Thursday, December 02, 2004

The Thing Itself III

Can government do anything to better people's lives? Should government do anything? These questions don’t get asked very much. We all just assume that government should do SOMETHING, and then argue about what that is….

Still…Let me ask. Actually, let me answer.

1. Can government do anything to make things better? Let’s suppose that government is neutral instrument, with a real power for accomplishing good in people's lives. The provision of public goods, particularly local public goods, is a "government" function.

(One might quarrel with this claim, as Burke did when he said, “The thing! The thing itself is the abuse!” But let’s not go there)

EVEN THEN, there are limits to what government can do. One of the first people to recognize this was the man who put the dismal in the dismal science, Parson Thomas Malthus. (Yeah, I know, it was Thomas Carlyle). Malthus discovered a general principle that will sound familiar to everyone: the more you have of something, the more you need!

In third world countries, we have found that if all you do is give people enough resources to make them a little bit healthier, you increase births. Births continue until the society comes up against the new resource constraint. People are still starving, but now there are lots more of them.

In cities and counties, the same logic applies to roads: if you make commuting cheaper by building or widening roads, it isn't long before people are once again, stopped and staring at the stationary taillights ahead of them. There are six lanes of gridlock now, instead of two, but people respond to the costs of the activity until the cost rises.

Sometimes we try to get around this problem by subsidizing an activity we think we value. Suppose, for example, we all think family farms are good. But we look around, and see that family farmers are all poor or going out of business. So, Congress or the state legislature passes a law that subsidizes farm crops. Everyone who owns farmland gets a one time wealth transfer from consumers and taxpayers. So far, so good: farmers (briefly) are wealthier.

Over time, though, people sell the land, or deed it to their children. But these people now implicitly pay a higher price for the land, a price that capitalizes the subsidy on the crop. If you ever cut the subsidy, the farmers will go bankrupt. But if you leave the subsidy, the farmer (at best) only breaks even, barely scraping by. We all still hear stories about the poor farmers, and wonder how this can be, when we are spending all this money on farm support.

This is how it can be: after the one time wealth increase for people who own land, new people enter (or farmers or their children stay on their farms). Profits fall back to subsistence levels, and farmers are once again poor, just indifferent between staying and leaving. Only now, we are all paying high prices for crop support programs, and taxes for subsidies! Lots of pain for us, no gain for the poor farmers!

In short, much of the time, government CANNOT do anything to help. Rent-seeking dissipates give-aways, and in equilibrium people crowd up to the same point whether there is a two lane road or a six lane road, as long as you charge a zero price.

2. The second question I raised above was: Should government try to help people? Appallingly fallacious analogy to "customers." Taxpayers aren't our customers; they are our bosses. May be that the use of "customers" is a way getting employees to accept a role, a style of treatment, in dealing with the public. Easier to train employees this way, better results.

But consider the implications of the "customer" metaphor run amok. I have participated in "studies" (and you can hear the quote marks drip down the side of that word as I use it) where we were paid money by the state, by a county, or a city to do "market research." What we did was ask poor people if they would like a better house, assuming somebody else would pay for it.

Mirabile dictu, they said "Yes!" We then wrote a study saying that there was, indeed, a "need" for this program. To put it another way (and this is how we put it): There was customer interest in this new program. But remember what that program was: we were taking money from taxpayers, without their consent and under threat of arrest or seizure of property, and giving it to people who didn't have decent housing. Then, to check to see if the program should be expanded, we asked the "customers" (the people whose housing would be improved) if they liked it. When they said yes (actually, they said the amount of the rental subsidy should be doubled), we concluded in our scientific way that this was something government should do.

Now, I participated for two reasons: First, I needed the grant money. Second, I believed (and still believe) in the goals of the program, which were to give poor people a life of dignity and a chance to achieve self sufficiency.

But the "customers" metaphor was a lie! Liberals pretend not to understand why taxpayers are so angry, but I understand it, and you should, too. Here is the reason.

The liberal philosophy, based on this conception of customers, has become a pathetic self parody: "Look, there's one! If we just had some funding, we could help him! Her, too! Her life would be better if we improved government services to her." Again, this is just rent seeking, and it is a nonproductive activity that is absorbing a high proportion of our best minds and resources.

