt and undisciplined voting is exploited to the reward of those the most corruptible if not most corrupted of political powers. It is with this understanding that the former Soviet Union did not offer a choice to vote, but made it mandatory.
Certainly no sensible person will argue that with the extra voting “the people” of the USSR enjoyed more “freedom”.
Comment by Winton Bates on 13 May 2010:
A great article, Steve. Well done!
Comment by Bill Reed on 14 May 2010:
Excellent!!
The economy is not some gigantic monolithic “ship” whose efficient navigation could be ensured by a “fully evolved” (socialist) skipper in the wheelhouse.
A far better analogy is a million vessels of varying sizes, technologies, styles, strengths and weaknesses, all captained by individuals with different destinations in mind. It is utterly impossible for any individual, or group of individuals, to not only know what port toward which to navigate each vessel, but to simultaneously navigate a million vessels even if they did know.
A little humility would go a long way.
Comment by Jim Davidson on 15 May 2010:
There is no difficulty here, only fallacy. The fallacies of classical liberalism are: power derives from the consent of the governed; governments exist to defend life, liberty, and property.
Power in fact derives from the ability of those in power to project force. They do not care one bit whether you consent or not.
Governments exist to separate the unwary from their property for the benefit of those who run the state. And as long as you promote and propagate the fallacy of classical liberalism, you are not only not free, but seeking to enslave others.
Free your mind.
Comment by scott on 15 May 2010:
Not so great. The same argument can be made about the private market. There are markets where the incentives are perverse. There are classic roles of gov’t, where gov’t functions well. But, one has to get beyond the fairy tale of the “free market” as if this explains all markets.
There are indeed free markets. Here the customer is always right, there is competition and alternatives that keep cost controlled. In these markets the customer has all the power. Here, there is no need for regulation or intervention save simple criminal protections from fraud.
The next market is the professional market. Here the customer isn’t always right, they are buying expertise after all. Because of the inordinate power the supplier must serve the customer, which is tellingly never called a customer but a client, patient or whatever, hinting at the special relationship. These markets have no alternatives, typically these professionals have an exclusive right to perform in these specialized, skilled tasks. Further, they have review processes of their peers, boards, bars, guilds whatever. Ben Franklin has a famous quote, “a country boy between two lawyers is like a fish between two cats.” This is a market that bears little resemblance to the free market.
The third market is the utilities market. Here we are dealing with inelastic markets for which there is no real alternative or competitor. These tend to be “essential” services/goods. Further, the are typically commissioned by the gov’t, the parameters and specifications are decided by gov’t as well. Typically gov’t helps fund these operations by bonds, loans or grants and uses easements and eminent domain powers to allow them to function.
It makes no sense to argue that we should have several competing water works and sewage systems. Drainage has to be controlled by zoning and some gov’t function. Which utility turns on your service first? Here in Dallas the water company (the most overtly socialized of all the utilities) nearly beat me home out pacing the cable company, electric, or phone who all were perusing that blessed private dollar.
The fact is that gov’t does operate utilities very well. In fact considering the substantial externalities one could reasonably argue that a utlity’s profit should probably be limited to 3X the bonds. After all a utility doesn’t “sell” their company/service/good like someone in a competitive market. Practically speaking, the inelastic nature of these markets means that they will bear any price. Again, this bears little resemblance to the free market.
Finally, there are two markets that are even more complex. These are health care and banking. In both of these markets we combing the inelasticity of utilities with the fiduciary needs of professional markets. Further, these aren’t simple professional markets but layers of professional markets. In these layers the principal and the agent’s roles get blurred.
Again, you wish to argue but you can only do so by ignoring the vast externalities that make these markets possible. Every hospital built is done with immense gov’t involvement and coordination. Easements and zoning alone for hospitals are substantial. There is no single private medical school. How do you shop your stroke? OR, The very Dollar is a gov’t creation, and of course the Fed is a gov’t licensed beast. Even if we were to abolish the Fed, the dep’t of Treasury would still have to perform activities that represent an externality to them. The FDIC is another gov’t subsidy, and a fine example of gov’t in action BTW.
