The Elusiveness of Effective Government
Why skepticism toward power is more practical than radical
“The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn’t work and then they get elected and prove it.”
I’ll never forget my first driving test behind the wheel. I was 18 years old and the only thing that stood between me and the ultimate symbol of adult independence was the signature of a disgruntled government employee. We’ll call him Dave.
I was already nervous when I got into my mom and dad’s white Astro Van with Dave in the passenger seat. I asked him how he’d like me to back out since the parking lot was crowded. He didn’t even bother to look up from his clipboard as he told me in the rudest of voices that “that’s part of your test!”
I did my best to not ask any more questions. But it wasn’t long before my nerves got the best of me and I made a series of small mistakes, each of which made Dave progressively more angry. It was so long ago, I don’t even remember what the mistakes were, but I definitely didn’t put him in any danger.
But I do remember exactly how the test ended. It ended with Dave almost screaming, and berating me for what a terrible driver I was. I remember having to cut the conversation short by saying “thank you” and abruptly exiting my own vehicle before he did.
I would later realize that employees like Dave were not unusual at the DMV (or for the matter at the Post Office, or other state agencies). I revisited the DMV many times in my young adult life and I learned the meaning of the lyrics of this Primus song which would echo in my head as I stood in line.
I’ve been to hell. I spell it…I spell it DMV
Yet, I began to visit AAA to handle my car registration, once I realized that I could, and I was blown away by the difference. The office was clean and less crowded. The process was faster — much faster. The employees were nice. They even had coffee for me!
Why the difference? I wondered.
I would come to realize that the public sector and private sector operate in fundamentally different ways. That is not to say that one is superior to the other. But their differences do shed light on why conservatives, libertarians — and to some extent, Americans in general — have always been fond of saying that “government doesn’t work.”
I have six reasons as to why that claim is legitimate.
#1: Taxation
Taxation is necessary, but it is also problematic. Taxes sever the relationship between the costs and benefits of any endeavor because people have to pay them no matter what. Whether it’s well used, or completely wasted, the money rolls in just the same.
The best explanation I’ve read for why taxation-funded projects tend to be so inefficient comes from political humorist PJ O’ Rorque, in his book Eat the Rich. I’ll paraphrase for brevity.
O’ Rorque explains that there are only four ways money can be spent:
- You spend your money on yourself. This is most efficient because you are invested in both the cost and the benefit.
- You spend your money on someone else. This is less efficient because you are invested in the cost, and perhaps a bit less in the benefit.
- You spend someone else’s money on yourself. You are invested in the benefit, but not the cost.
- You spend someone else’s money on someone else. This type of spending is most prone to waste since neither the costs nor the benefits affect you directly.
Yet almost all government spending falls into category four.
This helps to explain a few things. For instance:
- why the pentagon once spent $10,000 on a toilet seat, and the air force spent $325,000 on special coffee mugs costing $836 each
- why the federal government in 2017 spent 1.2 million dollars to study the social habits of monkeys
- why the costs of maintaining abandoned federal buildings is approximately 1.7 million dollars per year
- why in 2015 two students from the University of Washington received $1.3 million to study how foam koozies keep beer cold in hot weather
I could go on, of course, and there are plenty of articles from people who have listed these things in detail. But you don’t have time to read all that. You have to go to work so you can pay for all of this stuff!
#2: Uniformity
Government can only impose one-sized-fits-all solutions to problems, despite the increasing complexity and diversity of modern society.
One of the best examples of this is the current debate over the minimum wage. Economists have shown that the government cannot simply raise wages by force without creating some unintended negative consequences. Theses include:
- slowing job growth: The Congressional Budget office estimates a loss of 1.3 million jobs from raising the minimum wage to $15 per hour
- hurting small business: a recent survey of business owners in Indiana revealed that 74% of them felt that the minimum wage increase will hurt their business. Another recent survey of small business owners found that 14% of them would have to fire workers if the minimum wage were increased by only one dollar. 28% said that a hike would restrict them from hiring new workers
My point is not to argue against the minimum wage since economists have not come to consensus one way or the other on whether it does more harm or more good.
The point here is that the minimum wage is a blunt instrument. Like many government regulations and programs it is incapable of distinguishing between the people who will be helped by the law, and the people who will be hurt by the law.
Contrast America’s mandated solution to a place like Denmark that has no minimum wage. There, wages are driven higher by both competition and labor unions. But even labor unions avoid the uniformity problem since they can zero-in on specific industries, or specific companies. And the bargaining agreements, even if affecting a wide array of companies, can often create more caveats than a blanket government mandate.
