Government Intervention

[Surlethe]

I'm arguing with a friend regarding government intervention, and I was wondering what y'all's thoughts are regarding his argument.

So here's my thinking. Let's suppose we have a macro-scale problem that we can see will continue to get worse, but we're not exactly sure how to fix it. We can think of several examples of this either currently or throughout history: the current fuel crisis, Medicare, Social Security, racism, the Malthusian view, etc. There are several proposed solutions at hand, and we only have the resources to do one, or at best maybe start one and switch to another after 20% completion.

I kind of liken it to a freakish economic world where you have a small loan outstanding which is growing with interest. You can't pay it all off right now, but there are several risky* investment choices which may allow you to pay it back at some future date when your investment grows to meet the value of the loan. Here's the catch: you can only pick one investment, and some of them will fail to provide you with the return needed to pay off your loan. How do you pick?

I think most of the problems I listed above can be fit into something like this model, so I'll stay in general terms. There first is the problem of quickly and correctly picking the alternative to select. This itself will likely require time, money, and some of the best talent the country/city/world has to offer. You either have to force this talent (in economics, "human capital") to do your bidding, or you have to pay them enough to overcome their opportunity cost at whatever else they were doing. While this is a small overall cost in the process, the firms or universities that these professionals were working for beforehand will probably take offense at their star player being taken away. Again, this may be small potatoes, but realize that you're pissing people off from the start here.

Let's assume that this cohort of experts can pick with a high degree of certainty the correct choice. I'd also throw in there that if you choose less-qualified experts, the degree of certainty of the choice goes down. In an ideal world, the government could pick this consortium with perfect accuracy, the choices would be accepted easily, and they could get to work earning appropriate wages (which would likely be high) for their time. Then the government would take their findings, implement them, and the problem would be resolved before it got too large. However, we don't live in an ideal world.

Here's what I see more likely to happen: (a) The government will pick a less-qualified group of experts based on political motivations and (b) the recommendation given will be altered before put into practice.

Maybe all of the best experts are known to support solution X which will harm one political party far more than the other. Maybe the political party in power has some favors to repay to some of their own experts and so is less likely to consider others. Whatever the reason, much like nominations for Supreme Court justices, the process will be messy.

Once the report is in the hands of the government officials, there is also the problem of putting it into practice. Again, in an ideal world this is not a problem, but in our political system I think it becomes a vast problem. Representative A wants this provision included to present his constituents, and Senator B wants that provision included to protect her state's rights, and Representative C wants to make sure this industry (whose lobby gives him significant money for campaigns) isn't harmed too much in the process. When all is said and done, the result looks about as much like the proposed solution as a Yugo looks like a Ferrari. Then there are further complications as the various enforcement agencies (IRS, DOL, DOE, etc) have to come up with regulations and rules about how to actually enforce what Congress just put into words. Oh, and if they get it too far wrong then a good court case will snag the whole process for years, so they take their sweet time making these regs.

Cynical? Yes. However, I think we also have examples of that happening constantly. Follow a large bill (one with a lot of attention) through the process and watch what happens. (Aside: I've been privy to it with some technical corrections to the Pension Protection Act of 2006. These are corrections which are generally silly and correct things that should have been written that way to begin with. They would make my life as a pension actuary much more straightforward. However, because Congress keeps debating one point and/or adding riders onto the bill, it's been stalled for 10+ months now and likely won't be taken up until after the summer recess. Joy.)

Then let's fast forward a few years. The mangled solution has been put into practice and some of the problem is remedied, but it's not all gone. One side blames the other and there's a swing in the political power as a result. Then that side puts a few corrections on the implementation, declares it fixed, and leaves it alone. Repeat several times and I think you get something as useful and clear as the US tax code.

You can see why I'm not in favor of large government intervention. I think the whole system is too messed up to allow good ideas to come to fruition. Too many people have too much at stake (a whole career for a young politician) to let it go through without making their mark (helpful or not) on the idea. Then the good idea isn't so good anymore.

I see your criticism of the market view and agree that it is harsh as well. In that world, everyone works for the solution, there are a multitude of solutions, many fail and only a few succeed. There is pain while going through the process, and failures are a given rather than a choice. It's like investing in a fund of all the investments from my freak economic world in the second paragraph. However, I prefer this way because at long last, the solution will come out through the market. I do not have such faith in the government. I view Social Security, for example, as a large mistake which is 80 years in correcting, and it'll probably be another 60 before it fully dies. It was a problem back in its day, the solution was made, and has been mangled ever since.

I think that should give you enough to respond to. Your turn.

[Darth Wong]

So here's my thinking. Let's suppose we have a macro-scale problem that we can see will continue to get worse, but we're not exactly sure how to fix it. We can think of several examples of this either currently or throughout history: the current fuel crisis, Medicare, Social Security, racism, the Malthusian view, etc. There are several proposed solutions at hand, and we only have the resources to do one, or at best maybe start one and switch to another after 20% completion.

