Mike Dunford has a post here responding to my recent rebuttal of his arguments. I think this is good for one more round, so I'll post some thoughts here and then await his reply; then I'll post some concluding thoughts after that and let him have the last word, since I started things.
1) Choice and value
I think the fundamental difference between my position and his can be found in his statement,“I find it difficult to agree that it is not logically possible to say that people benefit from something if they have no say over the matter.” After all, the idea that government should take my money away so that I can’t spend it on X, and force me instead to pay for Y, usually rests on some account of why it is “better” for me to be forced to buy Y.
But surely there are things that are “good” for us even though we don’t choose them: parents require their children to do things they don’t want to do, because they’re good for the kids, right? We’ll put aside the disturbing implication that Dunford thinks of American taxpayers as children who must be dictated to by a paternalistic government, and note instead that for rational adults, choice is a necessary element of value, in both the economic and moral sense.
Is education really a “clear benefit,” as Dunford says, so that it is good to force people to acquire it? No, not always. I enjoy education, but I would not be benefitted by being forced to give up my job and go back to school. A poor mother who has to earn a living for herself and her child would not be “benefitted” by being forced to attend classes in art appreciation. Nothing is a clear benefit in this sense; everything is subject to a cost-benefit analysis. Wealth is not always a “clear benefit”: it’s not a benefit to a monk who has taken a vow of poverty. Not even life is a “clear benefit”: it isn’t a benefit to the chronically ill man in permanent and incurable pain.
The point is, value—both moral value and economic value—is inherently personal; inherently agent-centered. It is not intrinsic. It must be chosen, and choice-worthy, to be a value. To force education on a man who needs all his time to work, or to force riches on a man who has chosen a life of poverty, or to force life on a man who would prefer to escape his pain through death—and to force a person to spend his earnings on Y instead of X is not doing that person a favor, and cannot be justified as humanitarian.*
Now, in economics, we often speak of things being “efficient” or “inefficient.” What that means is, whether that thing accomplishes a purpose with the least waste. But what’s the difference between “purpose” and “waste”? These terms make sense only in relationship to a person’s chosen values. Wealth, and life, and education can all be waste to a person, just as they might be purposes to another. There is no such thing as any economic decision being inherently or universally efficient: a thing is efficient (or good) only if it accomplishes a person’s chosen ends, and does so with the least of what he considers waste. Anything else is merely transferring utility from one person or group to another, on the pretense that we're doing a good thing. But of couse, government always thinks that its projects provide “clear benefits.” The Texas Supercollider: was that a “clear benefit”? Or was it taking money from people who would have chosen to spend it on X, and giving them a Supercollider they did not want, instead? The Romanian Palace of the People: was that a “clear benefit”? Or was it taking money form people who would have chosen to spend it on X, and giving them a giant ugly building instead?
Whenever government claims that it will take away your freedom to choose what to do with your earnings, and give you what it considers “clear benefits” instead, it is coercing you, and it simply cannot claim to be acting efficiently. The only mechanism we have for figuring out what goals people desire is by observing what they choose to do with their resources. If we deprive them of that choice, we can no longer sensibly speak about efficiently accomplishing those goals. Thus coercive government transfers are inherently inefficient; even if they coincidentally echo what a person would have chosen to do with his money, it would be more efficient to let him just make that decision.
2) The inherent inefficiency of government planning
This leads me to Dunford’s very brief dismissal of my crucial point about government waste. My point is not that government makes “mistakes”: my point is that government transfer payments are inherently wasteful. We can only judge whether something is wasteful by reference to what the person would have chosen to do with his money; but when we deprive him of that choice, calculations of efficiency become meaningless.
This is also my problem with using the word “investment” for government subsidies. Something is only a wise investment if it leads to results that the investor is seeking. Remember the movie Brewster’s Millions? In that movie, Brewster must get rid of a bunch of money as quickly as possible, but is repeatedly frustrated by the fact that things he invests money in end up making him more money instead. Those things were not wise investments for him (even though most people, who do want to make money, would be pleased with such investments). For Brewster, they are not wise—they are not values—they are inefficient.