When you apply for a grant, or money from a government program, you are doing it so your constituents (maybe taxpayers in your county, or clients in your social service delivery program) can be better off. But that money doesn't come from creating a new product or service, it comes from taxpayers. Instead of devoting creativity and talent to new ways to make things people need, or make those things more cheaply, we are overseeing an enormous bureaucratic paper shuffle: you spend months writing a grant proposal, a team of people read it, and send a few applicants some money. Everyone is paid for their role in this exercise, and all pay taxes on their income to help subsidize the next go round.

The worst part is, it can only get harder and more time consuming as the years go by. Have you noticed that the applications for grants are getting longer? That the competition for this free money is getting tougher? Ultimately, rent seeking forces agencies and non profits to spend a substantial part of the value of the grant up front, just so they can win the competition to get the grant. The only time you can really do much good is if there is a new grant program (just like a new farm subsidy). After a few years, many more agencies are applying for the same fixed (or shrinking) grant pool. You spend so much time pursuing this "free money" that you wonder if it is worth it.

What the left has forgotten, or actually never wanted to believe, is that you have to persuade taxpayers that this is a good thing to do. Discovering heretofore unknown "rights," which are really privileges involuntarily extracted from taxpayers, is the stock in trade of the political liberal.

The failure of liberalism in the United States is to articulate a compelling set of reasons why. The great expansions in the social "safety net" occurred under a clear (debatable, but clear) set of arguments. FDR, JFK, and LBJ all seemed to believe that you had to get the people's consent, or at least their understanding, before you started taking their money. The argument that we can do good has become the only argument that we should.

So now we are at an impasse, a Gordian knot with nothing but fingers sticking out, all pointed in different directions. Liberals pretend not to understand that you have to persuade people that tax money should be used to "help customers." The fact that you can "help" people if you give them other peoples' money is not enough of an argument, not today.

5 comments:

Anonymous said...

Now, I participated for two reasons: First, I needed the grant money. Second, I believed (and still believe) in the goals of the program, which were to give poor people a life of dignity and a chance to achieve self sufficiency.


But if you participate in something you know creates these problems, aren't you part of the problem? Or are you just a liberal in disguise?

TtwbC

ranc said...

To the 1st point: in the long run (equilibrium) we are all dead. But don't we live in the short run?
To the 2nd point: I agree.

Anonymous said...

Hmmmm...it seems that you answered yer'own question incorrectly. YOU participated because YOU needed the grant money. So why is it a burden then for organizations to compete for it?

Regardless if anyone (or "customers") is actually helped by the ultimate "project", the fact is that a lot of smart (or studious), relatively unemployable people now have jobs. Think tanks, non-profits, tenuerd profs, etc. could not exist without grant money, the more competition the more people are needed, and therefore it creates an industry that is relatively middle-class. If they are skillful or talented, some may actually go on to be dept. heads who will be able to employ others in grant seeking activity.

I'm saying this not to insinuate that you are hypocrticial, or that I disagree, but rather that it seems like the targeted beneficiaries (oppps, my bad - "customers")aren't really the raison d'etre of these programs from the get go (although you are on target, they can be used nicely as a moral justification).

So is the problem that these programs don't actually do what they propose and often end up making it worse? Or is it that "grants" are a hidden employment program which increases, and encourages, the enlargement of the welfare state?

Anonymous said...

I would argue that the view of humankind represented by this statement identifies the political cutting line between modern liberals and conservatives perfectly:

"I believed (and still believe) in the goals of the program, which were to give poor people a life of dignity and a chance to achieve self sufficiency."

I am a conservative because I believe that people's dignity has nothing whatsoever to do with their wealth. (It may well be that there is some causation in the other direction, but let us put that aside.) Moreover, I believe that living off the money seized from others by the state reduces one's dignity rather than enhancing it.

The liberals who remain baffled by the insistence of working-class voters to prefer the party of tax cuts, despite the inevitable fact that the bulk of those tax cuts go to the "rich", do not understand something that these allegedly misguided voters DO understand. They want the money that they themselves earned, with dignity.

I am truly shocked by your cavalier embrace of such a narrowly materialistic view of human existence.

Anonymous said...

This is only to the poster above me. Duke is paying me a whooole lot of money to be here. Does this shame me and make me want to run and hide? Of course, only the rich should have access to good education.