I kind of liken it to a freakish economic world where you have a small loan outstanding which is growing with interest. You can't pay it all off right now, but there are several risky* investment choices which may allow you to pay it back at some future date when your investment grows to meet the value of the loan. Here's the catch: you can only pick one investment, and some of them will fail to provide you with the return needed to pay off your loan. How do you pick?

I think most of the problems I listed above can be fit into something like this model, so I'll stay in general terms. There first is the problem of quickly and correctly picking the alternative to select. This itself will likely require time, money, and some of the best talent the country/city/world has to offer. You either have to force this talent (in economics, "human capital") to do your bidding, or you have to pay them enough to overcome their opportunity cost at whatever else they were doing. While this is a small overall cost in the process, the firms or universities that these professionals were working for beforehand will probably take offense at their star player being taken away. Again, this may be small potatoes, but realize that you're pissing people off from the start here.

Let's assume that this cohort of experts can pick with a high degree of certainty the correct choice. I'd also throw in there that if you choose less-qualified experts, the degree of certainty of the choice goes down. In an ideal world, the government could pick this consortium with perfect accuracy, the choices would be accepted easily, and they could get to work earning appropriate wages (which would likely be high) for their time. Then the government would take their findings, implement them, and the problem would be resolved before it got too large. However, we don't live in an ideal world.

That's an awful lot of words for a statement which basically boils down to "Let's say we have a problem and we need to hire the best people to fix it. And let's go out on a limb and say that reality is not perfect".

Here's what I see more likely to happen: (a) The government will pick a less-qualified group of experts based on political motivations and (b) the recommendation given will be altered before put into practice.

Obviously, this guy has never had a job. This happens in ANY organization, public or private. Plans are repeatedly altered. Decisions are made for the wrong reasons. But at least the general goal is to solve the problem; a private business has no interest whatsoever in solving social problems. Even a corrupted attempt at fixing a problem is better than a complete disregard for the problem, is it not?

Maybe all of the best experts are known to support solution X which will harm one political party far more than the other. Maybe the political party in power has some favors to repay to some of their own experts and so is less likely to consider others. Whatever the reason, much like nominations for Supreme Court justices, the process will be messy.

See above. Anyone can point out that the process is not perfect. But at least it is an attempt, which is more than I can say for private industry. Private industry has NO interest or intention whatsoever to solve social problems.

Once the report is in the hands of the government officials, there is also the problem of putting it into practice. Again, in an ideal world this is not a problem, but in our political system I think it becomes a vast problem. Representative A wants this provision included to present his constituents, and Senator B wants that provision included to protect her state's rights, and Representative C wants to make sure this industry (whose lobby gives him significant money for campaigns) isn't harmed too much in the process. When all is said and done, the result looks about as much like the proposed solution as a Yugo looks like a Ferrari. Then there are further complications as the various enforcement agencies (IRS, DOL, DOE, etc) have to come up with regulations and rules about how to actually enforce what Congress just put into words. Oh, and if they get it too far wrong then a good court case will snag the whole process for years, so they take their sweet time making these regs.

Inter-departmental bickering and turf wars are the exclusive province of government now? Once again, this guy demonstrates that he has never had a job.

Cynical? Yes. However, I think we also have examples of that happening constantly. Follow a large bill (one with a lot of attention) through the process and watch what happens. (Aside: I've been privy to it with some technical corrections to the Pension Protection Act of 2006. These are corrections which are generally silly and correct things that should have been written that way to begin with. They would make my life as a pension actuary much more straightforward. However, because Congress keeps debating one point and/or adding riders onto the bill, it's been stalled for 10+ months now and likely won't be taken up until after the summer recess. Joy.)

And how does that compare to the stunning progress of private industry's unilateral attempts to solve major social issues?

Then let's fast forward a few years. The mangled solution has been put into practice and some of the problem is remedied, but it's not all gone. One side blames the other and there's a swing in the political power as a result. Then that side puts a few corrections on the implementation, declares it fixed, and leaves it alone. Repeat several times and I think you get something as useful and clear as the US tax code.

Or you could leave it to private industry, which would not make any attempt whatsoever to solve the problem, and would instead make the problem WORSE while enriching its shareholder and executives, until some kind of massive collapse occurs and they run to the government demanding handouts. Oops, that already happened in the financial markets.

You can see why I'm not in favor of large government intervention. I think the whole system is too messed up to allow good ideas to come to fruition. Too many people have too much at stake (a whole career for a young politician) to let it go through without making their mark (helpful or not) on the idea. Then the good idea isn't so good anymore.

All this idiot has proven is that government intervention is not PERFECT. He has utterly failed to propose any alternative mechanism through which social problems would be solved, since private industry has demonstrated repeatedly that it will not even try.

