Diagnostics and Therapeutics in Political Economy with Robert Higgs

This item by Robert Higgs addresses the sustained problem of pernicious governmental growth that remains largely independent of actual market demand.  This is a factor that is internal to the whole structure and is truly paracitic.

To understand just how easily this arises, if you are in charge of a small department, your administrative pay rank may well be say a two.  There are two ways to get to a three rank.  The hardest is to transfer to a larger unit losing skills and knowledge in the process and exposing yourself to real failure with new supervisors.  The second is to expand your department willy-nilly to that same level.   Doing that of course preservers local knowledge, but makes you less desirable for a lateral move.

Contraction means real job losses as well. The best solution in an organization like the government is in fact to reset wage rates to 80% of industry standard and insist half of hires come out of private industry.  That way all senior staff is rotating back and forth at least and no one imagines using government service as a royal road to best financial outcomes.

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Diagnostics and Therapeutics in Political Economy

Robert Higgs • Thursday October 15, 2009 4:27 PM PDT •

http://blog.independent.org/2009/10/15/diagnostics-and-therapeutics-in-political-economy/

Since the early 1980s, I have been lecturing on the growth of government to a wide variety of audiences. In academic seminars and workshops, professors typically ask questions about my explanatory framework, my evidence, alternative explanations, possible counterexamples, and so forth. But when I speak to a friendly lay audience, the first question is typically something along the lines of, “What can we do to turn this thing around?” Academic people, who are accustomed to discussing all sorts of political and economic developments, many of which are none too savory, usually have the ability to distance themselves from any revulsion they may feel about the matters under discussion and to concentrate on how one might best explain the events in question. In social science, “value freedom” is upheld as a standard for the analyst. Market-friendly nonacademic people, in contrast, are often surprised, and appalled, to discover how much the government has grown and many of the means by which political actors have enlarged it, and their immediate orientation is toward action to reverse what they perceive to be a pernicious development. Thus, they bring normative and programmatic concerns directly to the fore. Like Lenin, they demand to know, “What is to be done?”

Because I am often introduced as an authority on government growth, the lay audiences seem shocked and disappointed when I answer the query about how we can stop further government growth by saying that I don’t know or, worse, by saying that I don’t think we ― which is to say, those of us in the room and all other likeminded people ― can do anything significant to deflect the trend toward larger, more tyrannical government.

I often receive similar reactions when I post commentaries on the Internet. Thus, I recently posted a short essay called “Partisan Politics ― A Fool’s Game for the Masses,” and in response, one man wrote: “Quit whining and figure out something better if you’re so damn smart.” Another wrote: “Okay, Higgs. So what can one do to protect one’s person and family and aid in the country’s survival?” I commonly hear from people who find my description or analysis beside the point unless I have “an answer” or “a solution” to the problem under discussion. Higgs, they conclude, is “not constructive,” and therefore he does not deserve anyone’s time and attention.

Although I would be the last to assert that I have a claim on anyone’s time or attention, I believe that the solution-demanding response to my commentaries (or anyone else’s) betrays a confusion between diagnostics and therapeutics in political economy. The former focuses on finding the causes of a condition or development, the latter on prescribing measures by which the condition can be lessened or eliminated. This distinction is common in the medical profession, where some practitioners specialize in diagnosis and others in various kinds of therapy. In political economy, however, the two activities are often combined. In professional economics journals, countless articles have been published in which the author first lays out his “model,” sometimes presents empirical “tests” of some of its implications, and finally draws “policy conclusions” ― that is, unsolicited advice to government functionaries as to how they should employ their powers.

Lay people and professionals alike, however, need to appreciate two critical points. First, in social and economic affairs, one man’s problem may be another man’s solution. The growth of government belongs to this category. Many people are pleased when the government grows, whereas others are outraged. Still others, of course, have no concern one way or the other, so long as their personal ox is not being gored deeply. In short, the normative evaluation of a socioeconomic condition or development may vary greatly among the people involved in it.