There is plenty of evidence that these voluntaristic solutions can work. For instance, Denmark, Sweden, Switzerland, Iceland and Norway have no minimum wage at all and they out perform the United States in income/wealth equality.
#3: Slowness
Government tends to be the slowest of institutions to enact change because the political process is one in which a majority of politicians, representing diverse and often conflicting interests, must agree on a particular idea in order to move it forward. Fixing a policy mistake or making even a small improvement takes a lot of political effort.
We all witnessed this in action when congress proved incapable of passing a second Covid-19 relief bill when it was needed more than ever. But this tendency toward gridlock may be a feature as well as a bug. The framers of the constitution designed the federal government so that it would only change course when there was broad consensus to do so. Governments need to be stable. If they are able to turn course on a dime, then that also means they are vulnerable to frequent, radical shifts in policy and political instability.
In other words, it’s not a bad thing that governments are slow. It’s only a bad thing when we increasingly rely on government to solve the bulk of society’s problems.
#4: Restriction
Government, being an institution of force, can only solve problems by restricting peoples’ choices. This provides an increasingly narrow framework for improving society, as government is increasingly relied upon as a problem-solving institution. It also causes unintended side-affects when people look for ways to get around those restrictions, as they inevitably do.
A few examples of this are:
- alcohol prohibition in the 1920s which led to a massive increase in violent crime as alcohol sales were pushed underground and controlled by organized crime rings
- Rent control. In many places, such as New York city, strict rent control laws make it more difficult for developers and landlords to grow their businesses. In response they build more luxury housing, and commercial buildings that aren’t subject to rent control. As a result, people with low or middle-class incomes are priced out of the market and housing shortages get worse
- The 1990s California energy crisis. For years, the state had price caps on both wholesale and retail energy prices. The energy companies were then “deregulated” by removing the cap on wholesale prices only. The result was that wholesale prices rose, but companies could not pass those increases on to the consumer. The end results were massive energy shortages, rolling black-outs, and a dishonest, knee-jerk media response that incorrectly blamed the “free market” and “deregulation” for a government-engineered fiasco.
#5: Accountability
Government agencies are not directly accountable to the people they service. They are only accountable to other agencies, which are accountable to politicians, who are themselves, only loosely accountable to their constituents.
This explains why the the Government Accountability Office estimates that it takes six months to a year to fire a government employee.
This example is my personal favorite: the government employee who was caught with 7000 pornographic files on his work computer which he watched for six hours each day while he was waiting to be fired. It makes for this entertaining video:
But on a more serious note, we should also be concerned about the growth and centralization of government because it weakens democracy. As more power is concentrated in the hands of unelected officials, government becomes less responsive to the needs of everyday people regardless of what the politicians themselves do, since most of the boots-on-the-ground work is done not by politicians, but by bureaucrats.
#6: Division of Labor
One of the most fundamental principles of economics is the division labor, which states that complex systems are most effective when each producer focuses on what they do best.
As government grows, it moves further from the division of labor, and instead becomes all things to all people: educator, peace keeper, philanthropist, health care provider, arbiter of moral values, ensurer of social equality, benefactor of the arts, foreign nation builder, etc. Rather than doing a few things well, government does a great number of things, poorly.
Examples of the clumsiness that comes from government doing too much are the following:
- the federal government spends millions each year to prevent people from smoking. Until 2004 it also spent millions subsidizing tobacco farmers
- according to the Government accountability office, the federal government typically has 10 agencies performing the same job
- Social Security — the largest entitlement program in the world in the largest economy in the world — has been running a deficit for decades and will be depleted by 2035. Similar deficit issues plague Medicare and Medicaid.
Conclusion
None of this is to say that the private sector doesn’t have inefficiencies, or that the government doesn’t do some things extremely well. But the six factors I listed above show that ineffectiveness is baked into the cake of government.
We should be skeptical of politicians who say that a program isn’t working because it’s not funded well enough. We should be skeptical when the knee-jerk reaction to a problem is to pass a new law, or to make an existing law stricter because it’s not having the desired result.
The point is not to have small government, but effective government. But we will never have that if we allow the state to grow unchecked.
I propose we keep a healthy dose of skepticism toward people in power, at all levels of power, on both sides of the isle. Or to keep it simple, we should remember that generally speaking, government doesn’t work.