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The Inevitability of Government
Ineptitude
Dr. Charles Ormsby
09/01/06
Before
discussing government ineptitude, I need to first state
that some governments are effective in achieving their
objectives. Those are the governments which are designed
to enslave and exploit their citizens —
dictatorships – and they do a damn good job of it.
No ineptitude there!
But I’m sure you knew that that was not the focus of
this discussion. Here we are talking about governments
that are designed by well-meaning, intelligent people who
sincerely seek to create a government that operates in
the best interest of their country’s citizenry. So
why do these governments always seem to perform so
poorly? The record of government ineptitude is so
consistent that it must be a reflection of some basic
underlying principles.
Are poor performance and the proliferation of unintended
consequences truly inevitable?
Can governments make sure the people’s resources are
fairly and equitably deployed to serve the best interests
of the public?
I hate being the bearer of bad news, but there is
probably no prospect for developing a magic elixir that
cures the routine fumbling and misdirection of
government. When government programs go awry, government
aficionados are quick to suggest: “If we had just
done things a little differently, this wouldn’t have
happened.” Sometimes it is a government panel, a new
agency, more regulation, more money, a new tax or tax
incentive, more staff, harsher penalties, more oversight,
etc. But, in fact, these would rarely have helped
and, in many cases, they would just have led to a
different bad result and often a worse result – if
not immediately, then in the fullness of time.
Not all readers will agree with the suggestion that fixes
are not possible, but, for now, I ask you to take a
wait-and-see attitude while we consider some of the
causes. When these causes are related to the government
failures we experience every day, a pattern of
inevitability may emerge that will discourage any
inclinations you have towards social engineering.
OK, what is it about the nature of government that leads,
nearly inevitably, to poor performance or outright
failure?
When we started, we limited the discussion to governments
designed to serve the best interest of the people. That
may be the first problem. Is there a “best interest”
of the people?
We all have different interests and different likes and
dislikes. In fact, our individual interests and
likes/dislikes change over time. In addition, we all have
different values and, if given the opportunity, would
trade one value for another in different proportions. If
that weren’t enough, we all have different
tolerances for risk and would be more or less inclined to
risk things we value for some given amount of gain.
And all of this is true even if you consider a single,
narrowly defined issue. The problem is vastly more
difficult for government when you consider that there are
millions of such issues … from cable TV regulation
to airline pilot certification to peanut butter purity
standards.
So, how can the government serve the “best interest”
of the people when there isn’t any single best
interest and millions of issues are in play?
Of course, for any single issue, the government could try
to discern the best interest as seen by some democratic
majority, or even try to discern the best interests of
several sub-majorities and then serve them all. But the
democratic process – even with representatives as
proxies for the individual citizens – is ill suited
to this objective. Try to do this for millions of issues
and failure is inevitable.
Cause #1: Government is much too blunt an instrument to
effectively reflect the needs or priorities of millions
of citizens when millions of value decisions need to be
made and adjusted over time for changing circumstances.
Think of a pick ax being used for eye surgery.
That would be bad enough, but it only scratches the
surface. Even if we reduced the number of issues to a few
thousand and decided that we would be satisfied if the
government could serve the best interest of the majority
of its citizens in each case, would it be able to achieve
this more modest objective? Unfortunately, government is
even ill suited to accomplish that inadequate objective.
Why? Because of the underlying imbalance of rewards and
costs that accompany special interest lobbying.
Consider a bill for a tax incentive to encourage
development of a new cancer drug. Allowing for a moment
that there is an optimum tax incentive that should be
enacted to benefit the average citizen (of course there
is no optimum level for all citizens, who are of
different ages and different genetic susceptibility to
the cancer in question), is there any likelihood that
government can determine or set this optimum level? Of
course not. The savings to the drug companies of an extra
five percent incentive could be millions while the cost
to the individual citizen may be a few cents. Who is
going to be wining and dining the congressmen and giving
donations to their re-election campaigns?
Cause #2: The benefits of most government programs are
concentrated on a few while the costs are spread over
many, leaving an imbalance in the pressures controlling
government decision-making. Note: In some cases this
effect is reversed. A substantial number of people may
benefit enough from a government policy to form a
powerful voting block, while the costs of the policy are
concentrated on a few who have insufficient political
muscle. Such is the case with rent control. While such
situations cause substantial harm – e.g., a
reduction in the building of rental units, housing
scarcities, and decay in the quality of pre-existing
housing – eventually the victim pool diminishes and
the policy must be reversed.