I see your criticism of the market view and agree that it is harsh as well. In that world, everyone works for the solution, there are a multitude of solutions, many fail and only a few succeed. There is pain while going through the process, and failures are a given rather than a choice. It's like investing in a fund of all the investments from my freak economic world in the second paragraph. However, I prefer this way because at long last, the solution will come out through the market. I do not have such faith in the government. I view Social Security, for example, as a large mistake which is 80 years in correcting, and it'll probably be another 60 before it fully dies. It was a problem back in its day, the solution was made, and has been mangled ever since.

He's full of shit. He claims that in private industry, everyone works for the solution. But when the problem is a social one, NO ONE in private industry is working for the solution. Why should they? It's not their job. Their job is to make money for themselves, not to solve social problems. This fact is so blindingly obvious that I can't believe anyone would be stupid enough to make an argument which is so clearly ignorant of it.

Private industry is good at making a better, cheaper optical mouse. But when it comes to doing things for the greater social benefit, there is simply no workable alternative to government intervention.

[Lusankya]

To be honest, he sounds a lot like volleyball: he states that government is unable to solve the problem fully (without supporting evidence, I might add), but then he does absolutely nothing to demonstrate that the free market (or whatever) will do any more to solve the problem.

He makes several unsupported (and incorrect) assumptions:

1) The government is completely incompetent. (This makes me think he's American, btw - you should point him in the direction of elsewhere and show him how governments have implemented some quite competent and workable solutions to problems.)

2) The government will only attempt to implement one solution. (not necessarily true - although they may focus on some solutions more than others)

3) Private enterprise will have the wherewithal to implement all of the possible solutions. (False - the government has much greater resources than private enterprise)

4) Private enterprise will have the motivation to solve the problem. (False - many problems, such as overfishing and environmental destruction are actually caused in large part by private enterprise. Because it makes them money.)

5) That there is only one possible 'correct' solution. (False, clearly - there may be plenty of solutions that result in a variety of positive outcomes.)

6) That government intervention precludes a market solution. (False. This argument doesn't even hold up in regard to Communist economic systems. What makes him think that it would be true in a capitalist framework?)

Also, his idea that things take yonks to work out in Parliament is also more a criticism of the American system than government in general:

Cynical? Yes. However, I think we also have examples of that happening constantly. Follow a large bill (one with a lot of attention) through the process and watch what happens. (Aside: I've been privy to it with some technical corrections to the Pension Protection Act of 2006. These are corrections which are generally silly and correct things that should have been written that way to begin with. They would make my life as a pension actuary much more straightforward. However, because Congress keeps debating one point and/or adding riders onto the bill, it's been stalled for 10+ months now and likely won't be taken up until after the summer recess. Joy.)

If the House of Representatives passes any proposed law, and the Senate rejects or fails to pass it, or passes it with amendments to which the House of Representatives will not agree, and if after an interval of three months the House of Representatives, in the same or the next session, again passes the proposed law with or without any amendments which have been made, suggested, or agreed to by the Senate, and the Senate rejects or fails to pass it, or passes it with amendments to which the House of Representatives will not agree, the Governor-General may dissolve the Senate and the House of Representatives simultaneously. But such dissolution shall not take place within six months before the date of the expiry of the House of Representatives by effluxion of time.

As you can see, there are places which do have systems in place to ensure that bills aren't held up in a perpetual deadlock. Of course, this doesn't happen that often anyway, since the political parties in Australia, at least, are a lot more disciplined and cohesive than they are in America.

Really, you should get him to research some other countries' political systems, because it would seem that many of his views are coloured by his perception that all governments have a setup which is similar to the American system.

[CaptainZoidberg]

Just as a general comment, I think he's going to say at some point that when companies all try to increase their profits social issues are going to be solved as a side-effect.

I personally would use something like the air pollution as a counter to this. Each company can contribute to the world's air pollution a small amount, but because the pollution is dispersed over a wide area, the actual polluter isn't directly impacted by their own pollution. In such a case, the profit interests of the company (polluting) would run completely counter to the interests of the collective (not polluting).

[Darth Wong]

Just as a general comment, I think he's going to say at some point that when companies all try to increase their profits social issues are going to be solved as a side-effect.

I personally would use something like the air pollution as a counter to this. Each company can contribute to the world's air pollution a small amount, but because the pollution is dispersed over a wide area, the actual polluter isn't directly impacted by their own pollution. In such a case, the profit interests of the company (polluting) would run completely counter to the interests of the collective (not polluting).

The first response should be to simply deny this leap in logic and demand that he justify it, rather than treating it as an argument which is valid enough to require that sort of rebuttal. You should not let yourself get on the defensive, when he's throwing nothing but hot air.

This kind of argument basically presumes that private industry will solve social problems accidentally while trying to make profit, and that they will actually do this consistently and reliably, for all social problems. "Absurd" doesn't begin to describe it.