So, no, you’ve not made your case, but perhaps revealed an unwillingness to address very real factors you surely gripe about in other arguments. And, you’ve failed to recognize the water company, the first to deliver and with the best track record against “deregulated” electricity. Guess what, our deregulated electricity has taken our low rates to the highest in the nation here in TX. It ain’t like we have onerous pollution controls here. By the way, OK has a publicly traded firm that sells them regulated electricity retail for less than our wholesale rate! That firm is paying a fine dividend.
When you pretend utilities are free markets the customer takes it REAL HARD. We felt that when gas ran up to $4/gal when we were in an oil glut! That was all driven by manipulation in the London and Dubai markets thanks to the “Enron Exemption” or the “London Loophole” that barred the CFTC from regulating those trades. That exemption opened in 2000. In 2000 we saw $9 billion traded in oil futures, in 2007 nearly $300 billion. That’s “Free markets,” it destroyed the economy thanks to Goldman Sachs. Again, during that whole Spring and Summer we had excesses in oil and refined gas. Refineries were only operating at 89% when they’d rather be running at 95%. But hey, why let facts get in the way of your feckless whining? You’re hypothetical arguments are sounding increasingly like Communists.
Stick to civil libertarian issues and the anti-war beat, when you guys talk economics your strawman arguments are hard to bear.
Comment by a FEE fan on 16 May 2010:
Scott made some good points, despite his combative tone. History has shown time and again however that industry regulations are influenced by the regulated through their lobbyists and campaign donations. Lincoln was a lawyer for the subsidized railroads and a tariff supporter, the treasury department has been lead by Goldman Sachs Alum’s, etc. Horwitz reiterates the case that inefficiency in government goes beyond partisanship & competence. I agree that any productive reform will likely have roots in addressing structural deficiencies. Official acceptance the fact that Hayek’s “knowledge problem” is nonpartisan and pervasive in both public and private enterprises would be a good start down that road.
Comment by Richard on 16 May 2010:
Being a semi-educated layman, it sounds like Scott makes a good argument. But I feel Scott’s rebuttal is somehow confusing government-approved markets (i.e. health care) with unfettered (free) markets. I’m hoping Mr. Horwitz could respond to Scott’s points.
Comment by Sheldon Richman on 16 May 2010:
No one’s comment was intentionally kept off the site. I didn’t realize some comments were being held for moderation. (I have no idea why some were and some weren’t.) I’ve been out of town, so I have just gone in and cleared them all. I will have moderation turned off.
Comment by scott on 16 May 2010:
Think about it, initially we came out of literal Serfdom thanks to collective action. The elites retreated from direct control over our lives politically, trading this role for a less obvious role selling these inelastic goods.
I am not saying gov’t is without problems, but getting gov’t out won’t fix them. These are markets that are primed for manipulation because of their inelastic nature.
The best fix for the financial markets would be simple professional, fiduciary responsibilities. Single firms should be barred from both sides of a transaction. They should be forced to serve their customers as they’d serve themselves. It is we the people that need to demand anti-trust legislation.
I am keenly aware of the issues of regulatory capture. But simply saying it’s a troubled market, ergo let’s just let is go, is hasty and ignores the long history of abuses that crop up immediately upon unfettered trade in these inelastic markets. We’re not talking about Dutch Tulips that are as essential as stupid vanity, but oil, gas, electricity, water, sewage, banking and major health care.
These categories aren’t fixed, as cable and satellite, and telephony have shown. Though these still are monopolies, they may not be so forever. I am not saying we shouldn’t discuss these issues, only that the libertarian argument essentially does squelch discussion. They are problematic markets, and we’d all benefit from admitting these bear little resemblance to the free market.
Again, what is the most effective regulation/restraint is a more valuable question. Food stamps don’t distort the market like the farm subsidies do. Professional fiduciary rules are a freer form of regulation than some subjective review board. Glass Stegal, by barring firms entry didn’t suffer regulatory capture as other rules might.
I thought the article opened the door to these difficult questions but it too quickly slammed the door on these issues. Again, these problems are inherent to these markets. John Galt and his fans never realize that those railroads were built on gov’t granted easements–at least in the real world. So, to me John Galt is an ingrate, not some hero. Again, the facts really complicate your fairytale hasty conclusions.
