Decades ago, I bought Martin Mayer's irritable little classic, Today and Tomorrow in America, and have been learning from it ever since. Tonight, I'd like to share just one lesson, but a fundamentally important lesson, from that little book.
The great advantage of decision-making in an economic market is that markets automatically, routinely force the recognition of error. Presumably, computers will someday make it possible for a bureaucratic society to recognize and correct mistakes; but this presumption is likely to remain just that, because bureaucracies are fundamentally motivated by fear of the discovery of error. . . . Keynes once observed that man is rarely so harmlessly occupied as when making money, but the values of market discipline are greater than that: greed is the cleanest of human vices, the one most easily rebuked by reality. (pp. 36-37)
Anyone who has made any investments can recognize the truth of the first sentence; anyone who has dealt with bureaucracies can recognize the truth of the second.
Or to put it in a way that engineers might like, markets have powerful feedback mechanisms; bureaucracies have weak and often defective feedback mechanisms.
Can recognize, but may not. You do not have to look far to find politicians who are certain that they can erect immense new bureaucracies which will somehow cure the problems caused by earlier, somewhat smaller, bureaucracies. That the new bureaucracies, or sometimes the old ones, slightly revised, will have the same old problems, that they will bury failures and fail to reward successes, does not occur to these politicians. Or if it does, the politicians think the policy changes (or, cynics might say, the power they gain) from establishing those bureaucracies makes the cost of those inherent defects acceptable.
For some years, I have thought that we should, where we can, use market mechanisms to achieve social goals. The preceding sentence is almost bad enough to have come from a bureaucracy; let me attempt to save it with an example. For decades, American politicians worried about housing the poor, and tried many experiments, including building massive housing projects, projects that quickly became terrible traps for their occupants. In the last two decades, we have begun to move, more and more, to a market solution, to giving the poor rent vouchers which they can use to buy their own housing. The results, though not perfect (unlike other human endeavors), have been far better.
Not every social problem has a good market-based solution. We know a little about how to use markets to destroy families; we know almost nothing about how to use markets to build families.
But that doesn't mean we can't use them in many areas, and that we shouldn't fear any program that requires an immense bureaucracy. Bureaucracies are sometimes necessary, but we should always consider them guilty until proven innocent.
Cross posted at Jim Miller on Politics.
(Immediately after making that argument, Mayer describes, at some length, the many defects of markets, but that's a lesson for another day, perhaps sometime next week.)
Posted by Jim Miller at December 14, 2009 06:09 PM | Email ThisI would disagree with this conclusion that the results have been "far better" in the last two decades. One need only look at the black family unit and how it has fundamentally changed for the worse under the great society programs ushered in by Johnson. This was not the case prior to these programs existence. Now, there are 7 in 10 out of wedlock births, an atrocious record number of abortions occur within this community and the cycle of learned helplessness has only metastasized. When these bureacratic machines are the ones providing the safety net, some are more prone to mistake that for a hammock. Until people are moved to become more independent from these programs, we will not see these numbers decrease, but increase in size and proportion. FWIW, It isn't much better among the lower socio-economic classes of other races either.
Posted by: Rick D. on December 15, 2009 07:22 AM"I would disagree with this conclusion that the results have been "far better" in the last two decades. One need only look at the black family unit and how it has fundamentally changed for the worse under the great society programs ushered in by Johnson."
I'm guessing you were educated here in Washington. The last 2 decades would be 1989 to the present. If memory serves me correctly, President Johnson served somewhat earlier - like the 60's. That was the period during which all the social experiments that Jim is refering to took place. Newer ideas and programs put in place since 1990 have helped but as you say, people are going to have to become independent from these programs before things really get better.
Posted by: Jay on December 15, 2009 11:04 AMSo, how does this relate to what's happening in our society as we carom off our ideals of freedom and liberty toward the oppressive controls of collectivism? Right to work laws fade as union leadership buys political will enabling forced membership. Union leadership then sucks the life blood out of businesses that they are dependent upon for survival. Unions infiltrate the public sector where they find the traditional market based corrective measures that preserve unhealthy growth do not exist. There is no greater example of the detrimental effects of union power on the public sector than in public education. All attempts to explore ways in which education efficiencies might be improved are actively fought to preserve the power of the union. Government employees provide no products and little service yet their average salaries exceed the product producing and growth sustaining private sector.