The same is true of all government spending decisions. If I want to spend money on X, and government makes me buy Y instead, that is not a wise investment because I did not want Y. I wanted X. Even if Y is something that you prefer—something you think is “a clear benefit”—it is not a clear benefit to me. If it were, you could have just asked me for the money, instead of taking it. Thus nothing that you do with it can be described as economically efficient or a wise investment. It is inherently wasteful.
Now, in addition to that, there are the public choice problems I raised in my first post (that Dunford ignored). Government makes its decisions not based on what brings the biggest return for the payout, but on political considerations, which often have little to do with what the consumer actually wants. Those decisions are not just “mistakes”: they are inherently wasteful because they are not based on accomplishing the ends that people seek with their own money.
If people want to buy big cars, and government thinks they should buy small cars instead, government takes their money away and gives them small cars. The consumers made their decision based on what they needed and what they were willing to pay. But government overrides that decision, and makes its decision based on its own priorities: based on lobbying, on looking good in the press, getting credit for the vision thing, pleasing the UAW, and so forth. Thanks to the incentive structure, government is not capable of making decisions about resource use on the basis of what actual people really want to do with their money.
Now, Dunford asks at the end of his post for some reason why government is necessarily less capable of making wise decisions about subsidizing research than is private industry. The whole field of public choice economics, of which Dunford appears to be unaware, is dedicated to analyzing the necessary inefficiencies of government decision-making. It leads necessarily to waste, manipulation, and to decisions based on political considerations instead of efficient resource allocation. What does Dunford say in reply to this? He brushes it off with a single paragraph saying, yeah, yeah, government makes mistakes sometimes! For a man who asks for a theoretical explanation of why government decisionmaking is inherently inefficient, he seems quick to dismiss an entire field of economics as trivial!
3) Is the internet a great example of planting the seeds?
Government’s been redistributing wealth since God was an infant, so it’s hard to come up with a great example of an innovation in our lives that isn’t government-financed at least somewhere along the way. Dunford used the example of the Internet. I pointed out that it was actually private industry that made the Internet anything like what we look at today, but he says that this sort of innovation, delightful as it is, was only made possible by government seeding, as it were. This is, of course, non-disprovable. But we can approach disproving it by looking at other things government has invested in, where private industry has not been allowed. Until recently, space exploration was a good example. Government maintained a virtual monopoly over space exploration. And thus, forty years after we went to the moon...nothing. Space travel is still as much a pipe dream to most Americans as it ever was. Contrast that to railroad development (also, alas, something government was heavily involved in). Forty years after the railroad was introduced, railroads had revolutionized the lives of Americans—because of private industry.
I understand Dunford isn’t saying government should have a monopoly on research and technology; nor am I able to provide an example of a technological advance in which government has had no role. But I think that when you compare the historic record, it is clear that where government has been most deeply and persistently involved, innovation is slowest and the technology remains least accessible; and where government intervention has been minimal, as in the case of the Internet, private industry has made a bustling, vibrant, diverse world of innovation and accessibility.
What’s more, Dunford tried to use the Internet as an example of the necessity of government to fund innovation because private industry wouldn’t do it. He writes “No one company expended—or had to expend—the tremendous research and development funding required to develop the basic foundation of the internet.” But in fact private industry often develops basic, foundational technologies; it routinely performs research to develop new technological and scientific platforms for innovation and development. Sadly, given the nature of our mixed economy, there are no examples of this being done without some government intervention. But everything from the telephone to radio to television to the automobile to the airplane—these things have been developed overwhelmingly by private enterprise, doing research and development in fundamental ways without significant government intervention. Private industry invented MS-DOS and the GUI interface, both foundational technologies. The development of the airplane was done not only without government help, but in direct competition with the government, and that technology required significant scientific advances that were done by private industry. Look at what has been done with it today! The steam engine was developed almost independently of government intervention. Look what happened to it. The Xerox machine...well, this list could go on.