Second, even if everyone agrees that a certain condition constitutes a problem, it still may have no generally acceptable solution. Because of the diversity of beliefs, values, and interests in the populace, whatever is done to create a “public good” ― that is, a condition that, if established at all, applies equally to everyone ― will displease some people. For example, everyone may value “national security” in the abstract, but if in its pursuit some people want the government to go to war against country X, whereas others want the government to steer clear of war with country X, then some people are bound to be dissatisfied, no matter what the government does. Issues of this kind have no generally acceptable solution, owing to uncertainties about the “production function” for certain public goods. One might imagine, of course, that one side persuades the other to change its beliefs, values, or preferences, but unless unanimous agreement is achieved ― an extremely unlikely eventuality ― a certain number of problems whose solutions are contentious will necessarily always remain.

Since the Great Depression, the American public has generally approved of an active, interventionist federal government. In a perceived crisis, most people want the government to “do something.” Of course, most politicians and government functionaries, for perfectly understandable self-serving reasons, are quite pleased to respond to such public demands for action ― after all, taking such action promises to butter their bread more thickly. Franklin D. Roosevelt enthusiastically supported an approach whereby the government would “take a method and try it; if it fails, admit it frankly and try another. But above all, try something.” Likewise, more recently, despite the great confusion that prevailed about the current recession’s causes and about the best means of moderating or reversing it, Barack Obama, soon after taking office, declared, “The time for talk is over. The time for action is now.” In both instances the president was presuming that successful therapy can be administered without a sound diagnosis. This presumption is foolish, however, if one’s interest lies not in mollifying a bewildered electorate, but in implementing a genuine remedy for the perceived problem.

Furthermore, in dealing with a “problem” such as the relentless growth of government, we must recognize that unlike the automobile mechanic who undertakes to repair a sputtering engine, we are attempting to alter the workings of a socio-economic process that has hundreds of millions of moving parts, each one with a mind of its own! It is hubristic ― a Hayekian “fatal conceit” ― to suppose that anyone can control this process in fine detail. The “man of system,” Adam Smith sagely observed, “is apt to be very wise in his own conceit.”


He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it.

I am not a “man of system” in the Smithian sense. For me to propose a “magic bullet” to stop the growth of government, as an oncologist might prescribe a certain drug to cure a particular type of cancer, would be ridiculous. Just as one may know a great deal about the origin and development of a particular type of tumor without knowing how to cure it, one may know a great deal about the growth of government without knowing how to stop it. Indeed, curing a cancer is a much simpler task.

Yet, one thing we do know: Many Americans now believe many things about their government that are false, and they expect much from the government that the rulers cannot provide. The public at large embraces myths about what the government can do, what it actually does, and how it goes about doing it. Only people enamored of such myths can support, for example, a gigantically expensive health-care “reform” at a time when the present value of the government’s promised future Social Security and Medicare benefits alone amounts to several times the current GDP. (I am disregarding here the interested parties who expect to reap short-run pillage from an intrinsically doomed system.) Until more people come to a more realistic, fact-based understanding of the government and the economy, little hope exists of tearing them away from their quasi-religious attachment to a government they view with misplaced reverence and unrealistic hopes. Lacking a true religious faith yet craving one, many Americans have turned to the state as a substitute god, endowed with the divine omnipotence required to shower the public with something for nothing in every department – free health care, free retirement security, free protection from hazardous consumer products and workplace accidents, free protection from the Islamic maniacs the U.S. government stirs up with its misadventures in the Muslim world, and so forth. If you take the government to be Santa Claus, you naturally want every day to be Christmas; and the bigger the Santa, the bigger his sack of goodies. This prevailing ideology constitutes probably the most critical obstacle to reductions in the government’s size, scope, and power. Getting rid of this ideology will be diabolically difficult, if possible at all.

Analysts of the political economy, such as yours truly, may have some capacity to open people’s eyes with regard to the government’s true nature and its actual operation. Such diagnostic work is a full-time job, however, so consumers of this analysis should not be surprised if a diagnostician cannot prescribe a sure-fire cure whenever he identifies, describes, or analyzes a problem. Moreover, consumers of opinion and analysis in political economy would be well served by developing a healthy skepticism toward all those who propose a simple cure for the growth of government ― flat tax, term limits, constitutional amendment, abolition of the Fed, you name it. The doctor with a panacea just might be a quack.