But what about biases in decision making originating not
from outside pressures, but from government employees
themselves? Consider a situation in which a new
regulation is “needed” and two alternative
regulations are considered. Which one will be picked if
the enactment of one provides better job security or
compensation possibilities for the regulator?
If cuts are required due to a budget shortfall, is a
decision maker more likely to cut himself or co-workers
or will he make cuts elsewhere – either personnel or
materials – even if those cuts are more harmful to
society at large? The answer, of course, is obvious. The
problem only gets worse when you consider that even if
there is no proximate gain, decision makers will learn to
benefit other decision makers who later can make
decisions that will help them in return.
Cause #3: Government employees will bias decisions to
benefit themselves or those that will later “return
the favor.”
Then there is the “Cover Your Ass” problem.
Everyone likes job security and people are rarely fired
if nothing big goes wrong. So the result is that
decisions are made to try to avoid anything big or highly
visible going wrong. This sounds like a good thing, but
it routinely leads to perverse consequences. The FDA has
been trying to avoid another “Thalidomide disaster”
(which affected approximately 1500 newborns) since the
drug-deformed babies emerged in the late 1950s. Tougher
testing and reporting requirements were established for
new drug introductions because of the Thalidomide
disaster.
The cost to society has been way out of proportion to the
original problem: long delays in the introduction of new
drugs … delays that have cost millions of lives. But
that is just the beginning. These regulations have raised
the cost of all new drugs dramatically — putting
them out of the reach of many — and led to many
drugs never being introduced. This is especially true of
drugs for diseases that are uncommon and therefore have
an insufficient patient market to justify the increased
testing costs. Wouldn’t someone dying of a rare
disease be happy to take a risk on a less thoroughly
tested drug than just kick the bucket with 100 percent
certainty?
This pattern repeats itself throughout government, from
drugs to food, to aircraft certification, to
environmental regulation. The costs are huge, but they
are mostly invisible because they consist of the absence
of goods, services, and benefits that would otherwise
have materialized - but never did.
Cause #4: The rewards of risk taking will not be
reflected in government decision making because the
rewards may either be invisible (lives that could have
been saved in our FDA example) or, since they do not
accrue to the regulator, they are outweighed by the risks
of job loss.
Finally, if we want to reward efficiency and
discourage inefficiency, we need to reward the former and
punish the latter. In government, this reward/punishment
pattern is absent at best, or, more often, reversed. If
you are inefficient — often requiring less effort
— you are given more resources to make up for your
inefficiency. If you are efficient – typically
requiring innovation and extra effort — your
resources are reduced. This is in stark contrast to a
market-driven process where inefficiency leads to less
business and possible extinction, while higher
efficiencies are rewarded with increased profits and an
expanded business.
Cause #5: Government typically rewards inefficiency and
punishes efficiency. Any one of these problems would be
grounds for serious concern regarding the ability of
government to properly manage anything. When you consider
that these problems operate in parallel, often
reinforcing each other, it is amazing that government
works at all. In dictatorships, these tendencies are
encouraged to ensure that privileges for the chosen few
are maximized. Eventually they implode unless the
collapse is avoided through terror.
In democracies, freedom of information laws, freedom of
the press, and freedom of speech place a cap on the gross
excesses that these problems engender. But even in open
societies, only the most newsworthy excesses are ever
addressed. A “minor problem,” like millions of
people dying due to excess regulation of new drugs, leads
to an occasional story in the elite press and then benign
neglect a few days later. The overall cost to society of
government ineptitude, inefficiency, excess regulation,
excess taxation, and perverse incentives is enormous. The
only solution to this is to recognize that the concept of
government is fundamentally ill suited to organizing the
affairs of mankind. Government must be restricted in its
scope to only those absolutely necessary functions that
no conceivable competitive private institution can
possibly address – like the military, the police,
and the courts. Historians might note that this is pretty
much what our Founding Fathers prescribed when they wrote
our federal Constitution.
A Libertarian slogan popularized by Massachusetts
Libertarian Carla Howell declares, “Small government
is beautiful.” She’s got a pretty good idea,
but I would amend that to say, “Small government is
just too damn big!”
Dr. Ormsby is a member of the North Andover School
Committee. He is a graduate of Cornell and has a
doctorate from MIT. If you have any questions or
comments, you can contact Dr. Ormsby via email: ccormsby@comcast.net
*Send your questions comments to ValleyPatriot@aol.com
The October, 2006
Edition of the Valley Patriot
The Valley Patriot is a Monthly
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All Contents (C) 2006, Valley Patriot, Inc.
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