In short, you can always point to some predecessor technology and claim that it was the “real” foundation of some later discovery, and since government intervenes in so much today, it’s often possible to point to assert that in some way they were pioneered by government research. But private industry not only develops established technologies better than government, but it very frequently does fundamental research.
And, again, if we put the Internet on the plus side for government, we must put in the minus side the mountain of wasteful research that government has invested in—and we cannot just brush them off as “mistakes.”
4) Public goods
This leads into the issue of public goods. I think it is pretty well established that private industry can and does provide public goods. But as Tyler Cowen observes,
The imperfections of market solutions to public-goods problems must be weighed against the imperfections of government solutions. Governments rely on bureaucracy, respond to poorly informed voters, and have weak incentives to serve consumers. Therefore they produce inefficiently. Furthermore, politicians may supply public “goods” in a manner to serve their own interests rather than the interests of the public; examples of wasteful government spending and pork barrel projects are legion. Government often creates a problem of “forced riders” by compelling persons to support projects they do not desire. Private means of avoiding or transforming public-goods problems, when available, are usually more efficient than governmental solutions.
By the way, I’m genuinely puzzled by Dunford’s assertion that private foundations often make funds available “only for certain narrow purposes.” Does he imagine that government doesn’t do this? And does he imagine that government shouldn’t do this?—that government should hand out money to scientists with no strings attached to do whatever they like with it?
5) The environment
I pointed out that private industry spends massive amounts of time and money researching the environmental effects of their activities. To this he responds, “this is a request that I bet my life - and those of my family - on the free market,” something he’s unwilling to do. That’s unfortunate (and untrue) since in fact weach of us “bet our lives on the free market” every day, and come out ahead because of it. We bet our lives on privately run airlines and privately-built automobiles and privately built elevators and privately built stoves and refrigerators all the time. We bet our lives on privately-run hospitals sometimes. In all these cases, we’re more confident with them than we are with government-run institutions. Would you rather be in a VA hospital? Would you prefer to drive a car built by the government?
And what about the environment? There was once a country where all decisions about environmental and industrial policy were resolved by government: the USSR. And it turns out that the USSR ended up being the most horrifyingly polluted place on the earth. Why? Because consumers and property owners had no say: decisions were made for them by people who claimed to “know better” what the people “clearly benefitted” them—and who brushed off government’s failures as mere “mistakes.” I am not accusing Dunford of being a communist or anything; my point is, the more government gets involved, the more these problems crop up, and the worse they are. This is strong evidence supporting the theoretical account I have provided for why government intervention is a bad idea.
Dunford asserts—without any factual substantiation—that where an entire industry, instead of a single company, might be responsible for some harm, those industries won’t spend money researching those harms or possible solutions. In fact, this is not true.* There are all sorts of environmental research organizations funded by private industry and private donors, and they research effects on the environment in general. The Cayman Institute. The Health Effects Institute. Here’s a list of private foundations devoted just to restoring wetlands. Chrysler is even funding a program to absorb oil spills with trees.
Now, maybe you believe that this research is untrustworthy, because it is skewed by corporate donations. If so, then why isn’t there reason to believe it’s skewed by government funding, or by the donations of leftist groups?
Of course a free market would not result in an absolutely clean environment. In a free society, there would be dirty places. But that’s not a bad thing: people don’t want an absolutely clean environment. They want the cleanest environment they can afford. And the best way for determining what people can afford is not through government mandate—it’s through private economic decision making in a free market.
Finally, Dunford thinks he can respond to my statement that private industry takes great steps to ensure the safety of its products by point to “a single word: tobacco.” But tobacco was until very recently heavily subsidized by government! Why? Was that just a “mistake”? No. It was our old friend, rent-seeking, that destroys the pretense that government is capable of making decisions about what are and are not “clear benefits” for us.