Comment by Scott on 18 May 2010:
Seems to me that we don’t need to assert that public service naturally selects for malevolence or incompetence. We need to counterassert the neo liberal arguement that government natuarlly selects for benevolence and superior ability. Inherent to the human condition is the danger that people in charge of dense concentrations of power are likely to behave badly. We don’t need to demonstrate that the denizens of the dense concentration we call the state are more vulnerable to that corruption, we need to point out that reason, obeservation and experience do not support the whimsical notion that they are less vulnerable to it. What makes a dense concentration of private power dangerous also makes a dense concentration of public power dangerous. We don’t need to argue that the state causes problems. We need to argue that is does not fix them. It is not hard to get a neo liberal to damn statism with the faint praise of “the lesser of two evils”. We need to take that opportunity to point out that it is no such thing. It is, at best, no more than a very expensive relocation of the same evil.
Comment by Ivan Estrada on 18 May 2010:
well eventhough evilness and incompetence are not allways the root cause of the government failure, they are with out a doubt something that exsist and therefore SHOULD ALLWAYS BE MENTIONED NOT AS THE ONLY PROBLEM BUT AT LEAST AS PART OF THE PROBLEM.
Comment by scott on 18 May 2010:
It’s as efficient a system as any you can point to in appropriate markets. The American highway system is the envy of the world. This is a good and appropriate use of gov’t. When gov’t interferes in markets that are free it sure can screw those up. Or, when gov’t seeks to interject its own agendas rather than balance the concerned parties we see opportunities for abuse.
I think it’s reasonable for gov’t to show its needed it a particular market, and then how its interjection seeks to balance unequal markets as objectively as possible. Sometimes this is nearly impossible to “fix” a market, that doesn’t mean government’s intrusion is worse than the alternative.
I get combative because I’ve written these arguments to the majority of the Lew Rockwell contributors and they are too sophistic to respond. They can’t answer, they are full of it. Show me where I’m wrong, please. You keep running away, don’t get sore when I shout at you.
Comment by Michael Strong on 19 May 2010:
Great analysis, and it is nice to see people critical of classical liberalism paying attention in the comments.
I became a libertarian because of Hayek’s argument in “The Creative Powers of a Free Civilization” on the importance of freedom for innovation in combination with public choice theory. Both are fundamentally structural arguments, deep structural arguments.
With respect to Norman’s comment on public schools, I know from personal experience that they are not anywhere near as good as they could or should be. I spent time as a public school reformer, creating good programs in public schools that would then erode once there was a change in principal, superintendent, or school board member. I then went on to create private and charter schools because I realized that if one were to create a great program that was “Built to Last” one needed more autonomy than was possible in government-managed schooling. Ultimately I created a charter high school that was ranked the 36th best public high school in the U.S. in a region of New Mexico that was ranked among the lowest performing regions in the U.S. Had the system allowed me to do so, I would have replicated the charter school, much as KIPP has replicated its program. But there were numerous legal obstacles to such replication.
For the story of my NM experience, see “A Tale of Two Charter Schools,”
http://www.flowidealism.org/Downloads/Two-Charter-Schools.pdf
For a more general analysis of the structural obstacles to innovation in education, see “Why We Don’t have a Silicon Valley of Education,”
http://www.edspresso.com/index.php/2006/05/why-we-dont-have-a-silicon-valley-of-education-michael-strong/
Comment by willienelso3 on 20 May 2010:
to Norman Gorback:
even though it’s not “today” (May 13),
“read article.”
Comment by Gary on 22 May 2010:
Scott, I appreciate your arguments, however, I believe that you ar making one serious error.
All markets can be free, there are no markets that cannot be free.
Free markets require only two things, a willing buyer and a willing seller.
It is only when someone decides that the market needs to be “fixed” usually by regulation purported to “protect” the weak that markets are no longer free and some gain advantage they did not possess prior to regulation. Those who would cheat in a free market are quickly removed by natural market forces, in truth some do get cheated before the cheaters are ousted, however, government regulation often protects the cheater by limiting competition.
Living is not without risk and anyone who attempts to create a perfect world where there is no pain only ends up creating more pain for all concerned. In an attempt to protect people from pain we have created a nation of children dependent upon a nanny for the most basic needs.
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