Congress does nothing to control bureaucracy. They pass complex laws with abstract objectives, without knowing contents, without fully understanding implications, and with active suppression of dissenting views. They create slush funds that are used to buy influence, enable kickbacks to campaigns, and/or strengthen political power. Politics is bribery, extortion, deceit and deception. Political power is elevated above pubic interest. Political parties compromise national interest to attain or maintain power. Complex laws can easily be broken into separate sections capable of being voted on individually. Instead, party leaders force incorporation and combination of less than desirable elements to imbed a difficult to retract ideology within objectives with good intentions. As regulatory authority is delegated to subordinate bureaucracies, seeds of unmanageable bureaucratic growth are sown like weeds in a garden.
Malignant banking and investment bureaucracies have grown so large as to make politicians believe that they are too large to fail. They are subsidized and fed so their blood sucking tentacles can protrude ever further into every aspect of our economic structure. Antitrust laws are ignored as large banks and institutions merge, acquire and consume their competition. Other segments of industry are similarly treated, examples being software, aerospace, communication, broadcast and paper media, etc.
Local governments are not immune from bureaucratic perils. Zoning ordinances provide all the power necessary for growth management, but local bureaucracies want ever more control. Powerful development interests buy their way around zoning restrictions thus defeating growth management plans. Planning agencies are created to regulate land use then subsidies are offered to encourage preferred use policies. As land owners are seduced into acceptance of subsidized activities they lose aspects of property rights. Critical area ordinances are passed to further restrict land use, but waivers are then offered so land owners with power and money can buy their way around restrictions. State legislators pass laws enabling local government regulation thus encouraging increased bureaucratic growth. Tax revenues intended for education, protection and growth enabling infrastructure are diverted to ever growing management infrastructure.
Children are raised to grow from dependency upon their family to become independent and self sufficient adults. They are taught to be proud of their accomplishments attained through honesty and hard work, and of their independence. The government comes along and tries to convince people they should give up their independence and rely on a collective structure to enhance their quality of life. Where participation in collectives should be discretionary, government finds discretion defeats collective objectives. Freedoms are compromised with every mandated participation.
Posted by: Geoff on December 15, 2009 11:49 AMYes, I'm aware the last two decades are from 1989 and that Johnson served in the early to mid 1960's. Thanks for stating the obvious. If you believe the family unit has improved over the past 2 decades in contrast to, say, the 1950's, then you would be mistaken. That is what I was saying. The programs that liberals like Johnson instituted to help the black community only contributed to its degradation 40+ years later. From rampant absenteeism by their fathers, high crime rate, high incarceration rate, cyclic gang violence, education is discouraged, high unemployment, generational dependence on welfare handouts, and probably most of all, little to no "leadership" in the community. These have all contributed to its decline.
If things in these communities have gotten better, rather than worse in the last 2 decades, I have failed to see it.
Thanks, Jim, great post.
Hadn't heard of the book, I'll put it on my reading list.
You note that markets give instant feedback, and bureaucracies don't, I immediately thought of BIOFUELS like ethanol.
The market had it to kick around since the late 1800s and never did anything with it: markets realized intuitively that it used way too much land.
Now bureaucracies have it and are running with it. And even as folks begin to realize it uses too much land, the massive mandates remain in bureaucratic concrete.
On another anti-bureaucracy front today, one feeble note of hope for me as a left conservative: HOWARD DEAN came out against the healthcare bill, calling it a Bailout for health insurance industry.
I'm always hoping bad legislation, like this and cap & trade, can be stopped by a coalition that unites elements of left and right puritans against the corrupt deal-making middle--(that last description works regardless of whih side you're looking in from.)
Cheers,
new left conservative
Posted by: new left conservative on December 16, 2009 04:50 PM+2 for trying
- Infinity for factual integrity.
Jim, 'far better'? Than what?!?
You can find NO DATA to back up your premise?
Or maybe facts and data just don't matter?
The topic is a good one.
The housing focus could be a good one.
Is it really SO hard to do the analysis?
Between the lame posts, the lame topics, and the exceedingly lame moderation of the peanut gallery wingnut commenters there is unfortunately little point of coming here. Sadly.
You have a huge opportunity to advance via debate in this forum, yet...
:(
Posted by: MikeBoyScout on December 17, 2009 06:17 PM...and yet Mike BS has never posted on the public section of Sound Politics where he can post on any topic he chooses. But then, like most liberals, he finds it much easier to just piss and moan rather than put his money where his mouth is. I challenge liberals like Mike BS to defend the era of Johnson's "great society" programs and show me where this has benefited us some 40+ years later with actual facts and figures.
Bet you can't.
Posted by: Rick D. on December 17, 2009 08:58 PM