But of course, Dunford's point is that the tobacco industry didn't try to come up with safe products. That is not exactly true, since the tobacco industry did try to find some technologies for improving the safety of cigarettes, such as low tar and filtered cigarettes. Minor improvements at best, but they indicate that in the free market, even industries that sell poison are pressured to come up with safer poisons! And , of course, for every example like tobacco, there are tons of examples such as airplanes, bicycles, cars, chainsaws, glasses, dentures—all of which are designed for increased safely by private industry. Obviously government regulates these products—but the real reason private industry makes them safe is because they do not get rich by killing people. The tobacco industry tried to do what, and what happened? Well, the government stepped in and gave tobacco companies a permanent monopoly so that they would not go out of business!
But—that, too, was no doubt just a “mistake.”
The question is not whether private industry is made up of angels or government made up of devils. The question is, what are the relevant incentives? Does government have an incentive to provide environmental safety? Not really—no more than it has an incentive to provide airline safety. It has not done the latter, and it hasn’t really done the former. Its real incentive is to make us think it is doing something so it can get more power. Its actions in the environmental arena are frequently clumsy, one-size-fits-all “solutions” or outright political deals like the Tobacco Settlement. Why? Because of the incentives.
Private industry, too, faces incentives. Its incentives are, to make money in the market. It does that in most cases by selling us things we want at prices we are willing to pay. If we are unhappy with what we get, we can shop elsewhere. It can try to get money by fraud, but in the long run, fraud doesn’t pay—because other companies are in the business of selling people the truth. That’s what’s great about competition.
But the government? You can’t compete with it. You can’t refuse to pay it. You can’t shop somewhere else. You can’t fire it. You can’t sue it. You can’t see what it’s thinking or call up its CEO. Why should anyone think it’s going to make wiser decisions than private industry?
Oh, and the Roswell Park Cancer Institute? One of the leaders in tobacco research? Funded by private industry.
6) Showing government is necessarily worse
Dunford says that he wants me to show that government funding of science is “necessarily worse” than private funding of research. I already done that. I have shown that there are systematic, theory-driven problems including:
- The immorality of taking away my earnings to pay for something you want;
- The lack of constitutional authority for spending money on scientific research;
- The problem of incentives—i.e., public choice problems;
- The fact that, given the personal nature of economic value, government funding is inherently inefficient;
- The fact that only through voluntary buying and selling in a free market can people make choices about the efficient use of resources and weigh the costs and benefits of things like environmental protection and consumer safety policies;
- The fact that government funding necessarily has strings attached that compromise scientific integrity and independence;
- The fact that government uses scientific advancement as a cover for its projects;
- The fact that private industry provides public goods—and more effectively balances that with other economic needs;
- The fact that private industry has a long history of successfully funding solid scientific research, and a breathtaking history of technological innovation and success;
- The fact that the more government gets involved, the worse things get.
These are not just observations, they are explanations of systemic problems with government funding. It’s not that government sometimes makes mistakes: it’s that given the structure of economic incentives, government intervention in science is inherently wasteful, inherently subject to political pressures and manipulation, inherently incapable of reaching the ends consumers would haev preferred. I’ve provided, not a list of complaints about specific projects, but an argument resting on economic laws and supported by strong theoretical and systematic explanations. That is to say, I’ve shown that government subsidies are necessarily worse than private funding.
*--The parent-child example does not disprove this. When a parent requires a child to do Y, the parent does so on the presumption that the child really would want Y, if the child were capable of thinking about the future the way a mature adult does. In other words, the parent-child example does not undermine the proposition that choice is a necessary element of value, because it is just an example of imputed choice. The parent is presuming that the child would choose Y. The choice is made for the child only because of his incapacity to think about the future, and he retains the right to repudiate that choice later. The relationship between parents and children is not a helpful analogy in this discussion,but it does show that even there, the parent is not requiring a child to do something in direct contradiction to the child’s desires, and calling it good, which is what is happening in the context of government subsidies.
**–Also, under tort law in California (and I assume elsewhere), private industries can be held liable for such harms on a “proportion of the market” theory which allocates damages based on the size of the company at issue. So, again, tort law is capable of resolving these problems.
