Public Policy Inefficiencies Can Be a Feature, Not a Bug


Something of a theme emerged on Twitter, this morning — namely, the tendency of people who set or discuss public policy to isolate issues from the rest of society and the predictable reactions of others.  Thus arise unintended consequences that should have been entirely predictable.  Perhaps more importantly, viewing policy this way can tend to direct us away from underlying problems.

One example came from my friend Andrew Morse, who would like a “wholesale trade” of America’s human services programs and progressive income tax regime for a unified basic income (UBI) and a value added tax (VAT).  Inasmuch as both of these policies have been kicking around among people whose thinking I generally trust and admire, I’ve given them some thought, finding that I keep coming back to the same problem.

As I put it metaphorically to Andrew, one can reroute a stream by piling up boulders in front of it or by digging downstream, but these sorts of policies are more like attempting to dig more deeply upstream.

In particular, take the VAT.  One reason economists like the idea is that it raises money with reduced disruption to the economy, in part because it would be so broad.  In principle, the notion of a non-disruptive tax is extremely desirable.  The problem is that a less disruptive, broader tax would be easier to raise over time.  Even if the “wholesale trade” were a great deal at the start, it would only be a matter of time until the benefits were swamped.

In short, we would have to find some way to make permanent the principles that make the VAT more desirable… some way to control the inevitable growth of government before removing the trip wires that a more-disruptive tax naturally creates in the political field.  Put differently, the disruptions arguably have their benefits; just as you get light by putting resistance in a circuit, the inefficiencies of taxes create push-back against them.

A second example comes from a Valley Breeze article by Ethan Shorey, to which the Providence Journal’s Patrick Anderson linked, writing, “Cumberland to children: You’re not welcome here.”  From Shorey’s article:

Addressing a concern from some town officials on rising school enrollments, the board limited the residential units in the building to one bedroom only.

Scott Partington, attorney for Macari, was open to the limit on residential units in part because he understands that the Town Council will also be looking for the same limit on the number of bedrooms, said Jonathan Stevens, the town’s director of planning and community development.

Put aside the question of whether it indicates a healthy use of government to stop a municipality from growing, especially by blocking children who will think of that community as their home.

The aversion to children shows that — eventually — push-back will emerge when we make it too expensive to educate children at the public expense.  You can use state law to lock in every budget increase.  You can tilt the playing field in favor of labor unions to ensure that school employees control the political process governing their workplaces.  But eventually the people paying the bill will find some way to control costs, even if that means keeping out children.

Because of the incentives, this solution points in precisely the wrong direction.  Instead, the impulse should be taken as a red flag that something is wrong with the way things are currently being done and incentive to change it.  Lower the cost and give families more options, and taxpayers won’t pressure politicians to mitigate taxes by blocking children.

And most of all, try not to implement policies that remove visible boundaries for the misuse of government.

  • Rhett Hardwick

    Here I go again, one of my favorite lectures, “Zoning”. Zoning is much newer than most would think, about 70 years in most locales. Since it restricted use of property, it was challenged as a “taking” and therefore compensable. The courts denied that view, saying it was legitimate under the “police powers” for “public safety”. Side yard requirements reduced spread of fire, lot sizes
    placed distances between wells and cesspools, etc. I think new Zoning Board members are schooled in this. It is amazing how often variances are denied for “public safety” reasons. “Emergency Vehicles would be impeded” is a favorite.

    Objections to Zoning have faded, most believe it is necessary to “protect property values”. You won’t find “protecting property values” listed in the “police powers”. So, my question? Where do “children” come in under the “police powers”?

    There is a lot of law in Massachusetts about “Snob Zoning” and keeping the riff-raff out.